Friday 9/6/19=DJIA +88 NASDAQ +2
It was a very good week in the market. Friday ends on a quiet note.
Daily Wrap: The market ended a very good week on a quiet note. Gold had a pretty good sell-off and the bond market was also quiet. The monthly jobs report was a little weaker than expected. I think that you can blame the ongoing trade war with China. The two side will meet in October, however.
Trading: I did not do any buying or selling today.
Tweets: I was active on Social Media today. I sent out tweets on V, TWTR, LULU, COST, ACB, CGC, ASML, APLS, and AMBA.
Thursday’s action really helped the technicasl of the market.
- Stocks surged as hopes for a U.S.-China trade truce were reignited after the two sides agreed to hold high-level talks next month, which lifted equity markets around the world.
- Better than expected U.S. factory orders and non-manufacturing activity for August solidified the early risk-on sentiment that was maintained throughout the day.
- "Hopes of a trade resolution... shine brightly. That being said, I think you have to be a little bit careful," said JJ Kinahan, chief market strategist at TD Ameritrade, adding "we've been down this path a few times before."
- The S&P 500 (+1.3%), Dow Jones Industrials (+1.4%) and Nasdaq Composite (+1.8%) all closed above their 50-day moving averages.
Thursday’s action really helped the technical of the market.
Jobless claims still light.
- Initial Jobless Claims +1K to 217K vs. +215K consensus, 216K prior (revised).
- Continuous Claims: -39K to 1.662M vs. 1.685M consensus, 1.701M prior (revised).
- August nonfarm payrolls: +130K vs. +160K consensus, and +159K previous (revised from +164K)
- Unemployment rate: 3.7% vs. 3.7% consensus, and 3.7% previous.
Jobs report disappoints. This almost guarantees a rate cut at the October meeting.
- Digging into the jobs report numbers, not only did August jobs growth of 130K fall short of the 160K consensus, but the July number was revised down to 159K from the prior print of 164K.
- Job growth is clearly slowing from a year ago. Nonfarm payroll employment growth averaged 158K per month so far this year compared with the average monthly gain of 223K in 2018.
- That's not surprising, considering that uncertainty, especially about tariffs and trade policy were cited as concerns in the Fed's Beige Book report.
Some profit-taking in gold finally.
- Gold prices (GLD -2.5%) logged their largest one-day dollar loss in nearly three years, with December Comex gold settling -2.2% at a two-week low $1,525.50/oz., following news that the U.S. and China agreed to work toward a fresh round of trade talks and stronger than expected U.S. private sector employment data helped to ease worries about a slowing economy.
- "The gold market trading at highs was ambushed by strong U.S. data from ADP to ISM," said Tai Wong, head of base and precious metals derivatives trading at BMO, adding that the data "also savaged a frothy bond market, which helped rive the slide in gold."
- December silver (SLV -4.7%) also plunged, -3.8% to $18.80/oz., with the most-active contract suffering its largest one-day dollar and percentage drop in more than a year just a day after settling at a three-year high.
- Frankfurt +0.04%.
Some good reports on the U.S. economy.
- July Factory Orders: +1.4% to 500.3$B vs. +1.0% consensus and +0.5% prior (revised from +0.6%).
- August ISM Non-Manufacturing Index: 56.4 vs. 54.0 consensus, 53.7 prior.
- Business activity 61.5% vs 53.1.
- New Orders 60.3% vs 54.1.
- Employment 53.1% vs 56.2.
More stimulus from China.
- Looking to further stimulate the economy, the People's Bank of China is reducing the amount of funds banks have to hold in reserve as the trade war drags on.
- Effective September 16, the reserve requirement ratio will be cut by 50 bps and it would further reduce that ratio by 100 basis points for some qualified banks.
- The move was the third action of its kind this year and the seventh since early 2008, releasing another 900B yuan ($126.35B) of liquidity into the world’s second-largest economy.
- The Shanghai Composite closed up 0.5% at 2,999 ahead of the news.
- 's payments department.
- The development of the coin would help protect country’s foreign exchange sovereignty as commercial applications of such currencies expanded.
More evidence of an overheated bond market.
- Sales of investment-grade corporate bonds came to $54B in the U.S. through Wednesday, putting the week on track to be the busiest ever for corporate bond deals, with at least $70B more projected for the rest of the month, Bloomberg reports.
- Falling yields lured corporate issuers into a wave of refinancing, as demand for U.S. debt remains strong. Consider that there's more than $16T of bonds in Europe and Asia paying negative yields.
- Activity is also picking up in junk bonds and leveraged loans.
- For investment-grade companies, the average yield on bonds was 2.77% as of Wednesday, according to Bloomberg Barclays index data, vs. 4.3% in late November. A company selling $1B of debt would save $15.3M of annual interest, before taxes.
- It's not certain how long the surging corporate debt offerings will last; on Thursday the 10-year Treasury yield jumped as much as 12 basis points to 1.59%.
- Companies with near-term financing needs should be looking to act soon, said Jenny Lee, co-head of leveraged loan and high-yield capital markets at JPMorgan Chase. “Things potentially could shut down or get more difficult as we head toward the back half of this year.”
Facebook taking on Match.
- Facebook launches Dating in U.S.; MTCH, IAC lower
- With a live event, Facebook (FB +1.9%) has launched its Dating feature across the United States.
- "Finding a romantic partner is deeply personal, which is why we built Dating to be safe, inclusive and opt-in," the company says. "Safety, security and privacy are at the forefront of this product."
- While the experience is centered on Facebook (and the company says data will live there and not be shared across platforms), the company says users can connect Instagram accounts to show Instagram stories on their dating profile and connect with their followers there.
- As previously reported, users will be able to create a Dating profile separate from their main Facebook profile, and it will be suggested to others who have also opted in to Dating.
- By default it won't match people with Facebook friends, but if two users select each other as "Secret Crushes," they'll be matched.
- Dating rival Match Group (NASDAQ:MTCH) has turned down 6.4% today; parent IAC/InterActiveCorp (NASDAQ:IAC) is off 4.7%.
Costco breaks through $300 per share.
- Costco (NASDAQ:COST) report sales rose 6.9% to $11.79B in August.
- Comparable sales (ex-gas and F/X) were up 5.9% in the U.S. during the month vs. +4.1% consensus. A 6.1% comp was reported for Canada and 5.9% comp for other international markets.
- E-commerce sales increased 23.9% during the month.
- COST +0.05% AH.
I featured Lululemon once again on today’s show. I remain long. New, all-time high for stock.
- Lululemon Athletica (NASDAQ:LULU): Q2 GAAP EPS of $0.96 beats by $0.07.
- Revenue of $883.35M (+22.1% Y/Y) beats by $38.32M.
- Shares +2.5%.