May-June 2019 Outlook: And They’re Off!

TradeTheNews.com May-June 2019 Outlook: And They’re Off!
Wed, 08 May 2019 10:48 AM EST

After stumbling in the final furlong of 2018, risk appetite is off to the races again in the first four months of this year. A yield curve inversion spurred fears that a recession was looming and heading into first quarter earnings season there were concerns that corporate results would flat line. But with Q1 now in the books, earnings have been better than expected and economic growth appears to be firming up.
A number of risks to the economic outlook appear to have been scratched from the lineup: the Fed and other central banks have stopped tightening policy, global growth indicators have been mostly better than expected, Brexit has been postponed, and US/China trade talks seem to be making headway. Minimizing these concerns has led to the better risk appetite in recent months, but as we have just witnessed this past weekend, sometimes the longshot comes through, so it’s only prudent to consider the outlying alternatives. A number of potential political, monetary, and economic missteps could still befall the markets and shake the current generally positive outlook.

Politics: Putting on Blinders

The political environment in western democracies has been like a rain soaked track in recent years – conditions are sloppy and mud is splashing everywhere (much to the delight of Russia and other actors that have sought to exacerbate those muddy conditions). In these circumstances, it has become more and more difficult for political opponents to work across the aisle, but there are still some opportunities for bipartisan deal-making.
The US political environment was not cleansed by the Mueller report, it has only gotten dirtier. Instead of making any direct recommendations about how the President should be treated based on the evidence, Mueller left it up to Congress and the new Attorney General to decide. This left the White House to trot itself into the winner’s circle declaring “total exoneration,” while Congressional Democrats disqualified the AG’s interpretation of the text and are now calculating the political odds around dragging out the Russia investigation with endless hearings or a slap on Trump’s wrist via an impeachment that the Senate will never act on.
While relations between Capitol Hill and White House are as contentious as ever, both sides are still trying to make a show of bipartisanship, expressly on an infrastructure initiative. Initial meetings between the President and senior Democrats came away with a call for a $1-2 trillion investment package to rebuild America’s transportation and communication networks. However, the politicians have not agreed yet on any funding mechanism, and many Republicans are already bucking the idea of a gasoline tax. The debt ceiling is the other big issue to watch this summer in Washington. The threat of a US default has been used as political leverage in the past (most notably in 2011 when a standoff resulted in S&P downgrading the US sovereign rating to AA+), and in the unpredictable state of national politics in the Trump era, the risk can’t be ignored as a longshot.
The elections for European Parliament in late May are becoming another contentious horse race. Conservatives in the UK are upset that they will have to participate in the elections because of the Brexit delay, stiffening their resolve to throw PM May out of the saddle.
Unable to whip her own party into passing the Brexit bill, the PM is now using the carrot to bring the opposition on board. The latest reports indicate that PM May is prepared to concede on workers’ rights and a Customs Union in order to get support from the Labour Party for a Parliamentary stamp of approval for the Brexit deal. The key point for the PM appears to be getting a deal approved before EU parliament members are seated later this year, in an effort to save some face within her own party. The same report says that Labour leader Corbyn is now deciding whether to make the deal or drag it out through EU elections in order to inflict maximum political damage to the Conservatives, a tactic that could scuttle the chances of an agreement altogether.
At this point, PM May faces long odds on staying in her post through the end of the year. She has already offered to step aside once she has steered the UK into a Brexit deal, but some Tories still want her to specify a resignation date. The question this summer may be who even wants to lead the Conservatives after the savage rebuke the party received in recent local elections from rank and file members grown disillusioned with the infighting among MPs.
The EU elections could also be a new marker for the state of the nationalist movement across Europe. Notably in France Marine Le Pen’s far-right National Rally party is leading President Macron’s En Marche by a nose in the polls ahead of the continental elections. Le Pen is working hard to capitalize on the ‘yellow vest’ protests and a win for her party could reinvigorate the nationalist movement across Europe that sired the Brexit referendum and the maverick Italian government that is butting heads with Brussels while cultivating ties with Moscow.

Monetary Policy: The Race is Canceled

Amidst last year’s “synchronized global growth” scenario, it appeared that central banks were jockeying to see who could win the policy normalization race, but emerging concerns about weak growth and inflation led them to rein in any hawkishness. The assurance of continued easy monetary policy has done more than anything to run off recession fears.
The Federal Reserve made arguably the quickest policy reversal in its history this past winter, but it’s still not clear if the central bank will give the markets (and White House) the rate cuts they want. The FOMC’s May 1 statement chose to emphasize the weaker growth indicators rather than trumpeting Q1’s 3.2% advance GDP reading, and also announced a surprise 5 basis point cut in the IOER that is used to guide rates into the target range. Some Fed watchers saw the IOER cut as a signal that the Fed’s next rate move is tilted toward a cut, but Fed Chair Powell took pains to stress that the IOER move was a “small technical adjustment,” and not a policy shift. Powell also reiterated that the Fed would be patient, saying there is no strong case for moving rates in either direction right now. That, coupled with his explanation of below target inflation being caused by “transient” factors, may put a damper on market expectations for a 25 basis point rate cut later this year.
After Powell staked out his position, Fed doves made the case that inflation expectations may be running too low. Fed Presidents Evans and Bullard both took note of the recent weakness in core PCE readings, saying that the Fed can’t claim victory on its inflation mandate and hinting that they might support future rate cuts in order to spur inflation toward the target. Evans further suggested that the Fed might need to aim at above 2% inflation to get back to the target level. Bullard indicated he would be open to a rate cut in the autumn if inflation remains subpar, saying that a rate cut during ‘boom times’ would show the Fed is serious about achieving its inflation target. More weak PCE data in the months ahead could embolden the doves to lodge a dissent later this year.
In a less dramatic fashion, the Bank of England also slowed its normalization process, as it awaits a resolution on Brexit. This month’s meeting of the BOE resulted in a less hawkish statement than expected, now indicating that it may just need one more hike to get inflation in check (versus the prior forecast of one hike per year for the next three years). If the Brexit process turns out to be a smooth ride, the BOE could always revert to its original strategy.
Over in its lane, the ECB has not only put normalization back in the stable, it’s trotting out new stimulative measures as well. In March the ECB froze any rate hikes at least until next year, pushing it back from prior guidance of summer 2019. And to ensure ample liquidity to commercial banks, a third round of targeted long-term refinancing operations (TLTRO-III) will be loaded into the chute in September, in time to replace the last of the TLTRO-II low-interest loans that will mature next year. Many healthier European banks may refuse to take the restricted loans, and the ECB will have to make the case that the liquidity program is not just a thinly veiled effort to prop up ailing Italian banks that are still at risk of being taken behind the barn and shot. It’s also worth noting that Mario Draghi’s 8-year term as ECB President ends in October, so these new policy operations will be guided by his yet-to-be named successor.
As always, growth and inflation are the driving forces in the monetary policy race. Both factors have been running slow for most of the G20 economies, but recently tabulated Q1 data has shown some promise.
Preliminary readings on Q1 GDP in China and the Euro Zone were slightly better than expected and the BOE has raised its growth forecast for the UK. The advance reading of US first quarter GDP was even better, coming in at over 3% -- especially impressive considering GDP has usually stumbled out of the starting gate for the last ten years running. The more cautious market touts note inventories played heavily into the elevated US number, and that the implications of the partial government shutdown may not have been fully read into the advance data, so the second and third revisions of GDP might be ratcheted back. Notably the Atlanta and NY Fed estimates for Q1 GDP both ended on 2.7%.
Inflation has also been problematically low for most global economies, even after a decade of extraordinary stimulus. Euro zone CPI was better than expected in April, led by a jump in German inflation, though still hovering well below target. US core inflation data has tailed off in recent months, leaving the Fed nonplused again.
One factor in contributing to muted inflation last year was depressed oil prices, but energy prices have perked up lately. The slow choking off of Iranian oil and the potential for Venezuelan and Libyan supply to drop suddenly are upside risks to the oil market. In response to the tightening net of US sanctions, Iran is threatening to block the Straight of Hormuz and to resume certain nuclear enrichment activities. Meanwhile the Maduro regime’s days appear to be numbered which could result in more Venezuelan production disruptions in the near term, while Libya’s undeclared civil war disrupts oil fields on a day-to-day basis. Extreme weather is always a upside risk to energy prices as well, so market participants need to keep abreast of meteorological models as the Atlantic hurricane season kicks off on in June.
There is also a case for downside risks in oil prices as OPEC and its partners reconvene in late June (June 25-26) to discuss the production cutting agreement that has been the stabilizing force behind the market for two years. Member states agreed to an additional 1.2M bpd in cuts at the beginning of the year and will decide in June whether to keep production reined in. Under public pressure from President Trump to cut prices, Saudi Arabia has resisted raising production stating merely that it will meet market demand. Russia continues to cooperate but seems more eager to reopen the taps, concerned that US shale producers are gaining too much advantage from the discipline that OPEC+ is showing.

Global Trade: Run for the Roses

Perhaps the biggest geopolitical issue hanging over the economy is the rewriting of the global trade regime. Central to this is the negotiation of a new trade agreement between the world’s two biggest economies. White House officials have been trumpeting progress in the deal talks with China for several months, but negotiations are getting trickier as they round the final bend. Reportedly China has backtracked on some earlier commitments, prompting President Trump to order a new round of tariffs imminently. China retaliated by shrinking its delegation in Washington this week, all but assuring a final deal won’t close this month as the White House had hoped. The timing of new North Korea missile tests coinciding with this trade talk ‘impasse’ also raises suspicions that China is demonstrating what its lack of cooperation could mean. Although the rhetoric is clearly getting tougher, most experts are still convinced the trade deal will reach the finish line.
The risk factors around the anticipation of a Sino-US trade pact mostly come down to the final details and the timing of the deal. That is to say the quality of the actual agreement matters. Although President Trump has proclaimed it will either be a “great” deal or no deal, there have been reports over the last several weeks that the Washington negotiators were mulling certain concessions to get an agreement done quicker. For its part, China is said to be particularly resistant to demands for stronger commitments on technology transfers and IP protections that would require significant changes in domestic law and enforcement.
If the actual terms of a new trade deal aren’t as rosy as the White House has been boasting, markets may express their displeasure. At the other end of the spectrum, there’s also a chance that the terms could be unexpectedly difficult for China’s economy to adjust to, perhaps saddling one of the world’s growth engines with more new regulations than it can’t handle in the short term.
Even if the US and China successfully negotiate a deal, global trade tensions won’t cease. The White House has made it clear that Europe and Japan are next on its list for trade overhauls, and the North American trade deal (USMCA) is still not officially in the books. As Japan and Europe open trade discussions with the US, they are already balking at threats of new auto tariffs. Meanwhile, the USMCA is facing challenges from Congressional Democrats who want more assurances on labor rights and environmental impacts, and Mexico and Canada continue to complain about Section 232 steel tariffs. Tensions over these trade issues may overshadow other considerations at the upcoming G20 summit in Osaka (June 28–29).

Predictions: Down the Stretch…

With economic growth potentially about to break into a canter again and central banks keeping policy normalization entirely off the track, the bulls look to have the advantage in the near future. Yet, despite the positive catalysts, more volatility should be expected, as uncertainties remain.
First, the rapid Fed reversal since December has underpinned the risk-on tone of the markets, but the betting seems to be shifting away from the rate cut scenario that some market watchers want. Chair Powell’s insistence that core inflation weakness is “transient” casts doubt on the prospects of the Fed lowering rates to spur inflation. However, Fed doves are still making the case for a cut if inflation can’t pick up the pace, and Powell has now demonstrated that he is open minded about quick shifts in policy, despite the chance that such moves can erode confidence in Fed forecasting.
Inflation should get a boost from the energy market if OPEC+ can keep its alliance intact past June. Lower flows from Iran could allow other producers to modestly raise output without violating the spirit of the production cutting agreement. The growing animus between the US and Iran governments should not be ignored on the chance that President Trump’s more bellicose advisers push him into a military confrontation for security or political reasons.
Trump’s re-election aspirations hinge upon the economy remaining strong, and a China trade deal could be the key to defeating the growing field of Democratic challengers. Some show of bipartisanship through an infrastructure package could also help his chances, though the odds of a deal with the Democrats diminish every day that the 2020 election draws closer. The Democratic hopefuls will hold their first debate late next month (June 26-27), and their swipes at the President may ruin Trump’s already limited appetite for compromise. Trump is feeling his oats after the 3.2% advance Q1 GDP print, but watch for the GDP revision on May 30 – if it sees a substantial downside revision to below 3%, the White House may be more willing to get back to horse trading.
Markets have been pricing in a favorable outcome to the US/China trade talks, but are now coming to grips with fact that reaching a final deal will be challenging. Pricing in the trade tensions again may lead to a short term correction in markets as traders hedge against the possibility of an all-out trade war. But those tensions could be resolved fairly quickly if the trade discussions in Washington (May 8-10) go well enough to allow the White House to back off threatened new tariffs with another postponement.
Despite the recent posturing, the baseline belief is that both Presidents Trump and Xi are champing at the bit to reach an accord and that once it is announced, risk assets will see more upside. However, there has been so much anticipation of a sweeping trade agreement that the actual deal announcement may become a ‘sell the news’ moment. That would particularly be the case if the deal is judged to be less than favorable for the US. But for now, as long as talks don’t break down entirely, markets probably won’t price in a lot of downside risk.
Ultimately, it may be a weaker Chinese economy that becomes the next dampening effect on risk appetite. Amid the economic softness brought on by the US trade conflict, Beijing has been ramping up stimulus efforts again. That has translated into some improved economic data points in recent weeks, but stimulus is only a temporary fix for the drag that a full rework of the US/China trade relationship could have on China’s economy.
In the longer term, the trifecta of demur monetary policy, improving growth and favorable resolutions of trade disputes could secure a prosperous economic and trading environment for several years to come. However, when running for the roses, be cognizant of the thorns.


CALENDAR
MAY
1: US ISM Manufacturing; FOMC Policy Statement & Press Conf; China Caixin Manufacturing PMI
2: UK Manufacturing PMI; BOE Policy Statement
3: UK Services PMI; Euro Zone CPI estimate; US Payrolls & Unemployment

5: China Caixin Services PMI
6:
7: China Trade Balance
8: ECB Minutes; China CPI
9:US PPI
10: UK GDP; UK Manufacturing Production; US CPI; Preliminary Univ of Michigan Sentiment

13:
14: UK Unemployment; China Industrial Production
15: Euro Zone Flash GDP; US Retail Sales
16: US Housing Starts & Building Permits; Philadelphia Fed Manufacturing
17: UK Retail Sales

20:
21: German ZEW Economic Sentiment; UK Inflation Report hearings
22: German Ifo Business Climate; UK CPI; FOMC Minutes
23: Various European Flash Manufacturing & Services PMI; European Parliamentary elections (May 23-26)
24: US Durable Goods Orders

26: France holds EU Parliamentary elections
27:
28: US Consumer Confidence
29:
30: US Q1 GDP; China Manufacturing & Non-manufacturing PMIs
31: German CPI; US Core PCE; US Personal Income & Spending; Chicago PMI

JUNE
1: Hurricane season begins
2: China Caixin Manufacturing PMI
3: UK Manufacturing PMI; US ISM Manufacturing PMI
4: Euro Zone CPI Flash Estimate
5: UK Services PMI; ISM Non-manufacturing PMI
6: ECB Policy Decision & press conf
7: US Payrolls & Unemployment

10: UK Q1 GDP; UK Manufacturing Production
11: UK Unemployment; US PPI; China CPI
12: US CPI; China Trade Balance
13: UK Retail Sales; China Industrial Production
14: US Retail Sales; Preliminary Univ of Michigan Consumer Sentiment

17:
18: German ZEW Economic Sentiment
19: UK CPI; FOMC Policy Statement & press conf; BOJ Policy Statement
20: BOE Policy Statement; Philadelphia Fed Manufacturing
21: Various European Flash Manufacturing & Services PMIs; German Ifo Business Climate

24:
25: Semiannual OPEC meeting (June 25-26); US Consumer Confidence
26: US Durable Goods Orders
27: US Final Q1 GDP
28: UK Final Q1 GDP; Euro Zone Flash CPI Estimate; US Core PCE Price Index; US Personal Income & Spending; Chicago PMI; G20 Meeting in Osaka (28-29th)
29: China Manufacturing & Non-manufacturing PMI
30: China Caixin Manufacturing PMI

Barrons weekend summary

Barrons weekend summary: positive features on OXY, BURL; cautious on UBER 

Cover story: The millennial generation—consumers in their mid-20s and 30s—is overtaking the baby boomers as the largest generation of shoppers in history, and by 2020, millennial spending will account for $1.4T in U.S. retail sales, according to Accenture; Maturing millennials will lift spending for all sorts of industries and companies—a powerful demographic tide that should continue rising as the population grows and workers enter their prime earning years.

Features: 1) Positive on OXY: Shares of the company are the best play in the takeover battle over APC, because even if the company loses the takeover contest to CVX, its shareholder would be the winners for three reasons: a potential relief rally in its shares; the possibility an activist investor could surface and try to scuttle the bid and either break up the company or urge a sale; Occidental shareholders could vote down the deal; 2) There may be more similarities than differences among millennials, baby boomers, and Generation X: all three groups have increased “showcasing,” or examining merchandise at a retail store and then shopping for the lowest price online, according to an Accenture survey; 3) Positive on BURL: Retailer is upgrading its stores to appeal to a broader swath of price-conscious shoppers, and occupies a rare retailing bright spot that has been mostly immune to AMZN’s price cutting, and it benefits as designers and vendors look to offset slumping department store sales; 4) Cautious on Uber: Ride-hailing company is less an AMZN and more a glorified version of LYFT—and with revenue growth slowing, increasing competition, profitability nowhere in sight, and legal and regulatory risks, investors may want to say away from the IPO; 5) The Committee on Foreign Investment in the United States, or Cfius, vets foreign buyers of U.S. assets on national security grounds, and is gaining the kind of power that threatens to reshape U.S. mergers and acquisitions in cross-border deals. 

Tech Trader: Cautious on GOOGL: Tech giant faces a sudden slowdown in its advertising business, but investors know very little about the problem—the company’s vague disclosures worked fine when growth was booming, but it’s problematic when the tide turns; Watching AAPL suppliers’ stock prices to get a real-time read on iPhone demand seems like a good idea, but will cease to be so once everybody in the market follows suit. 

Trader: Lori Calvasina of RBC Capital Markets recommends moving out of industries with high valuations such as software and semiconductors and into cheaper ones such as financials, while Verdence Capital’s Megan Horneman recommends holding extra cash; Positive on CHDN: Horse racing isn’t a growth industry, but the company has done an excellent job boosting revenues and profits at its Churchill Downs track through marketing efforts and $100M in improvements. 

Interview: Roger Ferguson, president and chief executive officer at TIIA, talks about hos a 401(k) holder can replicate a defined-benefit pension, and why providing retirement plans for teachers and nurses is important. 

Profile: Jon Cheigh, head of global real estate investment at CNS and lead manager of the Cohen & Steers Global Realty Shares fund, looks for managers with a track record of using debt prudently, allocating capital smartly, and balancing great projects with sensible investment decisions and sound operations (top 10 holdings: UDR, PLD, WELL, CK Asset Holdings, ESS, EXR, Deutsche Wohnen, INVH, Link Reit, Realty Income). 

ETF Special Report: 1) Financial advisors are using exchange traded funds to do everything from constructing cheap, tax-efficient passive portfolios to making sophisticated investment bets that express market views without the need to pick individual stocks; 2) Ron Vinder, a Morgan Stanley Private Wealth Management advisor, became a major proponent of passive investing, and can now focus on asset-allocation decisions and helping clients stick to their plans; 3) Barron’s assembled 19 of the nation’s top advisors, asked them how they use ETFs, and presents their top strategies, which cover a wide range of approaches; 4) Barron’s publishes a 2007 article by investing guru John Bogle that had never seen the light of day, and which offers “an unassailable argument in favor of low-cost, broadly diversified index investing”; 5) Investors hoping to increase their exposure to commodities should consider exchange-traded funds instead of playing the futures market or by purchasing physical bars of bullion—ETFs are simple, and can help reduce overall risks and add to returns; 6) Positive on PRF, VLUE, QVAL: Today’s value ETFs don’t define value using the standard metrics—they incorporate criteria used by active managers, and tend to have bigger allocations to tech stocks and less traditional value fare like financials and energy; 7) As disruptive technologies change our economy, old-economy sectors like retail and financials are cheap for long-term, secular reasons—and ETF investors should think twice before buying sectors that look statistically cheap, but are exposed to secular risk. 

European Trader: Cautious on Tesco: Retailer had a sudden fall, but new management, a smart acquisition, and a focus on rebuilding its core UK business has boosted the stock, which has further upside. 

Emerging Markets: Mexican assets have been volatile since voters elected president Andres Manuel Lopez Obrado, and it remains unclear which side of him will prevail: the combative socialist spouting expensive promises and leveling rhetoric, or the pragmatic administrator who ran a tight fiscal ship as mayor of Mexico City.

Commodities: Gold prices fell in April and have now given back their gains for the year, but they could still climb 20 percent in 2019.

Streetwise: Positive on FB: Social site’s growth outlook is straightforward: There’s a massive disconnect between time spent online and ad dollars spent there, but that will change, and Facebook will sop up much of the growing spending.

Strong US jobs report salvages a choppy week; Central banks stay neutral

TradeTheNews.com Weekly Market Update: Strong US jobs report salvages a choppy week; Central banks stay neutral
Fri, 03 May 2019 16:09 PM EST

US stock markets pushed to new highs early in the week helped by another benign inflation reading when core PCE data missed expectations once again. Improving data in continental Europe buoyed risk sentiment and helped rates move up globally heading into the FOMC and BOE meetings Wednesday and Thursday. Stock prices also backed away from the highs as some noted seasonality and a heavy upcoming IPO calendar as a good reason to reassess and potentially take profits. Oil prices also dropped notably as US inventories and production continued to swell. The Dollar index fell back from 2-year highs as inflation expectations slipped and European data exhibited relative strength.

The spread between the US 2 and 10-year treasury yield continued to widen to the highest levels in months into what was initially perceived as a dovish FOMC statement Wednesday. Chairman Powell was not as dovish as the market may have expected, though, when he went out of his way to explain that the low inflation readings are likely the result of “transient” factors. Advocates for an ‘insurance’ rate cut amid low inflation, including the White House, were disappointed when Powell said he didn’t see any reason to move rates in either direction at this time. Thursday’s Q1 productivity data rose at the fastest pace since 2014 and was seen as an extremely positive signal. That, combined with another strong April jobs report on Friday enabled not only the White House, but also Fed doves to come out and hint the environment may be right for a rate cut aimed at bringing inflation back up to target. A Chinese press report on Thursday dampened markets by suggesting trade talks had reached an “impasse,” but stocks recouped the losses on Friday and interest rates settled. Gold prices bounced and the Dollar stayed on its back foot. For the week, the S&P gained 0.2%, the DJIA slipped 0.2%, and the Nasdaq rose 0.2%.

A heavy week of earnings topped corporate headlines this week. Google shares slumped after reporting a top-line miss and noting a slowdown in Pixel smartphone sales. Apple rallied after posting a beat and boosting its stock buyback program, despite a 5% drop in total revenue on an annual basis. McDonald’s reached fresh all-time highs after announcing strong SSS growth in Q1, while Yum Brands shares moved lower after disappointing SSS readings from Taco Bell and Pizza Hut. GE popped after beating its beaten-down expectations and reaffirming its FY outlook. Occidental partnered with Berkshire Hathaway to solidify financing for an Anadarko takeover, and reports indicated Chevron was unlikely to counterbid. Amazon rose after word surfaced that Berkshire had bought shares in the tech giant. HealthEquity confirmed a $2B bid for WageWorks in an effort to create a larger health savings account and employee benefits provider. Tesla stock rallied after the automaker formally announced an upsized $2.7B capital raise and Elon Musk said he would personally buy $25M of shares.


SUNDAY 4/28
(ES) Spain Snap Election Results: Socialists Party of PM Sanchez wins with 123 seats; will need to form coalition to get majority of 176 seats, likely with far left, anti-austerity Podemos

MONDAY 4/29
3328.HK Reports Q1 (CNY) Net 21.07B v 20.1B y/y, NII 34.86B v 30.5B y/y
*(EU) EURO ZONE APR BUSINESS CLIMATE INDICATOR: 0.42 V 0.49E
3988.HK Reports Q1 (CNY) Net 51B v 49B y/y, Op Income 141.0B v 126.1B y/y
386.HK Reports Q1 (CNY) Net 15.5B v 19.3B y/y, Rev 717.6B v 621.3B y/y
*(US) MAR PERSONAL INCOME: 0.1% V 0.4%E; PERSONAL SPENDING: 0.9% V 0.7%E
(US) Apr Dallas Fed Manufacturing Activity: 2.0 v 10.0e
(US) Atlanta Fed forecasts initial Q2 GDP growth at 1.3%
DB1.DE Reports Q1 adj €1.59 v €1.54e, adj EBITDA €475.5M v €460.8Me, Rev €720.8M v €722Me
GOOGL Reports Q1 $11.90** (ex fine) v $10.51e, Rev $29.5B (ex $6.9B TAC) v $30.0Be

TUESDAY 4/30
AIR.FR Reports Q1 adj EBIT €549M v €545Me, Rev €12.6B v €12.6Be
BP.UK Reports Q1 adj Net $2.36B v $2.36Be, Rev $67.4B v $69.1B y/y; raises dividend 2.5% to $0.1025/shr
066570.KR Reports final Q1 (KRW) Net 571B v 730B y/y; Op 901B, -18.7% y/y, Rev 14.9T v 14.9T prelim
*(FR) FRANCE APR PRELIMINARY CPI M/M: 0.2% V 0.3%E; Y/Y: 1.2% V 1.2%E
*(DE) GERMANY APR UNEMPLOYMENT CHANGE: -12K V -7KE; UNEMPLOYMENT CLAIMS RATE: 4.9% V 4.9%E
*(EU) EURO ZONE Q1 ADVANCE GDP Q/Q: 0.4% V 0.3%E; Y/Y: 1.2% V 1.1%E
*(EU) EURO ZONE MAR UNEMPLOYMENT RATE: 7.7% V 7.8%E (lowest level since 2008)
*(IT) ITALY DEBT AGENCY (TESORO) SELLS TOTAL €5.5B VS. €4.25-5.5B INDICATED RANGE IN 5-YEAR AND 10-YEAR BTP BONDS
*(IT) ITALY Q1 PRELIMINARY GDP Q/Q: +0.2% V +0.1%E; Y/Y: +0.1% V -0.1%E (ends its technical recession)
GE Reports Q1 $0.14 v $0.09e, Rev $27.3B v $26.9Be
*(DE) GERMANY APR PRELIMINARY CPI M/M: 1.0% V 0.5%E; Y/Y: 2.0% V 1.5%E
GM Reports Q1 $1.41 v $1.09e, Rev $34.9B v $35.8Be
ARNC Reports Q1 $0.43 v $0.40e, Rev $3.54B v $3.55Be
APC Berkshire Hathaway commits to $10B equity investment in Occidental to finance acquisition of Anadarko
WAGE Confirms to be acquired by HealthEquity for $50.50/shr in cash, in a deal valued at $2B
*(US) APR CONSUMER CONFIDENCE:129.2 V 126.8E
(US) House Speaker Pelosi (D-CA): meeting with Pres Trump about infrastructure was productive; we agree on need for big and bold infrastructure package

WEDNESDAY 5/1
*(UK) APR UK PMI MANUFACTURING: 53.1 V 53.1E (33rd month of expansion)
(US) Treasury to sell $38B 3-year, $27B 10-year notes, and $19B 30-year bonds
*(US) APR ISM MANUFACTURING: 52.8 V 55.0E; PRICES PAID: 50.0 V 55.0E (lowest Manufacturing PMI since Oct 2016)
(US) Atlanta Fed cuts Q2 GDP forecast to 1.2% from 1.3%
(US) Association of American Railroads weekly rail traffic report for week ending April 27th: 533.2K, -3.3% y/y (has fallen for 11 consecutive weeks)
(US) Reportedly US and China nearing deal to roll back certain tariffs - Politico
*(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 2.25-2.50%; CUTS IOER TO 2.35% FROM 2.40%; TO STAY PATIENT ON RATES AS ECONOMY IS SOLID AND INFLATION IS MUTED
(US) Fed Chair Powell: data since the March meeting has been broadly in line with our expectations; inflation has been somewhat weaker
(US) Fed Chair Powell: inflation weakness likely due to "transient" factors; some asset prices are elevated; don't see any evidence at all of overheating economy - FOMC Q&A
(UK) PM May reportedly mulls staying in the EU customs union in order to secure a deal with Labour - FT
6752.JP Execs have noted that they do not want to invest more money into Tesla gigafactory until they are sure Tesla can sell Model 3 at $35K without losing money - Nikkei

THURSDAY 5/2
RDSA.NL Reports Q1 Basic CCS EPS $0.65 v $0.69 y/y, adj CCS Net $5.43B v $5.81B y/y, Rev $83.7B v $83.0Be; Announces next $2.75B tranche of share buyback program
*(ES) SPAIN APR MANUFACTURING PMI: 51.8 V 51.2E (2nd straight expansion)
*(UK) BANK OF ENGLAND (BOE) QUARTERLY INFLATION REPORT (QIR); cuts inflation outlook for 2019 and 2020
*(UK) BOE LEAVES INTEREST RATES UNCHANGED AT 0.75%; AS EXPECTED
*(UK) BOE APR MINUTES: VOTED 9-0 TO LEAVE INTEREST RATES UNCHANGED
*(US) Q1 PRELIMINARY NONFARM PRODUCTIVITY: 3.6% V 2.2%E; UNIT LABOR COSTS: -0.9% V 1.5%E
BYND IPO opens for trade at $46.00
(US) Pres Trump: Stephen Moore is withdrawing consideration for the Fed
AMZN Berkshire Hathaway reportedly buying shares of Amazon - US press

FRIDAY 5/3
HSBA.UK Reports Q1 $0.21 v $0.15 y/y, adj EBIT $6.35B v $5.70Be, Rev $14.4B v $13.9Be
BAS.DE Reports Q1 adj Net €1.41B v €1.27Be, Adj EBIT €1.73B v €1.70Be, Rev €16.2B v €16.1Be; Affirms outlook
*(UK) APR SERVICES PMI: 50.4 V 50.3E (moves back into expansion)
*(US) APR AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.3%E; Y/Y: 3.2 V 3.3%E; AVERAGE WEEKLY HOURS: 34.4 V 34.5E
*(US) APR CHANGE IN NONFARM PAYROLLS: +263K V +190KE
*(US) APR UNEMPLOYMENT RATE: 3.6% V 3.8%E (lowest level since 1969)
*(US) APR ISM NON-MANUFACTURING INDEX: 55.5 V 57.0E (lowest since Aug 2017)

Barrons weekend summary

Barrons weekend summary: Cautious articles on BRK.A and ZM 

Cover story: “The recent exuberance has swelled investors’ wallets, but shrunk their confidence in the market’s ability to keep climbing—only 49% of the 148 professional money managers responding to Barron's spring 2019 Big Money poll call themselves bullish about the prospects for stocks over the next 12 months, down from 56% in our fall 2018 survey; The percentage of bulls hasn’t dipped below 50% since the fall 2016 survey”; American money managers are generally pleased with Donald Trump’s performance, and the majority who participated in the Big Money poll believe he will be re-elected. 

Features: 1) Cautious on Berkshire Hathaway: Many investors are frustrated that Warren Buffett continues to sit on $110B in cash while waiting for a major deal, but the stock’s underperformance probably reflects other factors, such as Buffett’s age and succession concerns, the lackluster performance of a $200B equity portfolio, and the current disfavor of value-oriented stocks; 2) Proxy season may garner more attention this year as several high-profile annual shareholder meetings hold proxy votes along themes such as excessive power concentrated in a company’s leadership and social and environmental concerns; 3) Democratic senator Elizabeth Warren’s proposal to eliminate student debt for most borrowers could work according to academics at Brandeis, who say offering graduates greater ability to save and build assets because of lower debt could spark a consumer-driven economic stimulus; 4) Investors concerned about TSLA's range of challenges can bet on its cars and clientele rather than on the company itself through bonds backed by customers’ car leases, also known as automobile asset-backed securities. 

Tech Trader: Cautious on ZM: To grow into its high valuation, Zoom needs to move into new markets, and has already started with its recent introduction of a Zoom Phone that competes with enterprise phone-system providers—but breaking into new adjacent markets won’t be easy. Trader: Investors have been happy to pile back into tech stocks as the Federal Reserve stands pat on interest rates—Bank of America Merrill Lynch strategist Michael Hartnett says fund flows reflect investors’ conviction that central banks “will never raise interest rates ever again”; Strong corporate earnings are the story of the week—230 companies in the S&P 500 have reported first-quarter numbers, about 46% of the index, of which almost 80% beat Wall Street estimates; Many analysts expect the trend of strong consumer staples to continue, with many investors moving back into them after shunning them during a rough 2018. 

Interview: Edwin Johnston of Buffalo-based Sandhill Investment Management shares his views about stocks, the wealth gap, and the national debt, and says that while Chinese tariffs, Brexit, interest rates, and the border wall garner constant headlines, they won’t have a long-term impact on the market (picks: BE, XRAY, FISV, MTN, ADBE). 

Profile: David Nadel, manager of the Royce International Premier fund, seeks companies with recurring revenues, i.e. business structures with a front-end sale but where most of the money is made on parts, repairs, long-term contracts, or other “sticky” customer relationships.

European Trader: Cautious on ULVR: Although the conglomerate’s first-quarter results showed sales growth, especially in emerging markets, some analysts believe it could run into the same issues as KHC, which recently acknowledged that its pursuit of more profit had led it to underinvest in some of its brands. 

Emerging Markets: A lot of things are suddenly going Russia’s way—including Trump administration sanctions on Iran that are boosting its oil market—while Russian stocks are on the rebound, such that the country may be one of the best-performing markets in bonds and equities this year.

 Commodities: Water is one of the cheapest commodities on the planet, and for can also be a good investment for investors who know where to look—possibilities include water ETFs like CGW and PHO and makers of water heaters and boilers such as AOS. 

Streetwise: Columnist Jack Hough says the good thing about Disney is that after years of television leading its earnings, booming parks and movie businesses are overtaking TV, de-risking the shift to streaming.

Solid corporate earnings and surprisingly strong in US GDP keep markets climbing

TradeTheNews.com Weekly Market Update: Solid corporate earnings and surprisingly strong in US GDP keep markets climbing
Fri, 26 Apr 2019 16:06 PM EST

US stock indices tested last fall’s highs this week amid a slew of corporate earnings reports. In many cases managements easily surpassed expectations that had been significantly lowered late last year as deceleration in earnings growth failed to match the most draconian forecasts. Central banks struck up a fresh chorus of dovish signals as economic data points kept global growth concerns smoldering. Friday’s much stronger than expected preliminary reading on US Q1 GDP did little to offset the sputtering global growth narrative but did suggest inflation remains significantly below the Fed’s comfort zone. Following the 3.2% GDP print, the US 10-year yield drifted back down below 2.5% for the first time in about two weeks. Crude prices retreated from 6-month highs on what some noted was a much needed technical correction. The Dollar index surpassed 98 mid-week for the first time since 2017 spurred by disappointing data abroad. For the week, the S&P gained 1.2%, the DJIA slipped 0.1%, and the Nasdaq added 1.9%.

In corporate news this week, earnings season for tech companies took center stage. Amazon popped after reporting its profitability surged, with a significant boost from its AWS division, and announcing that it intends to flex its logistical might to reduce standard free shipping times to one-day from two. Facebook shares soared after beating quarterly expectations and notching healthy US ad revenue, despite setting aside $3B for a possible FTC fine. Microsoft profitability jumped, helped by a 75% increase in revenue from its Azure division, briefly bumping the tech giant’s market cap above $1 trillion. Tesla shares fell to a 2-year low after the auto maker badly missed Q1 expectations and hinted that a capital raise may be under consideration. 3M missed expectations and cut its outlook in a particularly harsh quarterly report that helped rekindle worries about global industrial growth and weighed on the Dow midweek. Tobacco names dropped after Walgreens and Rite Aid announced they would move forward with plans to restrict tobacco purchases to customers over 21. Kraft Heinz named marketing veteran Miguel Patricio as its new CEO amid the company’s turnaround push. Netflix offered $2.2B in junk bonds in order to keep its content spending train rolling.


MONDAY APRIL 22
*(US) MAR EXISTING HOME SALES: 5.21M V 5.30ME

TUESDAY APRIL 23
KO Reports Q1 $0.48 v $0.46e, Rev $8.00B v $7.89Be
PG Reports Q3 $1.06 v $1.04e, Rev $16.5B v $16.4Be
STT Reports Q1 $1.24 adj v $1.19e, Rev $2.26B v $2.91Be
VZ Reports Q1 $1.20 v $1.17e, Rev $32.1B v $32.2Be
LMT Reports Q1 $5.99 v $4.29e, Rev $14.3B v $12.6Be
*(US) APR RICHMOND FED MANUFACTURING INDEX: 3 V 10E
*(US) MAR NEW HOME SALES: 692K V 649KE
WBA To implement new Tobacco 21 policy to further prevent youth access to tobacco products, effective Sept 1st
TXN Reports Q1 $1.26** v $1.13e, Rev $3.59B v $3.48Be
CP Reports Q1 C$2.79 v C$3.02e, Rev C$1.77B v C$1.77Be
SNAP Reports Q1 -$0.10 v -$0.12e, Rev $320.4M v $306Me
(BR) Brazil House Committee approves flagship pension reform bill

WEDNESDAY APRIL 24
CSGN.CH Reports Q1 (CHF) Net 749M v 717Me, Rev 5.39B v 5.10Be; positive momentum continued in Apr, but cautiously optimistic on Q2
SAP.DE Reports Q1 Non-IFRS EPS €0.90 v €0.83e, Op €1.47B v €1.24B y/y, Rev €6.12B v €6.00Be; Initiates Comprehensive Review To Accelerate Operational Excellence
HEIA.NL Reports Q1 Net €299M v €260M y/y
*(DE) GERMANY APR IFO BUSINESS CLIMATE SURVEY: 99.2 V 99.9E; CURRENT ASSESSMENT SURVEY: 103.3 V 103.5E
SWK Reports Q1 $1.42 adj v $1.19e, Rev $3.33B v $3.31Be
APC Occidental raises offer to $76/shr in cash and stock valued at $57B (Chevron bid $65/shr in cash and stock)
BA Reports Q1 $3.16 v $3.11e, Rev $22.9B v $22.3Be; pauses buyback program and withdraws guidance (as expected)
CAT Reports Q1 $2.94 adj v $2.84e, Rev $13.5B v $13.4Be
*(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 1.75%; AS EXPECTED; statement drops reference to future rate hikes
(US) Association of American Railroads weekly rail traffic report for week ending April 20th: 528.2K, -1.2% y/y (has fallen for 10 consecutive weeks)
MSFT Reports Q3 $1.14 v $1.00e, Rev $30.6B v $29.8Be
FB Reports Q1 $1.89 adj* v $1.66e, Rev $15.1B v $15.0Be
V Reports Q2 $1.31 v $1.24e, Rev $5.50B v $5.44Be
CMG Reports Q1 $3.40 v $3.00e, Rev $1.30B v $1.27Be
TSLA Reports Q1 -$2.90 v -$1.21e, Rev $4.54B v $5.78Be
*(KR) SOUTH KOREA Q1 PRELIMINARY GDP Q/Q: -0.3% V +0.3%E (weakest since Q4 2008); Y/Y: 1.8% V 2.5%E

THURSDAY APRIL 25
UBSG.CH Reports Q1 Net $1.14B v $0.9Be, adj Pretax $1.58B v $1.3Be, Rev $7.2B v $7.0Be
NOKIA.FI Reports Q1 Net -€118M v +€166Me, Rev €5.1B v €5.0Be
BAYN.DE Reports Q1 €2.55 v €2.24 y/y, Adj EBITDA €4.19B v €4.18Be, Rev €13.02B v €12.57Be
DBK.DE Said to deem talks with Commerzbank a success today - German press
*(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT -0.25%; AS EXPECTED; extends its view for next rate hike
BBD.B.CA Reports prelim Q1 adj EBIT $170M v $240Me, Rev $3.5B v $4.0B y/y
UPS Reports Q1 $1.39 v $1.42e, Rev $17.2B v $17.8Be
MMM Reports Q1 $2.23 v $2.50e, Rev $7.86B v $8.09Be; Announces restructuring actions, to cut 2K positions worldwide
(US) Nevada reports March casino gaming Rev $1.02B, -0.1% y/y; Las Vegas strip Rev $551.9M, -3.8% y/y
(US) Atlanta Fed cuts Q1 GDP forecast to 2.7% v 2.8% prior

FRIDAY APRIL 26
DBK.DE Reports Q1 Net €201M v €200M prelim, Pretax €292M v €290M prelim, Rev €6.35B v €6.4B prelim
SAN.FR Reports Q1 Business EPS €1.42 v €1.32e, Business Net €1.77B v €1.67Be, Rev €8.39B v €8.32Be
AZN.UK Reports Q1 Core EPS $0.89 v $0.84e, Rev $5.46B v $5.38Be
RBS.UK Reports Q1 Net £707M v £546Me, adj Op £1.01B v £0.9Be, Rev £3.04B v £3.30Be; retains outlook
(CN) Reportedly China President Xi could travel to U.S. as early as June - Chinese press
UBER To offer 180M shares in IPO; Said to price at $44-50/shr; Provides Q1 outlook
*(US) Q1 ADVANCE GDP PRICE INDEX: 0.9% V 1.2%E; CORE PCE Q/Q: 1.3% V 1.4%E
*(US) Q1 ADVANCE GDP ANNUALIZED Q/Q: 3.2% V 2.3%E; PERSONAL CONSUMPTION: 1.2% V 1.0%E

Barrons weekend summary

Barrons weekend summary: cautious cover story on SPOT; cautious feature on SAM; positive on health insurers 

Cover story: Investors love Spotify because it’s a fast-growing, youth-focused, cloud-based streaming service with a visionary founder—and it’s investing heavily in podcasting, a growing business; But for the company to become indispensable for investors, the music industry’s underlying structure must change radically in the coming decade and the tech giants competing aggressively with Spotify must lose interest, an unlikely scenario; At current prices, the stock’s potential reward isn’t worth the risk.

Features: 1) Cautious on SAM: Shares of the company have climbed during the past two years while those of rivals TAP and BUD slipped, but much of the growth came from hard cider and spiked tea and seltzer, areas in which the company will soon face growing competition; 2) Podcasting appears similar to other forms of digital media that have gained prominence and big money in the era of portable, on-demand consumption, but it remains a “strange niche phenomenon” and won’t likely scale like other digital formats; 3) Positive on ANTM, CI, CVS, HUM, UNH: Shares of the leading insurers look appealing, given the long odds of an industry-killing plan such as Bernie Sanders’ Medicare for All becoming law, though the shares could “be under a cloud” until the 2020 presidential election is over; 4) Large mergers and acquisitions typically generate the most goodwill, and are the biggest destroyers of it as buyers overpay, such as in the deal that led to KHC; savvy investors should focus on companies’ return on assets, which could indicate whether a buyer is squeezing more profit out of an acquisition. 

Tech Trader: Positive on INTC: Company’s move to exit the smartphone modem business following the resolution of the AAPL–QCOM lawsuit gets the chipmaker out of a money-losing business and will allow it to focus more on core strengths. 

Trader: A drop in XLV could push investors out of defensive growth stocks, where health care makes up 57% of the universe, and into cyclical growth stocks, says Thomas Lee, head of research at Fundstrat—and the same pattern might play out in the quality universe as well; PINS may have “surged” after its debut, but since only a select institutional investors get IPO stock at the offering price, regular investors who have to buy on the secondary market didn’t see the same bump. Interview: Don Bilson of Gordon Haskett takes a less traditional approach than many of his peers with what he calls “event driven” research, though some investors prefer the term “special situations.” 

Profile: Jason Callan of Columbia Mortgage Opportunities has done well in the unloved sector of non-agency mortgage-backed securities, but he says the strategies involved have time limits and investors who fail to adapt will be left behind. 

Advisor Rankings: 1) Barron’s list of the Top 100 Financial Advisors is topped by Lyon Polk, Gregory Vaughan, Andy Chase of Morgan Stanley PWM; the ranking reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms, and the quality of the advisors’ practices; 2) Demand for institutional consulting services has soared over the past couple of years, increasing the competition and the need for firms to cater to the more-specialized needs of institutions instead of being generalists; 3) Profile of the Jones Zafari Group, which caters to ultrahigh-net-worth individuals and serves as a “virtual family office”; 4) San Francisco-based Elaine Meyers, a managing director and financial advisor at J.P. Morgan Securities, has transformed her traditional advisory practice into one of the top family-office-style teams in the industry; 5) Lyon Polk, founder and managing director of Morgan Stanley’s Polk Wealth Management Group, has $15.4B under management and 20 employees in three areas—family and client services, investments, and business development. 

European Investor: Cautious on Lindt & Sprungli: Confectionary company’s stock is the second-most-expensive consumer stock in Europe behind Hermes; analysts are “unsure whether the company is undergoing a brief rough patch or suffering from a more serious secular downturn.”

Emerging Markets: Indonesian President Joko Widodo’s apparent re-election to a second five-year term April 17 was welcomed by investors, but the country lags peers economically and in growth, a situation that will demand structural reforms such as loosening labor restrictions and limiting minimum wage hikes. 

Commodities: Oil prices this month touched the highest levels of the year, but the market now faces a number of key tests, including tightening crude supplies and violence in Libya that could cut off the flow of more oil. 

Streetwise: “The U.S. stock market is approaching an all-time high. Relative to earnings, it is pricier than average. And in the next few weeks, we’ll learn whether first-quarter earnings have merely stalled versus a year ago, or gone into decline,” says columnist Jack Hough.

Barrons weekend summary

Barrons weekend summary: positive cover story on CVS; positive features on CVX, ALC, PINS 

Cover story: CVS plans to expand its HealthHUB locations nationwide, making healthcare simpler and more local, part of the company’s plan to become the “new front door of health care”; Now that it has acquired Aetna, CVS is “deeply entangled in how medicine and care are administered, priced, and paid for, and how the government’s role might change”; Its assets “leave it uniquely well positioned for a future when consumers gain more control over health care, and prices fall. Time to buy the shares.” 

Features: 1) Todd Boehly’s Eldridge Industries has produced everything from annuities through its insurer to a stock it successfully spun off into the market for retail investors—the simple version of his method “is that he builds a box and then puts assets in it”; 2) Positive on Pinterest: Bulletin-board startup has an attractive high-growth business, is close to profitability, and, most important, appears willing to price the deal to sell—a form of restraint that could pay off in a sector where unicorns feel pressure to aggressively price IPOs; 3) Positive on ALC: World’s leading eye-care company, recently spun off from NVS, should be able to improve operations and financial results now that it’s independent, and investors should “raise their sights on the stock” despite its high valuation; 4) Positive on CVX: Wall Street has punished the energy giant for its move to acquire APC, but the logic of the deal makes sense, because Anadarko’s oil assets are in regions where Chevron already has a foothold, and will allow it to gain scale in crucial areas. 

Tech Trader: Positive on EA, ATVI, TTW: So-called loot boxes—treasure chests that gamers either earn through game play or buy with digital currency by spending real money—have long generated billions in high-margin profits for gaming companies, but regulators are taking a closer look, and critics say it’s akin to gambling for young people. 

Trader: The 10-year Treasury yield rose 0.057 percentage point to 2.56% this past week, its highest in nearly a month—a sign the yield curve, which briefly inverted three weeks ago, is no longer signaling a recession, at least for now; Cautious on DIS: Disney is poised for a good year with its core businesses, and the stock could continue to rise, but the long-term outlook is much cloudier; “Maintaining guidance for the full year after a weaker first quarter means companies are predicting a re-acceleration of earnings to growth later in 2019—that’s effectively a higher bar, and could mean disappointment for investors later on if earnings trends don’t reverse.”

Interview: Karina Funk, co-manager of the Brown Advisory Sustainable Growth fund, believes that companies that embed sustainability in their business can provide compelling customer value (picks: Danaher, TMO, AZPN, BLL). 

Profile: Aram Green, manager of ClearBridge Select, which invests in young, disruptive companies as well as those that have durable growth prospects (top 10 holdings: NOW, SBAC, SHOP, ROST, CSOD, MELI, AAP, WIX, CPRT, SYNH). 

European Trader: The UK has emerged as the top global location to support autonomous vehicles, according to a new analysis conducted by the Society of Motor Manufacturers and Traders, and the sector could generate $81.1B annually by 2030. 

Emerging Markets: Saudi Aramco’s bond debut “was more than a feeding frenzy for yield-starved fixed-income managers. It lifted the curtain on the secretive monopoly’s finances, which look impressive,” showing it to be the world’s most-profitable corporation. 

Commodities: “Silver has been a lackluster performer this year, but as investors’ appetite for gold improves silver might share in the yellow metal’s prosperity.”

Improving Chinese data and M&A help week finish on positive note

TradeTheNews.com Weekly Market Update: Improving Chinese data and M&A help week finish on positive note
Fri, 12 Apr 2019 16:09 PM EST

Markets commenced trade this week on a cautious note. The US administration threatened a new round of tariffs on European products in retaliation for what officials viewed as unfair subsidies to Boeing competitor Airbus. EU officials noted they were reviewing potential retaliatory tariffs while simultaneously meeting holding high level meetings with Chinese trade officials. Brexit negotiations dragged on in London with few signs that Labour and the PM’s government were finding new grounds of compromise. PM May was able to convince EU officials at a Wednesday summit meeting to extend a Brexit deadline by 6 months, putting the ball back into the UK’s court. The PM and MPs now have until the end of next month to reach some kind of agreement on leaving the Union or be required to participate in EU elections. Wednesday also saw the ECB meet and, as expected, hold rates and current expectations for forward guidance. Draghi also noted they were still analyzing TLTRs and tiering and would provide further commentary in the future. Rates stayed relatively heavy and stock volumes overall remained muted as trading held within a bit of a holding pattern ahead of Q1 earnings season. For the week the Dow was essentially flat, S&P and NASDQ rose ~0.5%.

Late in the week, the tenor shifted as risk appetite expanded around improving global economic data. Chinese trade and lending data in particular provided a jolt, alongside some improving figures out of Europe. Friday saw Chevron reach a deal to acquire Anadarko, reportedly beating out Occidental Petroleum, stoking animal spirits further. Unwinding of safe haven flows pushed money away from government bonds and rotated into commodities and equities. The US 10-year and European government bond yields tracked to the highest levels in about a month. WTI crude traded back to the highs of the year before backing off. For the week

In corporate news, Boeing announced a plan to cut its 737 MAX production by 19% this year amid ongoing safety concerns, sending shares of its suppliers and industrials lower. Reports indicated Third Point had built an activist stake in Sony and is seeking a management review of several divisions across the company. Levi’s rallied after notching a profit in Q1 as part of its first post-IPO earnings report. Tesla shares dropped on a report that they along with Panasonic are freezing plans to expand the capacity of their EV battery plant Gigafactory 1. Disney soared to a record high after announcing details of its OTT plans, which included readying the November launch of its Disney Plus streaming platform at a $6.99/mo price point. Early Friday, Chevron said it would acquire Anadarko Petroleum in a blockbuster $33B cash-and-stock deal, a transaction that would expand Chevron’s U.S. shale oil and gas portfolio and value Anadarko at $65/shr.

MONDAY APRIL 8
*(EU) EURO ZONE APR SENTIX INVESTOR CONFIDENCE: -0.3 V -2.0E
SNE Reportedly Third Point (Loeb) has built an activist stake in Sony - press
(US) Atlanta Fed raises Q1 GDP forecast to 2.3% v 2.1% prior
(US) US Trade Representative (USTR) proposes tariffs to counter EU aircraft subsidies, releases for public comment a prelim list of EU products to be covered by additional duties, USTR estimates the harm from the EU subsidies of $11B/year

TUESDAY APRIL 9
(UK) German Chancellor Merkel said to be willing to put a five year time limit on the Northern Ireland backstop - BBC reporter
(US) President Trump tweets: "The World Trade Organization finds that the European Union subsidies to Airbus has adversely impacted the United States, which will now put Tariffs on $11 Billion of EU products! The EU has taken advantage of the U.S. on trade for many years. It will soon stop!"
(IT) Italy Govt reportedly cuts 2019 GDP growth forecast from 1.0% to 0.1% (as speculated); raises budget deficit target from 2.0% to 2.5% - draft document
*IMF UPDATES ITS WORLD ECONOMIC OUTLOOK (WEO): Cuts Global GDP growth forecast from 3.5% to 3.3% (lowest level since financial crisis)
*(US) FEB JOLTS JOB OPENINGS 7.087M V 7.550ME

WEDNESDAY APRIL 10
*(EU) ECB LEAVES 7-DAY MAIN REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; maintains forward guidance on rates
*(US) MAR CPI M/M: 0.4% V 0.4%E; CPI EX-FOOD/ENERGY M/M: 0.1% V 0.2%E; CPI NSA: 254.202 V 254.167E
(EU) ECB's Draghi: Reiterates forward guidance; provides no details on upcoming TLTRO-3 - Prepared remarks
(EU) ECB's Draghi: Too early to provide TLTRO and any possible Tiering details; need consensus for further analysis of economic outlook - Q&A
(US) Reportedly a bipartisan bill to be proposed in Senate to expand EV tax credits by 400K vehicles per manufacturer - press
(US) MAR MONTHLY BUDGET STATEMENT: -$146.9B V -$181.0BE
*(US) FOMC MINUTES FROM MARCH 20TH MEETING: MOST OFFICIALS SAW NO CHANGE IN INTEREST RATES THIS YEAR; MAJORITY SAID PATIENT APPROACH ON RATES IS NEEDED GIVEN UNCERTAINTIES
(US) Association of American Railroads weekly rail traffic report for week ending April 6th: 510.2K, -2.8% y/y (has fallen for 8 consecutive weeks)
BBBY Reports Q4 $1.20 v $1.11e, Rev $3.31B v $3.33Be; Raises Quarterly dividend 6.3% to $0.17 from $0.16 (indicated yield 3.5%), updates Board refreshment
(UK) EU's Tusk confirms EU and UK have agreed to Brexit extension to Oct 31st (additional 6-months), will check on progress in June

THURSDAY APRIL 11
*(DE) GERMANY FEB FINAL CPI M/M: 0.4% V 0.4%E; Y/Y: 1.3% V 1.3%E
*(US) MAR PPI FINAL DEMAND M/M: 0.6% V 0.3%E; Y/Y: 2.2% V 1.9%E
*(SG) MONETARY AUTHORITY OF SINGAPORE (MAS) SEMI-ANNUAL MONETARY POLICY STATEMENT: LEAVES POLICY UNCHANGED (AS EXPECTED); Follows 2 consecutive tightening moves

FRIDAY APRIL 12
*(CN) CHINA MAR TRADE BALANCE (CNY): 221.2B V 76.6BE
(US) NASA awarded SpaceX launch services contract for Asteroid Redirect Test Mission
JPM Reports Q1 $2.65 v $2.32e, Managed Rev $29.85B v $27.9Be
(US) New York Fed Nowcast: maintains Q1 forecast at 1.4%; raises Q2 forecast to 2.0% from 1.9%

Barrons weekend summary

Barrons weekend summary: positive feature on FL 

Cover story: The bull market recently hit 10 years, and it could rally for another 10—in general, bearishness rests on the fact the it has lasted for so long; “The yield curve briefly inverted, but even some investors who remain cautious on the U.S. market warn against reading too much into it”; Barron’s spoke to three strategists—Thomas Lee of Fundstrat Global Advisors, Binky Chadha of Deutsche Bank, and Dubravko Lakos-Bujas of JPMorgan—each of whom makes a case for continued bullishness.

Features: 1) After interest rate increases, the one-year Treasury bill yields 2.4%, prompting the question of whether ultra-short funds, which buy high-quality bonds with durations of less than one year, can keep up—the average ultra-short fund has only a 1.2% five-year annualized return, according to Morningstar; 2) The current market is testing the resolve of even the most dedicated value investors, who haven’t lost money, but have watched growth managers steadily gain ground; over the course of this market cycle, however, the gap between value stocks and growth stocks has gotten so large, and been so persistent, that some wonder if value will ever catch up; 3) Positive on BLK, Vanguard Group, STT: Firms each offer a comprehensive line of exchange-traded funds at hard-to-beat prices, and they essentially dominate the industry, holding 80% of ETF assets in about 600 products—raising questions about whether that concentration of power is stifling competition; 4) Treasury yields have been falling, typically an indicator of a weakening economy, yet bonds issued by risky companies have been rising sharply, which usually happens when the economic outlook is bright; the confusion creates opportunity for investors who know where to look; 5) Positive on FL: The shoe chain has gotten past the problems it faced two years ago, and last year began to expand in Asia, with stores in Singapore, Hong Kong, and Malaysia—earnings per share growth could rise by 13-16% through 2023; 6) Cautious on CGC, ACB, TLRY: There are currently no bargains among hemp or marijuana stocks these days, though eventually CBD—the hemp extract cannabidiol—will be big as it joins other wellness additives in products ranging from skin cream to pet food. 

Tech Trader: Barron’s tested AT&T’s first-ever 5G smartphone feed—a live, commercial mobile network based on Release 15, an industry standard agreed upon in June—and found the service impressive, but limited; rival VZ’s 5G service is only available in select neighborhoods in Chicago and Minneapolis, and can be used only on a specific Motorola phone.

MFQ: Mutual fund managers are the new breed of activist investors—they’re taking a larger role in challenging companies to do better, but they’re doing so quietly to help the company, and its stock, over the long term; related story says that in the past, fund managers simply sold a stock if they didn’t like what a company was doing, but today they are increasingly nudging companies whose shares are trading for far less than they should be to make changes that will close the valuation gap.

Interview: Ruchir Sharma, chief global strategist and head of emerging markets at Morgan Stanley Investment Management, sees global markets at an inflection point: U.S. tech stocks and global multinationals could struggle, while emerging markets are poised for a revival 

European Trader: Cautious on Just Eat: A recent spike in shares follows agitation from an activist investor, but the firm is without a leader after Peter Plumb stepped down in January, and it faces a raft of challenges that could hurt growth.

Emerging Markets: At least eight Chinese unicorns raised more than $1B through initial public offerings in Hong Kong or the U.S. last year, offering a smorgasbord of access to the country’s burgeoning economy—but “nearly all the issues have been dogs.”

Commodities: A new deluge of rain in the Midwest looks set to hit already waterlogged soil, possibly sending wheat prices soaring; to play the strong market, investors could buy WEAT, which tracks the price of futures, or shares of FMC, which sells crop-protection products. 

Streetwise: “Interest rates are falling, growth is scarce, and there is a glut of investment dollars. That means Wall Street is setting up perfectly for a flight to nonsense,” says columnist Jack Hough in a piece about LYFT, Uber, and other money-losing startups that are going public.

Global growth shows signs of recovery as US/China trade talks advance

TradeTheNews.com Weekly Market Update: Global growth shows signs of recovery as US/China trade talks advance
Fri, 05 Apr 2019 16:10 PM EST

Investors pushed stock prices higher this week as lingering worries about stagnating global growth were eased by improving PMI readings out of China and continental Europe midweek. Optimism that US/China trade talks are in their final stages also contributed to the positive tone. The improving sentiment surrounding growth and trade offset continued uneasiness related to Brexit. UK PM May was forced to turn to the opposition Labour party in an effort to secure an agreement with majority support, but expectations remained low. Many Tory Brexiteers felt betrayed by the PM’s end run, while by Friday some Labour MPs suggested she offered little in the way of compromise. Friday also saw the US jobs report rebound nicely from the soft February reading, including a modest upward revision to last month’s payrolls. Trade talks appeared to make headway as China’s Vice Premier Liu spent three days in Washington, leading President Trump to speculate a deal could reach its final stages in about a month. Treasury yields backed up for much of the week as risk appetite held up and the Dollar Index was modestly higher. WTI crude broke above the 200-day moving average for the first time since last fall, but inflation concerns remained subdued. For the week, the S&P gained 2.1%, the DJIA added 1.9%, and the Nasdaq rose 2.7%.

In corporate news this week, Delta boosted the airline sector on Tuesday after raising its Q1 outlook, reporting healthy demand and less expensive non-fuel costs than it had anticipated. The widely-anticipated Lyft IPO hit the skids after a promising opening above $88, soon falling below its $72 initial pricing. Walgreens reported a miss on its quarterly numbers and cut its outlook citing continued margin pressures and consumer market challenges. Tesla Q1 deliveries disappointed investors, as the carmaker blamed the miss on 'massive backlogs' in China and Europe. Shares of Constellation Brands bubbled higher after it reported a solid earnings beat and confirmed the divestiture of 30 lower-end wine and spirits brands. Concerns about Jeff Bezos control over Amazon were put to bed after his ex-wife agreed to give him 75% of their stock and full voting control of her Amazon shares.


SUNDAY 3/31
*(JP) JAPAN Q1 TANKAN LARGE MANUFACTURING INDEX: 12 V 13E (lowest since March 2017); OUTLOOK SURVEY: 8 V 12E; LARGE ALL INDUSTRY CAPEX: 1.2% V 0.7%E

MONDAY 4/1
*(ES) SPAIN MAR MANUFACTURING PMI: 50.9 V 49.7E (moves back into expansion)
*(UK) MAR PMI MANUFACTURING: 55.1 V 51.2E (32nd month of expansion and highest reading since Feb 2018)
*(EU) EURO ZONE FEB UNEMPLOYMENT RATE 7.8% V 7.8%E (matches lowest reading since Dec 2008)
*(EU) EURO ZONE MAR ADVANCE CPI Y/Y: 1.4% V 1.5%E; CORE CPI Y/Y: 0.8% V 0.9%E
*(US) MAR ISM MANUFACTURING 55.3 V 54.5E; PRICES PAID: 54.3 V 52.5E
AAPL Said to reduce prices of iPhone, iPads, Macs and AirPod models in China by as much as 6% - CNBC
(US) Atlanta Fed raises Q1 GDP forecast to 2.1% v 1.7% prior
*(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED

TUESDAY 4/2
WBA Reports Q2 $1.64 v $1.70e, Rev $34.5B v $34.9Be
(UK) PM May: We need a further extension of Article 50; will try and find an arrangement with Labour to put to EU next week

WEDNESDAY 4/3
*(UK) MAR SERVICES PMI: 48.9 V 50.9E (1st contraction in 32 months and lowest since July 2016)
(US) Association of American Railroads weekly rail traffic report for week ending Mar 30th: 510K, -4.6% y/y (has fallen for 7 consecutive weeks)
*(US) MAR ISM NON-MANUFACTURING INDEX: 56.1 V 58.0E (LOWEST SINCE AUG 2017)
(US) Conference Board March Experimental Help Wanted OnLine Index (HWOL) at 102.3 v 104.0 m/m
PPG Announces price increase on automotive refinish products in China due to higher prices for raw materials, logistics and freight
(UK) PM May reportedly to next week pave way to a longer Brexit extension if she's unable to secure her deal - UK's Telegraph
(CN) US reportedly wants to set 2025 target for China to meet trade pledges and wants timetable for purchases of goods and market access, as China Vice Premier Liu He and US Trade Rep Lighthizer begin talks - press
STZ To divest 30 brands from its wine and spirits portfolio to E&J Gallo for $1.7B

THURS 4/4
*(IN) INDIA CENTRAL BANK (RBI) CUTS REPURCHASE RATE BY 25BPS TO 6.00%; AS EXPECTED
STZ Reports Q4 $1.84 v $1.71e, Rev $1.80B v $1.73Be; Raises dividend 1.4% to $0.75/shr (1.67% yield)
AMZN Mackenzie Bezos dissolves marriage with CEO Jeff Bezos, to give Jeff 75% of their Amazon stock and full voting control of her Amazon shares
(CN) Pres Trump: China trade deal could be within the next four weeks; something 'very monumental' could come soon

FRI 4/5
066570.KR Reports prelim Q1 (KRW) Op 900B v 808Be, Rev 14.9T v 15.3Te
(UK) Details of PM May letter to Tusk being released; UK to ask for an extension to Article 50 until Jun 30th (as speculated)
(US) MAR CHANGE IN NONFARM PAYROLLS: 196K V +177KE
(US) Mar Unemployment Rate: 3.8% v 3.8%e
*(US) MAR AVERAGE HOURLY EARNINGS M/M: 0.1% V 0.3%E; Y/Y: 3.2% V 3.4%E; AVERAGE WEEKLY HOURS: 34.5 V 34.5E
(US) New York Fed Nowcast: raises Q1 forecast to 1.4% from 1.3%; raises Q2 forecast to 1.9% from 1.7%
BA CEO: to temporarily slow production of 737MAX aircraft to 42/month from 52/month starting mid-April

Brexit Anxiety Rises; Markets Calibrate to Slower Growth Expectations

TradeTheNews.com Weekly Market Update: Brexit Anxiety Rises; Markets Calibrate to Slower Growth Expectations
Fri, 29 Mar 2019 16:10 PM EST

Stocks managed to look past a host of worries this week and move higher. The Brexit saga rolled on, with the UK Parliament unable to coalesce around any particular way forward setting up another round of indicative votes early next week. The risk of the UK crashing out of the EU has not been taken off the table, despite MPs' insistence it will not happen. Global inflation readings continued to miss central bank targets allowing growth jitters to persist, particularly in Europe. Treasury yields slipped to fresh lows mid-week with markets continuing to fixate on inversions along the US curve and the burgeoning amount of global sovereign debt carrying negative interest rates once again. Emerging market currencies saw renewed pressures highlighted by a spike in Turkish swap rates rekindling concerns about potential contagion. Ultimately the investor anxiety, mainly emanating from Europe, was more than offset by optimism on the US China trade front. On Friday, the US Treasury Sec Mnuchin wrapped up a week of negotiations in Beijing by emphasizing discussions remained constructive and will continue in DC next week. WTI crude finished the week above $60, holding at roughly 5-month highs. The Greenback lifted and the Euro slumped. The DJ Transports had a particularly strong showing, outperforming the broader indexes in 3 of the 5 trading sessions to a 3.5% rally. For the week, the S&P rose 1.2%, the Dow added 1.7% and NASDAQ gained 1.1%.

In corporate news, Apple held a press event to announce its entrance into the video streaming market with its upcoming Apple TV+ product, as well as introducing an Apple Card digital credit card service and magazine subscription app Apple News+. Samsung weighed upon semi names after warning its Q1 will be lower than market expectations, noting a decline in memory chip and display prices that were larger than expected. Boeing shares lifted after it announced three software changes for its beleaguered 737 MAX aircraft, and the company said that the software upgrade could be installed within days following its approval from regulators. Wells Fargo CEO Tim Sloan announced he would retire, effective June 30th, while the Board pledged to find an outsider to replace him. Lyft’s long-awaited IPO opened for trade, quickly drifting below its opening price but finishing well above its $72/shr pricing.

SUNDAY 3/24
*(US) US Attorney General Barr releases special counsel Mueller report findings: Finds no collusion with Russia on 2016 Presidential elections but falls short of calling him innocent; identifies two Russian influences
386.HK Reports FY18 (CNY) 61.6B v 51.2B y/y; Op 82.3B v 71.5B y/y; Rev 2.89T v 2.36T y/y (update)
AVYA Evaluating offer from private equity that could value the company at over $20.00/shr, or over $5B - US press

MONDAY 3/25
ADM Extreme weather to affect Q1 NA operations by neg $50-60M in pretax operating profits
*(US) MAR DALLAS FED MANUFACTURING ACTIVITY INDEX: 8.3 V 8.0E
AAPL Introduces 'Apple Card', digital credit card services as part of Apple Pay product - Apple product event
005930.KR Guides Q1 to be lower than market expectations; decline in memory chip and display prices larger than expected

TUESDAY 3/26
*(DE) GERMANY APR GFK CONSUMER CONFIDENCE 10.4 V 10.8E
*(US) FEB HOUSING STARTS 1.162M V 1.210ME; BUILDING PERMITS: 1.296M V 1.305ME
*(US) MAR RICHMOND FED MANUFACTURING INDEX 10 V 10E
*(US) MAR CONSUMER CONFIDENCE INDEX 124.1 V 132.5E
BA Southwest Boeing 737 Max reportedly makes emergency landing at Orlando airport on its way to be grounded - local press
(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE (OCR) UNCHANGED AT 1.75%; AS EXPECTED; revises forward guidance to dovish from neutral

WEDNESDAY 3/27
(US) Fed's Kaplan (dove, non-voter): Too soon for Fed to consider lowering rates - press interview
LEN Reports Q1 $0.74 v $0.75e, Rev $3.87B v $4.08Be
(EU) ECB said to be working on models for tiered Deposit Rate - press
(US) Association of American Railroads weekly rail traffic report for week ending Mar 23rd: 503K, -4.5% y/y (has fallen for 6 consecutive weeks)
*(UK) PM May told Tory MPs in her Statement to 1922 Tory party committee that she'll hand over leadership once Brexit is delivered; does not offer a specific timetable for stepping down - press
BA Exec: Announces three software changes for 737 MAX; sees 737 MAX upgrade installed within days of software approval; working with regulators on a 737 MAX patch and training
(US) Pres Trump asks agencies to end conservatorship of Fannie and Freddie; will sign Trump reform memo
*(UK) UK Parliament indicative votes: no majority reached on any indicative votes (as expected); MP Letwin proposes parliament should vote again on Monday to reconsider these matters
(CN) Trump Administration Official: China tariffs will be key sticking point and will be resolved as part of the deal; no specific time frame set for trade deal, talks could conclude anytime from April to June

THURSDAY 3/28
(DE) GERMANY MAR CPI SAXONY M/M: 0.5% V 0.3% PRIOR; Y/Y: 1.4% V 1.4% PRIOR
(EU) EURO ZONE MAR BUSINESS CLIMATE INDICATOR: 0.53 V 0.68E
*(US) Q4 FINAL GDP PRICE INDEX: 1.7% V 1.8%E; CORE PCE Q/Q: 1.8% V 1.7%E
*(US) Q4 FINAL GDP ANNUALIZED Q/Q: 2.2% V 2.3%E; PERSONAL CONSUMPTION: 2.5% V 2.6%E
(RU) Russia and OPEC might agree to three-month extension of oil supply reductions at June meeting; Energy Min Novak said to tell Saudis he can't promise extension until end of 2019 - press
(US) Nevada reports Feb casino gaming Rev $1.01B, -0.6% y/y; Las Vegas strip Rev $591.7M, -2.0% y/y
(BR) Brazil Econ Min Guedes: pension reform will pass; has full support of Lower House President Maia
(UK) Northern Ireland's DUP party confirms they will vote against withdrawal agreement approval motion just announced - Sky News
WFC CEO and President Tim Sloan to retire, effective June 30th; Board of Directors elects General Counsel Allen Parker as interim CEO and President

FRIDAY 3/29
*(DE) GERMANY MAR UNEMPLOYMENT CHANGE: -7K V -10KE; UNEMPLOYMENT CLAIMS RATE: 4.9% V 4.9%E
(US) Treasury Sec Mnuchin: have concluded constructive talks in Beijing; looking forward to continuing the negotiations in Washington DC next week
*(US) FEB PERSONAL INCOME 0.2% V 0.3%E
*(US) FEB NEW HOME SALES 667K V 620KE
(US) Fed's Kaplan (dove, non-voter): yield curve is indicative of skepticism on growth; did not pencil in a rate increase for 2019
*(UK) UK PARLIAMENT VOTES 286-344 AGAINST WITHDRAWAL AGREEMENT
(US) Atlanta Fed raises Q1 GDP forecast to 1.7% v 1.5% prior
(US) New York Fed Nowcast: maintains Q1 forecast at 1.3%; cuts Q2 forecast to 1.6% from 1.7%
LYFT IPO opens for trade at $87.24

Barrons weekend summary

Barrons weekend summary Cover story: Nearly 80% of parents give some financial support to their adult children, costing about $500B a year, twice what parents put into retirement accounts according to surveys—and almost three-quarters of respondents acknowledged putting their children’s interests ahead of their own retirement needs; Ten years of a bull market and a growing comfort with debt have made this largesse easier to rationalize, but incurring additional costs just before or just into retirement can be problematic. 

Features: 1) Cautious on LYFT: The ride-hailing startup’s upcoming initial public offering is likely to be a hit, and with a float of just 12% of the shares outstanding and high revenue growth, the stock could pop on its debut—but investors should take a pass until the company proves it has a path to profitability; 2) Activist investors have generally become accepted by the investing community, but there is evidence their strategies don’t work as well as one might think: Activist hedge funds trailed the market by about five percentage points a year since the end of the financial crisis, and trailed the broader hedge fund industry by about five percentage points a year since the end of 2016; 3) Nearly 19 million Americans suffer from substance-use disorder, and overdoses are the leading cause of accidental death—yet affluence not only offers no protection, it can make matters worse as people with money spend vast sums in a largely unregulated treatment industry; 4) Even small investors can think like activists by looking at stock in terms of acquisition potential and studying cash conversion—the time it takes for a product sale to turn into cash—and asset turnover, the amount of sales generated by an asset; 5) Story looks at how parents can put their adult children on better financial footing without creating an air of entitlement or damaging their own financial situations. 

Tech Trader: Positive on GOOGL: Google's rollout of Stadia, which enables gamers to play streamed games on their computers, televisions, and smartphones without the need for a separate console, is the latest example of the tech battle moving to the cloud, which offers quicker scalability, cost efficiencies, and a closer connection to the customer. 

Trader: The yield-curve inversion might not be signaling a recession yet, but there are other reasons to worry, says Richard Farr of Merion Capital Group, who says earnings season, which gets under way in April, is a primary concern; Positive on IIPR: As the only U.S.-listed REIT serving the cash hungry cannabis industry, IIP has turned its cost-of-capital advantage into steady growth and a generously-valued stock; Positive on CAT: Changes the company made to its manufacturing system are improving operating margins and preparing the company for the next downturn, but investors so far don’t seem impressed—shares are trading at a 35% discount to the broader market. 

Interview: Rod Lache and Don Galves of Wolfe Research say the automotive landscape will change dramatically during the next five to 10 years, creating opportunities and disruption (picks: APTV, BWA, GM, LEA, TSLA). 

Profile: Samantha Lu, co-manager of the AB Small Cap Growth Portfolio and co-chief investment officer of small and SMID growth strategies at AllianceBernstein looks for small companies that can grow faster than the market expects, and seeks to minimize the opportunity cost of owning stocks that stumble (top 10 holdings: ETSY, IWO, FIVE, PLNT, TTD, IRTC, OLLI, NGVT, NEWR, LHCG). 

European Trader: Positive on RELX: Low-profile giant formerly known as Reed Elsevier—which owns properties as diverse as The Lancet and Comic Con—is transforming itself from a tired media stock into a high-margin tech player leveraging technologies such as artificial intelligence, sending the share price up. 

Emerging Markets: Emerging market currencies look undervalued, says Rob Neithart of Capital Group, while inflation is dropping in many places, positioning central banks to cut rates, after having hiked them to defend their currencies. 

Commodities: With a more than 30% jump in prices so far this year, rhodium—which is corrosion resistant, is used in catalytic converters and as an electrical contact material—now costs more than twice what gold or palladium do, but hasn’t attracted much attention from investors.

Streetwise: As Americans increasingly turn to streaming, they are paying more for it than cable or satellite—and “If there’s a safe bet in media right now, it’s that the market can’t stay this fragmented, because streaming fatigue isn’t much more appealing than bundle burnout.”

Investor worries grow after Fed doubles down and data disappoints

TradeTheNews.com Weekly Market Update: Investor worries grow after Fed doubles down and data disappoints
Fri, 22 Mar 2019 16:20 PM EST

US stock markets managed to scale the proverbial wall of worry for much of this week, helped by another prod from the US Federal Reserve. CPI figures continued to miss expectations here in the US and elsewhere, while global economic data both here and abroad suggested deceleration. Brexit worries were dragged out as PM May went to Brussels and appears to have at least secured a short-term extension to this month’s deadline, but a resolution remains up in the air and it is contingent on yet another round of vital votes in Parliament next week. Friday saw key European manufacturing figures move further into contractionary territory, suggesting Brexit and trade uncertainty has further pressured economic growth there. Risk appetite dried up as investors looked to unload assets while buying up government bonds in the final session of the week. Stocks gave back all the post-FOMC meeting gains. Volatility picked up notably after the yield on the US 3-month T-bill inverted by going above that of the US 10-year yield for the first time since 2007.

The Fed came out Wednesday with what was essentially a dovish double-down to the pivot announced earlier this year. The FOMC dot plot went from a median of two expected rate hikes this year to zero, while also announcing quantitative tightening of the balance sheet would likely come to an end by September at a size of ~$3.5T. In his press conference, Chairman Powell emphasized that risk factors to growth, namely overseas, as well as inflation readings persistently backing off from the Fed's 2% target make it the right time to be patient. He further opined that patience means there is no need to rush to judgment, and it may be some time before the outlook calls for a policy change. Rates fell globally and the US Treasury yield curve flattened in the wake of the news. The short end of the US curve further inverted and by Friday the German 10-year bund yield dipped into negative territory for the first time since 2016. The Greenback initially saw selling pressure in the wake of the Fed, but buyers returned quickly, particularly against the Euro and emerging markets, most notably Turkey. Crude briefly topped $60 helped by drawdowns in US stockpiles before backing away from those 4-month highs on growth concerns. Gold moved to a fresh 1-month high helped by the Fed, and the VIX shot up almost 20% on Friday. For the week, the S&P dropped 0.8%, the Dow shed 1.3%, and the Nasdaq lost 0.6%.

In corporate news this week, Boeing slipped further as questions about its MAX 737 aircraft mounted, as did scrutiny from regulators and Congress. FedEx pressured the transports sector after releasing disappointing results and an outlook that raised global growth concerns. Nike released underwhelming results and noted it saw FX headwinds weighing on their growth in the near term. The biotech space took a hit after Biogen and Eisai announced they were discontinuing Phase 3 ENGAGE and EMERGE Trials of aducanumab in Alzheimer’s Disease. Banks and financials fell sharply after a more dovish than anticipated Fed announcement and as the spread between the 3-month Treasury bill yield and the 10-year note yield dropped to the narrowest level seen since 2007.

MONDAY 3/18
LYFT Files to sell 30.7M IPO shares between $62.00 and $68.00 on NASDAQ - filing
(UK) Northern Ireland's DUP party spokesperson: DUP leader Foster has no current plans to travel to London; Deputy Leader Dodds continues to lead talks with govt
(UK) Parliament Speaker Bercow: PM May must change Brexit deal to hold third 'meaningful vote'; May CANNOT put the same Brexit deal to a third vote
(UK) EU to formally agree on Brexit delay this week potentially until July 1st - Guardian

TUESDAY 3/19
*(UK) FEB JOBLESS CLAIMS CHANGE: +27.0K V +15.7K PRIOR CLAIMANT COUNT RATE: 2.9% V 2.8% PRIOR
(UK) JAN AVERAGE WEEKLY EARNINGS 3M/Y: 3.4% V 3.2%E; WEEKLY EARNINGS (EX-BONUS) 3M/Y: 3.4% V 3.4%E
*(DE) GERMANY MAR ZEW CURRENT SITUATION: 11.1 V 13.0E; EXPECTATIONS SURVEY: -3.6 V -11.0E
(CN) China said to be considering excluding 737 Max aircraft from US trade deal - press
*(US) JAN FINAL DURABLE GOODS ORDERS: 0.3% V 0.4%E; DURABLES (EX-TRANSPORTATION): -0.2% V -0.1% PRELIM
(CN) Some US officials reportedly see China walking back trade offers; some officials said to see China moves as normal part of the process - press
FDX Reports Q3 $3.03 v $3.10e, Rev $17.0B v $17.6Be

WEDNESDAY 3/20
WP Becomes first card acquirer to enable Amazon Pay
(US) Association of American Railroads weekly rail traffic report for week ending Mar 16th: 501K, -6.8% y/y (has fallen for 5 consecutive weeks)
(US) Pres Trump: We are talking about leaving tariffs on China for a long period of time to ensure China complies with the trade deal
*(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 2.25-2.50%; SIGNALS NO HIKES THIS YEAR AND ONE RATE HIKE IN 2020
*(US) FED: Balance Sheet Normalization Plans: to slow reduction of holdings starting in May and conclude run off in Sept
(UK) PM May: UK will not leave EU on time on March 20th as previously expected; not ready to delay Brexit any further than June 30th
MU Reports Q2 $1.71 v $1.73e, Rev $5.84B v $5.92Be

THURSDAY 3/21
941.HK Reports FY18 (CNY) Net 117.8B v 114.3B y/y, EBITDA 275.5B v 270.4B y/y; Rev 736.8B v 741B y/y
*(CH) SNB LEAVES SIGHT DEPOSIT RATE UNCHANGED AT -0.75%; AS EXPECTED
700.HK Reports Q4 (CNY) Net 14.2B v 17.6Be, Adj EBITDA 29.7B v 29.6B y/y, Rev 84.9B v 83.4Be
*(NO) NORWAY CENTRAL BANK (NORGES) RAISES DEPOSIT RATES BY 25BPS TO 1.00%; AS EXPECTED
*(UK) FEB RETAIL SALES (EX AUTO/FUEL) M/M 0.2% V -0.4%E; Y/Y: 3.8% V 3.5%E
BIIB Biogen and Eisai to discontinue Phase 3 ENGAGE and EMERGE Trials of aducanumab in Alzheimer’s Disease; futility analysis suggests primary endpoint unlikely to be met, EVOLVE Phase 2 safety study and LT extension of PRIME Phase1b study of aducanumab also to be discontinued
*(UK) BOE LEAVES INTEREST RATES UNCHANGED AT 0.75%; AS EXPECTED
*(UK) BANK OF ENGLAND (BOE) MAR MINUTES: Voted 9-0 to leave rates unchanged
(BR) Former Brazil President Temer arrested as part of 'Carwash' probe - Brazil press
FB Reportedly stored hundreds of millions of user passwords in plain text for years - Krebs on Security
NKE Reports Q3 $0.68 v $0.63e, Rev $9.61B v $9.54Be
(EU) EU Tusk on Leader Summit draft conclusions: EU can agree on Brexit extension until May 22nd with extension conditional on Withdrawal Agreement approved by UK parliament during week of Mar 25th (next week)

FRIDAY 3/22
CSGN.CH Publishes FY18 Annual Report: Reports final FY18 (CHF) Net +2.02B v -983M y/y, Rev 21.6B v 21.8B y/y
(FR) FRANCE MAR PRELIMINARY MANUFACTURING PMI: 49.8 V 51.4E (back into contraction for 1st time in 3 months)
(DE) GERMANY MAR PRELIMINARY MANUFACTURING PMI: 44.7 V 48.0E; (3rd straight contraction)
*(EU) EUROZONE MAR PRELIMINARY MANUFACTURING PMI: 47.6 V 49.5E (2nd straight contraction and lowest since Apr 2013)
(DE) GERMAN 10-YEAR BUND YIELD MOVES INTO NEGATIVE TERRITORY
(CN) US President Trump: Reiterates deal with China coming along very well; will probably happen and getting very close - TV interview
(RU) RUSSIA CENTRAL BANK (CBR) LEAVES KEY 1-WEEK AUCTION RATE UNCHANGED AT 7.75%; AS EXPECTED
TIF Reports Q4 $1.60* adj v $1.60e, Rev $1.32B v $1.34Be
(US) MAR PRELIMINARY MARKIT MANUFACTURING PMI: 52.5 V 53.5E
*(US) FEB EXISTING HOME SALES: 5.51M V 5.10ME