Fitness centers around the world are shutting down at a rapid pace, unable to pay the rent due to COVID-19 restrictions. Investors have taken note, bidding up online fitness provider Pelotin Interactive Inc. (PTON) nearly eight-fold since the March low. The latest rally wave posted an all-time high near 140 and reversed last week, setting the stage for a pullback that could offer a low risk buying opportunity.
Peloton Pullback Trading Strategy
As it turns out, the company reports fiscal Q1 2021earnings on Nov. 3, with analysts expecting a profit of $0.15 per-share on $732.15 million in revenue. The stock sold off for two days in September despite beating Q4 estimates and then turned sharply higher, rewarding pullback buyers. A similar trade set-up could unfold this time around because the report is likely to attract another crowd of weak hands who need to be shaken out.
KeyBanc Capital Markets analyst Edward Yruma raised their Peloton target from $120 to $160 on Wednesday, commenting “We think investor attention will focus on companies leveraged to a post-COVID-19 reopening but PTON will remain a beneficiary due to the contraction in the traditional fitness space. Our Key First Look Data points to <60% retention for many leading fitness chains, which will further exacerbate closures. Demand (new and Bike+ upgrades) remains very strong and marketing leverage could be greater than previously forecast.”
Wall Street And Technical Outlook
Wall Street consensus is highly bullish, with a “Strong Buy’ rating based upon 21 ‘Buy’ and 2 ‘Hold’ recommendations. One analyst recommends that shareholders close positions and move to the sidelines at this time. Price targets currently range from a low of just $33 to a Street-high $160 while the stock is now trading about $7 above the median $121 target. However, it’s dropped more than $10 since last week and could hit the median target before the earnings date.
Peloton is losing momentum and has now completed a head and shoulders pattern on the 60-minute chart. Accumulation readings are rolling over at the same time, indicating that caution is growing ahead of the quarterly confessional. Daily relative strength readings could be at or near oversold levels by that time, supporting the post-report pullback strategy. Just keep in mind that earnings will be reported on the afternoon of Election Day, adding a measure of volatility.
US stocks moved lower on Monday as concerns that a stimulus deal would need to wait until after the November general election weighed on shares. House Speak Nancy Pelosi has given the White House a 48-hour timeline to move forward with a deal. The spread of COVID-19 has accelerated which is reducing the chance of a V-shaped recovery.
Over the past 2-weeks, the stock market has been starting higher and ending lower, which is not a good sign. All sectors in the S&P 500 index were lower, led down by communications and energy, utilities were the best performing sector in a down tape. The VIX volatility index surged higher rising 2-points and recapturing the 29% level. The US home building index released by the FAHB surged to the high level on record but the gain was not strong enough to buoy housing sector stocks on Monday.
Home Building Index Surges
Homebuilders continue to see expanding demand and are struggling to keep up with housing starts. The Homebuilder sentiment set a record high for the second month in a row, jumping to 85 in October on the NAHB/Wells Fargo Housing Market Index. September and October are the first two months the index has ever been above 80. This is a diffusion index with levels above 50 showing an expansion. The index stood at 71 in October 2019. All three components of the index either set records or matched their highest readings.
The current sales conditions rose 2 points to 90. Sales expectations in the next six months increased 3 points to 88, and buyer traffic was unchanged at 74. Builders are struggling to ramp up production, and while housing starts and building permits are rising they are not even close to meeting demand.
US stocks were mostly higher on Wednesday rebounding from Tuesday decline. Most sectors in the S&P 500 were higher driven by gains in energy and materials, while real estate bucked the trend. US inflation on the wholesale level was hotter than expected in September according to the Labor Department. Goldman Sachs continued a streak of better than expected earnings from the large banks, driven by strong gains in trading.
Goldman Beats on the Top and Bottom Line
Goldman Sachs reported stellar Q3 financial results beat analysts’ profit estimates on stronger-than-expected results in bond trading and asset management. Goldman reported $3.62 billion in profit, or $9.68 a share, exceeding the $5.57 per share estimates. Revenue of $10.78 billion topped the estimate by more than $1 billion, driven by the trading and asset management divisions. The trading division generated $4.55 billion in revenue, a 29% increase from a year earlier. That gain was fueled by bond trading results of $2.5 billion, nearly half a billion dollars more than analysts expected. Equities trading revenue of $2.05 billion essentially matched expectations. The asset management division produced $2.77 billion in revenue, a 71% gain from a year earlier, and nearly $900 million more than the $1.91 billion estimate.
US PPI Rose More than Expected
U.S. wholesale prices increased more than expected in September, leading to the first year-on-year gain since March according to the Labor Department. The PPI index rose 0.4% in September after advancing 0.3% in August. PPI increased 0.4% year over year in September after falling 0.2% in August. Expectations had been for PPI to gain 0.2% in September on both a month over month and year over year basis. Core PPI, which excludes food, energy increased by 0.4% in September. Core PPI had increased by 0.3% for three straight months. Core PPI climbed 0.7% year over year. The core PPI rose 0.3% on a year-on-year basis in August.
US stocks were mixed on Tuesday as the Dow and the S&P 500 closed lower and the Nasdaq notched up gains. All sectors in the S&P 500 index were lower on Tuesday driven down by losses in Real Estate and Financials, Consumer Staples was the best performing sector in a down tape. The big banks led off the earnings parade on Tuesday, with JP Morgan and Citigroup beating on the top and bottom line. US CPI came out in line with expectations, keeping US yields subdued. The dollar rallied which generated headwinds for the multinational companies.
Big Banks Start in the Black
Two of the largest US banks report financial results on Tuesday that came in better than expected. JPMorgan Chase & Co. reported that Q3 profit rose 4% from a year ago, beating expectations. Citigroup also delivered better-than-expected results. Strong gains in trading and investment banking continue to drive earnings.
Trading revenue jumped 30% at JPMorgan and 17% at Citigroup. Both banks set aside fewer reserves to cover bad loans in the quarter. JPMorgan set aside $611 million for potential future loan losses, far less than expected and the $10.47 billion it booked in the second quarter. Citigroup set aside $2.26 billion, down from more than $7 billion in each of the past two quarters. Despite the better than expected financial results, the financials were some of the worst performers in the S&P 500 index.
Inflation in the US Rises in Line with Expectations
The consumer price index rose by 0.2% last month after gaining 0.4% in August. Expectations were for CPI to rise by 0.2% in September. The CPI advanced 0.6% in both June and July after falling in the prior three months as business closures to slow the spread of the coronavirus weighed on demand. A 6.7% jump in the prices of used cars and trucks again accounted for most of the increase. People who want to avoid public transportation scrambled to purchase used vehicles.
That was the biggest gain since February 1969 and followed a 5.4% advance in August. New motor vehicle prices rose 0.3%. On a year-over-year basis, the CPI increased by 1.4% after rising 1.3% in August. Excluding the volatile food and energy components, the CPI climbed 0.2% after rising 0.4% in August. The so-called core CPI gained 1.7% year-on-year, matching August’s increase.
US stocks were higher on Wednesday rebounding as President Trump walked back his comments that he wanted to wait until after the election to discuss a new stimulus deal. All sectors in the S&P 500 index were higher, led by gains in cyclical stocks and materials. Utilities were the worst-performing sector in the S&P 500 index. Transportation shares broke out led by UPS and Fedex. Industrials are close to an upside breakout. US yields moved higher as the curve continued to steepen. The dollar moved lower, while the VIX volatility index eased. Fed minutes from the FOMC September meeting showed that the Fed is concerned if the Federal Government does not produce another stimulus bill. New mortgage applications declined while Eli Lilly asked the FDA for an emergency authorization of its new antibody-drug.
Fed Meeting Minutes Show Concern
The Federal Reserve meeting minutes from the most recent open market committee meeting show that official is concern about the lack of additional fiscal stimulus would jeopardize and economic recovery. While Fed official kept interest rates unchanged they did pledge in September to hold rates unchanged for several years. The meeting featured an extensive discussion about the economic outlook. With President Trump calling the talks off yesterday and then walking back some of those comments today, investors feel that the chance of a deal before the election is slim.
New Mortgage Applications Fall
Applications for new home mortgages fell 2% for the week but were 21% higher year over year. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 slipped to 3.01% from 3.05. In response, refinance application volume, which is most sensitive to weekly rate moves, rose 8% for the week and was 50% higher than a year ago, according to the Mortgage Bankers Association.
Lilly Ask FDA for Approval
Eli Lilly reported on Wednesday that it has requested Food and Drug Administration U.S. authorization of the emergency use of an experimental antibody-based treatment for people with recently diagnosed, mild-to-moderate Covid-19. Lilly said is seeking the authorization for its drug, code-named LY-CoV555, which was derived from a blood sample of one of the earliest U.S. survivors of Covid-19.
US Stocks whipsawed and moved lower following a comment from President Trump where he told the House and the Senate to forget about a stimulus bill, and that they would take it up after he won the election. He said that they should focus instead on getting his Supreme Court nominee passed through the senate. Ahead of the comments from Trump the Dow Industrial Average was up more than 100-points and after the comments, the index was down 300 points. President Trump said he would attend the debate next week, despite continuing to shed the virus. Most sectors in the S&P 500 index were lower, led down by energy shares. Utilities bucked the Trend. Fed Chair Powell said that there is a need for additional stimulus for the US economy to continue to rebound. The US trade deficit rose in August to the highest levels in 14-years. The August Jobs Openings and Labor Turnover were unchanged.
Fed Chair Power Calls for More Fiscal Stimulus
Federal Reserve Chairman Jerome Powell that there was a further need for fiscal stimulus. He noted that there was progress made in job creation, goods consumption and business formation, among other areas, but it was the wrong time for policymakers to take their foot off the gas.
The US Trade Deficit Rose More than Expected
The U.S. trade deficit rose in August to the highest level in 14 years. According to the Commerce Department, the gap between the goods and services the United States sells and what it buys abroad climbed 5.9% in August to $67.1 billion. The deficit in the trade of goods with China fell 6.7% to $26.4 billion. In 2020, the United States has recorded a trade gap of $421.8 billion, up 5.7% from January-August 2019. Exports rose 2.2% to $171.9 billion, but imports rose more up 3.2% to $239 billion.
Jobs Openings and Labor Turnover for August Were Unchanged
The number of jobs that are open for hire in the US was nearly unchanged at 6.5 million on the last business day of August, according to the Bureau of Labor Statistics. Hires were little changed at 5.9 million in August. Total separations decreased to 4.6 million. Within separations, the quits rate was little changed at 2.0% while the layoffs decreased to a series low of 1.0 percent.
US stocks moved higher on Wednesday following commentary from Treasury Secretary Steve Mnuchin that a deal with Democrats could come soon. Most sectors in the S&P 500 index were higher, led by Healthcare, the energy sector bucked the trend. US private payrolls came out stronger than expected according to ADP and Macroeconomic Advisors. The US pending home sales were stronger than expected continuing a streak of strong housing data. Second-quarter US GDP was revised slightly higher but a contraction of 31.4% was the worst in history.
Private Payrolls Rose More than Expected
US corporations added more jobs than expected in September due in good part to a surge in manufacturing. ADP reported that private-sector jobs increased by 749,000, more than the 600,000 expected. This comes ahead of Friday’s government employment report which is expected to show an increase of approximately 800,000 jobs, while the unemployment rate is expected to fall to 8.2%. Most of the gains were in the manufacturing space. ADP found that manufacturing added 130,000 jobs.
GDP Was Revised Higher buy Still Shocking
US growth dropped sharply in Q2 according to the Commerce Department. US GDP dropped 31.4% in Q2, only slightly changed from the 31.7% drop estimated one month ago. Estimates are that the Q3 will see a substantial rebound as the US economy reopened.
Mortgage Applications Drop
Despite another interest rate drop, demand for refinancing and purchasing mortgages fell last week, with volume for mortgage applications down 4.8% from the previous week, according to the Mortgage Bankers Association. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 decreased to 3.05% from 3.10% last week.
Pending Home Sales Surge
The National Association of Realtors’ Pending Home Sales Index surged 8.8% last month to an all-time high of 132.8. Expectations were for a rise of 3.1%. The reading is the fourth-straight climb for the index. All four major US regions in the US saw gains.
Chicago PMI Rise More than Expected
The Chicago Purchasing Manager’s Index, rose to 62.4 in September from 51.2 in August, which is in expansion territory. Expectations for the mid-west manufacturing index was for a rise to 53. Through Q3, business sentiment recovered sharply to 55.2, the strongest reading since Q1 2019.
US stocks again whipsawed between positive and negative territory but finished the session in the black. Most sectors in the S&P 500 index were higher led by gains in the Healthcare sector. Energy bucked the trend. The dollar gained traction on Friday, following a stronger than expected durable goods orders report. The VIX volatility index moved lower, as riskier assets were able to move higher. After losing ground for 3-consecutive weeks, the Nasdaq 100 finally settled in the black. Next week markets will begin to focus on the US ISM manufacturing report on Thursday and the employment report scheduled to be released on Friday. Concerns over the November election continue to buoy implied volatility.
After declining for 3-consecutive weeks, the Nasdaq finally took back its position as the leader. The Nasdaq had underperformed the broader S&P 500 index during the prior three weeks but this week rebounded and outperformed. For stocks to continue their trend higher, they will need to large-cap tech stocks to retake the mantle.
House Looks to Pass Stimulus Bill
The House of Representatives is attempting to push forward a $2.4 trillion stimulus bill next week. This is well off the much larger $3.4 trillion stimulus package approved in May. There White House and Senate Republicans are still far away from the House number. The White House has room to $1.5 trillion, but the Republicans have problems finding a consensus closer to $1 trillion.
Durable Goods Orders Rise More than Expected
US Durable Goods Order rose 0.4% in August after jumping 11.7% in July. Expectations were for a small decline. Durable goods orders were supported by a 0.5% rise in orders for transportation equipment. Orders for non-defense capital goods excluding aircraft, rose 1.8% last month, according to the Commerce Department. Data for July was revised up to show that core capital goods orders rose 2.5% instead of 1.9% as previously estimated.
Peloton Interactive Inc. (PTON) reports Q4 2020 earnings on September 10, with analysts expecting a profit of $0.11 per-share on $574.86 million in revenue. The stock jumped 16% after May’s Q3 report despite a greater-than expected loss and has doubled in price since that time, underpinned by a wave of upgrades and bullish channel checks. Even so, a long string of quarterly losses has market watchers wondering how long this momentum play can keep flying high.
Peloton Rapid Growth
The company now boasts the largest interactive fitness platform in the world, with more than 2.6 million members. It’s having trouble keeping up with surging demand, despite doubling the manufacturing pace since March and a prior disclosure that estimated delivery times would “normalize” in July or August. This game of catch-up suggests that strong sales and expanding revenue will continue into fiscal year 2021, underpinning the stock price even though it’s already gained nearly 200% year-to-date.
JPMorgan analyst Doug Anmut raised their Peloton target from $58 to $105 last week, noting the company “is on our U.S. Analyst Focus List and is one of our top picks. We continue to like shares into earnings and believe there is significant upside potential to consensus estimates both near and long term. Peloton’s biggest near-term challenge in our view is keeping up with elevated demand, with Bike order-to-delivery times of 6 to 7 weeks on average across the top 20 U.S. markets, as of our checks on September 1.”
Wall Street And Technical Outlook
Wall Street rates Peloton as a ‘Strong Buy’, based upon 15 ‘Buy’ and just 1 ‘Hold’ recommendation. No analysts are recommending that shareholders sell positions and move to the sidelines at this time. Price targets currently range from a low of $58 to a street-high $109 while the stock is now trading just above the $79.50 target. Expectations are extremely high ahead of the earnings release so results may need to exceed estimates to support additional upside.
A May 2020 breakout above the 2019 high at 36.00 attracted intense momentum buying interest, carving a powerful trend advance that stalled near 70 in July. Price action cleared that barrier in late August, reaching an all-time high at 92.50 on September 2. The stock sold off more than 18 points before bouncing into the Labor Day holiday in the United States, indicating that pre-earnings volatility is now picking up steam.
US stocks continued to experience volatility during the first week of September. The VIX volatility index climbed to the highest level since June. Most of the focus was directed to the US jobs numbers, which continue to rebound since tumbling in March and April. The question is whether the decelerating in jobs will weigh on stocks. Large-cap tech stocks continued to fall on Friday as large bets in the options markets that tech stocks would rise were unwound.
The VIX volatility index continues to climb, rising to the highest levels since June. Ahead of the jobs report, the Nasdaq was down by more than 1% which followed a 5% decline on Thursday. For the week, sectors were mixed, driven down by energy shares.
Payrolls Rise in Line with Expectations but Unemployment Rate Falls
Nonfarm payrolls rose by 1.37 million in August and the unemployment rate tumbled to 8.4%. The unemployment rate was by far the lowest since the coronavirus shutdown in March. Expectations were for a rise of 1.32 million jobs and the jobless rate to decline to 9.8% from 10.2% in July.
US stocks moved higher on Tuesday driven up by a stronger than expected US ISM Manufacturing report which showed a robust expansion in the manufacturing sector. The Nasdaq continued to lead the markets higher driven by large-cap tech stocks. Walmart surged higher on Tuesday buoying the consumer staples sectors as the company announced a new subscription service. Zoom shares rallied nearly 40% after the company reported better than expected financial results. The company has now captured 50% of the video conferencing globally.
Walmart Announces New Subscription Service
Walmart announced a new subscription service that will cost $98 a year to receive free delivery for orders over $35. The company hopes to build on the success of its pickup grocery business. That is lower than the $119 charged for Amazon Prime, but Walmart will require an order of at least $35, while Prime does not have a minimum.
ISM Manufacturing Comes in Much Stronger than Expected
The manufacturing sector in the US is robust, and the Tuesday report from the Institute of Supply Management showed a stronger than expected number. The August ISM Manufacturing Index came in at 56.0 in August compared to expectations that it would rise to 54.5 from 54.2 in July. New orders, surged to 67.6 in August from 61.5 in July and production rose to 63.3 in August from 62.1 in July. Backlogs also increased to 54.6 from 51.8 in July, while prices paid jumped to 59.5 from 53.2. the August expansion in manufacturing was the 4th consecutive month of expansion in a row. There was some news that was not as upbeat. The employment component only rose to 46.4 from 44.3 and remains in contraction territory.
US Construction Spending Edged Higher
U.S. construction spending edged higher in July. The Commerce Department reported that construction spending edged up 0.1%. Data for June was revised to show construction outlays falling 0.5% instead of decreasing 0.7% previously. Expectations had been for construction spending to rebound 1.0% in July. Construction spending dipped 0.1% year over year.
US stocks moved higher on Friday to close out the week on an up-note. Both the S&P 500 index and the Nasdaq closed at all-time weekly highs. The Dow Industrial Average has now erased all the losses it experienced during 2020. Stronger than expected consumer spending data in conjunction with solid sentiment helped lift the major average.
The University of Michigan reported that its final index of consumer sentiment was 74.1 this month, up slightly from July’s reading of 72.5. Most sectors in the S&P 500 index were higher driven by gains in energy and consumer discretionary stocks. Healthcare bucked the trend. US yields continued to grind higher while the dollar fell in the wake of the Fed’s new strategy to target inflation. Gold prices moved higher lifting the mining shares. Hurricane Laura was downgraded to a tropical depression as it moved inland after generating widespread devastation across Louisiana.
Consumer Spending Rose
U.S. consumer spending increased by 1.9% last month according to the Commerce Department. The July gain marked the third straight monthly increase in consumer spending, the primary driver of the U.S. economy, but represented a slowdown from the previous two months. Friday’s report from the Commerce Department also showed that income rose 0.4% in July after two months of declines. The personal saving rate was 17.8% in July, down from 19.2% in June and 24.6% in May but well above the 7.6% rate seen in January. Despite the upbeat spending news, jobs could continue to be an issue. On Friday, MGM Resorts International reported it is sending letters to 18,000 U.S. employees who were furloughed during the coronavirus pandemic, making their job cuts permanent.
US stocks closed mixed on Tuesday with the Dow Industrial Average declining while the Nasdaq notched up a fresh all-time high. Sectors in the S&P 500 index were mixed, led higher by Healthcare and Technology, Utilities bucked the trend. American Airlines announced on Tuesday that it would layoff 19,000 workers. This was less than initially projected. New Home Sales rose more than expected, continuing the string of better than expected sales. Housing prices also continued to rise according to the most recent Case-Schiller report.
American To Increase Layoffs
American Airlines reported that the company would layoff 19,000 workers by October 1 as the carrier prepares to downsize. American’s cuts are less than the 25,000 potential job losses it warned were possible last month.
New Home Sales Rise More than Expected
New home sales surged to highest level since 2006 according to the US Commerce Department. Sales of new single-family houses rose 14% between June and July to an annual rate of 901,000. Con a year over year basis new home sales were up 36%. Expectations were for new home sales to rise to a rate of 790,000. The government also revised June’s new home sales figure to a rate of 791,000, up from 776,000.
Home Prices Continue to Rise
Home prices rose 4.3% annually in June, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index. The 10-City Composite, which captures a smaller subsector than the national 20-city composite increased 2.8% annually, down from 3% in the previous month. The 20-City Composite rose 3.5% year over year, down from 3.6% in the previous month.
US stocks moved higher on Monday, initially rallying on news that President Trump was weighing fast-tracking the Astrazeneca vaccine for COVID-19. The S&P 500 index as well as the Nasdaq settled at fresh all-time highs. Apple shares continued to move higher on the date of record for the company’s 3-1 stock split.
Most sectors in the S&P 500 index were higher, led by financials and energy, Healthcare bucked the trend. Energy shares were buoyed by a surge in natural gas prices which rallied as two tropical storms moved into the Gulf of Mexico. Tropical storm Marco is beginning to peter-out after being downgraded to a tropical storm from a Hurricane. Tropical Storm Laura is expected to hit Port Author Louisiana as a category 2, hurricane.
The Attorney General of New York has asked a judge to enforce a subpoena that Eric Trump testify in front of a grand jury for issues related to the Trump organization. It appears that the New York Attorney General is going down the path to potentially issue criminal charges against the Trump Organization and several of the president family members. The FDA said it authorized the use of convalescent plasma, the antibody-rich blood component taken from recovered Covid-19 patients, for the treatment of serious coronavirus cases. The VIX volatility index whipsawed initially moving lower but rebounding into the close to settle the day up 1.5% at 22.80.
TikTok Sues White House
Chinese-owned TikTok sued the U.S. government in federal saying that it protects its users’ data and challenging President Trump’s executive order that would effectively ban the video-sharing app if it doesn’t find an American buyer for its U.S. operations.
US stocks consolidated on Friday with the Dow edging higher and the Nasdaq moving lower. For the week the S&P 500 index edge out a small gain but was unable to reach a new all-time high. The VIX volatility index edged slightly higher but remains relatively depressed. The sectors in the S&P 500 index were mixed, led higher by Energy, while Utilities lagged. Retail Sales came out weaker than expected but were revised higher for prior months. Industrials production continued to rebound but less than the gains experienced in June. Productivity rose to the highest levels since 2009, but labor costs also jumped. Consumer confidence also remained flat.
US Retail Sales Rose Less than Expected
US retail sales rose 1.2% in July, versus the expected increase of 2.3%. Excluding autos, the gain was 1.9%, ahead of the 1.2% estimate. The slowdown in retail sales in July was led by a 1.2% decline in receipts at auto dealerships. That followed a 6.1% acceleration in June
Industrial production, including output at factories, mines, and utilities, rose climbed 3% in July after surging 5.7% in June. Production remains 8.4% below its level in February before the spread of COVID-19 in the United States. Factory output rose 3.4% last month, pulled higher by a 28.3% gain in the production of cars, trucks, and auto parts.
U.S. productivity rose at a 7.3% rate in the Q2 as the number of hours worked fell by nearly half, the biggest drop-off since the government started tracking the data more than 70 years ago. The Labor Department said Friday that output decreased 38.9%, also the biggest decline ever recorded as hours worked fell 43%. The increase in productivity was the largest since 2009. Labor costs also jumped, rising 12.2%.
Consumer Confidence Was Stable
Consumer sentiment in the U.S. remained almost flat in August, according to a University of Michigan. The final reading of the index of consumer sentiment stood at 72.8 in August, up from July’s 72.5. Economists expected the indicator to be at 71.0.
US stocks were mixed on Thursday, as the Nasdaq rose but the Dow and S&P 500 came under pressure. This was despite Apple hitting all-time highs. Both Apple and Tesla continued to rise following news that the companies were planning a stock split. The addition of companies like Robin Hood that allow retail investors to trade partial shares has led to enhanced volumes in the retail trading space. Most sectors in the S&P 500 index were lower on Thursday, led down by the Energy sector, Communications bucked the trend. US Jobless claims rose less than expected, which helped buoy US yields. US import prices came in stronger than expected which is the 3rd gauge released this week that showed stronger than expected price pressures. The VIX volatility index moved sideways rising slightly to 22.5 and remains well above the 2019 average near 14.
US Jobless Claims Increase Less than Expected
US jobless claims rose less than 1 million for the first time since March 21 in a sign that the labor market is continuing its recovery. The total claims of 963,000 for the week ended August 8 were well below the estimate of 1.1 million expected. That represented a decline of 228,000 from the previous week’s total. Jobless claims had totaled above 1 million for 20 consecutive weeks. The last time the total was below that number was March 14, with 282,000, just as the pandemic declaration first hit. Continuing claims, which reflect the total number of claims that are longer than 2-weeks, totaled 15.5 million, down more than 600,000.
US Import Prices Rose More than Expected
U.S. import prices rose 0.7% in July, according to the Labor Department. The increase in import prices over the past three months is the largest since 2011. Despite this advance, import prices declined 3.3% over the past year. The gain in July was led by fuel prices, which rose 6.9% in July. Import prices excluding fuels rose 0.2% in July. Export prices rose 0.8% in July and are down 4.4% over the past year.
US stocks moved higher on Wednesday as the Nasdaq rebounded sharply and the S&P 500 closed just shy of an all-time high. The large-cap index has now rebounded 50% since hitting a low in March. Most sectors in the S&P 500 index were higher led by gains in Utilities and Consumer Staples. Financials, bucked the trend. The US 10-year yield continued to edge higher while the dollar resumed its downtrend. Oil prices rallied following a larger than anticipated draw in crude oil inventories and a drop in US production by 300-thousand barrels per week. The US consumer price index jumped by 0.6% matching the June rise. TSA traffic jumped to 700-thousand this week, up from approximately 200-thousand in April, but still down nearly 75% year over year. The VIX volatility index declined below 22, matching the lowest close in the volatility index since February.
Crude Inventories Draw More than Expected
US crude oil inventories decreased by 4.5 million barrels from the previous week. This compared to the expectation that they would decline by 1-million barrels. At 514.1 million barrels, crude oil inventories are about 15% above the five year average for this time of year. Gasoline inventories decreased by 0.7 million barrels last week and are about 8% above the five year average for this time of year. Total commercial petroleum inventories decreased last week by 6.2 million barrels.
The Consumer Price Index Rose More than Expected
The US consumer price index rose by 0.6% rise in June, matching the increase seen in May. The uptick was about twice what economists expected. The increase was drive by a rise in gasoline prices. Gasoline prices rose 5.3% from June to July but are down 20.3% on a year over year basis. Food prices dipped 0.4%, the first drop since April 2019. Grocery prices dropped 1.1% while the cost of dining out rose 0.5%. Excluding volatile food and energy prices, CPI surged 0.6% last month from June, which was the biggest monthly increase since January 1991. Still, core inflation is only up 1.6% from a year earlier.
US stocks were lower on Tuesday as the rotation into value stocks saw the Nasdaq sell-off. The S&P 500 index hit an intra-day all-time high, before turning lower later in the session. US yields moved higher with the 10-year hitting 64-basis points up 6-basis points reaching the highest levels seen since early July. The rise in yields weighed on precious metals knocking silver down 12% and gold prices down 5%. As the large cap S&P 500 index testes all-time highs, nearly 62% of the stocks in the S&P 500 index are at all-time highs. This compares to January when nearly 87% of the stocks in the index were at all-time highs. This means that the rally in the S&P 500 has come mainly with help from growth stocks and value has trailed.
Sectors in the S&P 500 index were mixed, with Financials leading the way higher, and Utilities bucking the trend. Oil prices attempted to move higher early in the session but were rejected and closed lower. The VIX volatility index hit 20% for the first time since February but rebounded to close above 22. While these levels are the lowest in 5-months they are still well above the average level of 15 seen in 2019. US PPI rose more than expected driven higher by gains in gasoline.
US PPI Rises More than Expected
The Labor Department reported that the producer price index increased 0.6%, driven by a surge in gasoline. That was the biggest gain since October 2018 and followed a 0.2% decline in June. On a year over year basis, the PPI dropped 0.4% after falling 0.8% in the 12 months through June. Expectations were for PPI to rise by 0.3% in July. Excluding the volatile food, producer prices increased 0.3% last month after a similar rise in June. On a year over year basis, core PPI edged up 0.1%.
Airbnb Plans to File for an IPO
Airbnb Inc. is close to filing for an initial public offering. The company plans to file IPO paperwork with the Securities and Exchange Commission in August, laying the groundwork for a potential listing before the end of the year. Morgan Stanley has been tapped to lead the offering, with Goldman Sachs Group Inc. also playing a key role.
US stocks were mixed on Monday as the Dow Industrials rallied along with the S&P 500 index but the Nasdaq bucked the trend. Better than expected inflation figures out of China on Monday helped lift the industrial stocks. The sectors in the S&P 500 index were mixed on Monday, led higher by solid gains in energy. Technology shares bucked the trend. Marriot posted a larger than expected loss weighs on the hospitality sector. The Tiger 21 Poll, which are investors larger than 10-million show many are sitting on cash as well as alternative assets, such as private equity, hedge funds, and real estate, along with gold. Airline shares surged higher on Monday as federal data showed air travel at the highest volume in nearly five months.
Airlines Share Rallied
Better than expected number from the TSA helped buoy airline shares. The number of people passing through Transportation Security Administration checkpoints at U.S. airports rose for a second consecutive week with 831,789 people on Sunday alone, its highest level since March 17. At the lows, in April the TSA number was down to 200K. Despite the uptick, TSA traffic is still down by about 70% from the same time a year ago.
Marriot Misses on the Top and Bottom Line
Marriott reported worse than expected financial results. The company posted a second-quarter loss of $234 million, or 72 cents a share, compared with a profit of $232 million, or 69 cents a share, in the same quarter last year. During the Q2 adjusted losses were 64 cents a share, wider than the 41 cents a share expected. The company incurred impairment charges and bad-debt expenses due to Covid-19 that hurt reported and adjusted losses by $61 million and $54 million, respectively, after taxes.
US Stocks moved higher on Wednesday led by strong gains in the Dow Industrials and the Russel 2000. Most sectors in the S&P 500 were higher, led by financials and Industrials, while Utilities bucked the trend. Weaker than expected US private payrolls, failed to weight on US yields, while the dollar continued to trend lower buoying the commodity complex. The US trade deficit narrowed, as both exports and imports rose more than expected. The VIX volatility index continued to trend lower, declining down to 23. While this level hits a new closing low since February, its still well above the 2019 average of 14.
US Private Payrolls Rise Less than Expected
US private payrolls increasing by just 167,000, according to a report released on Wednesday by ADP and Macro-Economic Advisors. This was below 1 million expected. Businesses with between 50 and 499 employees reported an outright decline of 25,000. Big business brought back 129,000 jobs while firms with fewer than 50 workers added just 63,000. All but 1,000 of the jobs came from the services sector, as professional and business services led with 58,000. Education and health services added 46,000 and trade, transportation and utilities contributed 41,000. On the goods-producing side, manufacturing added 10,000, but construction lost 8,000, and mining and natural resources fell by 1,000.
The Trade Deficit Narrowed
The US Commerce Department reported that the gap between the value of what the United States buys and what it sells abroad fell 7.5% to $50.7 billion in June from $54.8 billion in May. Exports shot up an unprecedented 9.4% to $158.3 billion. Imports rose 4.7% to $208.9 billion. This compared to June 2019, total U.S. trade when the combination of exports and imports plunged 21.9% to $367.2 billion.