The Morning Call
5/7/20
The
Market
Technical
The Averages (23664, 2848) made a strong opening but faded
into the close, finishing down on the day.
Still they remained in that 4/17-4/20 trading range. My prior comment holds: ‘That
the indices couldn’t hold above their 4/17 highs but also couldn’t develop
follow through on last Thursday/Friday’s selloff suggests that they have found
a standoff level between the bulls and bears.
I wait the outcome.’
The dollar had
another good day on big volume. TLT and GLD sold off with the long bond making
its first lower low in a long time. Both
charts continue strong. Overall, the
implication of yesterday’s pin action is a stronger economy despite a horrible
ADP private payroll report and the poor performance of stocks.
In sum, yesterday’s
price action across all Markets was a bit confusing.
Wednesday in the
charts.
Fundamental
Headlines
Yesterday’s numbers
were mixed. Weekly mortgage and purchase
applications rose while the April ADP private payroll report showed greater job
losses than anticipated.
Overseas, the
results were more upbeat. April EU and
German services and composite PMI’s were all better than expected. But March German factory orders and the April
UK construction PMI were disappointing.
The
coronavirus
***overnight
update.
The headline of
the day came out of a Trump news conference in which he stated that (1) China
may or may not live up to the terms of the recent trade deal and (2) the
coronavirus was the ‘greatest attack on the US since Pearl Harbor’. To be sure, this is just rhetoric. But it still it will likely raise the level
of tensions between the two powers.
Irrespective of whether one agrees with a political/military strategy of
playing hard ball with China, it raises the risks of detrimental economic
consequences.
***overnight, it
appears the US/Chinese trade negotiators could meet as soon as next week.
Belgium, not exactly
a right wing government, accuses China of bio espionage (must read).
Updated stats on
the coronavirus.
Nothing is ever as
permanent as temporary government program.
When the bill comes due.
In the meantime,
job losses, death and soaring stock prices.
The Fed
The Fed eats
Buffett’s lunch.
Bank of England meets,
leaves policies unchanged.
Bottom line: current valuation levels suggest that investors
believe in a (1) either ‘V’ shaped economic recovery---although reading the below
links indicate that not all are believers, (2) or QEInfinity. As you know, my vote is on the latter and
will remain so until investors act otherwise.
What if the
economy doesn’t match the Market’s ‘V’ shaped recovery?
Extraordinarily
uncertain, indeed (must read).
More on valuation.
And.
The disconnect
between valuations and reality.
Beware of the Fed ‘put’.
News on Stocks in Our Portfolios
Genuine Parts (NYSE:GPC): Q1 Non-GAAP EPS of
$0.92 misses by $0.17; GAAP EPS of $0.94 misses
by $0.15.
Revenue of $4.56B (-3.8% Y/Y) beats by $20M.
Becton, Dickinson (NYSE:BDX): Q2 Non-GAAP EPS of
$2.55 beats by $0.26; GAAP EPS of $0.53 misses
by $1.93.
Revenue of $4.25B (+1.2% Y/Y) beats by $150M.
Economics
This Week’s Data
US
Weekly
jobless claims rose 3,169,000 versus expectations of up 3,000,000.
Preliminary
Q1 nonfarm productivity fell 2.5% versus estimates of -5.5%; unit labor costs
rose 4.8% versus +4.0%.
International
March
German industrial production declined 9.2% versus forecasts of -7.8.
The
April Chinese Caixin services PMI came in at 44.4 versus consensus of 47.7; the
composite PMI was 47.6 versus 48.5; the April trade balance was +$45.3 billion
versus +$9.7 billion.
The
April EU construction PMI was 15.1 versus projections of 24.0.
Other
The
eurozone in trouble.
Saudi’s
slash oil price discounts.
What
I am reading today
A
possible explanation of those Navy UFO videos.
In support of online
education.
Visit Investing
for Survival’s website (http://investingforsurvival.com/home)
to learn more about our Investment Strategy, Prices Disciplines and Subscriber
Service.
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