Monday 6/10/19=DJIA +78 NASDAQ +81
I began the week with 531 B+ or better ranked stocks from my database of 5,140 stocks, etf’s and mutual funds. This is a very select list. This proprietary ranking is based on a combination of value, momentum, and safety. If a valuation cannot be calculated, then it is based solely on momentum and safety. In addition to this, I begin a new week with 343 A+ or better Momentum stocks. I check this list every day.
Here is how we finished last week:
- Stocks extended their rally to cap their strongest week since November, as a weaker than expected employment report appeared to raise the odds of easier monetary policy from the Federal Reserve.
- The U.S. economy added 75K jobs in May, marking the second time in four months that jobs growth failed to reach 100K, and wage growth also slowed.
- Stocks have surged since Fed Chairman Powell said on Tuesday the central bank would "act as appropriate to sustain the expansion," suggesting a possible rate cut as a solution to weakening economic data and uncertainty over trade.
- For the week, the Dow rallied 4.7%, the S&P surged 4.4%, the Nasdaq climbed 3.9% and the Russell 2000 lagged a bit with a 3.3% gain.
- In today's trade, the optimism contributed to big gains in Facebook (+3%), Amazon (+2.8%), Microsoft (+2.8%), Apple (+2.7%) and Alphabet (+2.1%).
- Their outperformance contributed to the leadership from the S&P 500 information technology (+1.9%), consumer discretionary (+1.6%),and communication services (+1.5%) sectors, but the financials (-0.2%) and utilities (-0.7%) groups were left out of the rally.
- U.S. Treasury prices rose, with the two-year yield sliding 5 bps to 1.84% and the 10-year yield shedding 4 bps to 2.08%.
- WTI crude oil futures rose 2.7% to settle at $53.99/bbl after Saudi Arabia's energy minister said OPEC was close to agreeing to extend its production cut beyond June.
Biggest ETF winners from last week:
We started a new week with good news from one of the trade fronts:
- The president minutes ago took to Twitter to announce a signed agreement with Mexico, meaning an indefinite suspension to tariffs that were set to go into effect on Monday.
- For Mexico's part, says Trump, it has agreed to strong measures to stem the flow of migrants coming to the U.S. southern border.
- President Trump's decision to suspend planned tariffs against Mexico is driving a 0.4% advancefor U.S. equity futures ahead of the open, while the peso rose 2% overnight to 19.2285 on the dollar.
- Stock gains were capped, however, as uncertainty remained if Mexico will enforce the deal that intends to stem the flow of illegal Central American migrants into the U.S.
- On Friday, the Dow closed 263 points higher at 25,984 to post its best week since November on hopes that the Fed would move to slash interest rates (nonfarm payrolls came in at just 75,000 in May, far below the consensus forecast of 180,000).
- Oil is up 0.4% at $54.19/bbl, gold is 1.1% lower at $1331/ounce and the 10-year Treasury yield is up 5 bps to 2.13%.
Japan already has negative rates, and they can go lower????
- The Bank of Japan could deliver more big monetary stimulus if necessary, but needs to take care with its side effects on the financial system, according to Governor Haruhiko Kuroda.
- The comments come after Fed Chair Jerome Powell signaled a willingness to act if the economy needs it, ECB President Mario Draghi vowed to support growth and PBOC Governor Yi Gang said that he has "tremendous" policy options to stoke demand.
- While it doesn't need to act now, the BOJ's options would be cutting the -0.1% negative rate further, lowering the target for 10-year yields, increasing the monetary base, or boosting asset purchases.
This news does not help China in the trade war:
- China's exports unexpectedly returned to growth in May, rising 1.1% from a year earlier, but imports fell the most in nearly three years, resulting in a trade surplus of $41.65B.
- Some analysts suspected Chinese exporters may have rushed out shipments to the U.S. to avoid new tariffs on $300B of goods, while business distortions related to April's value-added tax cut may have also helped export readings.
- Rare earth threat? China exported 3,639.5 metric tons of the materials last month, down from 4,329 metric tons in April.
The latest Q2 GDP estimate from the New York Fed:
- New York Fed now sees Q2 GDP growth at 1.0%, half a percentage point lower from its previous estimate.
- Nowcast for Q3 GDP growth is trimmed to 1.3% from 2.0%.
- Cites negative surprises from ISM manufacturing survey, employment data, and international data for most of the decrease.
- Atlanta Fed tweaks its Q2 GDPNow estimate down to 1.4% from 1.5% on June 6, due to the weaker-than-expected May jobs report.
Huge M & A deal to start a new week. I do not own either stock. Let’s see if the government allows this merger:
- The all-stock merger of equals will combine Raytheon (NYSE:RTN), a leading defense company, with United Technologies (NYSE:UTX), a leading aerospace company comprised of Collins Aerospace and Pratt & Whitney, creating a company with combined pro forma 2019 sales of ~$74B.
- Raytheon shareholders will get 2.3348 shares in the combined company for each Raytheon share.
- Deal excludes Otis and Carrier, which are expected to be separated from United Technologies in H1 2020 as previously announced.
A deal in the tech sector. I do have a position in Salesforce (CRM):
- Salesforce (NYSE:CRM) will acquire Tableau Software (NYSE:DATA) for $15.7B in stock, net of cash. The transaction is expected to close during Salesforce's fiscal Q3, which ends on October 31.
- Each Class A and B share of DATA will be exchanged for 1.103 shares of CRM common stock.
- Salesforce expects the deal to add $350-400M to its FY20 revenue, decrease non-GAAP operating margin by 75 bps Y/Y, and decrease adjusted EPS by $0.37 to $0.39. Operating cash flow is now expected between 21% to 22%.
- The companies will discuss the transaction on a call at 8 AM ET with a webcast here.
- CRM shares are down 3.3%. DATA shares are up 33.5%.
Iberdola is a very, very good under-the-radar stock. It trades very thinly, however:
- Iberdrola (OTCPK:IBDRY) says it plans to build a 590 MW solar photovoltaic plant that will be Europe's largest, outstripping a 500 MW project the company already is developing elsewhere in Spain.
- The Spanish company says it will seek government consent for the €300M ($337M) Francisco Pizarro project in Extremadura.
- Iberdrola is planning to build 3 GW of solar and wind in Spain's resurgent renewable energy market by 2022.
This could be big…
- Thinly traded micro cap Provention Bio (NASDAQ:PRVB) rockets 176% premarket on robust volume in reaction to its announcement of positive trial data on lead candidate teplizumab (PRV-031), in Phase 3 development for the interception of type 1 diabetes (T1D). The results were presented at the American Diabetes Association Scientific Sessions in San Francisco.
- The Phase 2 study, conducted by the Type 1 Diabetes TrialNet, enrolled 76 subjects aged 8 - 49 who were at-risk to develop T1D due to abnormal glucose metabolism or the presence of at least two T1D autoantibodies. Most (72%) were under the age of 18. Participants were randomized to receive teplizumab or placebo.
- The results showed that a single 14-day course of teplizumab delayed the onset and diagnosis of T1D by a median of two years compared to control. Specifically, the median time to diagnosis in the treatment group was 48 months versus just over 24 months for placebo (p=0.006). During the trial, 43% of patients receiving teplizumab developed clinical diabetes compared to 72% of patients receiving placebo.
- No new safety signals were observed.
- The company is evaluating a registration path in the at-risk population.
- A Phase 3 study, PROTECT, launched in April. Its objective is to assess teplizumab's effect on slowing the loss/preserving the function of beta cells in children and adolescents recently diagnosed (in the previous eight weeks) with T1D.
- Teplizumab is an anti-CD3 monoclonal antibody that suppresses the expression of T cells. T1D is an autoimmune disorder caused by the overactivation of T lymphocytes on insulin-producing beta cells.
There has been no stopping AMD lately. I remain long.
- Bank of America Merrill Lynch raises its AMD (NASDAQ:AMD) price target from $35 to $40 ahead of this week's E3 appearance.
- Firm maintains a Buy rating.
- AMD shares are up 4.4% pre-market to $33.83.
- AMD has a Bullish average SA Authors' rating.
As I fished the waters on Monday, I sent out tweets on the following stocks. AAXN, PEN, RACE, APPF, and AMD