Week of Aug 11 2017 Weekly Recap & The Week Ahead

August 14th, 2017

“If you do not know who you are, the stock market is an expensive to find out.” – George Goodma

1. OPEC Meeting Kicks Off in Abu Dhabi — Representatives from OPEC and non-member nations are gathering in Abu Dhabi to discuss poor conformity levels on their output cut agreement. According to Bloomberg data, compliance fell to 86% in July, the lowest level since January.
2. China Trade Data Missed Estimates — Chinese trade data produced a rare miss in July with annual growth levels undershooting expectations. Exports from the world’s second-largest economy rose 7.2% from a year earlier, while imports expanded 11%, resulting in a trade surplus of nearly $47B. China also said it will pay the biggest economic price from the new UN sanctions against Pyongyang, but will always enforce the resolutions.
3. Beer Cheaper than Soda in Philly On Sugary Drink Tax — Philadelphia’s tax on sugary drinks has made soda more expensive than beer in the city. A new study from the Tax Foundation found that the 1.5-cent per ounce tax has fallen short of revenue projections and has forced some Philadelphians to drive outside the city to buy groceries. It’s also hit the corporate level: PepsiCo (NYSE:PEP) is laying off up to 100 workers because of the tax.
4. Markets Jittery Amid Korea Tensions — Pyongyang has hit back at threats from President Trump, branding his warnings “a load of nonsense” and stating only “absolute force can work on him.” It also announced plans to launch four rockets near Guam, saying preparations should be ready in a matter of days. In response, the Pentagon has prepared a detailed plan for a pre-emptive strike on North Korea’s missile sites, should Trump order such an attack.
5. Intel’s Mobileye Planning 100 Test Self-Driving Vehicles — Intel has officially joined the self-driving car race. The chipmaker is building a fleet of 100 cars to test self-driving technology, as it tries to leapfrog rivals like Qualcomm (NASDAQ:QCOM) and Nvidia (NASDAQ:NVDA). The project will combine Mobileye’s (NYSE:MBLY) offerings with Intel’s (NASDAQ:INTC) open compute and communication platform. Testing will take place in the U.S., Europe and Israel.
6. Historical Records of the DJIA that Had Closed Up 10 Straight Sessions & One, Three, and Six-Month Returns Going Forward — courtesy of BIG, the Dow Jones Industrial Average had closed up 10 straight sessions, and nine of those were at all-time highs. Subsequently, Bespoke Investment Group looked at all previous eight-session or longer streaks of consecutive record closes going back to 1928, and the one, three, and six-month returns going forward were all comfortably better than average.

The week ahead — Economic data from

Week of Aug 4 2017 Weekly Recap & The Week Ahead

August 7th, 2017

“when the facts change, I change my mind – what do you do, Sir?” ― John Maynard Keynes

1. Oil Rose Above $50 per Barrell — crude futures briefly rose above $50 for the first time since May after OPEC said it would meet next week to discuss why some nations are falling behind on their pledge to cut production. The gathering in Abu Dhabi will take place on Aug. 7-8. It follows a fourth consecutive week of declines in U.S. crude inventories, and potential sanctions against Venezuela’s oil industry.
2. British American Tobacco Investigated by Serious Fraud Office — the Serious Fraud Office has opened a formal probe into British American Tobacco (NYSEMKT:BTI) over “allegations of misconduct,” while the cigarette maker said it “intends to cooperate with that investigation.” In February last year, BAT announced it had hired lawyers to examine allegations that it bribed officials in east Africa to undermine anti-smoking laws.
3. Dow (DIA) Finishes Above 22K for the First Time — the Dow Jones industrial average topped 22,000, with Boeing (NYSE:BA) contributing much of the latest leg upward, and Apple (NASDAQ:AAPL) providing the final push. The benchmark has recorded three 1,000-point milestones in 2017. While earnings season contributed to the latest sentiment, Dow industrials are up 20% since Election Day. Finally, while it may seem as though the move from 21K to 22K was quick, at 154 calendar days, it was nearly five times longer than the time that elapsed between 20K and 21K (35 days) and two and a half times longer than the time it took to go from 19K to 20K.

4. Bearish Sentiment Spikes — In this week’s AAII’s weekly sentiment survey update, bearish sentiment spiked from 24.32% up to 32.1%. That’s the highest weekly reading since mid-May and the largest weekly increase since March!

Even though bearish sentiment spiked this week, bullish sentiment also ticked higher, rising from 34.46% up to 36.11%. Ironically, that was also the highest weekly reading for bullish sentiment since early May, but it still marks a record 135th straight week where bulls have not been in the majority.

The week ahead — Economic data from

Week of July 28 2017 Weekly Recap & The Week Ahead

July 31st, 2017

“I have learned through the years that after a good run of profits in the markets, it`s very important to take a few days off as a reward. The natural tendency is to keep pushing until the streak ends. But experience has taught me that a rest in the middle of the streak can often extend it.”- Martin Schwartz

1. Trump Support Russia Sanctions Legislation — Congressional leaders have reached an agreement on a set of sweeping sanctions against Russia as punishment for interference in the 2016 U.S. election, engagement in Syria and the annexation of Crimea. Press Secretary Sarah Huckabee Sanders indicated Pres. Trump likely would support the bill, saying that original sanctions legislation “was poorly written but… we support where the legislation is now.” Meanwhile, the European Union could retaliate against U.S. sanctions on Russia, worried about potential harm to European energy deals.
2. Obamacare Repeal Fails in Senate — a plan to repeal and replace Obamacare that Senate Republicans have been working on for months failed to get the 60 votes needed for approval. The tally came out to 43 in favor and 57 against, with nine Republicans voting against the measure. It’s the first of many expected votes this week following the return of John McCain, who has been recovering from recent brain surgery.
3. U.K. to Ban Gas Vehicles from 2040 — Britain is set to ban all new gas and diesel vehicles from 2040 amid fears that rising levels of nitrogen oxide pose a major risk to public health. The commitment, which follows a similar pledge in France, is part of the government’s clean air plan, which has been at the heart of a protracted high court legal battle.
4. Dollar Index Hit by Fed statement — the dollar index has fallen to its lowest level in over a year after the Fed signaled its balance sheet reduction would be starting soon. The central bank kept rates on hold and made no changes to its overall policy, but the statement following its July meeting said balance sheet normalization would start “relatively soon”.
5. Border Adjustment Tax Abandoned — Republican leaders have also abandoned the idea of a border adjustment tax, as part of an effort to present a united front for a broad tax overhaul. “While we have debated the pro-growth benefits of border adjustability, we appreciate that there are many unknowns associated with it,” Steven Mnuchin, Paul Ryan and Mitch McConnell said in a statement.
6. Tobacco Shares Plunge After FDA Proposes Cut to Cigarette Nicotine — the U.S. Food and Drug Administration plans to explore regulating the level of nicotine in conventional cigarettes, a radical step that would reshape the $130 billion American tobacco industry. The move would represent one of the most sweeping federal efforts to reduce smoking since Congress required cigarette packages to carry health warnings in 1965. It follows other moves by President Donald Trump’s FDA Commissioner Scott Gottlieb to try and deal with the high cost of prescription drugs and opioid addiction. Companies effected are stock of cigarette producers including British American Tobacco (BTI), Altria Group (MO) and Philip Morris International (PM).

The week ahead — Economic data from

Week of July 21 2017 Weekly Recap & The Week Ahead

July 24th, 2017

“The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading… I know this will sound like a cliché, but the single most important reason that people lose money in the financial markets is that they don’t cut their losses short.” – Victor Sperandeo

1. GOP Abandons Healthcare Bill – Republican leaders have given up on their effort to replace Obamacare after the defections of two more GOP senators left the party short of votes needed to pass the American Health Care Act. “Republicans should just REPEAL failing Obamacare now & work on a new Healthcare Plan that will start from a clean slate.
2. Ecuador Breaks Ranks with OPEC by Raising Crude Output — Ecuador has dealt a blow to OPEC unity by announcing it will start raising crude production this month. The country won’t be able to meet its commitment to lower output by 26,000 barrels a day to 522,000, arguing that it needs the money. Its exit is largely immaterial when considering the size of the global oil market, but it could create a dangerous precedent.
3. U.S. Considers Ban on Venezuela crude? — the Trump administration is considering a ban on oil imports from Venezuela, sources told Bloomberg, as part of a spate of sanctions to punish President Maduro. The potential disruptions is Venezuela the third-biggest supplier of oil imports to the U.S., and Gulf refiners like Valero (NYSE:VLO), Chevron (NYSE:CVX) and Phillips 66 (NYSE:PSX) have spent millions tailoring their plants to use its unique brand of heavy, tar-like crude.
4. Facebook to Test Subscription News Product in the Fall – Facebook (NASDAQ:FB) will start testing the product in October, head of news partnerships, Campbell Brown, told the Digital Publishing Innovation Summit. Facebook plans to build a paywall that will require readers to become subscribers to the service after accessing 10 free articles. It will also direct readers to news publishers’ home pages.
5. Facebook Explores ‘Modular’ Device — Facebook is looking into developing a “modular electromechanical device,” according to Business Insider, which described a patent for both a phone and smart speaker as potential product categories. Coincidentally, many key members of Google’s (GOOG, GOOGL) Project Ara team (which had developed a similar project) now work at Facebook’s (NASDAQ:FB) Building 8, the group responsible for the new patent application.

The week ahead — Economic data from

Week of July 14 2017 Weekly Recap & The Week Ahead

July 17th, 2017

“When you talk, you are only repeating something you already know, but if you listen, you may learn something new.” — Dalai Lama

1. G20 Recap Following Hamburg Summit – G20 leaders declared in a joint communique “We will continue to fight protectionism including all unfair trade practices,” . The group stepped back from an unequivocal commitment to free trade for the first time since its inaugural summit in 2008. Instead, it said it would “strive to ensure a level playing field,” noting “the importance of reciprocal and mutually advantageous trade and investment frameworks.”
2. Electricity Investment Overtakes Fossils Fuels — fossil fuels are no longer the largest recipient of investment in the energy industry, according to the latest report from the IEA. The electricity sector received the largest level of investment for the first time ever, growing its share by 12 percentage points to 43% between 2014 and 2016. In comparison, over the same period, investments in upstream (exploration and production) oil and gas fell 44%.
3. Hartford Downgraded to Junk by S&P – S&P downgraded Hartford debt to junk bond status last week, citing “growing liquidity pressures” and “weaker market access prospects,” as well as pursuing “expertise in financial restructuring.” Meanwhile, Illinois squirms in the agony of the unknown.
4. Wells Fargo Cutbacks Auto Loans – Wells Fargo (NYSE:WFC) is scaling back and remolding its auto lending business in response to growing stress in the market, as well as a bank-wide push for more centralized risk controls. Although it was the No. 2 U.S. provider of auto loans less than a year ago, Wells has already cut quarterly originations by nearly 30% over the nine months leading into March 31.
5. AAII Weekly Sentiment Survey — even as the market has started to enter rally mode and the Nasdaq is getting back on its feet, bullish sentiment actually saw a slight decline, falling from its already depressed level of 29.58% down to 28.24%. That’s the lowest weekly print since the start of June.

Also, the percentage of bearish respondents declined from 29.86% down to 29.63%. This week’s print actually marks the sixth straight weekly print where bearish sentiment has been below 30%. That’s the longest streak since last August, when it went eight weeks below 40%.

With bulls and bears both below 30%, that means there are a lot of investors who just can’t make up their minds. That’s reflected in the percentage of neutral investors which came in at 42.13, and is the second-highest weekly reading in neutral sentiment this year.
6. Earnings For the Week of July 17 – below is a list of companies reporting earnings this week.

The week ahead — Economic data from

Week of July 7 2017 Weekly Recap & The Week Ahead

July 10th, 2017

“When I get hurt in the market, I get the hell out. It doesn’t matter at all where the market is trading. I just get out, because I believe that once you’re hurt in the market, your decisions are going to be far less objective than they are when you’re doing well… If you stick around when the market is severely against you, sooner or later they are going to carry you out.” – Randy McKay

1. Qatar Outlook Lowered at Moody’s — Qatar’s credit outlook has been cut to negative by Moody’s, which cited growing financial risks surrounding the country’s diplomatic spat with its Arab neighbors. It comes as Bahrain, Egypt, Saudi Arabia, and the UAE meet in Cairo to consider further sanctions on Doha as a deadline approaches for their list of demands.
2. Poland to Buy Patriot Missile Systems — Poland has agreed to buy Patriot missile defense systems (NYSE:RTN) from the U.S., in a deal worth up to $7.6B, as President Trump visited Warsaw to discuss transatlantic relations. During a joint news conference with Polish President Andrzej Duda, Trump stated it was “past time” for all NATO countries to “get going” on their financial obligations.
3. Berkshire Hathaway Buys Oncor utility — Berkshire Hathaway (BRK.A, BRK.B) has struck a deal to buy bankrupt Energy Future for $9B in cash, giving it Texas-based Oncor (including debt, the deal has an enterprise value of about $18B). The move is a bold bet by Warren Buffett, as Texas regulators blocked two earlier attempts to sell Oncor, one of the largest U.S. power transmission networks.
4. Robots Enter Bank Trading Floors – Robots are moving on to the trading floors of investment banks, and they’re not just doing back-office tasks. “We decided to start a conversation with the front-office guys on whether there were processes we could use a robot to do and we found a number of them,” said UBS’s Beatriz Martin Jimenez. The AI systems will automate post-trade allocation requests, as well as develop new strategies for trading volatility.

The week ahead — Economic data from

Week of June 30 2017 Weekly Recap & The Week Ahead

July 3rd, 2017

“I think investment psychology is by far the more important element, followed by risk control, with the least important consideration being the question of where you buy and sell.” – Tom Basso

1. EU Slaps Google With €2.4B Fine — Google has been hit with a record €2.4B fine after EU antitrust regulators ruled the company had abused its power by promoting its own shopping comparison service at the top of search results. The penalty is the largest doled out by Brussels for a monopoly abuse case and follows a seven-year-long investigation into the search group’s practices.
2. Sears Canada to Delist from Nasdaq After Filing Bankruptcy — After filing for bankruptcy last week, Sears Canada (NASDAQ:SRSC) has received notice from Nasdaq stating it will delist the company’s shares on July 3, 2017. The firm, which is closing about a quarter of its stores, has been struggling with years of losses and falling sales due to competition from big-box retailers and online merchants.
3. Bank Get Fed’s Blessing to Unleash Big Buybacks, Dividends — the central bank did not object to any of the buybacks or dividend hikes from the 34 banks it reviewed during the second phase of its annual stress test. This is the first time in the seven-year history of the tests implemented in the wake of the financial crisis that all banks have passed. JPMorgan announced a repurchase program of up to $19.4 billion, its biggest since the financial crisis. Citigroup unleashed its largest ever buyback program — worth up to $15.6 billion — and doubled its dividend. Bank of America and Morgan Stanley hiked their quarterly dividends to 12 cents a share and 25 cents a share, respectively.
4. Facebook Crosses 2 Billion-User Line — Facebook has now hit 2B monthly active users, representing a doubling of its user base in just the past five years. It hit the 1B user mark in October 2012, the year it went public. It’s the latest of a few metric milestones for Facebook (NASDAQ:FB), which celebrated 250M daily users of Instagram Stories last week, and Instagram overall hitting 700M MAUs in April.
5. American Airlines (NASDAQ:AAL) Buying New 3-D Carry-On Bag Screeners To Speed Up Airport Security — American Airlines (NASDAQ:AAL) is buying new 3-D carry-on bag screeners that it will deploy at eight U.S. airports once the machines get fully certified by the TSA. 3-D scanners not only give TSA agents a clearer view of potential problems, but the machines – built by Analogic (NASDAQ:ALOG) – are designed to go twice as fast checking carry-on bags.

The week ahead — Economic data from

Week of June 22 2017 Weekly Recap & The Week Ahead

June 27th, 2017

…“People somehow think you must buy at the bottom and sell at the top to be successful in the market. That’s nonsense! The idea is to buy when the probability is greatest that the market is going to advance”… Jesse Livermore

1. James Clinger Nominated for FDIC Chair — taking a big step towards loosening the shackles on Wall Street, President Trump has nominated James Clinger as chairman of the FDIC, one of the U.S.’s most powerful bank regulators. If confirmed by the Senate, he would begin his term in November. Clinger currently serves as chief counsel for the House Financial Services Committee and has been involved in efforts to rip up Dodd-Frank.
2. UPS Adopts Peak Time Charges for 2017 Holiday Season — UPS plans to charge retailers extra fees to deliver packages during the busiest weeks before Christmas, creating a new challenge for an industry seek to offset declining foot traffic to shopping centers. UPS’s fees will force retailers like Amazon (AMZN) and Wal-Mart (NYSE:WMT) to decide over the next few months whether to raise prices, a difficult to do when online shoppers are reluctant to pay shipping fees.
3. MSCI Will Include China’s A shares In the MSCI Emerging Markets Index – the long-awaited China’s A-shares will be included in the MSCI Emerging Markets Index in what was seen as a major milestone. “International investors have embraced the positive changes in accessibility… over the last few years,” said Remy Briand, Chairman of the MSCI Index Policy Committee.
4. Oil To Flow Through Dakota Access Pipeline as Summer Hearings Proceed — a U.S. District Court judge has set up a series of hearings through the summer to determine what will happen to the Dakota Access Pipeline while authorities conduct an additional review of the project’s environmental impact. Project developer Energy Transfer Partners (NYSE:ETP) is “pleased with the decision” as oil will continue to flow through the pipeline during the hearings.
5. All US Banks Pass This Year’s Stress Tests — The 34 largest U.S. lenders have all cleared the first stage of the Fed’s annual stress test, showing they would be able to maintain enough capital in an extreme recession to meet regulatory requirements. Banks are still subject to a second portion of the test in which the Fed approves or denies their capital plans, which will be released next week.

The week ahead — Economic data from

Week of June 15 2017 Weekly Recap & The Week Ahead

June 19th, 2017

“That cotton trade was almost the deal breaker for me. It was at that point that I said, ‘Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?’” – Paul Tudor Jones

1. Jeff Immelt to Step Down as CEO of GE; John Flannery Takes Role — General Electric Co. (GE) Chief Executive Jeff Immelt will step aside this summer, and replace by John Flannery, head of the company’s health-care business and retire as chairman of the board on Dec. 31. Under Immelt ’s term, GE shares have vastly underperformed the stock market during his tenure.
2. U.S. Retail Sales Fell 0.3% in May — retail sales which reflecting consumer spending at stores, restaurants and websites—fell 0.3% in May from a month earlier, the Commerce Department reported. That marked the steepest drop since January 2016. A big factor was cheaper gasoline, which translated into less spending at service stations. But consumers also cut spending at big-box stores, electronics retailers and restaurants. Car sales, after hitting a record in 2016, have fallen nearly 2% over the past three months. Retail sales are a big component of consumer spending, which in turn accounts for roughly two-thirds of U.S. economic output.
3. Quantitative Investing Based on Computer Formulas Accounts for About 90% of All Trades — JPMorgan’s Marko Kolanovic stated that “The majority of equity investors today don’t buy or sell stocks based on stock specific fundamentals,” which estimates “fundamental discretionary traders” account for only about 10% of trading volume in equities.
4. Fed Raises Interest Rates and Sets Plan to Shrink $4.5 Trillion Balance Sheet ‘this year’ – the Fed as expected on Wednesday last week raised its benchmark federal-funds rate by a quarter percentage point to between 1% and 1.25% — the third increase in a year and a half. The Federal Reserve lifted a key U.S. interest rate and laid out a plan to shrink its massive $4.5 trillion balance sheet starting “this year,” a pair of moves reflecting its view that an economic expansion now entering its ninth year no longer needs so much propping up. Under the plan, the Fed will initially allow $6 billion a month in principal from maturing Treasury securities to runoff. That will increase in steps of $6 billion each quarter over a year until it reaches $30 billion a month. For mortgage-backed securities and federal agency debt, the Fed set an initial cap of $4 billion. That will increase in quarterly steps of $4 billion each quarter until it reaches $20 billion a month.
5. U.S. Stock ETF Inflows Surge – Investors raced into exchange-traded funds this past week despite market jitters, according to Lipper, delivering the most cash to those funds since late last year. Stock ETFs listed in the U.S. attracted $17.7B during the week ended June 14, while their mutual fund counterparts recorded $6.8B of outflows in their largest week of withdrawals since April.

The week ahead — Economic data from

Week of June 9 2017 Weekly Recap & The Week Ahead

June 12th, 2017

“Success if getting what you want. Happiness is wanting what you get.” — Dale Carnegie

1. Arab Nations Sever Ties with Qatar — four Arab states have cut off diplomatic ties with Qatar, as well as closing air and sea routes, pointing to Doha’s ties to terrorism. The coordinated move by Saudi Arabia, Egypt, the UAE and Bahrain marks a sharp escalation of a rift between the Persian Gulf states since late last month.
2. Global Market for Natural Gas Has Finally Arrived — the U.S. and China are working on a trade deal that could send vast quantities of gas pumped in Texas and Pennsylvania to factories in Shanghai and Guangdong. Improved access for U.S. exporters to China’s giant energy markets could boost overall global shipments. Thirty-nine countries now import LNG, up from 17 a decade ago, according to data and analytics firm IHS Markit. Several more, among them Uruguay, Bahrain and Bangladesh, are expected to lift the total to 46 in the next couple of years. The price differences also shrink. In 2012, Asia spot prices for LNG were $5.74 per million British thermal units higher than natural-gas prices in Europe, according to S&P Global Platts. This year so far, the difference has averaged less than $1.
3. S&P500 Brokeout to New All-time Highs — the S&P500 broke above the upper end of this consolidation from the past 3 months. Meanwhile, the list of stocks in the S&P500 also making new highs also broke out to the highest level since those March highs. According to to a research note by Sam Stovall of CFRA, “So far, 2017 has seen 17 new all-time closing highs for the S&P 500 and just 10 days where the index moved more than 1 percent in either direction. That kind of higher highs with low volatility always – yes, always – has been positive for the market, according to Sam Stovall, chief investment strategist at CFRA. The previous 17 times that has happened, the market has averaged a 19.4 percent gain, with advances happening 100 percent of the time.”

4. British PM Theresa May Looks to Form New Government — Prime Minister Theresa May will seek permission from the Queen to form a new government, according to a spokesperson, despite calls for her to resign after a bruising election. Her Conservative party lost its majority, with Labour gaining significant ground, resulting in a hung parliament. Furthermore, The U.K. could suffer another ratings downgrade after a general election led to a hung parliament, according to S&P Global. The country lost its AAA rating last June following its vote to leave the EU. S&P said at the time it was worried the decision would lead to a deterioration of Britain’s economic performance and institutional framework.
5. FDA Wants Endo’s Opana ER Off the Market Due to Abuse Potential – in an unprecedented move, the FDA has notified Endo International’s (NASDAQ:ENDP) Pharmaceuticals unit that it wants opioid pain med OPANA ER (oxymorphone HCl) removed from the market due to its abuse potential. It comes after a panel of advisers concluded in March that the drug’s benefits did not outweigh the risks – opioids were involved in more than 33,000 deaths in 2015.
6. Technology darlings Stocks Reversed Hard in the Last 2-day — most notable being the NASDAQ (-1.8%) and the Philadelphia Semiconductor Index (- 4.23%), as can be seen in the attendant chart below.

The week ahead — Economic data from

August 2017
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