Monday 8/5/19=DJIA -766 NASDAQ -278
The Sky is Falling!!!!
I begin a new week with 249 B+ or better ranked stocks. This number has come down from over 500 last week.
I begin a new week with 102 A+ or better ranked stocks. This number has also been cut in half.
Daily Wrap: It was a horrible day in the market on Monday. China is obviously not going to cave in. The market is afraid that earnings estimates for 2020 are too high. They are starting to price in a long and protracted trade war.
I sent out tweets on the following stocks today: GME, EMTY, Elizabeth Warren, BIO, AUY, AGG, GLD, AAPL, YANG, and SHOP.
A lot of negativity in the market today. We had this happen over the weekend.
- Gun and law enforcement stocks will be on watch Monday morning after two mass shootings in the U.S. in less than 24 hours.
- Nine people have been killed and at least 16 were injured early Sunday morning in Dayton, Ohio, just hours after a massacre in El Paso, Texas, which left at least 20 people dead.
- Last weekend, a shooting at an annual garlic festival in Gilroy, California, left three dead and sixteen people wounded.
The flight to safety continues.
- A sharp deterioration in global risk sentiment is pushing investors into safe haven assets, with gold climbing to fresh multi-year highs, up 0.8% to $1468.80/ounce.
- The flight to safety is also evident from the ongoing free-fall in U.S. Treasury bond yields, with the 10-year falling 9 bps overnight to 1.76%.
- Another big winner of the market turmoil? Bitcoin (BTC-USD). Prices climbed 9% past the $11,000 level for the first time since mid-July to lead gains among the biggest cryptocurrencies.
Here was the mood of the market before it opened.
- President Trump surely won't be happy with the action in China's yuan, which has plunged through the 7 (per dollar) level.
- On top of trade war fears, there's the ongoing political crisis in Hong Kong, and the Hang Seng (NYSEARCA:EWH) is down 2.5% in Monday morning action. Shanghai (NYSEARCA:FXI) is down 0.4%.
This was the major driver behind today’s sell-off.
- The latest proposed U.S. tariffs on China is threatening to unleash a whole new front in trade hostilities - a currency war.
- On Monday, the yuan tumbled past the psychologically important level of 7 to the dollar for the first time since the financial crisis, a move that can be seen as part of the PBOC's defense.
- President Trump and many other U.S. officials have long accused China of weakening the renminbi to make its exports cheaper and gain an unfair advantage in trade, although Beijing has denied doing so.
- Propping up China's currency can be an expensive business. When the nation tried defending its currency in 2016, in ended up burning through a large amount of currency reserves, spending as much as $100B in a single month.
Here is Trump’s reasoning behind the new tariffs.
- President Trump wasn't happy with progress made in the U.S.-China trade talks, Larry Kudlow, White House National Economic director, said in an interview on Fox Business Network.
- "And so, he's put this 10% tariff on the $300B" of Chinese goods, Kudlow said.
- Trump was also disappointed that the Chinese haven't yet acted on their promise to stop exporting the painkiller fentanyl to the U.S., Kudlow said.
- He declined to comment on reports that Trump may delay the new tariffs set to start Sept. 1.
- The president resisted giving Beijing advance notice of the tariffs that he announced via Twitter moments after a briefing on the U.S.-China trade talks that took place in Shanghai earlier this week, Bloomberg reported, citing people familiar with the discussions.
- Kudlow describes the July jobs report as "pretty solid," and notes that manufacturing is "ticking up in recent months."
- Adds that with "severe monetary tightening in 2017 and 2018," it's "a wonder we're growing at all."
- Previously: China responds to new U.S. tariff threat (Aug. 2)
A big warning from BofA on oil
- Crude oil futures continue lower as markets remain concerned about U.S.-China trade tensions and the implications for global energy demand; WTI -1.1% to $55.02/bbl, Brent -1.2% to $61.13/bbl.
- China's government overnight allowed the yuan to drop beyond the key 7 per dollar level for the first time in more than a decade, signaling it may tolerate further currency weakness because of the trade dispute; a lower yuan would raise the cost of dollar-denominated oil imports in China, the world's biggest crude oil importer.
Another crack in the pavement of the U.S. economy.
- June Factory Orders: +0.6% to $493.8B vs. +0.8% consensus and -1.3% prior (revised)
Another rate cut coming?
- In the day since President Trump tweeted plans for imposing new tariffs on Chinese goods, traders are betting that Wednesday's rate cut won't be a "one and done."
- The CME FedWatch tool, which uses federal funds rate futures trading to calculate the probability of rate movement, now puts the probability of a September rate cut of 25 basis points at 98% vs. ~61% probability before the tweet.
- The argument strengthens that the likelihood of further rate cuts increases as the trade war ramps up. Fed Chair Jerome Powell noted in his press conference on Wednesday that trade tensions is one of the downside risks to the generally healthy U.S. economic outlook.
A buy recommendation on Facebook.
- MKM reinstated its coverage of Facebook (FB -1.4%), with a Buy rating.
- The firm set its price target to $245, now implying nearly 29% upside.
- Street analysts overall rate Facebook at Outperform, and Seeking Alpha authors are Bullish as well, while Facebook has a Quant Rating of Neutral.
I am short this stock in my personal acct. (very small position)
- GameStop (GME -0.5%) plans to lay off 50 management-level employees, according to reporting by DualShockers.
- The jobs eliminations arrive with the retailer looking to add $100M to operating profit.
- "GameStop faces increasing pressure to engineer a turnaround after the gaming retailer's sales have fallen by nearly $1 billion over the last five years and its profits turned negative last year," notes Retail Dive.