Tuesday 9/10/19=DJIA -73 NASDAQ -3
The market, especially the Nasdaq is still shaky.
Daily Wrap: I have two theories as to why the so-called “momentum” stocks have become so shaky all of a sudden. Theory number one: Work got out that John Bolton wanted to attack someone (probably Iran) in the Middle-East.
That would explain the big move in the oil and natural gas stocks on Monday. That would also explain the big move out of the momentum stocks (risk-off) on Monday and Tuesday. The markets did improve quite a bit when it was announced that he had been fired by Trump.
Theory #2: Some big firm is busy making a contrarian move out of the leading sectors and into the laggards. This would also explain today and yesterday’s big sell-off amongst the leading stocks.
Theory #2b: Tomorrow is 9/11. Risk off just in case?
The bottom line is this. Every sell off in the leadership stocks over the last ten-plus years has been a buying opportunity. It does not look any different this time around.
Trading: I was busy adding to several positions for new clients today. I am also getting very nervous about some other positions.
Tweets: I was fairly active on Social Media today. I sent out tweets on CSX, BKNG, ARDX, SPLK, SHOS, QQQ, IPAY, IJR, and HMY.
Dem Debate on Thursday
This was the mood of the market as we got ready to start a new week of trading.
- Japan +0.35%.
- Hong Kong +0.01%.
- China -0.12%.
- India Closed.
- London -0.07%.
- Paris -0.54%.
- Frankfurt -0.35%.
- Democrats are prioritizing action on gun control after returning from their summer recess, with Nancy Pelosi and Chuck Schumer sending a letter President Trump demanding he express support for universal background checks.
- Lawmakers in the House passed bipartisan legislation earlier in the year that would strengthen federal background check laws, but Mitch McConnell has said he will not let the Senate vote on the measure without a clear indication from Trump.
- "The administration is in the process of studying what they are prepared to support, if anything. And I expect to get an answer to that next week," he told the The Hugh Hewitt Show on Sept. 3.
Finally, a little breathing room for the bank stocks.
- Threatening to collapse below 1.40% just a handful of sessions ago, the 10-year Treasury yield is up another six basis points today to 1.62%. While the Fed Funds rate of 2.25% continues to tower over that number, the yield curve is at least somewhat less inverted (and the Fed is expected to trim 25 bps from the Fed Funds rate later this month).
- That's helping those who rely on positive carry for profits. Gains in the financial sector (XLF +1.4%) today are far outpacing the broader market.
- Some individual players: Bank of America (BAC +2.9%), Citigroup (C +3.5%), PNC Financial (PNC +3%), KeyCorp (KEY +2.9%), Brighthouse Financial (BHF +3.2%), AGNC Investment (AGNC +1.1%), Armour Residential (ARR +1.7%)
The oil stocks really bolted higher on Monday.
- Crude oil prices (USO +2.3%) enjoy strong gains after Saudi Arabia's newly chosen energy minister, Prince Abdulaziz bin Salman, confirmed expectations that there would be no radical change in the country's oil policy.
- U.S. October WTI +2.3% to $57.81/bbl, November Brent +1.6% to $62.51/bbl.
- Abdulaziz said the framework of Saudi policy would not change and that an agreement between OPEC and its allies to curb production by 1.2M bbl/day would continue "with the will of everybody."
- "The new energy minister is expected to continue his predecessor’s policy, i.e. to keep oil supply tight," Commerzbank's Carsten Fritsch says, adding that this week's OPEC+ Joint Technical Committee meeting to discuss progress on production cuts likely will not bring any changes to policy.
- Prices also are supported by a rise in oil imports in China in August, with shipments to the world's biggest importer up 3% from July and nearly 10% higher YTD from a year ago.
- The top five gainers on the S&P 500 are all oil and gas names: HP +5.9%, NBL +5.4%, NOV +5.3%, SLB +4.8%, HAL +4.6%.
This is the bottom ranked sector in the market. Someone is suddenly buying.
- Gas-focused producers enjoyed strong gains today as October natural gas futures (NYSEARCA:UNG) surged 3.6% to $2.585/MMBtu, their highest settlement since late May.
- Analysts said forecasts for warmer than normal temperatures in many parts of the U.S. have increased demand prospects for the fuel.
- Notable gainers in the group included CHK +20%, GPOR +17.5%, SWN +16.6%, RRC +16.5%, AR +9.9%, EQT +9.9%, COG +4.8%.
- ETFs: UNG, UGAZ, DGAZ, BOIL, GASL, FCG, KOLD, UNL, GASX, GAZB, GAZ
Balancing the budget is not a winning platform for any presidential candidate. Giving away free stuff and breaking the budget even further is much more popular.
- The federal deficit has surpassed $1T in the first 11 months of fiscal 2019, according to the Congressional Budget Office, though it is likely to be reduced in September as quarterly tax payments are paid.
- In its most recent baseline projections, CBO estimates that the 2019 budget deficit would be $960B, noting that the amount would be $181B higher than last year's deficit.
They must have a big safe.
- China has added nearly 100 tons of gold to its reserves since it resumed buying in December, as government purchases accumulate bullion to help diversify their reserves amid a rally in prices and the drag of the trade war with the U.S.
- The People's Bank of China raised bullion holdings to 62.45M oz. in August from 62.26M oz. in July; in tonnage terms, August's inflow totaled 5.91 mt, following the addition of ~94 mt in the previous eight months.
- Trade war restrictions - or sanctions, with Russia - give "an incentive for these central banks to diversify," says National Australia Bank JohnSharma. "Also, with increasing political and economic uncertainty prevailing, gold provides an ideal hedge, and will therefore be sought after by central banks globally."
No recession in sight yet.
- Chain store sales increased 6.4% for the week ending September 7, according to the latest report from Johnson Redbook.
- Chain store sales were up 6.5% a week ago.
- Target (NYSE:TGT) announces plans to add more than 130K seasonal team members in the U.S. for the upcoming holiday season vs. 120K a year ago.
- The hiring blitz includes a two-fold increase in the number of roles focused on fulfilling digital orders from Target stores. About 8K of the job opportunities are within distribution and fulfillment centers.
- The retailer says it also committed to offer existing team members additional hours based on their preference and availability.
- UPS (UPS +1%) plans to hire about 100K seasonal employees to support the holiday surge in package volume from November to January.
- "We expect another record Peak season this year, with daily package deliveries nearly doubling compared to our average of 20 million per day," notes UPS Chief Operating Officer Jim Barber.
- The full- and part-time seasonal positions are primarily package handlers, drivers and driver-helpers. Many of them are likely to be hired on full-time by the shipping giant.
Worst IPO now?
- SoftBank (OTCPK:SFTBY), the biggest outside shareholder in WeWork, is urging the lossmaking property group to shelve its IPO, FT reports.
- Advisors for the We Company (WE) were said to still be testing investor appetite at a valuation of between $15B-$20B, far below the $47B valuation given to WeWork when SoftBank invested $2B in the business this year.
- If the company cancels the IPO, it stands to miss out on nearly $10B of capital, likely halting an aggressive expansion that has seen WeWork open 528 locations in more than 110 cities.
- WeWork (WE) will rely on junk bonds for financing for the foreseeable future, according to an anonymous exec who spoke to Bloomberg.
- WE might also issue whole-business bonds.
- Currently WeWork’s $669M of 7.875% bonds due 2025 are down 1.75 cents to 101 cents on the dollar, down from an August 15 high and the largest decline since early July.
- Related Dow Jones recently reported that WeWork could push its IPO valuation below the $20B low end of its rumored range.
Do the early investors give a hoot about the secondary market investors?
- CNBC reports that WeWork (WE) will move ahead with its IPO process despite investor concerns that the valuation could dip below $20B, far below the $47B at the time of SoftBank's (OTCPK:SFTBY) last investment.
- The roadshow could kick off as soon as Monday.
- SoftBank, WeWork's largest investor, is reportedly urging the company to shelve its IPO plans.
- Canceling the listing would cause WE to miss out on nearly $10B of capital.
- Related: Seeking Alpha Authors are weighing in on the WeWork IPO and have an overall
Big day for Apple, but not even close to what these shows used to conjure up.
- Apple's (NASDAQ:AAPL) annual fall event takes place today in Cupertino, California, where the tech giant is expected to unveil three new iPhone models, an updated Apple Watch and more details on its new streaming service, Apple TV+.
- Names and sizes? Analysts and industry watchers are expecting a 5.8-inch iPhone 11 Pro, 6.5-inch 11 Pro Max and a low-priced 6.1-inch 11R.
- The iPhones are rumored to have improved battery life with better charging power, faster processors and an enhanced camera with three lenses on the Pro models.
- For the first time ever, Apple will stream the event on YouTube at 10:00 a.m. PT.
Ford is becoming an Edsel.
- Moody's lowers Ford (NYSE:F) to a Ba1 rating from Baa3 on concerns over the automaker's balance sheet.
- Moody's on Ford: "The Ba1 ratings reflect the considerable operating and market challenges facing Ford, and the weak earnings and cash generation likely as the company pursues a lengthy and costly restructuring plan. The restructuring is expected to extend for several years with $11 billion in charges, and a cash cost of approximately $7 billion. Ford is undertaking this restructuring from a weak position as measures of cash flow and profit margins are below our expectations, and below the performance of investment-grade rated auto peers. Moreover, these measures are likely to remain weak through the 2020/2021 period including a lengthy period of negative cash flow from the restructuring programs."
2.375% on a slot-machine maker? The demand for corporates is ridiculous right now.
- International Game Technology (NYSE:IGT) has priced €500M 2.375% senior secured notes due 2028.
- Settlement of the Notes is expected to occur on September 16.
- IGT intends to use the net proceeds from the sale of the Notes to repay in full utilizations under its senior revolving credit facilities and for general corporate purposes which may include the scheduled €320M amortization payment due under its senior term loan facility on January 25, 2020.
- IGT -0.97% premarket.
- Previously: International Game Technology to offer €500M senior secured notes due 2028 (Sept.
- Toll Brothers (NYSE:TOL) has priced an underwritten public offering of $400M of 3.800% Senior Notes due 2029 issued by Toll Brothers Finance Corp., a wholly-owned subsidiary of the Company and interest payable semi-annually on May 1 and November 1, commencing May 1, 2020.
- Settlement of the Notes is anticipated to occur on September 12.
- The Company expects to use the net proceeds from the Offering for general corporate purposes, which may include repayment of indebtedness.
The turnaround at Boeing continues…
- Boeing (BA -1.4%) is lower after suspending load testing of its new 777X aircraft, the latest blow for the company whose 737 MAX faces delays that threaten to prevent it from resuming North American flights during the December holiday season.
- But Morgan Stanley keeps the faith, saying Boeing has become its top pick in the aerospace and defense industry, and believes the 737 MAX grounding "creates a buying opportunity in a steady aerospace cycle," setting a $500 stock price target.
- Although some investors fear the fallout from the 737 MAX crashes will weigh on orders over the long term, Morgan Stanley believes Boeing still has "considerable" growth potential.
- Stanley's upbeat view comes amid signs that, at least among short-term traders, sentiment remains bearish; Schaeffer’s Investment Research says options activity suggests traders are leaning more toward puts, bets that pay out if Boeing's share price declines.
End of an era.
- While the move had been planned for more than a year, Jack Ma has officially stepped down as the chairman of Alibaba's (NYSE:BABA) board.
- Daniel Zhang will take up the role and continue as the Chinese e-commerce giant's CEO.
- 2019 is a big year for Alibaba. The company is celebrating its twentieth anniversary as it looks back at milestones that include Taobao, Alipay, Tmall and Ant Financial, as well as its cloud business, Singles Day extravaganza and New York IPO.
I hope it is better than their chili.
- Wendy's (NASDAQ:WEN) plans to launch its breakfast menu across the U.S. system in 2020 after an initial rollout at 300 locations.
- "Launching breakfast in our U.S. restaurants nationwide provides incredible growth opportunities," says CEO Todd Penegor.
- The national launch into breakfast daypart across the U.S. system in 2020 will lead to an one-time upfront investment during 2019 of ~$20M. The company now expects EPS to decline by 3.5% to 6.5% this year.
- WEN -2.87% AH to $21.32 paring an earlier loss of ~9% during the session.
Five Below is on a roll.
- Craig Hallum picks up coverage on Five Below (NASDAQ:FIVE) with a Buy rating and price target of $168.
- Analyst coverage on the retailer leans to the bullish side, with 16 Buy-equivalent ratings on the books vs. 6 Hold-equivalent ratings and only one Sell-equivalent rating.
- Shares of Five Below are up 24.4% YTD.
Shopify goes shopping.
- Shopify (NYSE:SHOP) has a deal to acquire 6 River Systems for $450M in cash and stock.
- The target is a provider of collaborative warehouse fulfillment solutions. Shopify plans the deal to accelerate growth of its Shopify Fulfillment Network.
- The deal is about 60% cash and 40% Shopify Class A subordinate voting shares. That includes shares and options valued at $69M issued to 6 Rivers' founders and employees.
- Shopify expects the deal to close in Q4. The acquisition is expected to generate annual billings of about $30M in 2020.
Carvana is the number two ranked stock in my Best Stocks Now Database right now.
- Carvana (NYSE:CVNA) says it launched as-soon-as-next-day vehicle delivery in the Tennessee cities of Clarksville, Johnson City and Kingsport.
- Carvana now offers as-soon-as-next-day vehicle delivery in 141 markets across the U.S.