Archive for August, 2017

Week of Aug 25 2017 Weekly Recap & The Week Ahead

Monday, August 28th, 2017

“The easiest thing to do is prepare. If you don’t, on behalf of the other market participants, we thank you.” — unknown

1. Trump ‘s Afghanistan Strategy Puts Defense Stocks in Focus — President Trump has revealed a reversal of strategy in Afghanistan, warning against creating a vacuum for terrorists, but declined to give details on troop levels. Defense stocks have nearly doubled the S&P 500’s performance since Trump’s election, with the SPDR S&P Aerospace & Defense ETF (NYSEARCA:XAR) rising 26% since Nov. 8 vs. a 13.5% gain for the S&P500 Index. Stocks effected are: RTN, NOC, LMT, OA, GD, BA. Also, The U.S. Air Force has awarded Boeing (NYSE:BA) and Northrop Grumman (NYSE:NOC) separate contracts to continue work on the Ground-Based Strategic Deterrent program, which is planned to replace aging Minuteman missiles. It’s the first step in a three-pronged $500B refresh of the U.S. nuclear arsenal, which includes a long-range bomber being built by Northrop (NOC) and new nuclear submarines now under construction by General Dynamics (NYSE:GD).
2. Next OPEC meeting set for Sept. 22 to Discuss Oil Output — the next joint committee meeting of OPEC and non-OPEC producers will be held in Vienna on Sept. 22. All options, including extending supply cuts beyond Q1 of 2018, are “left open to ensure that all efforts are made to re-balance the market,” according to an OPEC statement. The group also confirmed that its deal achieved a conformity level of 94% as of July.
3. Texas Refining Industry on Watch for Hurricane Harvey — nearly a third of U.S. refining capacity appears to be in Harvey’s path on the Texas and Louisiana coastlines, while forecasters expect the tropical storm to reach hurricane strength soon. Anadarko Petroleum (NYSE:APC) has pulled workers from its Gulf of Mexico platforms, and refiners are assessing their operations.
4. Offshore Driller Seadrill Prepares for Chap. 11 — Once the biggest offshore rig firm by market value, Seadrill (NYSE:SDRL) plans to begin its Chapter 11 debt restructuring in the coming weeks, while revealing a $100M loss in the second quarter. The negotiations will likely involve bankruptcy “on or before Sept. 12,” as the company plans to raise $1B in new capital and obtain a five-year extension for its bank facilities.
5. Trump to Push for Major Tax Reform — “Starting next week, the president’s agenda and calendar is going to revolve around tax reform,” National Economic Council Director Gary Cohn told FT. “He will start being on the road making major addresses justifying the reasoning for tax reform and why we need it in the U.S.” The current American tax system has remained largely unchanged for three decades.

The week ahead — Economic data from Econoday.com:

Week of Aug 18 2017 Weekly Recap & The Week Ahead

Monday, August 21st, 2017

“There is only one side to the stock market; and it is not the bull side or the bear side, but the right side” … — Jessie Livermore

1. North Korea Retracts Guam Threat — Kim Jong-un has decided not to launch a threatened missile attack on Guam, but warned that he could change his mind “if the Yankees persist in their extremely dangerous reckless actions.” Signs of easing in tension on the Korean peninsula helped the stock markets rally for another day following an exchange of threats between Pyongyang and Washington.
2. Berkshire Hathaway Discloses Stake in Synchrony Financial — Berkshire Hathaway sold its stake in General Electric (NYSE:GE) as of the end of June, but will still keep its hand in a legacy part of the conglomerate. Berkshire (BRK.A, BRK.B) reported a 17.5M share stake in Synchrony Financial (NYSE:SYF), the financing arm of GE that was spun out in a 2014. It also boosted stakes in Store Capital (NYSE:STOR), Bank of New York (NYSE:BK), General Motors (NYSE:GM) and Apple (AAPL).
3. Trump Signs Executive Order Aimed at Boosting Infrastructure Projects — President Trump has signed an executive order to speed approvals of permits for highways, bridges and other major building efforts as part of his proposal to spend $1T to fix aging U.S. infrastructure. The move revokes a previous order by President Obama that required strict building standards for government-funded projects to reduce exposure to consequences of climate change.
4. Fiat Joins Autonomous Driving Consortium — Fiat Chrysler is joining a self-driving car consortium led by BMW (OTCPK:BAMXF), Intel (NASDAQ:INTC) and its Mobileye (NYSE:MBLY) subsidiary that aims to develop fully driverless vehicles by 2021. CEO Sergio Marchionne has long said that automakers need to work together to develop the future technology because of the vast development costs. Last year, FCA (NYSE:FCAU) became the first carmaker to partner with Waymo, the driverless car unit owned by Alphabet (GOOG, GOOGL).
5. FOMC Chairwoman Yellen to Speak at Jackson Hole Conference — Fed Chair Janet Yellen is scheduled to speak at Jackson Hole this week. The subject of the speech will be “Financial Stability,” and it will happen on August 25 at 10 ET. The talk comes a couple of weeks ahead of the FOMC’s next policy meeting, at which most are currently expecting another rate hike and the start of the wind-down of the central bank’s balance sheet.
6. Russell 2000 (SmallCap) Erases Year’s Gains — the major averages have been up pretty much all year, but the Russell 2000 lagged by a pretty nice measure – peaking with about a 6% YTD advance in late July, and swooning since. With last thursday’s 1.4% decline, the small cap index is in the green for the year by just a handful of basis points. The S&P 500 remains higher by nearly 9%, and the Nasdaq by 16%.

The week ahead — Economic data from Econoday.com:

Week of Aug 11 2017 Weekly Recap & The Week Ahead

Monday, 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 Econoday.com:

Week of Aug 4 2017 Weekly Recap & The Week Ahead

Monday, 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 Econoday.com:

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