Bill Gunderson’s Daily Fishing (Market) Report Friday, August 2, 2019

Friday 8/2/19=DJIA 98   NASDAQ -108

Daily Wrap: The market threw another tariff tantrum today, although it did rebound somewhat from its lows earlier tin the day. The Bond Market is soaring, the U.S. economy showed a few crack in the pavement, while Square roundly missed today. The Nasdaq took the brunt of today’s sell-off.

I sent out tweets on the following stocks today: KGC, IPHI, EMTI, APHA, AUY, AGG, AAPL and GLD.

Daily Buys: I sold three core holdings today. I did not like the way they were trading. Our Bond Fund had another very good day.

This should be a very interesting newsletter this week. I am working on it now



Here is what all the excitement was about today. This took place yesterday.

Stocks retrench after Trump tweet on new tariff

  • Stocks fall after President Trump says he'll impose an additional 10% tariff on the "remaining" $300B of goods and products imported from China as of Sept. 1.
  • Dow falls 0.5% at 2:00 PM vs. a 1.0% gain at noon New York time; the S&P 500 at -0.4% loses all of its 1% rise, and Nasdaq at -0.2% remains in the green for now compared with +1.5% earlier.
  • Still, he said U.S. representatives had constructive talks with their Chinese counterparts. "We look forward to continuing our positive dialogue with China on a comprehensive Trade Deal," he writes via Twitter.
  • Investors turn to safety. 10-year Treasury note yield pushes lower to 1.889% vs. 1.957% at around noon.


Semi stocks drop after Trump's tariff tweet

  • The Philadelphia Semiconductor Index falls 1.1% versus the 0.12% dip for the tech sector (NYSEARCA:XLK) after President Trump tweets that he will impose an additional 10% tariff on the remaining $300B of goods and products imported from China as of the start of next month.
  • Trump also said U.S. representatives have had constructive talks with China.
  • Chip stocks were already primed for pressure from yesterday's disappointing earnings results from Qualcomm and Lam Research. 
  • Components on the move: ON Semi (ON -3.3%), Silicon Motion (SIMO -3.1%), Maxim (MXIM -3.3%), Micron (MU -2.2%), Microchip (MCHP -2.5%).


Oil prices plunge, crushing energy stocks, following Trump tweet

  • Energy stocks (XLE -2.5%) are slammed after Pres. Trump tweets he will place an additional 10% tariff on the remaining $300B of Chinese goods and products effective Sept. 1, sparking more worries about a global economic slowdown.
  • WTI September crude oil plunged more than 7% on the news and the rout is getting worse, now -8.4% $53.62/bbl; Brent -7.2% to $60.35bbl.


Here was the mood of the market before the trading day started.


Nervous action ahead of jobs report

  • U.S. stock index futures are down about 0.4% across the board, and the 10-year Treasury yield is off another 3 basis points to 1.85%.
  • Europe's lower by 1.9%, and yields there are all down sharply as well.
  • If one listened to the Fed and Jay Powell this week, trade concerns topped their list of worries, so the escalation between the U.S. and China this week seemingly points to another rate cut in September. A strong jobs number at 8:30 ET could throw a wrench into that thinking.
  • Markets are expecting 164K jobs added in July, with the unemployment rate steady at 3.7%.


Global markets lower ahead of US jobs data

  • Japan -2.20%.
  • Hong Kong -2.35%.
  • China -1.41%.
  • India +0.27%.
  • London -1.89%.
  • Paris -2.85%.
  • Frankfurt -2.64%.


China will fight back.


China responds to new U.S. tariff threat

  • China doesn't want a trade war, but it isn't afraid of fighting one, according to the country's foreign ministry, which added that Beijing will be forced to take countermeasures if the U.S is bent on putting more levies on Chinese goods.
  • On Thursday, President Trump vowed to put an additional 10% duty on the remaining $300B of not yet tariffed Chinese imports from Sept. 1, sharply escalating a bruising trade war and rocking financial markets.
  • Immediately after the announcement, oil prices nosedived 8% and Treasury yields plunged below 2%, while China's yuan dropped to a 2019 low and the DJIA closed down 280 points.


More rate cuts coming?


Rate cuts back on the table?

  • The timing of Trump's trade tweet is particularly noteworthy as it occurred just a day after Fed Chair Jerome Powell said trade tensions had returned to just a "simmer."
  • Trump also expressed disappointment in Powell, calling for a more dovish stance at the Fed and the "beginning of a lengthy and aggressive rate-cutting cycle."
  • It may be unrelated (given renewed trade talks just ended), but traders are now pricing in two more interest rate cuts by year's end. Bets are also increasing the Fed will need to ease policy further in 2020 to offset risks from the escalating trade war.


A huge rally in the bond market.


10-year yield dips back below 2%

  • In wake of yesterday's Fed rate cut, the 10-year Treasury yield was volatile, but finished the session higher. It's resumed course lower today, now down four basis points and sitting at 1.98% - roughly matching about a 2.5-year low.
  • Yields are also off sharply on the short end, the two-year down four basis points to 1.83%.
  • TLT +0.55%, TBT -1.1%


Jobs report was no surprise.


July jobs growth matches expectations

  • July nonfarm payrolls: +164K vs. +164K consensus and +193K previous (revised from +224K).
  • Unemployment rate: 3.7% vs. 3.7% consensus and 3.7% previous.


Some cracks in the pavement of the U.S. economy.


PMI manufacturing lowest since September 2009


ISM manufacturing hits 3-year low

  • July ISM Manufacturing Index: 51.2 vs. 51.9 consensus, 51.7 prior.
  • Prices 45.1% vs 47.9.
  • New Orders 50.8% vs 50.0.
  • Employment 51.7% vs 54.5.

June Construction Spending falls unexpectedly

  • June Construction Spending-1.3% M/M vs. +0.3% consensus, -0.5% prior (revised).
  • Construction spending -2.1% vs. -2.3% prior Y/Y.


Another trade war escalates.


Japan-S.Korea trade dispute escalates

  • Trade is being rattled across the globe as Japan's cabinet approved a plan to remove South Korea from a list of countries that enjoy minimum export controls.
  • Cutting Seoul from the so-called "white list" could require Japanese exporters to obtain permits, potentially slowing down exports of a wide range of goods that could be used to produce weapons.
  • The decision comes a month after Japan tightened curbs on exports to South Korea of three high-tech materials and will likely to escalate tensions fueled by a dispute over compensation for wartime forced laborers.


Problems in Hong Kong worsen.


Hong Kong stock traders cash out

  • Marking its longest string of declines in five years, the MSCI Hong Kong Index slid 1.8% overnight, taking declines since its eight-day losing streak started to 7.3%.
  • The economy, already buckling under the pressure of the U.S.-China trade war, faces additional strain as increasingly violent street protests damp spending.
  • Just this week alone, data showed the economy contracted more than expected last quarter, with retail sales plunging 6.7% in June from a year earlier.


An ETF for Vegans coming.


Coming this fall, ESG ETF under vegan guise

  • Beyond Investing plans to launch the US Vegan Climate ETF in the fall under the ticker symbol "VEGN".
  • Will track the US Vegan Climate Index, which has been calculated live since June 2018. The ETF is expected to launch on the NYSE in the fall.
  • Rather than focusing on specific vegan-centric companies like Beyond Meat, the index is a passive rules-based index of U.S. large cap stocks, screened according to vegan and climate-conscious principles.
  • But it really seems to be more of an ESG fund rather than vegan-focused.
  • The index "excludes companies engaged in animal exploitation, human rights abuses, fossil fuels extraction and energy production, and other environmentally damaging activities," according to Beyond Investing's website.
  • The index's components aren't exactly what you would expect for something labeled as vegan -- Microsoft, Apple, Facebook, Mastercard, and Visa are its top five.


Square misses roundly!


Square EPS beats by $0.05, beats on revenue

  • Square (NYSE:SQ): Q2 Non-GAAP EPS of $0.21 beats by $0.05; GAAP EPS of -$0.02 beats by $0.02. EPS excluding the effect of Eventbrite is $0.00.
  • Revenue of $563M (+46.2% Y/Y) beats by $5.33M.
  • Shares -5.2%.


A winner in the weed patch.


Aphria up 21% after hours on big jump in revenue

  • Aphria (NYSE:APHA) fiscal Q4 revenue up 969% to $128.6M; distribution revenue: $99.2M (+72%); net cannabis revenue: $28.6M (+86%).
  • Net income: $15.8M (+416%); non-GAAP EBITD


Aphria up 33% premarket as production ramp continues

  • Aphria (NYSE:APHA) is up 33% premarket on average volume after posting large increases in fiscal Q4 revenue and earnings yesterday after the close. Key points from the earnings call:
  • Quick assets now total $610M, including an additional $39M received from Green Growth Brands related to its takeover bid.
  • Aphria One campus now fully planted with over 500K plants.
  • Aphria Diamond fully constructed (1.3M sq. ft. of production capacity), ready to come on line after regulatory sign-off.
  • Total annualized capacity will be 255K kgs.


Pot stocks (mostly) in the green premarket after Aphria's FQ4 beat

  • Cannabis producers are mostly up in premarket trading after Aphria posted better-than-expected fiscal Q4 results yesterday after the close.
  • Selected tickers: Cronos Group (NASDAQ:CRON) (+4%), Canopy Growth (NYSE:CGC) (+1%), Aurora Cannabis (NYSE:ACB) (+7%), Tilray (NASDAQ:TLRY) (-1%)
Bill Gunderson

Bill Gunderson

Bill Gunderson is a wealth manager, syndicated financial talk show host, and author of the Best Stocks Now -- one of the top 10 best selling financial aps in the world.

He is a frequent guest on local and national media, including CNBC, Fox Business, Fox News, Bloomberg, Barron's, Forbes, and others.

His wealth management business caters to high net worth individuals clients all over the world. He would be happy to look at your portfolio.

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