Sorry that I did not post on Wednesday. We were evacuating from our home near Charleston S. C.
Thursday 9/5/19=DJIA +385 NASDAQ +133
China and U.S. to Meet in October.
Daily Wrap: All it took was an announcement of an October meeting between the U.S. and China and the market blasted off today. This follows yesterday of a pact between China and Hong Kong. The market is up almost 600 point in just two day. Today the momentum stocks lagged while the trade related stock let the market. Both the bond market and precious metals sector cooled off considerably today.
Trading: I did a lot of buying today, but I was buying stocks that I already own for new clients. I made one outright sell today of a fairly-large position. I will more than likely replace tomorrow with a brand-new stock.
I broadcast the show live today from Columbia, S.C. as we evacuated Charleston yesterday to let Dorian pass through. It looks like our neighborhood survived just fine. We are grateful!
Here is a re-cap of Wednesday’s market.
- Stocks rebounded from yesterday's sharp losses, as easing tensions in Hong Kong and the reduced likelihood of a messy Brexit offered some optimism to investors worried about global growth.
- Hong Kong's top executive agreed to withdraw its extradition bill, in the first major concession to protesters' demands after months of unrest, but it is hardly clear that the crisis is over.
- Also, British lawmakers voted to again to potentially delay Brexit, significantly reducing the chances that the U.K. will leave the bloc abruptly on Oct. 31.
- "Markets have been kind of pricing in the worst, and now people are thinking, 'Maybe the world isn’t ending just yet'," said Brad McMillan, chief investment officer of Commonwealth Financial Network.
- Today's advance was broad-based, with all 11 S&P 500 sectors finishing higher, led by information technology (+1.7%), communication services (+1.6%), energy (+1.4%), industrials (+1.3%) and financials (+1.1%).
- Despite today's gains, trading volume remained relatively light, as it has in recent sessions.
- U.S. Treasurys continued to see increased demand despite the rally in equities, pushing the two-year yield down 3 bps to 1.44% and the 10-year yield a basis point lower to 1.44%.
Here is what ignited the market today.
- China's Ministry of Commerce says leaders of the U.S. and Chinese trade talks held a phone call and agreed to meet early next month in Washington, D.C., for another round of negotiations.
- Liu He, China's top negotiator on trade, spoke with U.S. Trade Representative Lighthizer and Treasury Secretary Mnuchin, according to a statement from the Commerce Ministry.
- Reacting to the news, the Shanghai Composite index jumped 1.8% and Japan's Nikkei surged 2.4%, while U.S. Dow and S&P futures have popped ~1%.
I don’t know about 10,000 points. Maybe a thousand.
- President Trump says U.S. stocks would be much higher if he hadn't imposed tariffs against Chinese good, but said he had to take action against China's trade and economic policies.
- "Our stock market would be 10,000 points higher than it is right now, but somebody had to do this," he told reporters in the Oval Office.
- "To me, this is much more important than the economy," he added.
- It "had to be done, and I'm not talking about purely economically, I'm talking about other ways also. It was out of control and they were out of control," Trump said.
This is not the news that recessions are made of.
- Concerns about tariffs and trade policy continued even as the U.S. economy expanded at a "modest pace through the end of August," the Federal Reserve observes in its latest Beige Book.
- The "modest pace" matches with the pace described in the July report. Manufacturing activity, though, was down slightly from the previous report and agricultural conditions remained weak.
- The majority of businesses remained optimistic about the near-term outlook, it said.
- Employment also rose at a "modest pace, on par with the previous reporting period."
- Also, on net, prices increases continued at (you guessed it) a "modest" pace since the last report.
- "Although firms in some Districts noted an ability to pass along price increases, manufacturers relayed limited ability to raise prices," the report said.
- There's little reaction from the equities markets; the Nasdaq is up 1.1%, the S&P 500 rises 0.8%, and the Dow gains 0.7% in midafternoon trading.
Either is this.
- The Baltic Dry Index rose 0.68% to 2,518 points to carve out a 10th straight day of gains. Higher Chinese ore prices and some cooling off of Hong Kong tension are seen as supportive of shipping rates.
- The Capesize index was up +1.3% to help offset a 0.5% dip in the Panamax index.
- Some analysts think the increasing number of vessels entering the shipyards in order to install exhaust gas cleaning systems (scrubbers) could support pricing for the balance of 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), Seanergy Maritime (NASDAQ:SHIP), Genco Shipping & Trading (NYSE:GNK).
I guess negative interest rates are not helping the economy. How about some fiscal stimulus? Put some money into the pockets of your people.
- German factory orders fell 2.7% in July, intensifying an industrial slump that has pushed Europe's largest economy to the brink of recession.
- In light of ongoing international trade conflicts and modest business expectations in manufacturing, no fundamental improvement in momentum is in sight for the coming months," according to the country's economy ministry.
- The ECB is expected next week to unveil fresh stimulus measures as it looks to steady the bloc's economy.
DB CEO’s dire warning about negative rates. Is anyone listening to him?
- Deutsche Bank's (DB +1.4%) and UBS's (UBS) CEOs warn about the consequences of negative interest rates ahead of a key European Central Bank meeting next week.
- More monetary easing by the ECB, as widely expected next week, will have "grave side effects" for a region that has already been dealing with negative rates for five years, said Deutsch Bank CEO Christian Sewing at an event organized by German newspaper Handelsblatt.
- UBS CEO Sergio Ermotti says that negative interest rates have resulted in an "absurd situation" in which banks don't want to hold deposits.
- A further rate cut would only divide society by lifting asset prices while punishing Europe's savers who are already paying €160B ($176B) a year because of negative interest rates, Sewing said.
Is the bond market getting bloated?
- Some $18.8B flowed out of U.S.-listed equity ETFs during August as President Trump's tweets rattled markets, according to State Street Global Advisors' U.S.-Listed Flash Flows report.
- Fixed-income ETFs pulled in more than $14B during the month, making it the 49th month out of the last 50 that bond ETFs have had positive flows; pushes bond ETF assets to more than $800B for the first time.
- As volatility shook equity markets, gold-backed ETFs attracted almost $4B in August and $8.6B in the past three months, the highest three-month total since the financial crisis.
- By sector, almost $4B flowed out of financials as the yield curve inverted again. Trade-sensitive cyclical sectors -- energy, materials, industrials -- experienced outflows.
- Defensive sectors -- consumer staples and utilities -- drew in $1.6B and $726M of inflows, respectively.
Ohhhh Monsanto! ….Neil Young.
- Germany will ban the use of the Bayer (OTCPK:BAYRY +1.9%) weedkiller glyphosate from the end of 2023 and restrict its use beginning next year, the Environment Ministry says.
- Analysts say the ban will have very little impact on Bayer's bottom line, as Europe accounts for less than 10% of its total glyphosate sales, which the company does not break out; the bulk of Bayer's glyphosate sales are generated in the U.S. and South America.
- But the optics of the product being banned in Bayer's home country are jarring amid the company's insistence that it is safe to use.
- Glyphosate was developed by Monsanto under the Roundup brand; it is now off-patent and marketed worldwide by dozens of other chemical groups including Dow Agrosciences (NYSE:DOW) and Germany's BASF (OTCQX:BASFY).
- Shortly before fresh U.S. duties on $112B of Chinese goods went into effect last weekend, Target (NYSE:TGT) sent a memo to hundreds of its suppliers, warning them that it would refuse to "accept any cost increases related to tariffs."
- "Our expectation is that you will develop the appropriate contingency plans so that we don't have to pass price increases along" to customers, wrote Mark Tritton, chief merchandising officer.
- Target's shares are trading just shy of an all-time high, giving the S&P 500 company a $54.9B market capitalization.
Look out Tesla. Here comes a Porsche! Steep price, though.
- Porsche (OTCPK:POAHY) unveiled the all-electric Taycan, at simultaneous events today in Germany, China and Ontario.
- As expected, the automaker is bringing its electric luxury car to the market at high price points compared to Tesla (TSLA +0.6%), Mercedes-Benz (OTCPK:DDAIF) and BMW (OTCPK:BMWYY) models. The Taycan Turbo will list at $150,900, while the Taycan Turbo S will enter the market at $185,000.
- Porsche says owners can fast charge the Taycan batteries up to 80% in 22.5 minutes and a range of about 250 miles is anticipated. The Taycan Turbo S is said to go from 0 to 60 mph in 2.6 seconds with the help of a dual motor powered by a 93kWh lithium-ion battery pack.
Incogmeato???? Sounds corny to me.
- Kellogg (K -0.5%) announce plans to introduce Incogmeato by MorningStar Farms to its plant-based portfolio.
- The company says the new next-gen product line includes the its first ready-to-cook plant-based burger to be sold in the refrigerated meat case and frozen, plant-based Chik'n tenders and nuggets.
- "As more consumers are choosing a 'flexitarian' lifestyle and actively reducing meat, we're thrilled to be extending the MorningStar Farms portfolio with a delicious and satisfying meat-like experience," says MorningStar Farms exec Sara Young.
- The new Incogmeato by MorningStar Farms items are expected to land in grocery stores and foodservice channels in early 2020.
- Shares of Kellogg rose 6% earlier in the summer off speculation of a plant-based Morningstar product line.
Good news for Teladoc.
- Teladoc Health (TDOC +4.9%) perks up average volume on the heels of a published item from UnitedHealth Group's (UNH -0.6%) UnitedHealthcare unit extolling the benefits of its Virtual Visits telemedicine program, used by ~500K members since its launch in 2016.
- Most users thus far have been women who appear to have warmed to the convenience of online doctor consultations sooner than men. A recent survey of 5,000 consumers revealed that ~75% would consider using virtual care with a doctor for their dermatology, oncology, pre- and post-surgical and pregnancy checkups as well as behavioral health issues.
- VP of Product Innovation Patrick Keran cites two primary hurdles constraining the growth of telemedicine: ease of use and increased awareness and promotion from employers.
- TDOC will be joining the UnitedHealthcare network this month as the national Virtual Visit provider.
I featured Charter on my radio show today.
- Charter Communications (NASDAQ:CHTR) is up 1.2% and tagged an all-time high this morning after Evercore boosted estimates and its price target.
- The firm has raised its target to $460 from $450 (10.5% upside) on expectations for higher cash flow from what it thinks will be earlier-than-expected service price increases: early October rather than early 2020. Those will be primarily focused on video (7-12% increase in package prices) and stand-alone broadband, it says.
- It's also boosting revenue and EBITDA forecasts for 2019 and 2020 a bit.