Thursday 8/29/19=DJIA +326 NASDAQ +116
The rhetoric between China and the U.S. CALMS down!
Daily Wrap: The two sides in the trade war decided to kick it down a notch and the market loved it. There were also some good economic reports and earnings. Dollar General and Burlington Stores were the stars of show today. The Gold stocks and the bond market took a breather today.
Trading: I did very little trading today. Just looked at a lot of nice charts. I was active on StockTwits, Twitter, and Seeking Alpha today. I sent out tweets on the following stocks: MLSS, HD, DG, CMG, BURL, AZN, AKAM, and AGG.
The futures were up good this morning.
- U.S. stock index futures are continuing a pre-Labor Day rally as China indicated it wouldn't immediately retaliate against the latest U.S. tariff increases set for Sept. 1. Dow +0.7%; S&P 500 +0.6%; Nasdaq +0.9%.
- The two countries are also discussing face-to-face talks to be held in the U.S. in September, according to China’s Commerce Ministry, which said it's willing to resolve the trade war with a "calm attitude."
- On the economic calendar, a second reading of U.S. GDP growth will be released this morning that's expected to be revised down slightly to 2.0%, after showing a 2.1% growth in its earlier estimate.
Stocks have a better dividend yield than the 30-yr treasury. They also have a lot more risk, however.
- With the yield on 30-year Treasuries falling below the 1.98% dividend yield from U.S. stocks, investors can now get more income from dividends on S&P 500 shares than on even the longest-dated government debt.
- "It's a really big deal," said Jonathan Golub, chief U.S. equity strategist for Credit Suisse. "If your primary concern is steady cash to live off then the idea that you can get a better return of capital from equities is important, but also out of sync with what we have been trained over time to think is normal."
- Still a dilemma? A recession could put dividends at risk, not to mention the danger of a big fall in share prices, which have until recently been setting record highs.
Barkin does not see a recession looming.
- "If you look at the data, the national economy appears great," said Richmond Fed President Tom Barkin in prepared remarks for the West Virginia Chamber of Commerce annual meeting.
- He points to unemployment at 50-year lows, solid GDP growth, and strong consumer spending as reasons to be optimistic about the U.S. economy.
- However, weaker international economies, uncertainty -- particularly around trade -- and a drop in business investment in Q2 prompted the Fed's FOMC to make a "mid-cycle" interest rate cut in an effort to provide "a little insurance for the continued growth of the economy and strength of the labor market," he said.
- Of course, he gave no clues as to what the Fed's next move might be. "We are monitoring" the July cut's impact, Barkin said.
- Argentina is looking to restructure its debt with the IMF and bondholders in an effort to stem a confidence crisis that has upended the country’s financial markets.
- The nation will now delay $7B of payments on short-term local debt due this year and will seek a "voluntary reprofiling" of $50B of longer-term debt, as well as postponement on the repayment of $44B of loans from the IMF.
- The move will probably be judged as another sovereign default, although Argentina is at the moment only seeking a voluntary extension of repayment times, rather than "haircutting" interest payments or the size of its debt.
Still a strong labor market.
- Initial Jobless Claims +4K to 215K vs. +213K consensus, 211K prior (revised).
- Continuous Claims: +22K to 1.698M vs. 1.680M consensus, 1.676M prior (revised).
Another mall based retailer about to fold.
- Forever 21 is considering filing for bankruptcy as efforts to restructure its debt run dry, CNBC reports.
- Its real estate footprint is particularly large, with more than 815 stores globally, and any closures would likely put pressure on the mall owners that lease spaces to the company.
- Forever 21 is Simon Property Group's (NYSE:SPG) seventh-largest in-line tenant in terms of how much rent it brings the landlord, with 99 stores across its portfolio.
- Brookfield Property Partners (NASDAQ:BPY) also leases considerable space to the apparel retailer.
Best Buy is feeling the heat from online retailing.
- Best Buy (NYSE:BBY): Q2 Non-GAAP EPS of $1.08 beats by $0.09; GAAP EPS of $0.89 misses by $0.10.
- Revenue of $9.54B (+1.7% Y/Y) misses by $10M.
- Shares +0.07% PM.
Disaster of the day. I am glad I sold it a few weeks ago. It is good to have an exit strategy.
- Ollie's Bargain Outlet (NASDAQ:OLLI): Q2 Non-GAAP EPS of $0.35 misses by $0.11; GAAP EPS of $0.38 misses by $0.09.
- Revenue of $333.87M (+15.9% Y/Y) misses by $5.78M.
- Shares -12.58%.
Decent numbers from Five Below.
- Five Below (NASDAQ:FIVE) is up 5.55% premarket after posting an initial post-earnings drop.
- Investors may be latching on to the detailed explanation by Five Below management on the conference call (transcript) of the company's tariff mitigation strategy and price increase testing.
- Solid earnings reports from Dollar Tree and Dollar General could also be helping to tip sentiment.
- Previously: Five Below -5% after comp sales miss (Aug. 28)
One of the starts of the day!
- Burlington Stores (NYSE:BURL) reports comparable-store sales rose 3.8% in Q2.
- New and non-comparable stores contributed an incremental $115M in sales during the quarter.
- Gross margin rate flat at 41.4%.
- Adjusted SG&A expense rate decreased 30 bps to 26.6%.
- Adjusted EBITDA grew 12% to $170.33M.
- Adjusted EBIT margin rate up 10 bps to 7.1%.
Just a so-so report.
- Dollar Tree (NASDAQ:DLTR): Q2 GAAP EPS of $0.76 beats by $0.01.
- Revenue of $5.74B (+3.8% Y/Y) beats by $20M.
- Shares +1.51% PM.
- Press Release
The stock of the day!
- Dollar General (NYSE:DG): Q2 Non-GAAP EPS of $1.74 beats by $0.17; GAAP EPS of $1.65 beats by $0.08.
- Revenue of $6.98B (+8.4% Y/Y) beats by $90M.
- Shares +3.9% PM.