The Morning Call
5/1/20
The
Market
Technical
The Averages (24345, 2912) continued this week’s see saw pin
action, ending lower on the day.
Nonetheless, they remained above their 4/17 highs, reestablishing very
short term uptrends. On the one hand, it
has taken a lot of energy to overcome those 4/17 highs suggesting a diminished
rate of upward momentum. On the other
hand, traders that I talk to said that there was a lot of month end portfolio
rebalancing yesterday; so, I am not sure how much information we can take away
from the price action.
BofA: It ain’t
over.
TLT, GLD and UUP
got whacked yesterday. That is
informationally inconsistent and like stocks could have been a function of
month end rebalancing.
Thursday in the
charts.
Fundamental
Headlines
The numbers
remain disappointing. March personal
income, personal spending, PCE price index,
the April Chicago PMI and weekly jobless claims all made poor reading.
Overseas, the
data wasn’t so bad. March Japanese industrial production, housing starts, and construction orders, March German retail
sales, the April Chinese manufacturing, small business manufacturing and nonmanufacturing
and Q1 EU unemployment were better than anticipated. Still, all was not upbeat. March Japanese retail sales, April consumer
confidence and Q1 EU GDP growth and inflation were worse than expected.
Yesterday, there
were reports that Trump is considering action to prevent a government retirement
plan from investing in a fund containing Chinese securities. While that is almost meaningless as a single
action. The question is, is a trade war
with China about to re-escalate? Certainly,
such as occurrence would only exacerbate the economic damage done by the
coronavirus shutdown.
The
Fed
In
defense of the Fed. The dots that the author
doesn’t connect is that (1) it isn’t lower interest rates that drive up the
Market, it is the liquidity and (2) the dollar isn’t weak because every other
central bank is pushing QE even harder than the Fed; in other words, it is the
cleanest shirt in a bag of dirty laundry.
But, Jerry, we
have to have sex to save the friendship.
The coronavirus
***overnight update.
The latest coronavirus
data.
Bottom line: the stats are horrible and will
remain so for the near future. We
expected that. To be sure, steps are
already being taken to bring the country out of lockdown. Plus, the stats from overseas are starting to
improve (i.e. getting less bad). From a
valuation standpoint the questions are, how fast will US numbers recover, by
how much and what is that worth? The
answers are that much about the speed and magnitude of recovery isn’t knowable
right now unless the assumption is that conditions return to the way they were
pre-coronavirus within a reasonable timeframe.
And that may happen; but I don’t think it is prudent to be paying
current valuations based on that assumption.
That
said, the Fed along with the other major central banks are pushing money into
the financial system---with the Fed and ECB promising this week to continue to
do so as long as there is a question about economic growth. Investors are using that liquidity to buy
stocks (the Fed ‘put’) just as they have for the last decade. As long as that remains the modus operandi, stock
prices will have an upward bias. (must read):
When you have no idea what happens next.
The latest from Ed
Yardini.
News on Stocks in Our Portfolios
Revenue of $5.05B (+15.0% Y/Y) beats by $430M.
Revenue of $4.71B (-6.2% Y/Y) beats by $50M.
Revenue of $5.2B (+6.1% Y/Y) beats by $160M.
Revenue of $35.02B (+14.4% Y/Y) beats by $1.32B.
Revenue of $58.31B (+0.5% Y/Y) beats by $3.67B.
Exxon Mobil (NYSE:XOM): Q1 Non-GAAP EPS of
$0.53 beats by $0.47; GAAP EPS of -$0.14 misses
by $0.18.
Revenue of $56.16B (-11.7% Y/Y) misses by $2.09B.
Economics
This Week’s Data
US
The
April Chicago PMI came in at 35.4 versus estimates of 38.0.
International
April
Japanese CPI was reported at -0.1% versus expectations of +0.1%; the April manufacturing
PMI was 41.9 versus 43.7.
March
UK consumer credit fell L3.8 billion versus forecasts of +L0.7 billion.
The
April UK manufacturing PMI was 32.6 versus consensus of 32.8.
Other
Hotel
occupancy rates crash.
Restructuring
US debt (must read).
Inflation
versus deflation.
Inflation
versus deflation. Part 2.
What
I am reading today
How
Trump pressured the Saudi’s to cut production.
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for Survival’s website (http://investingforsurvival.com/home)
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