Thursday 7/11/19=DJIA +191 NASDAQ -14
I had a brand new article about one of my total return stocks published on Seeking Alpha today.
Fed Chairman, Jerome Powell was one again the main catalyst behind today’s move up in the market. United Healthcare was also a big catalyst for the DJIA. The S&P 500 obviously now has resistance at 3,000. Big Pharma was whacked today: https://seekingalpha.com/article/4274322-nextera-energy-big-dividend-big-total-return
Once again, here is the big catalyst behind the latest move in the market.
S&P hits 3K for first time, Nasdaq closes at record as Powell signals rate cut
• Strong hints from Fed Chairman Powell that the central bank would cut interest rates later this month pushed stocks to broad gains, sending the Nasdaq to an all-time record close and lifting the S&P 500 past the 3,000 level for the first time before finishing slightly below that mark.
• Powell also said the stronger than expected June employment report did not alter the Fed’s mindset, contrary to the market’s thinking last Friday when stocks fell.
• The dovish tone helped eight of the 11 S&P 500 sectors end higher, led by energy (+1.4%), which benefited from a 4.5% surge in U.S. crude oil to $60.43/bbl amid bullish inventory data and supply disruption in the Gulf of Mexico.
• On the flip side, lower rate expectations hit bank shares, placing financials (-0.5%) at the bottom of today’s sector standings.
• Prices of shorter-dated U.S. Treasurys rose sharply on growing expectations for a sharp rate cut, driving the two-year yield down 8 bps to 1.82%, while the 10-year yield gained a basis point to 2.06%.
Here was the mood of the market before it opened this a.m.
Futures extend gains on rate-cut hopes
• Building on to yesterday’s momentum that vaulted the S&P 500 over the 3,000 level, U.S. stock index futures are extending gains by a modest 0.2%.
• Although Jerome Powell’s congressional testimony merely underlined the Fed case for easing policy to insure against the economic effects of a trade war and sub-target inflation, it was enough to get futures markets back pricing in a 1-in-4 chance of 50 bps cut later this month.
• Powell is back in the spotlight today, testifying before the Senate Banking Committee and likely emphasizing his dovish outlook in the Q&A with senators.
I debated Steve Forbes on this issue on CNBC several years ago. Jerome Powell agrees with me.
Powell argues against the gold standard
• Federal Reserve Chairman Jerome Powell tells the House Financial Services Committee that returning to the gold standard wouldn’t be a good idea.
• Congress would need to pass a law that would charge the Fed with stabilizing the dollar to the price of gold, Powell pointed out, adding that then the Fed wouldn’t be focused on its current dual mandate of full employment and stable inflation.
• Also, such a move would lead to more volatility in other parts of the economy, he said.
• “Every country in the world abandoned the gold standard decades ago,” Powell said.
• He prefaced his remarks to clarify that he’s not commenting on the view of any potential nominees to the Fed.
• President Trump has said he plans to nominate Judy Shelton, who has advocated returning to the gold standard.
There are still not any signs of inflation.
Core CPI beats estimates with 0.3% gain
• June Consumer Price Index: +0.1% vs. +0.0% consensus, +0.1% prior.
• Core CPI +0.3% vs. +0.2% consensus, +0.1% prior.
Jobless claims are still very low.
• Initial Jobless Claims -13K at 209K vs. +220K consensus, 222K prior (revised).
U.S. ETFs cross $4T threshold
• The U.S. ETF industry crossed $4T in assets on July 5, boosted by a strong H1 in equity markets and increasing demand for fixed-income ETFs.
• Though it took almost eight years for the industry to reach its first trillion in assets, wealth management and institutional markets’ embrace of ETFs has shortened the time to amass the most recent trillion to two years.
• Low-cost ETFs to support asset allocation strategies are helping to drive the market’s growth. For example, the iShares Core S&P 500 ETF (IVV +0.6%) and the Vanguard S&P 500 ETF (VOO +0.5%) are the second and fourth largest funds, respectively.
• The biggest and most liquid ETF is the SPDR S&P 500 ETF Trust (SPY +0.5%), with $272B in assets and average daily dollar volume of $18B.
• U.S. equity ETFS make up 57% of the $4.02T ETF market.
• Though fixed-income ETFs make up only 19% of the market, these ETFs have brought in $75B in H1 2019, 57% of the $132B in ETF inflows.
Is Vladimir meddling in the oil markets now? His economy is mostly oil-dependent.
Oil advances as Iran ‘harasses’ British tanker
• Continuing yesterday’s big advance that bought crude over $60, oil prices extended gains overnight by 0.7% to $60.82/bbl amid the latest Persian Gulf tensions.
• Three Iranian vessels tried to block the passage of the BP (NYSE:BP)-operated British Heritage through the Straits of Hormuz, but backed off after the HMS Montrose – an escorting military ship – “pointed its guns” and “warned them over radio.”
• The incident comes almost a week after British Royal Marines boarded an Iranian tanker, Grace 1, off Gibraltar and seized it on suspicion that it was breaking sanctions by transporting oil to Syria.
Our big, gas guzzlers are helping out oil prices too.
Crude inventory falls sharply
• EIA Petroleum Inventories: Crude -9.5M barrels vs. -3.1M consensus, -1.1M last week.
• Gasoline -1.5M barrels vs. -1.3M consensus, -1.6M last week.
• Distillates +3.7M barrels vs. +0.7M consensus, +1.4M last week.
• Futures +2.8% to $59.45.
• ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, USL, SZO, OLO, OLEM.
Stocks leading S&P 500 to 3,000
• The record-long bull market run capped another milestone on Wednesday as the S&P 500 jumped above 3,000 for the first time, nearly five years after the index hit 2,000 on August 26, 2014.
• Stocks in the tech sector powered the historic rally since August 26, 2014, including Nvidia (+728) and Advanced Micro Devices (+707), as well as FANGs – Amazon (+489%) and Netflix (+455%) – while oil companies were among the laggards.
• Medical implant manufacturer Abiomed led the herd by far, surging a whopping 909%, while fifth best was MarketAxess, which climbed 487% on a rising tide of interest in electronic bond trading on Wall Street.
Sound like a whacky theory to me.
Boeing drop ultimately could kill off bull market, analyst says
• The S&P 500 and Nasdaq both broke into record territory in today’s trade, but one stock – Boeing (NYSE:BA) – could single-handedly kill the recent market strength, warns strategist Bill Blain of London-based Shard Capital, which oversees $1B-plus in assets.
• “I am concerned the market is underestimating just how bad things could go for Boeing,” Blain writes, believing if the company continues to struggle, “the whole equity market will knee-jerk aggressively, triggering pain across all stocks.”
• “Boeing is hemorrhaging cash to build an aircraft no one can fly,” Blain says, so the company is trying to rush deliveries of other aircraft to make up for it, which has presented its own issues, including problems with 787 Dreamliners that reportedly are suffering from “shoddy production and weak oversight” at Boeing’s Charleston factory.
• Blain also does not like Boeing’s approach of upgrading its old aircraft instead of designing new ones, which “made commercial sense for Boeing to keep upgrading and upscaling [the 737] because it kept the factories delivering and they could tell regulators it was just an upgrade not a new design, saving billions on testing and training,” but that led to cost-cutting that compromised the 737 MAX.
• The analyst predicts the “likely trigger for a market shock will be… something so obviously hidden in plain sight it catches us completely and painfully
More good news for Airbus.
Air China to buy 20 A350-900s from Airbus
• A fresh order would help Airbus (OTCPK:EADSY) narrow a deficit in widebody orders against Boeing, which won a positive total of 61 widebody orders in the first half of 2019 against Airbus’ negative tally of 35 jets.
• While the Air China (OTCPK:AIRYY) deal is worth $6.54B based on list prices, it wasn’t immediately clear if the order would bolster the Airbus order book or if it had previously been attributed to an unidentified customer.
First the Fab Four, now this!
End of the road for the VW Beetle
• The last Volkswagen (OTCPK:VWAGY) Beetle has rolled off the assembly line in Mexico’s central Puebla state, serenaded by a mariachi band and surrounded by proud factory workers.
• It marks the end of the road for a iconic car that ran from Nazi Germany in the 1940’s through the hippie counterculture in the 1960’s but failed to navigate a current swerve in consumer tastes toward SUVs.
• The Puebla factory, which already produces VW’s Tiguan SUV, will make the Tarek SUV in place of the “bug” starting in late 2020.
• It will apply a 3% levy on revenue that companies like Google (GOOG, GOOGL), Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB) and Amazon (NASDAQ:AMZN) reap in France from such activities like targeted online advertising or running a digital marketplace.
Not so fast Facebook!
Fed has ‘serious concerns’ over Facebook Libra – Powell
• As part of his testimony before the House, Fed Chairman Jay Powell weighed in on Facebook’s (FB +0.6%) planned Libra digital token, saying the Fed has “serious concerns.”
• “While the project’s sponsors hold out the possibility of public benefits, including improved financial access for consumers, Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability,” Powell says.
• Ahead of his own Congressional testimony next week, David Marcus (head of the Calibra digital wallet, Facebook’s attempt to profit from the currency’s adoption) earlier said Facebook will need help and time in order to get the currency right.
Bitcoin tumbles as Fed raises Libra concerns
• Are 10% moves for Bitcoin (BTC-USD) still newsworthy? Probably not, but uncertainty in the crypto space definitely made headlines after Jerome Powell said Facebook’s Libra offering should “not go forward” without addressing concerns.
• Those include privacy, money laundering, consumer protection and financial stability, the Fed Chair declared during his semi-annual testimony before the House Financial Services Committee.
• The crypto shed close to $1500 to the mid-$11K level following the comments, which echoed a growing chorus of doubts about Libra from authorities around the world.
Delta Air Lines EPS beats by $0.07, revenue in-line
• Delta Air Lines (NYSE:DAL): Q2 Non-GAAP EPS of $2.35 beats by $0.07; GAAP EPS of $2.21 misses by $0.06.
Morgan Stanley boosts PayPal price target on its `market dominance’
• Morgan Stanley analyst James Faucette boosts price target for PayPal (PYPL +1.2%) to $129 from $114, noting that an internal survey illustrates its “market dominance” and strong consumer demand.
• “Offline could be an incremental driver, providing a higher rate of compounding EPS growth,” Faucette writes.
• Separately, Wedbush recommends buying the stock ahead of Q2 results; analyst Moshe Katri writes, “We expect another `beat-and-raise’ quarter.”
• Quant rating Neutral; Sell-Side average rating Outperform (20 Buy, 9 Outperform, 10 Hold, 1 Underperform).
• SA Authors’ Rating Neutral (5 Bullish, 1 Neutral, 2 Bearish)
• In the past six months, PayPal has risen 32% vs. information technology sector median performance +14%.
One of the best stocks in the entire market.
Mastercard expands partnership for small-business tools
• Mastercard (NYSE:MA) expands its partnership with Zoho from India to the rest of the world.
• Offers small business customers a suite of marketing, accounting, and CRM tools to automate and digitize time-intensive paper-based processes.
• Zoho is a cloud-based platform accessible via website and app and can be delivered via API. Mastercard and Zoho shared solutions will be available later this year.
I continue to own this stock. Big winner!
CoStar Group to record high as KBW initiates at Outperform
• CoStar Group (NASDAQ:CSGP) is up 1.9% following an initiation at Outperform by KBW.
• The stock’s tagged a record high today.
• The company’s set to benefit from secular tailwinds in the real estate market, rapidly moving toward digitization with an estimated total addressable market of $13B-$18B per year.
• Sell-side analysts rate the stock Outperform on average, while it has a Quant Rating of Neutral
Very interesting micro-cap.
Simulations Plus +8% AH on FQ3 beat
• Simulations Plus (NASDAQ:SLP) FQ3 results: Revenues: $8.94M (+16.3% Y/Y).
• Net Income: $2.9M (+20.1%).
• EPS $0.16 vs. $0.13 in 3Q18.
• SG&A expenses were $3.1M (+18.6%).
• R&D expenditures $1.07M (+7.4%).
• Previously: Simulations Plus EPS beats by $0.02, beats on revenue (July 10)
I sent out tweets on the following stocks that really caught my eye today: LLY, MRK, NVCR, COST, APPS, AMZN, ADBE and NEE.