Dour Mood in Markets Lifted by a Trio of Positive Developments on Friday

TradeTheNews.com Weekly Market Update: Dour Mood in Markets Lifted by a Trio of Positive Developments on Friday
Fri, 04 Jan 2019 16:05 PM EST

2019 commenced with a bang as markets gyrated in much the same fashion as the closing weeks of 2018. Following the New Year’s Day holiday global markets endured a fresh bout pernicious risk-off trading linked to worries about global growth. A key China PMI reading dropped into contraction territory while European and US data continued to soften. The US government remained in a partial shutdown and the prospects for ending the standoff anytime soon appeared remote. Global bond yields dropped precipitously along with stock prices on Thursday after Apple preannounced a significant shortfall in quarterly sales which only served to perpetuate fears that the ongoing trade war has severely stunted corporate prospects. The Japanese Yen saw extreme upside volatility in the wake of the Apple news highlighting how global liquidity conditions maybe exacerbating capital market swings in the wake of central banks attempts to wean off of unconventional measures, namely quantitative easing. US rates fell aggressively after the December ISM reading dropped at the fastest pace since October 2008. For the first time since the financial crisis the Fed funds rate briefly traded above that of the yield on the 2-year Treasury note prompting more forecasts for an eventual rate cut by year’s end.

Investor sentiment turned abruptly on Friday as a confluence of factors enticed investors back into risk assets. First, the PBOC cut the Reserve Requirement Ratio (RRR) by a full percentage point, adding liquidity to China’s economy ahead of trade talks with the US early next week. Second, the US December employment report was viewed in a very positive light as upside surprises in payrolls and wage growth far outweighed a rise in the unemployment rate, which could even be viewed as encouraging in the context of a rising participation rate. Finally, within hours of the jobs report a host of risk assets surged again after Fed Chairman Powell noted that he saw the jump in wages as a positive, rather than raising concerns on inflation. He went on to echo what was heard from other Fed officials this week when he added the Fed would remain patient on raising rates and would not rule out modifying the balance sheet run off if it ultimately proved necessary. Breadth on both the NYSE and NASDAQ widened to levels not seen in recent weeks as US stock indices rebounded into the weekend. Rising oil and copper prices supported the positive tone in equities, and for the week the S&P gained 1.9%, the DJIA added 1.6%, and the Nasdaq rose 2.3%.

Leading corporate headlines during this holiday-shortened week was news that Bristol-Myers would acquire Celgene for $74B, which would make it the largest health-care deal ever, though Bristol investors were less than enthusiastic about the plan. Apple slashed its outlook for the first time in the iPhone era, noting poor demand in China and unexpectedly less frequent model upgrades. Samsung announced plans to cut its chip inventory in order to maintain tight supplies as demand is expected to slow. Tesla shares fell after it reported a miss on Q4 targets for Model 3 and implemented a price cut for all vehicles to offset tax credit reductions. Delta weighed on the transports midweek after trimming its Q4 revenue outlook. Netflix named former Activision and Disney executive Spencer Neumann as its new CFO. Shares of winter clothing manufacturer Canada Goose lifted on the news that its store opening in China was well received.

SUNDAY 12/30
(US) Texas judge Reed O'Connor rules Affordable Care Act ('Obamacare') to remain in place during appeal, cited the need to avoid uncertainty during appeal process - US Press

MONDAY 12/31
*(US) DEC DALLAS FED MANUFACTURING ACTIVITY: -5.1 V 15.0E
(US) Federal Communications Commission (FCC) to suspend most operations tomorrow if shutdown continues - press

TUESDAY 1/1
*(CN) CHINA DEC CAIXIN MANUFACTURING PMI: 49.7 V 50.2E (first contraction since May 2017)

WEDNESDAY 1/2
*(UK) DEC PMI MANUFACTURING: 54.2 V 52.5E (29th month of expansion)
*(US) DEC FINAL MARKIT MANUFACTURING PMI: 53.8 V 53.9E (lowest since Sep 2017)
AAPL Cuts Q1 Rev $84B v $91.3Be, gross margin 38%, opex $8.7B (prior Rev $89-93B, gross margin 38.0-38.5%; op-ex $8.7-8.8B) on emerging market challenges and lower anticipated iPhone Rev; China market especially weak (first guidance cut since 2002)
TSLA Reports Q4 Deliveries 90.7K vehicles +8% q/q v 92.0Ke (model 3 deliveries 63.2K v 63.7Ke); Announces $2K price reduction in the US to offset tax credit reduction
005930.KR Will cut chip inventory due to oversupply - Korean press

THURSDAY 1/3
CELG To be acquired by Bristol-Myers in cash and stock deal for implied $102.43/shr initially valued at ~$74B
GM Reports Q4 total deliveries: 785.2K units, -2.7% y/y
(US) Fed's Kaplan (dove, non-voter): Favors taking no action the first few quarters in 2019; personal forecasts for GDP have come down a bit - financial press
(US) Association of American Railroads weekly rail traffic report for week ending Dec 29th: 411.7K, +5.1% y/y
(CN) China Commerce Ministry (MOFCOM): Confirms China and US to hold vice ministerial level trade talks on Jan 7-8th (Mon-Tues)
(JP) Reportedly BoJ will consider trimming inflation outlook for next 2 years - Nikkei

FRIDAY 1/4
*(DE) GERMANY DEC UNEMPLOYMENT CHANGE: -14K V -13KE; UNEMPLOYMENT CLAIMS RATE: 5.0% V 5.0%E
*(CN) CHINA PBOC CUTS REQUIRED RESERVES RATIO (RRR) BY 100 BP to 14.50%; in two stages
*(UK) DEC SERVICES PMI: 51.2 V 50.7E (29th month of expansion)
*(EU) EURO ZONE DEC ADVANCE CPI ESTIMATE Y/Y: 1.6% V 1.7%E; CORE CPI Y/Y: 1.0% V 1.0%E
*(US) DEC UNEMPLOYMENT RATE: 3.9% V 3.7%E
*(US) DEC CHANGE IN NONFARM PAYROLLS: +312K V +184KE
*(US) DEC AVERAGE HOURLY EARNINGS M/M: 0.4% V 0.3%E; Y/Y: 3.2% V 3.0%E; AVERAGE WEEKLY HOURS: 34.5 V 34.5E
*(US) Fed Chair Powell: Welcomes wage data, it doesn't raise inflation concerns; Always prepared to shift policy and shift it significantly if necessary - panel discussion
(US) DOE CRUDE: +0.0M V -2.5ME; GASOLINE: +6.9M V +1.5ME; DISTILLATE: +9.5M V +0.5ME
GE Apollo reportedly mulling offer of jet leasing division; could be worth $40B - press

TradeTheNews overview

For years now subscribers of the Sunday Links newsletter enjoy weekly market updates (sample), two-months market outlooks (sample), and Saturday Barron's summaries (sample). In the newsletter, you did see the link to the original source of those, TradeTheNews. Today I want to present the service behind these informative bits and introduce you to this feature-rich source, highlighting a few more sides of it you may have not seen.

(Disclaimer: I have no financial interest in TTN, nor do I get paid for this post or compensated for subscriptions) .

At its heart TTN is a real-time scrolling news source. Thus, its default view has the headlines occupying main area. They scroll, you read - simple as that. Of course, you don't have to watch them all the time. There are sound alerts when something significant happens (more on that later). Also, you read more details behind the headline by hovering your cursor over it, like so:

You can also click on the headline, and full text will appear in the bottom part, where you will also have an access to other related news, upcoming earnings and current holders of the stock:

Speaking of that bottom area, you have a default tab "Show Market Data." It displays S&P 500 real time changes, and there is more to it. First, you can switch to other market indicators, if you prefer - NASDAQ, VIX, even Gold or Oil, etc. Second, there are red circles on the chart. Those are indication of a certain event happened at that point in time. Pointing your cursor to it and reading the event details, you can match the information to the market change:

This kind of matching the event to the market response is not only informative, it's educational as well. You get a sense for how market is likely to behave when influenced by various news. It's more nuanced than a primitive "good news - up, bad news - down" view that befalls many traders. If you are familiar with my A Taoist Trader, 111 Trades and other materials, you can see how this idea of verifying the market moves against the information/news background goes to the very heart of my trading approach. Being familiar with patterns described, among others, in Techniques of Tape Reading, utilized by Jesse Livermore and valid since, well, forever, you can gauge which stage of the movement the market is. Is tulip mania at the beginning or at the peak - that's the question you need to answer to understand how the next news item is likely to impact the market. Good news can push the stock upward if it comes at the beginning stages of the movement, and can have just the opposite effect at the top of the move. Accumulation by smart money at the early phase vs. euphoric buying by the crowds at the final stage, and how the news fit in this context - if you have a firm grasp of these concepts, you have the key to the markets. TTN provides the tools for such understanding. In case these concepts are new to you, let me offer you this chart as a means to pique your curiosity and as a starting point for the further research:

 But I digress.

Remember a bit about sound alerts? It's not just your rudimentary beep getting your attention when something of importance happens. It's also a squawk box, voice commenting on the latest news of note, so you can hear it while watching the market or browsing other tabs in your browser:

Let's move on to the other features. There is a Calendar tab where you can familiarize yourself with all important events of the upcoming week and switch between different world regions:

As you look at those tabs, you will notice a few more, providing wealth of information and mostly self-explanatory. Let me show you how they look and what kind of information they provide. Filers tab:

...and Top Stories tab:

Now that have first idea of the interface, I'll leave you to explore the rest of it to discover the TTN's full potential. One more aspect to mention is e-mail alerts. You can configure them to control the volume of incoming e-mails according to your interests and trading style. For instance, to prepare for the beginning of trading day, Pre-Market Movers is invaluable. This is what you get:

There is Morning and Evening Papers Summary, Online Reading Summary, Market Close Summary, Event Watch, midday Trading Hours Summary... if you get overwhelmed by choice, just watch them all for a week or two to get a sense of which of them are useful for you.

Let me wrap it up by saying that there is a lot more to the TTN offerings, and the main thing you are likely to discover is a value of a single well-organized and thought-through source of information and analysis. 

Barrons weekend summary

Barrons weekend summary: Positive cover story on DIS; cautious on medical device makers ABT, BSX, MDT 

Cover story: After 20 years of focus on television, DIS is returning to its roots in films and theme parks, part of a transformation that includes a bold move into streaming that could help pull the company’s stock out of a three-year slump. 

Features: 1) The streaming landscape is beginning to resemble cable, with a handful of major “networks” such as AMZN, Hulu, and NFLX dominating as players such as DIS prepare to enter the fray; 2) Investors think index funds are a great way to capture market returns, but many funds that do no more than track broad market benchmarks charge fees on a par with actively managed funds; 3) Cautious on ABT, BSX, MDT: Recent research that found evidence doctors misdiagnose patients to justify useless but lucrative procedures could curb the inappropriate use of stents, trimming revenue from medical device companies. 

Tech Trader: “With consumers, legislators, and investors more skeptical of tech than they’ve been in years, trust could be an an intangible factor next year in how companies compete, recruit new customers, and retain talent.” 

Trader: Three months ago, the market appeared to be pricing in a strong economy and solid earnings in 2019, but that changed in September, and stocks are now pricing in a possible recession; Positive on CGNX: Company’s gross margins of more than 75% are more comparable to a software company than its industrial peers, and it’s always on the hunt for new industries for expansion. 

Profile: Bob Doll, chief equity strategist and senior portfolio manager at Nuveen, applies quantitative and qualitative analysis to the Large Cap Core fund, a strategy known as "quantamental" (top 10 holdings: AAPL, MSFT, UNH, MA, Comcast, GOOGL, AMZN, CSCO, CELG, CI); Winton Capital founder David Harding, who deploys high-powered computers to crunch data, pick up potential trading signals, and ascertain market patterns, talks about artificial intelligence and statistical fallacies. 

Interview: BX chief executive Stephen Schwarzman talks about whether the firm has grown too big, whether it should convert from a partnership to a regular C corporation, and about succession planning. 

Up and Down Wall Street: Now could be the time to look at preferred shares, whose relative stability and higher dividend yields are attractive to some investors; Positive on G4S: Shares of the company, which are down from their 2018 high, are cheap and set for a rebound, says Alexander Roepers of Atlantic Investment Management. 

European Trader: Positive on Aegon, Prudential, ING: “After a broad selloff in preferred stocks during the first half of the year, several U.S. exchange-traded preferreds from European issuers have become attractive income plays.” 

Emerging Markets: Emerging markets fund mangers followed two lines of thought in 2019: a belief that fundamentals remained sound, and that many excellent companies would thrive despite political or economic volatility—but investors didn’t buy either argument. 

Commodities: Prices for platinum, which is used primarily in automobile catalytic converters, look ready to bounce more than 40% in the next few weeks, according to analysts. 

Streetwise: Banks have squandered the public’s trust over the past decade, but fintechs—which stepped in with offers of better technology and stronger ethics—have also stumbled, raising questions about whether the new guard is any better than the old guard.

Historic Volatility Marks Closing Days of 2018

TradeTheNews.com Weekly Market Update: Historic Volatility Marks Closing Days of 2018 

In the wake of the most bruising week of trading since the financial crisis holiday week trading opened with the worst Christmas Eve performance in the history of the US stock market. Concerns surrounding global growth and the potential for a recession, along with dysfunction in Washington DC remained a toxic concoction for investor sentiment while year-end tax loss selling kept technical readings in an extremely precarious state. US economic data deteriorated led by a particularly poor Richmond Fed reading which saw manufacturing indicators decline at a record pace in December. The picture was further muddied by delays in other key US readings due to the partial government in Washington. The S&P briefly sniffed bear market territory following the Transports, NASADQ and Russell which had already decline more than 20% from their peaks. Oil prices plumbed to new lows along with US Treasury yields and the VIX traded above 36 before global equity markets were closed for the Christmas holiday. 

Wednesday saw a snap back rally of epic proportions when the Dow gained more than 1,000 points in one session for the first time ever. Oil prices surged roughly 9% in tandem with stocks and Treasury yields rose resulting in steepening along the curve. Many were quick to call it a dead cat bounce as it had many of the attributes of a typical bear market rally. There was no major news catalyst to point to while much of the most aggressive buying was seen in the most beaten down names suggesting algorithmic short covering. Many of those investors felt vindicated when markets turned around Thursday morning giving back more than half of the post-Christmas rally before a vicious snap back rally ensued into the close. Markets were volatile again on Friday, as traders searched for a new pattern. In a week of violent trading, the S&P ended up 2.9%, the DJIA gained 2.8%, and the Nasdaq rose 4%. 

In corporate news this holiday-shortened week, Amazon caught a bid after reporting ‘record-breaking’ holiday season orders. Fitness industry software developer Mindbody announced a go-private deal with PE firm Vista Equity for $1.9B. Canadian cannabis firm Aphria rebuffed a C$11/share takeover offer from Green Growth Brands. Tesla named Oracle's Larry Ellison and Walgreens Boots' Kathleen Wilson-Thompson as new independent board members. Deal renewal talks between Verizon and Disney reportedly hit a snag, which could black out a slew of Disney channels, including ESPN, for Verizon customers at the start of the New Year. 

SATURDAY 12/22 (US) Pres Trump has discussed firing Fed Chairman Powell after the December FOMC rate hike; advisers not convinced he would actually go through with it – press (US) Treasury Sec Mnuchin: Trump "never suggested firing" Fed Chair Powell, Trump does not believe he has the right to fire Powell - press 
SUNDAY 12/23 (CN) China Finance Ministry will not levy tariffs on 94 items including fertilizer and iron ore, to adjust tariffs on items, effective Jan 1st, 2019; to implemented temporary import tariffs on more than 700 items; to remove import tariffs on goods produced in Hong Kong and Macau (US) Treasury Sec Mnuchin: Called CEOs of largest banks over the weekend all confirmed have ample liquidity 
MONDAY 12/24 MB To be acquired by Vista Equity Partners for $36.50/shr in cash valued at $1.9B (US) Appaloosa's David Tepper: I have been buying some stocks today - CNBC 
TUESDAY 12/25 (CN) China Association of Automobile Manufacturers official: China will cut electric vehicle (EV) subsidy by 30% in 2019 - China Securities Times (US) President Trump said to be getting increasingly frustrated with Treasury Sec Mnuchin, while still publicly supporting him - US press 
WEDNESDAY 12/26 *(US) DEC RICHMOND FED MANUFACTURING INDEX: -8 V +15E (record drop for data series) (US) White House Econ Adviser Hassett: Fed Chair Powell's job is not in jeopardy; Powell is 100% safe; there's no hidden liquidity crisis - Fox Business interview 
THURSDAY 12/27 HUAWEI.CN Trump administration said to be looking to issuing an executive order in January barring US companies from buying Huawei & ZTE products - US Financial Press (CN) China PBoC: To maintain its prudent policy stance; to comprehensively use multiple policy tools - Q4 quarterly meeting statement (US) Nevada reports Nov casino gaming Rev $967.2B, +6.4% y/y; Las Vegas strip Rev $534.5M, +10% y/y *(US) DEC CONSUMER CONFIDENCE: 128.1 V 133.7E (lowest since July) (US) Association of American Railroads weekly rail traffic report for week ending Dec 22nd: 567.3K, +4.2% y/y 12/27 APHA.CA Green Growth confirms intention to launch C$11/shr takeover bid for Aphria 
FRIDAY 12/28 (DE) GERMANY DEC CPI SAXONY M/M: +0.4% V -0.1% PRIOR; Y/Y: 1.9% V 2.1% PRIOR (DE) GERMANY DEC PRELIMINARY CPI M/M: 0.1% V 0.3%E; Y/Y: 1.7% V 1.9%E (US) DOE CRUDE: -0.05M V -2.5ME; GASOLINE: +3M V 0ME; DISTILLATE: +0.0M V 0ME TSLA Names Oracle's Larry Ellison and Walgreens Boots' Kathleen Wilson-Thompson as new independent Board members

Barrons weekend summary

Barrons weekend summary: positive feature on CVS, LH, TDOC 

Cover story: Next year could be a time of reckoning for several tech giants that will hit the public market, which takes a more hard-headed view of the high cost of growth than the private market, according to participants in Barron’s Tech Roundtable; The panel picked twelve fast-growing startups to watch: Uber, Airbnb, Stripe, Lyft, Warby Parker, Discord, Allbirds, Toast, Fundbox, Nuro, and Aurora Innovation. 

Features: 1) If several large unicorns go public next year, they could revive an IPO market that is wobbling with the downturn in stocks, but investors should temper their expectations for the IPOs and their impact on the stock market; 2) Though 81% of the companies that went public in 2018 priced in or above their indicated range, their luster has dimmed, and combined they have returned minus 2.3% this year; 3) After dropping by about 25%, some European stocks hold a lot of long-term value, and investors willing to do some legwork can find buried gems (positive on Henkel, Danone, Cie Financiere Richemont, BP, BASF); 4) Positive on CVS, LH, TDOC: A JNJ selloff on the alleged risks of baby powder looks overdone, but the stock was expensive to begin with; investors may instead want to focus on powerful long-term trends with these three stocks. 

Tech Trader: The market often extrapolates the recent past and pays higher valuations when growth rates are accelerating, but the reverse is also true: earning multiples contract as forecasts fall, a problem the tech sector, and chip stocks in particular, face; Outside the tech world, there are other indications that a global slowdown may have already begun. 

Trader: The odds of a recession have increased, according to Jason Pride of Glenmede, who puts the chances of a slowdown at about 35%—and when the odds of a slump are that high, it signals a high level of fragility in the economy; Positive on MS: Though weak prices make sense at some banks, which are trading as if a 2019 recession is guaranteed, the discount is hard to justify at Morgan Stanley, which has a number of growth drivers; “It’s been raining stock buybacks on Wall Street this year, and the outlook appears to be for another downpour in 2019” after repurchases crossed the $1T mark in mid-December. 

Profile: Ben Kirby and Brian McMahon of the Thornburg Investment Income Builder fund, which has adjusted its allocation to stocks and bonds in line with shifting market conditions during the past 16 years. 

Interview: Gary Heminger, chairman and CEO of MPC , talks to Barron’s about pump prices, refining profits, miles-per-gallon requirements, electric cars, and more. 

Follow-Up: The promise of blockchain technology seemed unlimited a year ago, but it may be years before it proves its usefulness, and much of seems to be “smoke and mirrors”; Some investors wonder if the rapid decline in oil prices and a market selloff are an ominous signal about global economic growth, but they probably aren’t. 

European Trader: Positive on BTI, PM: After taking a hit for most of the year, shares of the tobacco companies are substantially undervalued, generally less volatile than the overall market, and yield huge dividends. 

Emerging Markets: Cautious on GCL-Poly Energy Holdings, Sungrow Power Supply: Until this year, China seemed poised to dominate the solar energy industry, but an abrupt moratorium on state subsidies for new projects has led to a drop in installations. 

Streetwise: The decision by CBS to refuse a $120M exit payout for former chief Les Moonves may have inadvertently created a turning point in the “baffling pattern” of harassment settlements.

Fed Chair Spooks Already Fragile Markets Fearing a Slowdown

TradeTheNews.com Weekly Market Update: Fed Chair Spooks Already Fragile Markets Fearing a Slowdown
Fri, 21 Dec 2018 16:06 PM EST

The quarter and year drew mercifully towards a close in what was another bruising week for investors. Concerns surrounding global growth heading into 2019 lingered amid heightened speculation on just how much the US Fed would incorporate those worries into their rate policy statement on Wednesday. Another string of weak economic readings, particularly in core Europe and China, along with some deceleration evident in the US economy only exacerbated that trepidation and manifested itself in downward moves for global equities and commodities, most notably continued pressure on crude oil prices.

Wednesday’s FOMC statement failed to meet mounting dovish expectations and Chairman Powell’s press conference delivery further underwhelmed those same investors. The Chairman emphasized the Fed would remain data dependent into 2019 and at this point most FOMC members now forecast two hikes next year rather than three given the strength of the US economy. Dovish tweaks to the statement language and the press conference itself did nothing to change sentiment and investors resumed selling stocks. US indices plumbed through the February lows, the NASDAQ officially fell into bear market territory, and the Transports careened lower, further worrying Dow theorists. Dysfunction in Washington DC didn’t help either as the President and Congress veered towards a government shutdown as the two sides fought over funding for the Mexico border wall. Gold prices rose above the 200 day moving average and the VIX jumped above 30 for the first time since February. The S&P500 had its worst week since 2011, falling 7.1% and the Russell 2000 was down 8.2%. The DJIA and Nasdaq had their worst week since 2008, plunging 6.9% and 8.4%, respectively.

In corporate news this week, Nike jumped after reporting results, noting strong online growth and rising women’s sportswear apparel sales. FedEx crystalized concerns about international growth and shares came under pressure after slashing its forecast, saying its international business had weakened as global trade decelerates. Pfizer and Glaxo announced they would combine their consumer businesses, creating an over-the-counter-drug monolith. Qualcomm won a ruling against Apple in a Munich Court that would ban the sale of some iPhone models in Germany — this coming after a judge had granted preliminary injunctions against Apple in China last week. Jack in the Box announced it was exploring strategic alternatives and has spoken with potential buyers, though no timelines for a deal are known. The Malaysian government lodged criminal charges against Goldman Sachs and said it would seek $7.5B in damages from the American bank over allegedly fraudulent dealings with the state development fund 1MDB.


MONDAY 12/17
*(US) DEC EMPIRE MANUFACTURING: 10.9 V 20.0E (lowest since May 2017)
*(US) DEC NAHB HOUSING MARKET INDEX: 56 V 60E
WTI crude futures settle at $49.88/bbl, settling below $50 for the first time since Oct 2017
ORCL Reports Q2 $0.80 v $0.78e, Rev $9.56B v $9.53Be
JNJ Announces $5B share repurchase program (1% of market cap); affirms FY18 $8.13-8.18 v $8.16e, Rev $81-81.4B v $81.3Be

TUESDAY 12/18
*(DE) GERMANY DEC IFO BUSINESS CLIMATE: 101.0 V 101.7E; CURRENT ASSESSMENT: 104.7 V 105.0E
(SA) Saudi Arabia 2019 budget: Forecasts 2019 GDP growth at 2.6% vs. 2.3% this year - financial press
*(US) NOV HOUSING STARTS: 1.26M V 1.228ME; BUILDING PERMITS: 1.33M V 1.260ME
MU Reports Q1 $2.97 v $2.93e, Rev $7.91B v $8.03Be
FDX Reports Q2 $4.03 v $4.06e, Rev $17.8B v $17.7Be; initiates voluntary employee buyout program

WEDNESDAY 12/19
GSK.UK Reached agreement with Pfizer Inc to combine their consumer health businesses into a new world-leading JV (Pfizer to receive 32% equity stake of JV)
(TH) THAILAND CENTRAL BANK (BOT) RAISES BENCHMARK INTEREST RATE BY 25BPS TO 1.75%; AS EXPECTED
(SA) Saudi Oil Min Al-Falih: Current oil price not reflected in fundamentals; will achieve oil market balance in 2019
(US) DOE CRUDE: -0.5M V -3ME; GASOLINE: +1.8M V +1ME; DISTILLATE: -4.2M V +0.5ME
(US) Association of American Railroads weekly rail traffic report for week ending Dec 15th: 569K, +3.9% y/y
*(US) FOMC RAISES TARGET RANGE BY 25BPS TO 2.25-2.50%; AS EXPECTED
*(US) FOMC SUMMARY OF ECONOMIC PROJECTIONS (DEC) FOR SEPT MEETING (V. SEPT)
*(US) Fed Chair Powell: inflation has come in a touch lower than we expected, gives FOMC the ability to be patient going forward - Q&A FOMC press conf

THURSDAY 12/20
(ID) INDONESIA CENTRAL BANK (BI) LEAVES 7-DAY REVERSE REPO UNCHANGED AT 6.00%; AS EXPECTED
(SE) SWEDEN CENTRAL BANK (RIKSBANK) RAISES REPO RATE BY 25BPS TO -0.25%; NOT EXPECTED
(UK) NOV RETAIL SALES (EX AUTO/FUEL) M/M: 1.2% V 0.2%E; Y/Y: 3.8% V 2.3%E
(UK) BANK OF ENGLAND (BOE) DEC MINUTES: Voted 9-0 to leave Interest rates unchanged
QCOM Wins injunction against Apple in Munich Court; Can ban the sale of some iPhone models in Germany - press
(US) DEC PHILADELPHIA FED BUSINESS OUTLOOK: 9.4 V 15.0E
(CN) Reportedly US and over a dozen allies plan to openly accuse China about its economic espionage activities - Washington Post
(SA) Saudi Arabia reportedly to cut production more than initially expected as part of OPEC agreement; to cut 3% of collective output from 2.5% initially announced - press
Nasdaq Composite now 20% off record high set in Aug, entering a bear market
NKE Reports Q2 $0.52 v $0.45e, Rev $9.37B v $9.16Be
(US) Pres Trump in tweet announces Defense Sec Mattis will be retiring at end of Feb; replacement to be named 'shortly'

FRIDAY 12/21
(CN) China State Council guideline on implementing Central Economic Work Conference Report: Reiterates to enact a proactive fiscal policy; modifies its monetary policy stance to neutral for 2019 - financial press
(UK) Q3 FINAL GDP Q/Q: 0.6% V 0.6%E; Y/Y: 1.5% V 1.5%E
(US) US President Trump Tweets: Senator Mitch McConnell should fight for the Wall and Border Security as hard as he fought for anything. He will need Democrat votes, but as shown in the House, good things happen. If enough Dems don’t vote, it will be a Democrat Shutdown! House Republicans were great yesterday!
*(US) Q3 FINAL GDP ANNUALIZED Q/Q: 3.4% V 3.5%E; PERSONAL CONSUMPTION: 3.5% V 3.6%E
*(US) NOV PRELIMINARY DURABLE GOODS ORDERS: 0.8% V 1.6%E; DURABLES EX-TRANSPORTATION: -0.3% V +0.3%E
*(US) NOV PERSONAL INCOME: 0.2% V 0.3%E; PERSONAL SPENDING: 0.4% V 0.3%E
(US) Fed's Williams (moderate, voter): the important message is that the economy is very strong; listening to markets closely - CNBC interview
(US) Pres Trump: chances are pretty good there will be a shutdown; totally prepared for a very long shutdown

Barrons weekend summary

Barrons weekend summary: names top 10 stocks for 2019 

Cover story: “After a gloomy 2018, Wall Street strategists are upbeat about the market’s prospects next year, given a growing economy, low interest rates, and a possible truce on trade,” and U.S. stock could rise by more than 10 percent, according to a Barron’s panel of market strategists. 

Tech Trader: Column looks at three opportunities in the tech sector for 2019: Cloud computing chips (INTC), artificial intelligence (GOOGL), and digital commerce (PYPL, GRUB). 

Trader: “Peak everything” isn't a problem as long as the market sees continued earnings growth, profit margins, and positive confidence indicators, all signs the economy remains strong, according to Julian Emanuel of BTIG; A report from HSBC groups risk into three categories: event risk, market risk, and liquidity risk, all of which are driving the current market volatility, though investors also need to worry about other things; +/- XPO: A report by short seller Ben Axler claims the company, one of the year’s best-performing transport stocks, has used aggressive accounting to hide poor returns on its growth-by-acquisition strategy. 

Interview: Liz Ann Sonders of SCHW talks about where investors should brace for a bear market, what her favorite indicators are signaling, and risks to which investors may not be paying attention. 

Features: 1) Barron’s list of the top 10 stocks for 2019 includes GOOGL, AAPL, BAC, BLK, CAT, CVX, DAI, DAL, ET, and TOL; The list “tilts toward more economically sensitive issues and value,” and value investors could see some of the best opportunities in years; Most of the picks trade for 10 times forward earnings or less; 2) Growing cost pressures and concerns about slowing growth have led many investors to lose faith in small-caps, so investors will have to be choosy and avoid simply buying the index—2019 could be the year for stock pickers; 3) As rates rise, so do borrowing costs, which could create problems for companies with large debt loads—and just because some businesses aren’t feeling pressure now doesn’t mean they won’t at some point next year; 4) Investors in target-date funds are wondering what went wrong this year, but should think twice if they’re tempted to sell—losses may be due to an unusual confluence of events, and the funds are designed to be long-term savings vehicles. 

European Trader: Stocks in the U.K., France, and Germany weren’t much of a bargain for investors in 2018, but the problems they face are likely to dissipate, shares are inexpensive, and central bank monetary policies will remain supportive (Positive on Rehinmetall, Accor, B&M European Value Retail). 

Emerging Markets: Emerging market stocks didn’t change much over 2018, but they are growing twice as fast as those in developed countries, and economic management is solid in most countries, with inflation near historic lows (Positive on BABA, Tencent, PAGS, MELI, HDB, Kotak Mahindra, NTES, ATHM, VALE). 

Commodities: Some laggards in 2018, including gold, copper, corn, and soybeans, could become leaders in the commodity sector in 2019 as new opportunities arise because of the U.S.-China trade war and other global events. 

Streetwise: The uncertainty around Britain’s future after the Brexit isn’t likely to be resolved much before the March 29 deadline, and though prime minister Theresa May’s deal is flawed and unpopular, it may be the best the U.K. can get.

Downside Risks Continue to Overshadow More Dovish Central Banks

TradeTheNews.com Weekly Market Update: Downside Risks Continue to Overshadow More Dovish Central Banks
Fri, 14 Dec 2018 16:19 PM EST

It was another eventful week, particularly for equity traders, as significant intra-day swings were prevalent throughout most of the week’s trading sessions. Ultimately global growth worries overshadowed a better tone on the trade front and another dovish turn by a major Central Bank. The S&P slipped through the October low for the first time on Monday after UK Prime Minister May pulled the Brexit vote and a Chinese court ordered an immediate ban on import and sale of certain iPhone models. Midweek saw stock futures trade up sharply before the opening bell, spurred by reports suggesting US/China trade talks were beginning to get traction in right direction. President Trump even went as far as to say he could consider intervening into the Huawei CFO saga as part of a broader trade deal with China. The positive effects were short lived though, as each day selling pressure returned and indices retraced much of the pre-market gains by days end. By Friday, a Chinese announcement that it would temporary ease auto tariffs had almost no beneficial effect on markets.

Wednesday evening UK PM May narrowly survived her party’s confidence vote, but it provided little clarity on Brexit, as she sought “assurances” from Brussels on the backstop plan. Thursday the ECB met and, as expected, confirmed the end of QE while outlining an indefinite reinvestment process. ECB President Draghi also acknowledged a slight downgrade to growth prospects, suggesting that any rate hikes remain uncertain and are likely a ways away. The Dovish tilt had diminishing effects on investor sentiment just as the Fed’s walk back for 2019 rates did last month. By Friday, stock markets were rolling over once again as global data continued to deteriorate and flash warning signs. Core EU PMI figures missed expectations, highlighted by the French manufacturing reading falling into contraction territory. Italy and EU crawled towards some kind of agreement on the 2019 budget as speculation grew in a host of EU capitals elections might not be that far off. China retail sales figures grew at the slowest pace since 2003 and the US President kept up the pressure suggesting the weakening Chinese economy was the direct result of US tariffs and that it could ultimately push China into a comprehensive deal. Global growth/risk barometers remained at warning levels. WTI crude stayed heavy holding just above $50/bbl, the US 10-year yield still has a 2.8% handle and the Dollar index surpassed the November high, briefly touching the highest level in more than a year. Interestingly, the Russel 2000 continued to underperform despite US economic data that continues to outperform on a relative basis. In another volatile week of trading, the S&P fell 1.25%, the DJIA lost 1.2%, and the Nasdaq dropped 0.8%.

In corporate news this week, e-commerce platform Travelport was taken private by Siris Capital in a $4B deal following efforts by activist Elliott Management to push for strategic alternatives. Apple announced it would update its iOS 12 software to circumvent a ban in China of certain iPhone models after Qualcomm won a patent infringement case. GoPro said it planned to move US-bound camera production out of China due to tariff concerns. Costco shares dropped on weaker than expected earnings and lower gross margins y/y. Reports indicated that the German government had intensified its planning for a possible merger between the troubled Deutsche Bank and Commerzbank. On Friday, Johnson & Johnson shares plunged after a Reuters investigation found evidence that the company may have known about asbestos contamination in its baby powder for decades and failed to inform the FDA.

MONDAY 12/10
*(EU) EURO ZONE DEC SENTIX INVESTOR CONFIDENCE: -0.3 V +8.3E (lowest since Dec 2014)
TVPT Confirms to be acquired by affiliates of Siris Capital Group, LLC and Evergreen Coast Capital for $15.75/shr in cash valued at $4.4B
*(UK) PM MAY SAID TO CANCEL PLANNED TUESDAY'S MEANINGFUL VOTE IN PARLIAMENT - financial press
(IN) India Central Bank (RBI) Gov Patel steps down citing personal reasons; effective immediately - financial press
QCOM Court orders immediate ban on import, sale, offers for sale of Iphone 7, Iphone 8 plus, Iphone 8, Iphone 8 plus and Iphone X in China
*(US) OCT JOLTS JOB OPENINGS: 7.079M V 7.100ME
(UK) PM May: confirms she will delay Parliamentary meaningful vote on Brexit; there is broad support for aspects of the deal, the Backstop is creating concerns

TUESDAY 12/11
(UK) NOV JOBLESS CLAIMS CHANGE: +21.9K V +23.2K PRIOR; CLAIMANT COUNT RATE: 2.8% V 2.7% PRIOR
(UK) Oct Average Weekly Earnings 3M/Y: 3.3% v 3.0%e; Weekly Earnings (ex Bonus) 3M/Y: 3.3% v 3.2%e
(DE) GERMANY DEC ZEW CURRENT SITUATION SURVEY: 45.3 V 55.0E; EXPECTATIONS SURVEY: -17.5 V -25.0E
(CN) Reportedly China is signaling it could cut tariffs on U.S. cars - press
(US) NOV PPI FINAL DEMAND M/M: 0.1% V 0.0%E; Y/Y: 2.5% V 2.5%E
(UK) Senior govt source: expect confidence vote on PM May imminently; threshold of 48 letters has been reached to trigger a vote - Buzzfeed
(US) President Trump: Release of Huawei CFO Meng could be part of broader trade deal with China, could intervene in the Huawei case if it aids China trade deal; Would be 'foolish' for US Fed to raise rates at next week's meeting (Dec 18-19th)

WEDNESDAY 12/12
CSGN.CH Affirms FY19 RoTE 10-11%; To buy back shares of up to CHF3B in 2019, 2020 (17.5% of market cap); on track to complete 3-yr restructuring - Investor Day
(UK) LEADERSHIP CONTEST SAID TO HAVE BEEN TRIGGERED - press
(IT) Italy Govt said to propose 2.0% budget deficit to GDP target in revised 2019 budget - financial press
(CN) China reportedly preparing to replace "Made in China 2025" plan; revised plan would downplay China's efforts to expand its manufacturing dominance - press
*(US) DOE CRUDE: -1.2M V -3ME; GASOLINE: +2.1M V +2ME; DISTILLATE: -1.5M V +1.5ME
(IT) Italy PM Conte: New budget deficit proposal of 2.04% in 2019 does not betray Italians
*(UK) PM MAY SURVIVES THE CONSERVATIVE PART CONFIDENCE VOTE (as expected)

THURSDAY 12/13
*(PH) PHILIPPINES CENTRAL BANK (BSP) LEAVES OVERNIGHT BORROWING RATE UNCHANGED AT 4.75%; AS EXPECTED
AAPL Said to build new $1B campus in Austin; establish new sites and add jobs across the US - press
*(CH) SNB LEAVES SIGHT DEPOSIT RATE UNCHANGED AT -0.75%; AS EXPECTED
*(NO) NORWAY CENTRAL BANK (NORGES) LEAVES DEPOSIT RATES UNCHANGED AT 0.75%; AS EXPECTED
(TR) TURKEY CENTRAL BANK (CBRT) LEAVES 1-WEEK REPO RATE AT 24.00%; AS EXPECTED
(EU) ECB’s Draghi: Reaffirms guidance on rates; confirms reinvestment on QE program; reiterates that significant monetary stimulus still needed - Prepared remarks
(EU) ECB sources: Policymakers debated modifying the balance of risk assessment to highlight downside risks - press
COST Reports Q1 $1.73 v $1.62e, Rev $35.1B v $34.6Be
*(JP) JAPAN Q4 TANKAN LARGE MANUFACTURING INDEX: 19 V 18E; OUTLOOK: 15 V 17E (weakens for first time in 3 quarters); LARGE ALL INDUSTRY CAPEX: 14.3% V 12.8%E
*(CN) CHINA NOV INDUSTRIAL PRODUCTION Y/Y: 5.4% V 5.9%E (matches slowest growth rate since early 2016)
*(CN) CHINA NOV RETAIL SALES Y/Y: 8.1% V 8.8%E (slowest growth since 2003)
(CN) China National Bureau of Statistics (NBS) Official: Nov industrial production was impacted by the auto and electronics sectors; China 2019 economic growth target should reflect goal of doubling GDP by 2020 from 2010
AAPL China Unit: To publish iPhone software update early next week to resolve any possible concerns about compliance with court order

FRIDAY 12/14
(US) Lipper: US-based money market funds had inflows of $81B in most recent weekly period (largest inflows since the early 1990s), US-based stock funds had $46.0B in outflows (largest since the early 1990s) - US financial press
(FR) FRANCE DEC PRELIMINARY MANUFACTURING PMI: 49.7 V 50.7E (1st contraction in 27 months, lowest since Sept 2016)
*(DE) GERMANY DEC PRELIMINARY MANUFACTURING PMI: 51.5 V 51.7E (48th month of expansion but lowest since Mar 2016)
(EU) EURO ZONE DEC PRELIMINARY MANUFACTURING PMI: 51.4 V 51.8E (66th month of expansion but lowest since Feb 2016)
(US) Nov Industrial Production M/M: 0.6% v 0.3%e; Capacity Utilization: 78.5% v 78.6%e
JNJ Reportedly J&J was aware of asbestos issues for years regarding talc baby powder and failed to tell FDA – press
*(US) DEC PRELIMINARY MARKIT MANUFACTURING PMI: 53.9 V 55.0E (lowest since Nov 2017)

Hopes for China trade deal fade; Yield curve inverts

TradeTheNews.com Weekly Market Update: Hopes for China trade deal fade; Yield curve inverts
Fri, 07 Dec 2018 16:09 PM EST

It was a jarring week for investors which saw the Dow trade lower by nearly 800 points in two separate sessions before sliding another 559 points on Friday. Traders were forced to navigate the anomaly of a Wednesday US market closure due to the observance of Former President George H. W. Bush’s funeral which may have hampered liquidity and goosed volatility. Stock trading opened on a decidedly positive note after President Trump and President Xi appeared to reach some sort of a détente at their G20 dinner last Saturday. The euphoria spurred by positive tones coming from the US President was short lived though. Tuesday saw the US Treasury yield curve invert for the first time when the 5-year yield dropped below 3-year and eventually 2-year rates. This alarming growth signal spooked investors and, along with a rethink of just how lasting the trade truce will be, sent stocks careening lower in a global flight from risk assets.

Thursday when markets reopened the panic resumed after news broke late on Wednesday that the CFO of Chinese tech giant Huawei was arrested in Canada and was to be extradited to the US on trade sanction violations. The US 10-year yield dropped below 2.85% for the first time since this summer while the VIX popped back above 25. The Russel 2000 took out the fall lows while the other major US indices appeared poised to retest those Oct/Nov lows. Oil prices also remained heavy heading into the OPEC producers meetings. Oil prices bounced on Friday after an agreement was reached to take an additional 1.2M bpd of supply off the market beginning in January. Friday’s softer than expected November employment data didn’t raise any serious doubts about the prospects for a rate hike on December 19th, but was consistent with growing market expectations for a less hawkish Fed in 2019. Various Fed officials echoed the dovish shift outlined by Powell last week, but the softening of Fed expectations had diminishing effects on investor sentiment and stocks remained under pressure into the closing bell. Trade concerns and troubling signals for growth both home and abroad seem to have surpassed any positive momentum coming from the growing expectation of a wait and see Fed. For the week the S&P500 fell 4.6%, the DJIA lost 4.5%, and the Nasdaq tumbled 4.9%.

In corporate news this week, Nexstar confirmed it would acquire Tribune Media Company for $46.50/shr cash in a $6.4B deal that would make it the largest local TV firm in the United States. Tesaro shares jumped after Glaxo announced it would acquire the cancer-focused drugmaker in a $5.1B all-cash deal. Marlboro maker Altria Group announced a C$2.4B strategic investment in Canada pot firm Cronos, sending the cannabis company’s shares 20% higher on Friday. Toll Brothers dropped after reporting an earnings miss and lackluster guidance, the latest evidence of slowing housing demand. Restoration Hardware jumped on a strong outlook and beats on both the top and bottom line. Lyft filed confidential plans for an IPO with the SEC, beating rival Uber to the punch.

SUNDAY 12/2
(US) US President Trump: China has agreed to remove tariffs on Car imports - tweet

MONDAY 12/3
(UK) UK Home Secretary Javid: No chance of pulling the 11th Dec vote on PM May's Brexit Deal - radio comments
*(UK) NOV MANUFACTURING PMI: 53.1 V 51.7E
(CN) Reportedly China imports first US crude cargo in November after a month's halt following escalation of trade war - press
TRCO Nexstar confirms to acquire Tribune Media Company for $46.50/shr cash in $6.4B deal
TSRO To be acquired by GSK for $75/shr cash in $5.1B deal
(US) MARKIT NOV FINAL MANUFACTURING PMI: 55.3 V 55.4E
CRON Altria reportedly in discussions to acquire Cronos - press
(US) Atlanta Fed raises Q4 GDP forecast to 2.8% from 2.6% prior
*(AU) RBA LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED; Low rates support the economy

TUESDAY 12/4
(UK) UK Parliament find Government in contempt over Brexit legal advice; UK Gov defeated in contempt motion 311-293; Orders Gov to publish full advice immediately
(RU) Sec of State Pompeo: reiterates US position that Russia is cheating on the INF treaty; US has given Russia a 2-month deadline to come back into compliance
(UK) UK PM May Government defeated 321-299 in Vote on Parliament Brexit Power

WEDNESDAY 12/5
*(IN) INDIA CENTRAL BANK (RBI) LEAVES REPURCHASE RATE UNCHANGED AT 6.50%; AS EXPECTED
*(UK) NOV PMI SERVICES: 50.4 V 52.5E (28th month of expansion but lowest since July 2016)
*(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATE UNCHANGED AT 1.75%; AS EXPECTED
Oman Energy Minister: OPEC+ agrees to recommend a cut, has consensus for Oil production cut
(US) Association of American Railroads weekly rail traffic report for week ending Dec 1st: 567.3K, +0.4% y/y
(US) FEDERAL RESERVE BEIGE BOOK: ECONOMIC GROWTH 'MODEST OR MODERATE'; LABOR MARKETS TIGHTENED FURTHER
HUAWEI.CN Canada reportedly arrests global CFO, Deputy Chairwoman and daughter of founder, Wanzhou Meng in Vancouver on trade sanction violation suspicions in the US - Globe & Mail
HUAWEI.CN Confirms Wanzhou Meng is detained by Canada authorities Dec 1st, not aware of any wrongdoing by Meng, not provided with much information so far; confirms US is seeking to extradite her

THURSDAY 12/6
(US) Q3 FINAL NONFARM PRODUCTIVITY Q/Q: 2.3% V 2.3%E; UNIT LABOR COSTS Q/Q: 0.9% V 1.0%E
*(US) DOE CRUDE: -7.3M V -1ME; GASOLINE: +1.7M V +1ME; DISTILLATE: +3.8M V +1ME
(US) Atlanta Fed cuts Q4 GDP forecast to 2.7% from 2.8% prior
(US) Fed Reports Q3 Financial Accounts: Household Change in Net Worth: $2.07T v $2.278T prior
JPM CEO Dimon: we still have a strong economy; trade, oil and Brexit are creating uncertainty which is roiling the markets; see 60% chance of a US/China trade resolution - CNBC interview
LYFT.IPO Announces Confidential Submission of Draft Registration Statement for Proposed Initial Public Offering

FRIDAY 12/7
(EU) EURO ZONE Q3 FINAL GDP Q/Q: 0.2% V 0.2%E; Y/Y: 1.6% V 1.7%E
CRON Announces C$2.4B strategic investment from Altria Group; Altria agreed to acquire 146.2M shares at C$16.25/shr
(US) NOV CHANGE IN NONFARM PAYROLLS: +155K V +198KE
(US) NOV UNEMPLOYMENT RATE: 3.7% V 3.7%E (matches the lowest since 1969)
(US) NOV AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.3%E; Y/Y: 3.1% V 3.1%E; AVERAGE WEEKLY HOURS: 34.4 V 34.5E
(US) DEC PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 97.5 V 97.0E
(US) Atlanta Fed cuts Q4 GDP forecast to 2.4% from 2.7% prior
BAS.DE Cuts FY18 Adj EBIT -20% to -15% y/y (prior slight decline up to -10% y/y) due to the Chemicals segment

Barron’s weekend summary

Barron’s weekend summary: Cover story on firms benefitting from offering subscription services; Cautious feature on AAPL; Positive features on AMAT, CAT, DVMT 

Cover story: Subscription services are giving companies as different as MSFT and DE regular revenue streams and benefiting investors; Recurring payments are also changing the way Americans consume software, music, movies, TV, fitness, clothing and food (Positive on SNPS, ADVS, CDNS, AZPN, ADBE, ADSK, INTU, MODN, PTC, PRO, GWRE). 

Features: 1) Cautious on AAPL: As the company’s iPhone juggernaut slows down, it could look to ADBE as a model and create a subscription service for Apple Music, iCloud storage, AppleCare warranties, and its rumored video service; 2) Story looks at how Bernie Madoff perpetuated his massive fraud, and at some of the warning flags investors should keep in mind to avoid sophisticated Ponzi schemes; 3) Positive on DVMT: Michael Dell and Silver Lake Partners will reap $11B by gaining control of VMW, but holders of the tracking stock—who aren’t getting as much as they deserve in the deal—will still benefit by owning stakes in a company with $90B in annual revenue; 4) Positive on AMAT: While the company faces near-term challenges, the long-term outlook for growth remains bright, because new, more sophisticated chips require more manufacturing equipment; 5) Positive on CAT: Shares are down, yet investors have dire concerns that seem at odds with business conditions and near-term earnings forecasts, and the recent selling looks overdone; 6) Story says many taxpayers will get a nasty surprise when they finalize their 2018 returns, but there are still ways to minimize the damage from new restrictions on deductions and other changes to the tax law. 

Technology Trader: Positive on PYPL: Company has “become an essential arms merchant in the raging war for e-commerce dollars” as retailers such as WMT, TGT, and BBY battle AMZN—and is flourishing in the transition to smartphone e-commerce. 

Trader: As the market grows more volatile, investors should own high-quality, low-volatility stocks, and not chase the market’s moves, says Savita Subramanian of BAC/Merrill Lynch; Positive on LEN: Housing doesn’t have to boom for the stock to do well, and with a dismal spring selling season baked in, shares are cheap—and likely to rise on even a modest upswing in home sales; A recent paper from the New York Fed says that equity markets treat the Fed chair “almost as the pope of Wall Street,” and that his or her words can significantly move equity markets. 

Interview: Matthew McLennan of First Eagle Global favors companies with strong competitive advantages and market positions, as well as conservative leverage, regardless of where they’re located (picks: XOM, ORCL, WY). 

Profile: Luz Padilla, manager of the DoubleLine Emerging Markets Fixed Income fund, was cautious as this year’s emerging markets rout unfolded, and believes developed markets could be the tinder for the next crisis. 

Follow-Up: Cautious on LRCX: If earnings have finally hit bottom, the shares could be a deal, but if not, the question is how low they can still go. 

European Trader: Cautious on DB: The fact that shares are down doesn’t make them a bargain, and investors should consider dumping them in any forthcoming rallies, or purchase out-of-the-money put options that will pay out if the stock falls. 

Emerging Markets: Investors will almost certainly make money in Asia over the next three years, says Edmund Harris of Guinness Asset Management, but things could certainly get worse during the next 12 months. 

Commodities: Silver prices quietly sit close to their lowest levels in nearly three years following a 15% decline this year, and the metal deserves a closer look. 

Streetwise: Politicians should stop criticizing GM chief Mary Barra for plant closures, since she is guiding the 110-year-old company toward the autonomous, electric future, while expanding its profit margins and U.S employment.

Barrons weekend summary

Barrons weekend summary: Positive feature on PGR; cautious on FB 

Cover story: “The explosive growth of digital data, along with better tools to analyze and store it, has jump-started a once-niche industry that packages under-the-radar information”; so-called alternative data, such as language tracking software that detects consumer sentiment, is becoming mainstream, creating potential and risk for investors. 

Features: 1) Cautious on FB: Company has gotten past a string of scandals recently, but there is the risk its prospects may be damaged more than the market expects down the road by Washington and Brussels; 2) Positive on PGR: Company, the No. 3 auto insurer in premium volume behind State Farm and Geico, has excelled at every major aspect of the business, and offers a tech-like growth story with its sophisticated analytics; 3) Regular investors are increasingly able to take advantage of alternative data, such as credit-card use or location tracking, offered by firms such as AMTD or Sentieo. 

Tech Trader: Positive on MSFT: Tech giant’s revival bucks a trend in which once-great companies such as Sun Microsystems or Digital Equipment flounder and disappear; Under chief Satya Nadella, it made a bold pivot away from Windows, putting its cash cows at risk, and successfully transitioned to cloud computing. 

Trader: Earnings estimates are likely to keep falling, says Dennis DeBusschere of Evercore ISI, and with the S&P 500 trading about at 15.8 times forward earnings, the risk of lower profits will limit future returns; Positive on APTV: For investors unwilling to bet on automakers such as GM because of tough competition and high capital needs, Aptiv, a supplier that sells key safety technologies for driverless cars, could be a good play;The annual meeting of the American Society of Hematology will feature developments from big firms such as CELG, AMGN and smaller ones such as BLUE and Genmab. 

Interview: Raghuram Rajan, governor of the Reserve Bank of India, has an independent streak that has drawn backlash; He talks to Barron’s about where the next crisis might be brewing, China’s debt, and why investors should care about income inequality. 

Profile: Robert Hyman, manager of the ALPS/Core Commodity Management Complete Commodities Strategy fund is trying to mitigate the contango that has cost about six percentage points per year for the past 10 years to the Bloomberg Commodity Index. 

Follow-Up: 1) Positive on GM: Automaker is taking the right steps with its plan to shutter plants and focus on its profitable truck/SUV business and autonomous vehicles, but investors are giving it little credit, and shares are undervalued; 2) Cautious on GE: Story offers four suggestions for how chief Larry Culp can turn around the troubled company: Be bold at GE Capital, sell part of GE Healthcare, infuse new life into the culture, and switch deal-making priorities. 

European Investor: Positive on J.D. Wetherspoon: Shares of British pub chain, which recently dropped after an earnings scare, are cheap, and offer a persistently high return on equity. 

Emerging Markets: Markets are skeptical about the ability of Mexico’s incoming President Obrador to deliver on socially generous campaign promises and deal with a “caravan” of migrants massing on the U.S. border. 

Commodities: “Achieving a balance in the oil markets is proving to be a challenge for OPEC and its allies, and they face their stiffest test yet when they meet in Vienna next week.” 

Streetwise: If there’s value in stocks, it’s in foreign markets, says Doug Ramsey of Leuthold Group—companies such as those in the MSCI EAFE index could gain 10% just to get back to median valuations.

Fed’s Powell “put” the market at ease amid G20 trade discussions

TradeTheNews.com Weekly Market Update: Fed’s Powell “put” the market at ease amid G20 trade discussions
Fri, 30 Nov 2018 16:05 PM EST

Investors had a host of issues to chew on this week, but ultimately the Fed Chairman’s speech on Wednesday moved the needle ahead of the weekend G20 meeting. Powell softened his comments on the whereabouts of the ‘neutral’ rate from Oct 3rd that many believed was a major catalyst for the recent US stock market correction. By acknowledging rates were “just below” the range that most Fed members viewed as neutral he appeared to offer investors an early Christmas gift by leaving the door open to backing away from some or even all of the Fed’s projected 2019 rate hikes. The economic numbers largely supported the dovish tilt as US data softened, oil prices plunged further, key inflation readings stayed subdued, and overseas growth signals remained worrisome.

Risk assets held the post-Powell gains heading into the G20 meeting on Friday. Expectations grew for the Xi/Trump summit as even some of the White House’s most ardent China hawks suggested something was likely to come of the meeting. Market expectations seemed to coalesce around the notion the two sides could zero in on a deal to de-escalate the trade dispute, involving the US delaying implementation of further tariffs in return for China policy modifications on farm and energy product restrictions. US Treasury yields fell and the curve flattened, rekindling fears of a potential curve inversion when the 2-year and 5-year yields converged to within a few basis points on Friday. For the week, the S&500 gained 4.8%, the DJIA rose 5.1%, and the Nasdaq added 5.6%.

GM’s announcement of a major restructuring headlined the corporate news this week. Citing shifting consumer tastes in automobiles, GM announced it would cease operations at three plants in the US and Canada and cut thousands of jobs with the expectation of saving billions of dollars in costs and capex. The US and Canada governments expressed displeasure at the move and President Trump said he would look at clawing back GM subsidies and bailout costs. United Technologies completed its acquisition of Rockwell Collins and confirmed the next step in its plans, splitting the conglomerate into three more focused entities. In a reversal from the consumer optimism surrounding the Black Friday weekend, Tiffany shook high end retailers with a subpar earnings report and a cut to its same store sales guidance for the fiscal year. Meanwhile, Salesforce reinvigorated trading in tech growth names with an impressive Q3 report. The week closed out with a report of a database breach at Marriott that may have exposed the personal information of half a billion customers over the last 4 years, sending the hotel’s shares down more than five percent.


MONDAY 11/26
(IT) Italy ruling coalition said to be discussing lowering 2019 budget deficit to GDP target from 2.4% to 2.0-2.1% - press
*(DE) GERMANY NOV IFO BUSINESS CLIMATE: 102.0 V 102.3E; CURRENT ASSESSMENT: 105.4 V 105.3E
GM Reportedly to cut car production in North America, will stop building some car models; to announce significant job cuts in N.A. among salaried and executive workers - press
GM Confirms accelerates transformation; cuts production from 5 plants; to take charge of $3.0-3.8B
(US) NOV DALLAS FED MANUFACTURING ACTIVITY: 17.6 V 24.5E
(US) Pres Trump: not happy with GM's decision to cut auto production; expects GM will put something else in Ohio; the country has done a lot for GM
UTX Confirms to Separate Into Three Independent Companies; Completes Acquisition of Rockwell Collins; affirms dividend of $0.735 post split; Cuts FY18 $7.10-7.20 v $7.27e (prior $7.20-7.30); Raises Rev $64.5-65.0B v $64.8Be (prior $64.0-64.5B); Affirms organic Rev ~+6%

TUESDAY 11/27
(US) Fed Vice Chair Clarida (moderate, voter): Gradual rate hikes appropriate as data shows way to neutral policy
(US) Nevada reports Oct casino gaming Rev $1.06B, +7.5% y/y; Las Vegas strip Rev $593.4M, +12.2% y/y
(EU) Reportedly US President Trump to impose 25% tax on European carmakers next week after G20 meeting - German press
*(US) NOV CONSUMER CONFIDENCE: 135.7 V 135.9E
GM Pres Trump expresses disappointment in GM, says he is studying cutting all GM subsidies, including for electric cars
CRM Reports Q3 $0.61** v $0.50e, Rev $3.39B v $3.37Be
GSK Unilever reportedly in exclusive talks to acquire nutrition unit from GlaxoSmithKline including Horlicks drink brand - FT
(CN) China Ambassador to US Cui: doesn't believe anyone in Beijing is thinking seriously about pulling back from US Treasury debt market if trade disputes worsen

WEDNESDAY 11/28
TIF Reports Q3 $0.77 v $0.76e, Rev $1.01B v $1.05Be
(US) Q3 PRELIMINARY GDP ANNUALIZED Q/Q: 3.5% V 3.5%E; PERSONAL CONSUMPTION: 3.6% V 3.9%E
(US) NOV RICHMOND FED MANUFACTURING INDEX: 14 V 15E
*(US) OCT NEW HOME SALES: 544K V 575KE
(US) Fed Financial Stability Report: large US banks are strongly capitalized; business debt high relative to GDP
*(US) DOE CRUDE: +3.6M V +0.5ME; GASOLINE: -0.8M V 0ME; DISTILLATE: +2.6M V -0.5ME
(US) FED'S POWELL: POLICY RATE IS 'JUST BELOW' ESTIMATES OF NEUTRAL; GREAT DEAL TO LIKE ABOUT THE US ECONOMY - PREPARED REMARKS AT NY ECONOMIC CLUB
(US) Association of American Railroads weekly rail traffic report for week ending Nov 24th: 470.9K, +3% y/y
(CN) US Trade Rep Lighthizer: China has yet to offer meaningful proposals; Chinese policies on auto tariffs are egregious

THURSDAY 11/29
(IT) Italy PM Conte said to be seeking to cut budget deficit target to 2.2%; 'optimistic' country could avoid Excessive Debt Procedure - Stampa
(DE) GERMANY NOV UNEMPLOYMENT CHANGE: -16K V -10KE; UNEMPLOYMENT CLAIMS RATE: 5.0% V 5.1%E (fresh post German reunification record low)
(EU) EURO ZONE NOV BUSINESS CLIMATE INDICATOR: 1.09 V 0.96E; CONSUMER CONFIDENCE: -3.9 V -3.9E
WTI crude trades below $50 mark for first time in more than 1-year
(US) OCT PERSONAL INCOME: 0.5% V 0.4%E; PERSONAL SPENDING: 0.6% V 0.4%E
(US) Former Pres Trump attorney Michael Cohen to plead guilty to making false statements to congressional committees investigating Russian collusion - ABC News
(US) Atlanta Fed raises Q4 GDP forecast to 2.6% from 2.5% prior
(CN) US and China reportedly considering deal to de-escalate trade disputes; likely would focus on delaying US tariffs in return for China policy modifications on farm and energy product restrictions - press
(US) FOMC MINUTES FROM NOV 8TH MEETING: ALMOST ALL SEE ANOTHER RATE INCREASE WARRANTED 'FAIRLY SOON'; FUTURE POLICY STATEMENTS TO EMPHASIZE IMPORTANCE OF INCOMING DATA
(CN) CHINA NOV MANUFACTURING PMI: 50.0 V 50.2E (lowest since July 2016); NON-MANUFACTURING: 53.4 V 53.8E
(CN) China Finance Ministry (MOF): Confirms to adjust cross-border e-commerce import tax from 2019; to raise the annual cross border quota for individuals to CNY26K from CNY20K, effective Jan 1st 2019

FRIDAY 11/30
(EU) EURO ZONE NOV ADVANCE CPI ESTIMATE Y/Y: 2.0% V 2.0%E; CPI CORE Y/Y: 1.0% V 1.1%E
MAR Announces Starwood guest reservation database security incident involving 500M guests
(CN) China Director of International Affairs Wang Xiaolong: the points of consensus between the US and China are rising, though some areas of disagreement remain as trade talks continue - press

Barrons weekend summary

Barrons weekend summary: Cover looks at opportunities in the FAANG stocks; positive features on to US financial firms; cautious on FB, IGCC 

Cover story: The FAANG stocks—FB, AAPL, AMZN, NFLX, and GOOGL—have lost $1.1T since their peaks, part of which may have been the result of herd behavior; The selloff creates an opportunity for investors to reassess them, because the next opportunity for the FAANGs could come from picking them apart and judging each on its own merits. 

Tech Trader: A new kind of lending has emerged in fintech: Affirm, launched by PYPL co-founder Max Levchin and others, allows users to pay online for goods with the repayment schedule of an installment loan, based on a new process for gauging credit risk. 

Trader: “Investors are fearful that 2019 earnings estimates won’t pan out because of potential global economic weakness, but some reduction in growth already seems discounted in the market”; Bankers are concerned that corporate leverage could trigger the next recession, and Fed chairman Jerome Powell has called out non-financial corporate debt as something to watch; Cautious on TGT: Shares are down after the retailer fell short of same-store sales and earnings estimates, but it’s unlikely the problem is as bad as investors think, and the shares are now a bargain. 

Interview: Jamie Zimmerman of Lifespeed Mananagemet, which specializes in event-driven investing, seeks to profit from asset mispricings from mergers, spinoffs, and bankruptcy filings. 

Profile: Jamie Cuellar, co-manager of the Buffalo Small Cap fund, looks for companies that benefit from long-term trends, such as cost-containment in healthcare and software-as-a-service (top 10 holdings: TWLO, CXW, MTZ, MIME, MDSO, HQY, HMSY, CONE, EGHT, RGEN). 

Features: 1) Cautious on FB: Barron’s likes the stock despite recent controversies, with two caveats: there are concerns about its changing user base and how that will affect selling ads, and it’s possible that recent markdowns could prove to be a lasting reset, not a dip; 2) Positive on WFC, USB, GS, PNC, BK, JPM, BAC: Berkshire Hathaway owns shares in seven of the country’s top 10 banks, a sign the sector offers value because they are less cyclical than other stocks and have more resilient earnings; 3) Early data from CFRA indicated that while it’s still early in the shopping season, hot consumer items—including electronic goods and apparel—are selling fast over the Thanksgiving weekend; 4) Positive on Curaleaf Holdings: As prohibitions against marijuana are relaxed across the U.S. and companies race to obtain licenses and locations, Russia-based Curaleaf is the best funded, though Canadian and U.S. counterparts are catching up; 5) Cautious on IGCC: Company that combines cannabis and blockchain isn’t living up to expectations, and negative details are emerging that are raising questions about its viability. 

European Trader: Positive on Advanced Metallurgical Group: Investors who recently soured on lithium sent shares down, and they look cheap, especially given the company’s expanding profit margins. 

Emerging Markets: Russia has a host of problems, but an oil-price correction isn’t among them—that’s the message the Kremlin is sending in response to Saudi Arabia’s latest call for exporters to unite on a production cut. 

Commodities: Emerging markets such as China and Saudi Arabia are expected to boost demand for uranium, creating significant growth prospects for the sector and benefiting companies such as Kazatomprom. 

Streetwise: Investors who opened cryptocurrency trading accounts during the past year are underwater, and most financial institutions are keeping quiet about their Bitcoin ambitions.