Tuesday 8/6/19=DJIA +312 NASDAQ +107
Daily Wrap: After the DJIA had a 766-point drubbing yesterday, today the rebound went to the bulls. It was a struggle all day long, but in the end the Dow finished up over 300 points. I sent out several buys yesterday when the market was way down, those stock all had a very good day today.
I sent out tweets on the following stocks today: FXP, SHAK, AU, SMG, GFI, and AMZN.
Here is how bad Monday was….
Stock market suffers its worst day of 2019
• Stocks never stood a chance today after China let the yuan drop overnight to its lowest level against the dollar since 2008, retaliating against Pres. Trump's move to extend tariffs across essentially all Chinese imports.
• The reaction was steep selloff in equities and commodities that began in Asia and swept westward through Europe to the U.S., where stocks declined steadily throughout the day.
• The day ended in this year's worst percentage drop for all three major U.S. stock indexes; the S&P 500 is now more than 6% below its record high hit just last month.
• All 11 S&P 500 sectors finished with steep losses, including eight that ended with losses between 4.1% (information technology) and 2.3% (health care).
• The tech sector was hit especially hard by losses in Apple (-5.2%) and semiconductor firms, many of which derive a large part of their revenue from China; the Philadelphia Semiconductor Index plunged 4.4%.
• The rising potential for a 50-bp rate cut at the September FOMC meeting amid increased risks to the economic outlook exacerbated a flight to safety in U.S. Treasurys, which saw the two-year yield tumbling 13 bps to 1.58% and the 10-year yield sliding 12 bps to 1.74%, its lowest level since November 2016.
• Comex December gold gained 1.3% to settle at $1,467.50/oz.; WTI crude futures fell 1.7% to $54.69/bbl.
The war escalates!
Treasury designates China a currency manipulator
• The Treasury Dept. has designated China a currency manipulator, a rare move that follows China permitting the yuan to rise over 7 to the dollar.
• That's the first country designated a manipulator since China (again) in 1994, during the first Clinton administration.
• It amps up a trade battle that sent stocks reeling today.
• Treasury Secretary Steven Mnuchin will engage with the International Monetary Fund to eliminate the "unfair" competitive advantage created by China's loosening its peg, the department says.
• The dollar/yen pair has declined in the immediate wake of the announcement, while the dollar-Swiss franc dropped 0.2%.
A 32-basis point spread! The FED is behind the curve.
Yield curve signals biggest recession warning since 2007
• The yield curve inversion is at its most extreme since just before the 2008 financial crisis, with the 10-year note yield, at 1.74% earlier today, 32 basis points lower than three-month bills.
• The yield curve is widely watched due to its track record in predicting recessions when it inverts for a sustained period of time.
• As China responds to President Trump's threat of more tariffs by letting the yuan fall and stopping imports of U.S. agricultural products, stocks fell and investors turned to the safer haven of government bonds.
• In conjunction with the lower stock prices and higher bond prices, volatility resurged with the CBOE Volatility Index (or VIX), also dubbed the fear index, jumps 26%.
• With the increased demand for U.S. Treasurys, bond prices rise, pushing yield down.
• iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) rises 1.2%; ProShares UltraShort 20+ Year Treasury ETF (TBT -2.3%).
• Yield curve ETFs: STPP, FLAT
• VIX ETFs: VXX, UVXY, TVIX
An indicator on the Global Economy.
Baltic Dry Index falls for 11th straight day
• The Baltic Dry Index of commodity shipping costs fell 2.25% to 1,734 points to mark the 11th straight day of posting a drop.
• The BDI is coming off its high point of the year in July and is still up 39% for the year.
• Related stocks: Diana Shipping (NYSE:DSX), DryShips (NASDAQ:DRYS), Eagle Bulk Shipping (NASDAQ:EGLE), NAvios Maritime Holdings (NYSE:NM), Navios Maritime Partners (NYSE:NMM), Globus Maritime Limited (NASDAQ:GLBS), Safe Bulkers (NYSE:SB), Scorpio Bulkers (NYSE:SALT), Star Bulk Carriers (NASDAQ:SBLK), Golden Ocean Group Limited (NASDAQ:GOGL), Tidewater (NYSE:TDW), Seanergy Maritime (NASDAQ:SHIP), Genco Shipping & Trading (NYSE:GNK).
But, wait a minute, futures were up this morning!
Futures recover as China moves on yuan
• Wall Street is pointing to positive territory for the session ahead, with Dow and S&P 500 futures up 0.7% and the Nasdaq ahead by 1%, following the worst trading day of the year on Monday.
• Traders may have been buoyed after the People’s Bank of China took steps to stabilize the yuan, setting the currency's reference point higher than the key 7 per dollar level.
• Late Monday, the U.S. Treasury Department labeled China a currency manipulator for the first time since 1994, opening the door to new sanctions and ratcheting up already high trade tensions.
Another crack in the pavement.
ISM service unexpectedly slides in July
• July ISM Non-Manufacturing Index: 53.7 vs. 55.5 consensus, 55.1 prior.
• Business activity 53.1% vs 58.2.
• New Orders 54.1% vs 55.8.
• Employment 56.2% vs 55.0.
China confirms suspension of U.S. ag purchases
• The intensifying U.S.-China trade war pushed the Shanghai Composite down 1.6% overnight as Beijing confirmed its suspension of U.S. agricultural product purchases in response to new American tariffs.
• China, one of the largest buyers of U.S. agriculture, also did "not rule out" duties on newly purchased agricultural goods after August 3.
• Adding to frenzied selling of global markets, the U.S. Treasury Department on Monday determined for the first time since 1994 that China was manipulating its currency, taking the trade row into uncharted territory.
Gold stocks breaking out all over the place!
Gold hits six-year high; precious metals miners rally on safe-haven trade
• Gold equities (GDX +4%) are early gainers in an otherwise morning sea of red, as the yellow metal surges to a more than six-year high with the escalating U.S.-China trade war sending investors scurrying for the safety of bullion; December Comex gold +1.4% to $1,477.60/oz., silver also +1.4% to $16.49/oz.
• Among big gainers: SAND +10.9%, HL +7.1%, AG +7%, GFI +6.6%, IAG +6.4%, SBGL +5.6%, GOLD +5.4%, HMY +5.1%, PAAS +4.8%, AUY +4.4%, DRD +3.6%, NEM +3.4%, WPM +3.3%, AU +3.1%, AEM +3.1%.
Why would money be flowing into bitcoin?
Crypto stocks jump as bitcoin tops $11,000
• While markets swing dramatically to risk-off, the main exception is crypto, with bitcoin (BTC-USD) climbing above $11,000 for the first time since July 12, pushing up crypto-related stocks.
No accidents yet.
Boeing has conducted 500 MAX jet test flights, CEO says
• Boeing (NYSE:BA) CEO Dennis Muilenburg says the company has conducted nearly 500 test flights with a new software update to its grounded 737 MAX planes, adding that he has personally flown on two of the test flights.
• The CEO also reiterated the company's plan to submit a certification package to the Federal Aviation Administration in September, and that he expects the plane to return service early in Q4.
• "We know that trust has been damaged over the last few months, and we own that and we are working hard to re-earn that trust going forward," Muilenburg told the Global Business Travel Association conference today in Chicago.
• Boeing shares fell 2.5% in today's trade to close at a nearly seven-month low amid a broad market rout.
Jeff Bezos unloads $2.8B in Amazon stock
• Jeff Bezos sold roughly $2.8B worth of Amazon (NASDAQ:AMZN) shares in the past week, prior to losing $3.4B on Monday as shares of his online retailer tumbled.
• Bezos hasn't provided an explanation as to why he's accelerating stock sales, but he's currently selling about $1B in Amazon stock each year to fund his space exploration company, Blue Origin, and is also deploying capital for the "Day One Fund," which was announced in 2018 to help homeless families and create preschools.
Very nice report and breakout to new highs. I remain long.
Zoetis EPS beats by $0.08, beats on revenue
• Zoetis (NYSE:ZTS): Q2 Non-GAAP EPS of $0.90 beats by $0.08; GAAP EPS of $0.77 beats by $0.10.
• Revenue of $1.55B (+9.2% Y/Y) beats by $40M.
• Shares +0.6% PM.
Outstanding report and huge breakout. I am long.
Insulet up 10% after hours on Q2 revenue beat, guidance raise
• Insulet (NASDAQ:PODD) Q2 results: Revenue: $177.1M (+43%); Omnipod revenue: $160.8M (+51%).
• Net income: $1.4M (+182%); EPS: $0.02 (+167%).
• Q3 guidance: Revenue: $174M - 181M; Omnipod: $159M - 165M.
• 2019 guidance: Revenue: $700M - 715M from $667M - 690M; Omnipod: $637M - 649M from $612M - 629M.
• Shares up 10% after hours.