Tuesday 6/11/19=DJIA (-14) NASDAQ (-1)
The mood of the market as we started a new day:
- It looks like there's another session of gains in store for Wall Street, with DJIA futures up by 83 points and the S&P 500 and Nasdaq ahead by 0.3%.
- The advance comes despite the latest trade war comments from President Trump, who said that if Chinese President Xi Jinping did not attend the G-20 meeting later this month, there would "immediately" be additional duties levied on Chinese goods.
- "The China deal is going to work out. You know why? Because of tariffs," he told CNBC. "Right now, China is getting absolutely decimated by companies that are leaving China, going to other countries, including our own, because they don’t want to pay the tariffs."
- Oil is up 1% at $53.77/bbl, gold is 0.1% lower at $1328/ounce and the 10-year Treasury yield is up 1 bps to 2.15%.
Chinese Government intervenes to prop up their sagging market:
- China equities outperformed overnight, with the Shanghai Composite jumping 2.6%, after Beijing encouraged local governments to use special bonds for infrastructure projects in a bid to shore up economic growth.
- That helped offset President Trump's threat to raise tariffs again if President Xi Jinping doesn’t meet with him at the G-20 summit at the end of June.
- The onshore yuan also bounced off its closing low of the year as the PBOC set its reference rate higher than forecast and announced plans to sell bills this month after the currency was hit in May.
Still no signs of inflation…
- May Producer Price Index: +0.1% in-line with consensus, +0.2% prior.
- Core PPI +0.2% in-line with consensus, +0.1% prior.
Small business still optimistic:
- NFIB Small Business Optimism Index: 105 vs. consensus of 102.3, 103.5 in April.
Where did those tax savings go?
- U.S. corporations' cash holdings declined last year from a record high in 2017 as companies, flush with cash from U.S. tax reform, spent record amounts on capex, dividends, stock buybacks, and M&A, according to a report from Moody's Investors Service.
- 928 non-financial companies that Moody's rates had $1.69T in cash and liquid investments as of December 2018, down 15% from $1.99T a year earlier.
- Moody's expects cash balances to recede again next year as companies repay maturing debt and return more cash to shareholders.
- In 2018, capex rose 12% to a record $851B. Dividends increased 6.7% to $412B. Net share buybacks, up almost 100%, hit $467B. Acquisition spending rose 14% to $405B.
- For 2019, Moody's sees spending on capital investments, dividends, stock buybacks, and acquisitions rising to a total of $2.3T from $2.14T in 2018.
Big Tech receiving big scrutiny:
- Congress will begin its scrutiny of America's tech giants this afternoon amid growing discomfort in Washington over the power that the companies wield over the industry and public life.
- An inaugural hearing by the House Judiciary Committee will analyze anti-competitive practices among Silicon Valley’s biggest names, starting with a look at the impact of their platforms on news content, the media and the spread of misinformation online.
- The committee has already put Amazon (NASDAQ:AMZN), Google (GOOG, GOOGL), Facebook (NASDAQ:FB) and Apple (NASDAQ:AAPL) on alert, and members made clear that the tech titans will go under the microscope.
Who is Boeing’s biggest shareholder?
- Vanguard has raised concerns with Boeing (BA +0.5%) management over its handling of the grounded 737 MAX, saying its fund managers have become "very concerned" by reports of oversight failures following the aircraft's two crashes, Financial Times reports.
- The issues raised by Vanguard - BA’s largest shareholder, with a 7.1% stake - were included in a letter from the mutual fund group's top portfolio company engagement official, according to the report.
- The letter says Vanguard had "engaged with Boeing leadership and directors to convey our concerns" and would continue the discussions.
- The group also has contacted Boeing critic Ralph Nader that said it frequently intervenes following incidents that "put the health and safety of consumers at risk, or threaten to disrupt confidence in an industry."
Would a breakup be good for Alphabet’s stock?
- Needham says the recent Alphabet (GOOG,GOOGL) on regulatory concerns has left the shares "too cheap."
- Analyst Laura Martin sees a potential 50% upside for investors if the U.S. Department of Justice broke up the parent company.
- Martin says the increased scrutiny "adds costs and margin pressures" for the next few years, but will likely have little impact on revenue growth and consumer usage until the court fights are over.
- Needham maintains a Buy rating and $1,350 price target.Would a breakup be good for Alphabet’s stock?
Short-Sellers finally get some relief:
- JPMorgan lowers Beyond Meat (NASDAQ:BYND) to a Neutral rating from Overweight following the meat alternative seller's IPO run from $25 to as high as $186.43.
- While JP is highly favorable on the total addressable market for alternative meat and Beyond Meat's role within it, the share price ran right past the firm's price target of $120. "At some point, the extraordinary revenue and profit potential embedded in BYND… will be priced in' – we think this day has arrived," advise analyst Ken Goldman and team.
- Shares of Beyond Meat are down 14.32% in premarket action to $158.50.
Wait a minute! More good news for Beyond Meat...
- Beyond Meat (NASDAQ:BYND) announces that it will release the latest version of the Beyond Burger at grocery stores nationwide.
- The company calls the new Beyond Burger patty the brand's next step forward in its vision of building the Future of Protein.
- "The new, meatier Beyond Burger features marbling designed to melt and tenderize like traditional ground beef. Made using a blend of pea, mung bean and rice proteins that offer a complete protein source, the blend of proteins provides a meatier taste and texture that mimics the chew and juiciness of beef."
- Consumer reviews of Beyond Meat patties from long-time carnivores have been largely favorable in comparison to many of the meatless products of the past.
- The new Beyond Burger will begin shipping this week. BYND -10.81% premarket to $150.08 following a JPMorgan downgrade.
- Shares of Beyond Meat are down 14.32% in premarket action to $158.50.
Rolling out another pot ETF:
- Global X Management plans to start an exchange-traded fund that will invest in marijuana, according to a prospectus it filed last week.
- The Global X Marijuana ETF will invest at least 80% of its total assets in the securities of the Underlying Index.
- To be eligible for inclusion in the Marijuana Index: A company must derive at least 50% of its revenue, operating income, or assets from the marijuana value chain;
- The company must also be listed on a regulated stock exchange;
- It must operate in a manner that is legal under all laws, rules and regulations applicable to the company’s business.
- Brown Brothers Harriman is the custodian and transfer agent for the fund.
- In May, Horizons ETF Management Canada received regulatory clearance to start two leveraged pot ETFs on the Toronto Stock Exchange.
Cannabis at your local mall?
- Green Growth Brands (OTCQB:GGBXF -2%) says it will open more than 70 stores selling CBD-infused products at U.S. malls operated by Brookfield Properties (BPY -1.4%), according to CNBC.
- Green Growth is also aiming to place 100 locations at Simon Property Group (SPG -1.3%) malls.
- "We know that consumers prefer to buy personal care and beauty products from physical stores, and this partnership will allow us access to millions of consumers," says Green Growth CEO Peter Horvath on the brick-and-mortar strategy.
Another mall casualty coming?
- Chico's FAS(NYSE:CHS) reports comparable sales fell 7.0% in Q1 on a lower average dollar sale and a decrease in transaction count. Total sales were down 7.8% as 41 net store closures factored in.
- A bright spot was the Soma business, with comparable sales up 3.4% during the quarter off strength in the bras and sleepwear categories.
- Chico's gross margin fell to 36.9% of sales from 40.4% a year ago. The impact of product liquidations, continued charges related to the omnichannel programs and accelerated depreciation as a result of the retail fleet optimization plan all factored into the margin drop.
- Looking ahead, Chico's expects a mid-single digit decline in total net sales during Q2 and a low-to mid-single digit decline in total net sales for the full year.
- Shares of Chico's are down 6.16% premarket to $3.20. The 52-week low is $3.24.
- Previously: Chico's FAS EPS beats by $0.02, revenue in-line (June 11)
Three more small biotechs launching IPO’s. Lookout below!
I remain long DLTR in my Buy and Hold Ultra Growth Portfolio. This new portfolio is up over 33% year-to-date!
- JPMorgan upgrades Dollar Tree (NASDAQ:DLTR) to an Overweight rating and assigns a price target of $122.
- "Our top-line and margin builds across banners support an inflection to high-single net income growth and low-double-digit consolidated EPS growth beyond FY19," notes JP.
- The firm says the combination of Dollar Tree stability and Family Dollar's self-help story could drive +$1B annual free cash flow generation by FY20 in a stable/rational low-end backdrop (wages/employment) translating to an overall attractive fundamental risk/reward profile on the retailer.
- The average sell-side rating on Dollar Tree is Outperform and the SA Authors' consensus rating is Bullish, while the Quant Rating on DLTR is Neutral.
- Shares of Dollar Tree are up 3.59% premarket to $107.50.