Stand Still

Stand still.  Yesterday, stocks finished mostly unchanged as traders awaited the start of earnings season.  Equities could not muster enough energy to make any large moves in absence of any new stimulants.

WHAT YOU NEED TO KNOW:

1)  Wholesale prices ticked up in March.  Yesterday’s Producer Price Index showed that prices at the wholesale level grew by +0.6% month over month versus the +0.1% growth in February.  The uptick led to a year over year growth of +2.2% beating estimates.  Excluding volatile food and energy, the PPI came in at +2.4% year over year, down slightly from the prior month’s figure of +2.5%.

2)  Ride sharing is in the news again.  WHILE YOU COMMUTED HOME, Uber made public its filing for an initial public offering after yesterday’s close.  While the filing itself was largely expected, the details of the private company provides the first glimpse into Uber's profitability… or unprofitability as it turns out.  Meanwhile shares of competitor Lyft had its first mildly positive day after slipping more than -18% in the prior 3 sessions.

3)  The hunt for yield is real, and it’s scary.  Greece, the EU’s most indebted member continues to require special treatment from the European central bank in order to get back on financial track which should, in theory, make Greek sovereign bonds somewhat risky.  Riskier bonds usually provide higher yields to compensate investors for the risk… except in the current yield-starved environment.  News of central bank support caused a rally in Greek bonds pushing yields in 5 year maturities below that of US Government 5 year treasuries.  Seems like someone is getting it wrong, although it is not yet clear which one.

THE MARKETS:

Watching equities trade in yesterday’s session was akin to watching a snail race as equities ticked up and down in a news vacuum.  Even the lowest weekly unemployment claims number in over a half century couldn’t spark a sustainable rally.  Weekly new claims for unemployment came in at +193k, which is the lowest number since 1961.  This is a good sign that the economy is still in growth mode because more jobs means more money spent on goods and services.  The downside is that low unemployment ultimately drives up wages and prices.  Brexit is delayed, a US Chinese deal seems imminent, prices are under control, and the Fed is still on hold - all factored into the market.  In yesterday’s mixed close the S&P500 traded up by +0.004% (yes that is 4 one-thousands of a percent, which is flat), the Dow Jones Industrial Average slipped by -0.05%, the small cap Russell 2000 traded off by -0.15%, and the NASDAQ 100 ticked down by -0.22%.  Bonds dipped slightly as the 10 year treasury yield added 3 basis points closing at 2.49% and the 3 month / 10 year yield curve is just under +7 basis, which is really flat but positive.

WHAT TO LOOK FOR TODAY:

This morning, The University of Michigan will publish its sentiment indicator and it is expected to come in at 98.2 down slightly from the last read of 98.4.  To learn more about sentiment indicators you can read my note on the subject here: https://www.siebertnet.com/blog/index.php/2019/01/30/they-earned-it/ .  The big news of the day will be the pre opening earnings releases by JP Morgan Chase and Wells Fargo marking the official start of first quarter earnings season.  JP Morgan is expected to post a profit of $2.353/share and Wells Fargo is expected to have profited by $1.092/share.  Beyond the numbers, investors will be interested to hear forward guidance and the banks’ views of the near-term economy.  Next week we get industrial production, retail sales, some PMI numbers, and some fresh housing numbers amongst others.  Also up next week: lots of earnings to consider.  Have a great weekend.

daily chartbook 2019-04-12