Wednesday, January 29, 2020

The Morning Call--FOMC day


The Morning Call

1/29/20

The Market
         
    Technical

The Averages (28722, 3276) staged a comeback yesterday, especially the S&P.  It finished right on the lower boundary of its very short term uptrend (halting the clock on Monday’s break) and closed Monday’s major gap down open.  The Dow did neither; leaving the indices out of sync and the near term pin action directionally in question.  They still ended above both MA’s and in short, intermediate and long term uptrends.  So, there has hardly been a loss in long term momentum. 

            Counterpoint.

Volume was down, breadth weak, moving out of overbought territory.  The VIX fell 10 ¾%, but still finished for a third day above both its 100 DMA (reverting to support) and its 200 DMA (now resistance; if it remains there through the close today, it will revert to support). 

The long bond fell ¾ %, but that didn’t impact the ongoing directional momentum change to the upside.  Although there are two gap up opens below that need to be filled. 

The dollar was unchanged, remaining below both MA’s, in a short term downtrend and is still the ugliest chart on the block.  While it is attempting to close that big gap down open from 12/23, my assumption remains that the dollar will continue to weaken.

Gold declined 7/8%, the first down day in almost two weeks.  It closed within very short term and short term uptrends and above both MA’s.

Tuesday in the charts.

Dr. Copper is getting hammered.

    Fundamental

       Headlines

Yesterday’s dataflow was upbeat.  The January Richmond Fed manufacturing index, January consumer confidence, month to date retail chain store sales and the November Case Shiller home price index were all positive.  The only negative was December durable goods orders/ex transportation (primary indicator).

The numbers continue to come in ahead of forecast.  My take is that strength will help offset the economic fallout from the coronavirus epidemic but not enough to provide any kind of ‘lift off’ to a higher rate of economic growth.

            In other news:

            Update on coronavirus.

            The FOMC began its January meeting yesterday; so, we will get the latest on rates and NotQE this afternoon.  And what’s a day without a little Fed criticism?
           
Sometime, somewhere, earnings are going to matter even though they haven’t for the last decade.  The current earnings season is coming in line with past history: mediocre reports on reduced estimates.  This is the busiest week of this season and it too has been mixed.   

            Bottom line: I opined yesterday that as long as the NotQE continued that events like the coronavirus epidemic, which likely won’t have dramatic long term negative implications for the global economy, will probably not have that big an impact of the Market.  We will have the Fed’s last thinking on rates and QE this afternoon.  I doubt any major changes policies or investor disregard for valuations.

            More on valuation.

            And more.

            Thoughts on the ETF industry.

            Looking at returns in the 2020’s.

    News on Stocks in Our Portfolios
 
C.H. Robinson Worldwide (NASDAQ:CHRW): Q4 GAAP EPS of $0.73 misses by $0.23.
Revenue of $3.8B (-8.2% Y/Y) beats by $50M.

Apple (NASDAQ:AAPL): Q1 GAAP EPS of $4.99 beats by $0.45.
Revenue of $91.82B (+8.9% Y/Y) beats by $3.41B.

Mastercard (NYSE:MA): Q4 Non-GAAP EPS of $1.96 beats by $0.09; GAAP EPS of $2.07 beats by $0.19.
Revenue of $4.41B (+16.1% Y/Y) beats by $10M.

Boeing (NYSE:BA): Q4 Non-GAAP EPS of -$2.33 misses by $0.50; GAAP EPS of -$1.79 misses by $3.87.
Revenue of $17.91B (-36.7% Y/Y) misses by $3.85B.

Automatic Data Processing (NASDAQ:ADP): Q2 Non-GAAP EPS of $1.52 beats by $0.08; GAAP EPS of $1.50 beats by $0.06.
Revenue of $3.67B (+5.2% Y/Y) misses by $20M.

General Dynamics (NYSE:GD): Q4 GAAP EPS of $3.51 beats by $0.07.
Revenue of $10.77B (+3.8% Y/Y) beats by $130M.

McDonald's (NYSE:MCD): Q4 Non-GAAP EPS of $1.97 in-line; GAAP EPS of $2.08 beats by $0.11.
Revenue of $5.35B (+3.7% Y/Y) beats by $50M.

AT&T (NYSE:T): Q4 Non-GAAP EPS of $0.89 beats by $0.01; GAAP EPS of $0.33 misses by $0.30.
Revenue of $46.82B (-2.4% Y/Y) misses by $140M.

T. Rowe Price (NASDAQ:TROW): Q4 Non-GAAP EPS of $2.03 beats by $0.10; GAAP EPS of $2.24 beats by $0.19.
Revenue of $1.47B (+12.2% Y/Y) beats by $20M.


Brown-Forman (NYSE:BF.B) declares $0.1743/share quarterly dividend, in line with previous.   

McDonald's (NYSE:MCD) declares $1.25/share quarterly dividend, in line with previous.

Canadian National Railway (NYSE:CNI) declares CAD 0.575/share quarterly dividend, 7% increase from prior dividend of CAD 0.5375.

Economics

   This Week’s Data

      US

            Weekly mortgage applications rose 7.2% while purchase applications were up 5.3%.

            The December trade deficit was $68.33 billion versus forecasts of $68.75 billion.

            December wholesale inventories fell 0.1% versus consensus of -0.2%; sales also declined.
           
     International

            January Japanese consumer confidence came in at 39.1 versus expectations of 40.8.

            February German consumer confidence was reported at 9.9 versus estimates of 9.6.

    Other

            Global growth without a trade cushion (must read):

            It is what you believe that ain’t so that matters.

            CBO projects $1 trillion deficit in FY2020 and expects it to grow every year thereafter.

What I am reading today

            The secret life of a professional hustler.

           

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