Bill Gunderson’s Daily Market Observation for Thurs. 10/10/2019

Thursday 10/10/19=DJIA +137 NASDAQ +45 U.S. 10yr=1.66%
Let’s Make a Deal!
Minnesota Oct. 15, 16, & 17-Bill Gunderson and his team will be at the Radisson Blu-Mall of America. Call (855)611-BEST or visit our website to make an appointment.
Daily Wrap: Futures were down 350 points after the close of the market on Wednesday. Bloomberg reported that the trade talks with China were going nowhere. The futures drew back to even over the next 12 hours, however. The market got a lift from yet another Trump Tweet saying that “China wants to make a deal.”
I still think that by the end of the day on Friday, we have at least a partial agreement. I think both sides are very motivated to get something done.
Trading: I sat on my hands and did not do any buying or selling today.
Tweets: I was active on Twitter and StockTwits today. I sent out tweets on SPWH, ROST, LULU, IMPUY, NOW, ASML, and AAPL.

The market is even volatile when it is closed!

Wild overnight trade as rumors fly
• Day traders are having a field day as headlines grab hold of market sentiment.
• While U.S. stocks rallied Wednesday on trade optimism, futures fell sharply after the close on reports that U.S.-China trade talks - scheduled for today and tomorrow in Washington - might be cut short.
• A volatile session then ensued, with futures now back at the starting line.
• Among the rumors: There has been no change to the negotiation schedule, next week's tariff hike could be suspended, concessions may be announced for blacklisted Huawei, a currency pact is underway, a partial trade deal is in the works and Beijing is offering to increase agricultural purchases.
• Frankfurt -0.07%.

The Jobs Market is still very strong.

Jobless claims lower 10K to 210K
• Initial Jobless Claims -10K to 210K vs. +219K consensus, 220K prior (revised).
• Continuous Claims: +29K to 1.684M vs. 1.653M consensus, 1.655M prior (revised).

Deflation almost guarantees another rate cut this month.

Core CPI gain of 0.1% trails estimates
• September Consumer Price Index: flat M/M in-line with consensus, +0.1% prior.
• Core CPI +0.1% M/M vs. +0.2% consensus, +0.3% prior.
• On a year-over-year basis, headline inflation is now at 1.7%, vs. consensus of 1.8% and 1.7% previously.
• Core inflation on a year-over-year basis is now at 2.4% in-line with consensus, and 2.4% previously.

FOMC's comments on inflation boosts odds for October cut, BBH says
• The Federal Reserve's September meeting minutes suggest that odds for another rate cut in October are increasing based on inflation trends, Brown Brothers Harriman's Win Thin said.
• "Given this apparent focus on inflation to justify the cut last month, the odds are rising for an October cut, too," he wrote in an email after the FOMC meeting minutes were released. "Especially if September CPI misses on the downside tomorrow."

Overall economy slowing, however.

Atlanta Fed's Q3 GDPNow model slips to 1.7%
• The Atlanta Fed trims its model for Q3 GDP growth to 1.7% from 1.8% on Oct. 4, as this morning's wholesale trade report lowered the contribution from inventory investment.
• Previously: Wholesale trade inventories shy away from estimates (Oct. 9)


Yuan rises as U.S. weighs China currency pact - Bloomberg
• The offshore yuan rises 0.2% against the U.S. dollar to 7.1249 per greenback as the White House considers announcing a previously agreed currency pact with China as part of a first-phase agreement that could include suspending tariffs that were due to take effect next week, Bloomberg reports, citing people familiar with the talks.
• The currency agreement had been agreed to earlier this year before trade talks broke down. Negotiators would later tackle the more difficult issues of intellectual property and forced technology transfers.
• This comes as Chinese negotiators, led by Vice Premier Liu He, arrive in Washington to resume trade talks with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Thursday, the first in-person talks between senior officials since July.

Gentlemen start your Generators.

Generac jumps as power goes off in California
• Shares of Generac (GNRC +9.1%), the largest seller of backup home-electricity generators, surged near all-time highs in today's trade as widespread power outages struck central and northern California on short notice.
• California utility PG&E (NYSE:PCG) announced yesterday it would implement a proactive power shutoff affecting as many as 800K customers across 34 counties in the central and northern parts of the state as a safety precaution due to wildfire risks posed by expected hot, dry and windy weather.
• PG&E warns the weather event will last through midday Thursday, with peak winds starting Wednesday morning through Thursday morning and reaching 60-70 mph at higher elevations.
• Meanwhile, PG&E edged higher in today's trade despite the news, as the outages will have little if any impact on the company's earnings, which are largely based on capital investment returns rather than the amount of electricity sold.

Another reason to stop vaping now!

Prudential boosts life insurance rates for vapers
• Prudential Financial (NYSE:PRU) is raising life insurance rates for customers who vape, in continuing fallout from the lung-injury health scare surrounding the e-smoking.
• Vapers will be classified as smokers rather than nonsmokers on individual policies, Prudential says, generally resulting in higher charges.
• A study this week found that e-cigarette vapor causes lung cancer and possibly bladder cancer in mice.
• As of Oct. 1, the CDC has confirmed 1,080 lung injury cases associated with vaping, along with 18 deaths in 15 states.

Weed stocks continue to get hammered.

Hexo down 20% premarket on soft preliminary revenue, withdrawal of 2020 outlook
• Consumer cannabis package goods seller HEXO Corp. (NYSE:HEXO) slumps 21% premarket on modestly higher volume in response to less-than-expected preliminary fiscal Q4 and fiscal 2019 results.
• Net revenue for FQ4 and F2019 should be $14.5M - 16.5M and $46.5M - 48.5M, respectively. During its FQ3 conference call, management projected a doubling of revenue in FQ4 (C$31.8M based on FQ3). The shortfall was due to "lower than expected product sell through."
• Final FQ4 and F2019 results will be released on Thursday, October 24 before the open.
• The company is also withdrawing its previously announced fiscal 2020 guidance.

Neflix reports next week.

Hard hats on for Netflix earnings
• Goldman Sachs drops its price target on Netflix (NASDAQ:NFLX) to $360 from $420 this morning.
• GS is just the latest firm to reel in near-term estimates on Netflix ahead of next week's earnings report and in advance of the launches of Disney+ and Apple TV+. Within the last few weeks, the list of firms lowering expectations includes Wells Fargo, Evercore ISI, Monness Crespi Hardt and Rosenblatt. Meanwhile, Seeking Alpha authors have a consensus Neutral rating on NFLX.
• Shares of Netflix are down 1.11% premarket to $264.56 to stand about 31% below the 52-week high of $385.99.

Costco does it again.

Costco beats U.S. sales estimates for September
• Costco (NASDAQ:COST) reports U.S. comparable sales rose 5.7% (ex-fuel and F/X) in September to top the consensus estimate for a 5.2% gain.
• The company's total comparable sales were up 5.6% (ex-fuel and F/X). E-commerce sales were up 18.5% during the month.

I like Nike too.

Oppenheimer sees tailwinds for Nike
• Oppenheimer recommends that investors keep buying Nike (NKE +0.7%).
• "NKE has improved meaningfully product innovation and is leveraging better a strengthened digital backbone, efforts that are fueling upticks in sales and margins throughout the organization," writes analyst Brian Nagel. He notes the positive impact of higher average selling prices for Nike products and doesn't see great risk for Nike in China due to the NBA flap.
• Oppenheimer sets a 12-18 month price target of $115 on Nike.

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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