Stocks posted moderate gains yesterday with no economic news and positive vibes from the Fed and lawmakers. The head-scratching continued over Apple's expensive, electrified ski goggles, and investors remained on the fence.
Their trouble is our trouble. It’s early and I am frantically scrolling through the articles and charts I curated this morning, beginning WHEN IT WAS STILL DARK. It is now light out, but here in the New York area the morning haze has taken on a completely different quality. There appears to be a blueish-beige hue in the air. Now I know that is not a real color, but seriously, that is what it appears to be. I opened my patio door to check on my beloved beach grass (which is not really beach grass, but rather Miscanthus Sinensis, morning light silvergrass, which reminds us of the beach), and I am inundated with the smell of smoke. I checked my barbecue to make sure I remembered to turn it off from last night’s supper. It was off, so I breathed a sigh of relief and coughed. It was then that I remembered that what I was witnessing was smoke from wildfires… in Canada. I grabbed a glass of water and headed back to my office to continue my morning note. As I climbed the steps, I thought how much something from so far away could have such an impact on us.
I know better, though. We are all connected by nature, by the Internet… and by trade. That’s right, trade. There was lots of news about individual stocks yesterday. Apple topped the list with its newfangled, shiny, $3500, augmented reality headset which we will all… someday NEED. There were many reports of the SEC cracking down on some notable Crypto brokers. There was something or another worth noting that according to the Taylor Rule, interest rates should be higher. Oh, and some sort of mega merger between the PGA and the much-chided, Saudi-backed, super-golf upstart, which I suppose might be interesting to someone… somewhere. Then it came to me. I saw it. It wasn’t even an article, but just a few lines reporting Chinese exports. Chinese exports, as reported by the Customs General Administration of the People’s Republic of China, fell by -7.5%, far more than expected. China has been in recovery mode since it lifted pandemic restrictions a few months ago, and the world of all-things-industrial (crude, steel, industrial metals, heavy machinery, etc.) is hopeful for that recovery. China, being a net exporter, is heavily reliant of foreign trade to power its economy, so a decline in exports is not good news. But there is something else.
The US is heavily reliant on imports from China. Historically, when the US economy is strong and consumers are confident, our trade deficit with China, indeed all our trade partners, widens. The opposite occurs when US industry and consumers are pulling back. That does fit into the narrative that purchasing managers in the US are scaling back orders from Chinese manufacturers and it is consistent with not only the nationwide PMIs, but also the regional Fed statistics which show a limping manufacturing sector. I don’t often report on economic numbers released by the Chinese Government, but this one is, indeed, notable. More reminders, along with the fact that my cherished window-view of my garden looks like a sepia photograph, that our trouble can be their trouble in this case.
WHAT’S SHAKIN’ THIS MORNIN’
Netflix Inc (NFLX) shares are higher by +2.93% after Wells Fargo raised its price target by +25% for the company. The company’s forward PE of 35.57x is higher than the 24.53x median of its peers. Potential average analyst price target upside: -4.6%. WHY IS THIS NUMBER NEGATIVE? Because the stock is currently trading higher than median average price targets of analysts. While that can be interpreted as the stock being overpriced, it does not mean that the stock will not continue to climb as analysts, like Wells Fargo, potentially raise price targets.
Campbell Soup Co (CPB) shares are lower by -2.65% after the company announced a beat on EPS but missed revenue targets. The company reaffirmed its full-year guidance, but it was short of the consensus estimate. Dividend yield: 2.92%. Potential average analyst price target upside: +6.0%.
YESTERDAY’S MARKETS
Stocks gained yesterday on a news cycle with… very little news. The S&P500 gained +0.24%, the Dow Jones Industrial Average inched higher by +0.03%, the Nasdaq Composite Index advanced by +0.36%, and the Russell 2000 Index jumped by +2.69%. Bonds gained and 10-year Treasury Note yields slipped by -2 basis points to 3.66%. Cryptos gained +4.43% and bitcoin climbed by +5.08%. The S&P500 ESG Index traded higher by +0.01%.
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