Wednesday 6/12/19=DJIA -44 NASDAQ -30
The mood of the market before the opening bell on Wednesday. It appears that this current bout of profit-taking will continue for a second day.
- Market focus is turning back to trade developments after President Trump said he was holding up a trade agreement with China and reiterated his stance that there might be no deal at all.
- The tough line on trade talks caused U.S. markets yesterday to close back at the starting line, while DJIA futures are now pointing to a 62-point decline at the open.
- Analysts are also starting to reassess the June market comeback, with some saying it doesn't quite make sense. "This rally is not fundamentally backed. Instead what we are seeing is a bunch of people getting swung around and now they are chasing stocks higher," said Tom Essaye, founder of The Sevens Report.
- Oil is down 2.7% at $51.81/bbl, gold is 0.7% higher at $1340/ounce and the 10-year Treasury yield is down 2 bps to 2.12%.
More problems for China:
- The benchmark Hang Seng Index gave up 2.1% overnight as protests against the territory’s controversial extradition law shut down key parts of the city.
- Financial institutions also scrambled for liquid assets, triggering interbank interest rates in the city to shoot up across the curve, with the one-month and two-month HIBOR reaching their highest level since late 2008.
- Hong Kong Chief Executive Carrie Lam argues the legislation is necessary to close a legal loophole that makes the city a refuge to criminals, but opponents say its approval would tear down the legal wall intended to keep Hong Kong's justice system separate from China's.
Another blow for Huawei:
- The companies announced the hard drive and nonvolatile flash storage partnership in April. WDC is also a supplier for Huawei's smartphones.
Kudlow remains bullish on the U.S. economy.
- The U.S. economy will continue to grow at a strong pace through the rest of 2019 even if the U.S. and China don't reach a deal," said Larry Kudlow, director of the National Economic Council, in a CNBC interview.
- “I think we’re in very good shape and I think we’ll maintain a 3% growth pace this year," he said.
- He sees "lower tax rates, massive deregulation, opening up the energy sector, and various trade reforms" fueling the growth.
- Last Friday's weaker-than-expected jobs report isn't cause for concern, he added.
- “I wouldn’t put much stock in one month’s jobs number. There’s lots of other evidence” that points to a strong economy, including the better-than-expected NFIB small business survey and a record number of hirings in April, Kudlow said.
- Just minutes before the close, the Dow and S&P 500 are flat and the Nasdaq is up less than 0.1%.
Still no signs of inflation:
- May Consumer Price Index: +0.1% vs. in-line with consensus, +0.3% prior.
- Core CPI +0.1% vs. +0.2% consensus, +0.1% prior.
The rush is on.
- MBA Mortgage Applications
- Composite Index: +26.8% vs. +1.5% (W/W).
- Purchase Index: +10.0% vs. -2.0%.
- Refinance Index: +47.0% vs. +6.0%.
- 30 year mortgage rate at 4.12% vs. 4.23%.
Oil continues to plunge also…
- Crude oil prices tumble on concerns over weakening global demand and a U.S. supply glut, dragging prices back to the bottom of their recent range; WTI -2.7% to $51.83/bbl, Brent -2.4%to $60.77/bbl.
- The U.S. Energy Information Administration yesterday cut its 2019 world oil demand growth forecast by 160K bbl/day to 1.22M bbl/day, a 15% cut from the prior month's forecast, playing into concerns about global economic growth driven partly by trade tensions between the U.S. and China.
- U.S. crude inventories spiked by 4.85M barrels in the week ended June 7 to 482.8M barrels, according to data from the American Petroleum Institute, compared with analyst expectations for a decrease of 481K barrels.
- Today's release of the U.S. Energy Information Administration's weekly inventory report will be closely watched; supply data have been unseasonably bearish in recent weeks.
- Despite low oil prices, U.S. shale producers will continue to produce an all-time high 12M bbl/day throughout next year, perhaps going up to as high as 13M bbl/day, U.S. Deputy Energy Secretary Dan Brouillette tells CNBC.
The latest FAANG news:
- Department of Justice antitrust chief Makan Delrahim says Google (GOOG +0.5%)(GOOGL+0.5%) and Amazon (AMZN +0.3%) are "digital gatekeepers" that can't escape scrutiny by arguing their products are free or cheap.
- Delrahim: "The antitrust division does not take a myopic view of competition. Price effects alone do not provide a complete picture of market dynamics, especially in digital markets in which the profit-maximizing price is zero."
Boeing’s woes continue…
- Boeing (BA -1.5%) reports May deliveries fell 56% Y/Y to 30 planes from 68 in the year-ago month, as deliveries for its top-selling 737 MAX jets remained halted.
- Net orders YTD remained in negative territory, with a total of minus 125 net orders.
- Rival Airbus delivered 81 aircraft in May, up 59% Y/Y, and 313 in the January-May period, a 40% increase.
- Saudi Arabian Airlines is close to placing a multi-billion-dollar order for aircraft at least partly involving Airbus (OTCPK:EADSY) jets, Reuters reports.
- The order for wide-body aircraft, which could also include a number of smaller A320-family narrow-body aircraft, may be announced at the Paris Airshow next week.
More bold predictions from Elon:
- "It won't be long before we have a 400-mile range car," Tesla (NASDAQ:TSLA) CEO Elon Musk said at the company's annual shareholder meeting, outlining plans to unveil a pickup truck this summer and get into semi production toward the end of 2020.
- He also said that sometime next year, drivers will be able to use self-driving features in their vehicles without intervention.
- Tesla is on target to grow its entire "fleet" by 60% to 80% in 2019, Musk added, saying "it's hard to be profitable with that level of growth," but the company would still be cash-flow positive while growing at that rate.
- By the end of this year, Tesla intends to determine and announce the location for another battery-and-car plant in Europe, with plans of establishing a car factory on each continent.
- A proposal to narrow board members’ tenure to two years from three failed to get enough votes, as did the bid to change the supermajority voting requirement to a simple majority.
- Auto insurance? Tesla will be able to offer policies after completion of an unspecified acquisition, as well as development of additional software.
More good news for BYND:
- Beyond Meat (NASDAQ:BYND) gains after Tim Hortons announces that Beyond Meat Breakfast Sandwiches are now available at almost 4K Tim Hortons restaurants in Canada after a strong consumer response to testing.
- Shares of Beyond Meat are up 4.73% premarket to $132.00.
- More good news for BYND.
Who will get the McDonald’s contract?
- Nestle (OTCPK:NSRGY) exec Marco Settembri says the company could expand its plant-based burger sales partnership with McDonald's (MCD +0.6%) outside of Germany or sign on new fast-food partners.
- Nestle is looking to sell its Herta meat and cold cuts unit, which would free it up to scale up the meat alternatives business without competing with itself. Meanwhile, McDonald's is widely expected to make some sort of meatless menu option announcement this year.
Getting in on the act!
- Kroger (KR +0.9%) is the latest retailer with plans to sell CBD products.
- The grocery store operator is stocking CBD lotions and balms as it looks to eventually take CBD-infused products into 945 stores across 17 states.
Another mall retailer in trouble:
- Dave & Buster's Entertainment (NASDAQ:PLAY) reports comparable sales fell 0.3% in Q1 to fall short of the consensus expectation for a 1.6% gain. The shift of the Easter holiday was blamed in part for the shortfall.
- Adjusted EBITDA was up 2.4% to $98M during the quarter.
- Looking ahead, D&B sees full-year revenue of $1.365B to $1.390B vs. $1.37B to $1.40B prior and $1.40B consensus. Full-year net income of $103M to $113M is anticipated vs. $105M to $117M prior. 15 to 16 new D&B store openings are expected for the full year.
- Shares of Dave & Buster's are down 15.95% in AH trading.
Will Wedbush be right?
- Wedbush warns that Lululemon (LULU +0.3%) trends are modering into Q2.
- "While we see long-term opportunity ahead as LULU’s international growth plan unfolds, our expectations for near term earnings upside are tempered," notes the firm just ahead of the company's earnings report tomorrow.
- Wedbush rides into the LULU earnings report with a Neutral rating, consistent with the Quant rating of Neutral but below the sell-side consensus of Outperform.
I sent out tweets on the following stocks on Wednesday: ARGT, EXAS, PODD, ROKU, VCYT, ZEN, ZTS