Thursday 10/3/19=DJIA +122 NASDAQ +87 U.S. 10yr=1.54%
Growth Stocks Back in Fashion!
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: Today was one of the most highly anticipated economic reports that I have seen in a long time. After the weak ISM Manufacturing report on Tuesday sent the market into a tailspin, all eyes were on today’s ISM Services report. While the Manufacturing report represents about 10% of the U.S. economy, the Services report represents 90%. The report could have gone either way today.
At 10:00am this morning the report came in a little bit lighter than expected. It did show decent growth still, however. The market immediately responded with a 350-point drop. During my live radio show today, I pretty much called the bottom of the market when the S&P 500 hit its 200-day moving average. I also reiterated my current S&P 500 target price for 6-12 months down the road.
If you missed the show, you can listen to it here: www.gundersoncapital.com/radio-show-archives
The market then turned around and closed up over 120 points for the day. All of sudden growth stocks are back in fashion. I saw big moves from Dexcom (DXCM), ServiceNow (NOW), Roku (ROKU), etc.
Are we now out of the woods with the market? We are never out of the woods with the market, but I have used earnings as my guide since early 2009, and I have been right about the market for ten straight years. Reminder: I am a market-timer.
Tomorrow, we will get a very important non-farm payrolls report. Rising layoffs and rising unemployment would be very disturbing. We have yet to see that, however.
Trading: I did just a little buying in a few stocks that I already own. I bought them for new clients.
Tweets: I was very active on Twitter and StockTwits today. I sent out tweets on DXCM, CYBR, CVNA, COR, CHTR, BX, BABA, COR, ATVI, ANPDY, ABT, and AKAM.
Here was the mood of the market as we started a new day.
Futures point to slight turnaround
• Wall Street is looking to recover from an 800-point plunge over the last two sessions as investors track fears of an economic recession and latest tariff ruling from the WTO.
• After Tuesday's dire picture on manufacturing from the ISM, investors now await today's ISM services report and tomorrow's non-farm payrolls data to confirm or quash concerns about world economic growth.
• Ahead of the release, U.S. stock index futures indicate a higher open, with the Dow ahead by 88 points, and S&P 500 and Nasdaq up 0.4% and 0.5%, respectively.
Jobless claims stay muted.
Jobless claims stay range bound
• Initial Jobless Claims +4K to 219K vs. +216K consensus, 215K prior (revised).
• Continuous Claims: -5K to 1.656M vs. 1.645M consensus, 1.656M prior (revised).
This was the number that I was watching today:
DJIA 200-day moving average=25,840
Another tariff war brewing?
Which EU goods will be hit by tariffs?
• The WTO on Wednesday gave the U.S. the go-ahead to impose tariffs on as much as $7.5B worth of European exports annually - in retaliation for illegal government aid to Airbus (OTCPK:EADSY) - and the Trump administration is wasting no time in levying them.
• A list has been released of hundreds of European products that will get the new tariffs as early as Oct. 18, including 25% levies on French wine, Italian cheese and single-malt Scotch whisky.
• The main target, however, is Airbus aircraft made in the EU, which face a 10% duty that could hurt U.S. airlines such as Delta (NYSE:DAL) which have billions of dollars of orders waiting to be filled.
Pretty soon they will pay us to trade!
E*Trade jumps into the $0 commission pool
• E*Trade (NASDAQ:ETFC) joins the fray in eliminating retail commissions for online U.S.-listed stock, ETF, and options trades, following TD Ameritrade (NASDAQ:AMTD), Charles Schwab (NYSE:SCHW), and Interactive Brokers (IEX:IBKR).
• It also reduces the options contract charge to 65 cents per contract for all traders while maintaining its active trader pricing at 50 cents per contract.
• Changes take effect on Oct. 7, 2019.
Fidelity may soon follow with price cuts, Morgan Stanley says
• Morgan Stanley analyst Michael Cyprys writes that the likelihood that Fidelity will reduce prices after E*Trade (NASDAQ:ETFC), TD Ameritrade, and Schwab (NYSE:SCHW) cut online trading commissions to zero.
• Potential areas of pricing risk include per-contract fee on options (which will have more of an impact on ETFC and AMTD), commissions on futures, foreign currencies, and margin lending.
• Schwab may rally if Fidelity "responds in a manner that leads to minimal to no EPS impact for Schwab," Cyprys writes.
• Estimates ETFC EPS will be hurt by 23%, in line with Morgan Stanley's previous expectation.
• If LPL Financial (NASDAQ:LPLA) matches, will hurt its EPS by 26 cents.
• Sees Virtu Financial (NASDAQ:VIRT) as potential winner from e-broker commission war, as trading activity may rise.
TESLA feeling the heat.
Tesla on the hot seat after deliveries report
• Wedbush Securities analyst Dan Ives sees Tesla's (NASDAQ:TSLA) Q3 deliveries report as a step in the right direction.
• "The most important number in the release was the key Model 3 deliveries which came in at 79,600 and were above the Street’s 77,010 estimate as this remains the linchpin of the Tesla growth story for the coming years," says Ives.
• "While the doomsday scenario is off the table with cash in the coffer (convert) and Model 3 sales ramping, the question on the minds of investors is around profits into 2020. The stock will be range-bound in our opinion until Musk & Co. update the Street with the financial results, profitability picture, and 4Q guidance later this month trying to regain the credibility of the Street," he adds.
• Wedbush sticks with a Neutral rating on Tesla and price target of $220.
• Elsewhere on Wall Street: JMP Securities lowers Tesla to a Market Perform rating from Outperform. The firm says it's concerned that demand for Tesla cars is levelling off. "We know of no operational issues that could have prevented TSLA from delivering more vehicles if demand were available," notes the firm.The consensus sell-side rating on Tesla is Hold.
Large Internet stocks 'compelling' heading into earnings - RBC
• Large-cap Internet stocks have declined enough since Q2 earnings that they're now "downright compelling," says RBC.
• That puts a spotlight on companies such as Facebook (NASDAQ:FB), Alphabet (GOOG, GOOGL) and Amazon.com (NASDAQ:AMZN).
• Highest expectations going into the new earnings season rest on Twitter (NYSE:TWTR), Akamai (NASDAQ:AKAM) and Booking Holdings (NASDAQ:BKNG), analyst Mark Mahaney says, while there's lowest expectations on Lyft (NASDAQ:LYFT), Uber (NYSE:UBER) and Spotify (NYSE:SPOT).
• Several Internet stocks he tracks are trading below three-year multiples for EV to projected EBITDA, while demand trends overall are "very robust."
Good news for AMD.
Analysts praise AMD's Microsoft win
• Lynx Equity says Microsoft's endorsement of AMD (AMD -2.3%) "is a harbinger of things to come in the notebook space for AMD, where its share currently is in the mid-teens."
• Wells Fargo says the "announcement reflects another validation of AMD’s latest CPUs and competitive positioning against Intel."
• The firm believes "investors could initially consider this representing as much as ~$5-15M of quarterly AMD revenue from this design win."
• Related: Microsoft's Surface Laptop 3 event included a 15-inch model with a processor from AMD rather than Intel.
I never left!
Bull returns to ServiceNow
• SunTrust reinstates ServiceNow (NYSE:NOW) at Buy with a $321 target, a 30% upside.
• ServiceNow will report earnings on October 23. Consensus estimates expect $885.82M in revenue and $0.88 EPS.
• NOW shares are up 0.1% after hours to $247. The company has a Buy average Sell Side rating.