Archive for August, 2020
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Jobless Claims Drop Below One Million
Eddy Elfenbein, August 13th, 2020 at 11:35 amThis morning’s jobless claims report fell to 963,000. This is the first time in 20 weeks that it was below one million. Economists had been expecting 1.1 million.
While the sub-1 million reading marks a milestone, there’s still plenty of work to do for the job market to get back to normal. Those collecting benefits for at least two weeks, known as continuing claims, totaled nearly 15.5 million, a decrease of 604,000 from a week ago but still well above pre-pandemic levels.
“The labor market continues to improve, but unemployment remains a huge problem for the U.S. economy,” wrote Gus Faucher, chief economist at PNC Financial Services. “The number of people filing for unemployment insurance, both regular and PUA benefits, continues to steadily decline as layoffs abate. But job losses remain extremely elevated, far above their pre-pandemic level.”
Yesterday, the S&P 500 got as high as 3,387.89, which was above the highest all-time closing number for the index. However, by the closing bell, the S&P 500 came just shy of a new record. The market is mostly flat so far today.
One quick factoid: Industrial stocks (red) have slightly edged out tech stocks (blue) over the past several weeks. I would not have guessed that.
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Morning News: August 13, 2020
Eddy Elfenbein, August 13th, 2020 at 7:04 amA Collapsing Economy And A Family Feud Pile Pressure on Syria’s Assad
In China, Fears of Financial Iron Curtain As U.S. Tensions Rise
Trump, Pelosi Make Opposing Economic Bets in Stimulus Standoff
A $2 Trillion Credit Boom Leaves America’s Smaller Firms Behind
Google, Facebook and Others Broaden Group to Secure U.S. Election
Postponed College Football Games Could Disrupt $1 Billion in TV Ads
Apple Readies ‘Apple One’ Subscription Bundles to Boost Services
Staffing Woes Put U.S. Car Industry’s Remarkable Rebound at Risk
REI Built an Elaborate HQ. Because of Covid-19, the Outdoor Retailer Wants to Sell It
Norwegian Taxis, Wirelessly Charging While They Wait For A Fare
Bankrupt Brooks Brothers Finds a Buyer
Cullen Roche: Three Things I Think I Think – Moar Stuff
Jeff Miller: Investing for the Long Run: The Challenge of a Bifurcated Market
Joshua Brown: Shade of the Week & Talent
Howard Lindzon: Delay The A – William Libby Of Upper 90 Joins Me On Panic With Friends
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The Stock Market and 30-Year TIPs Yields
Eddy Elfenbein, August 12th, 2020 at 9:29 pmHere’s an update to some studies I’ve done before. I like to see how well the stock market has performed at different levels of interest rates. I’ve also done It for TIPs yields, which are inflation-protected Treasury bonds.
The problem with TIPs is that the data doesn’t go back very far. What data we do have gives us a clear picture that stocks have done better when TIPs yields are lower. This makes sense so it’s good to see the numbers bear it out.
At the St. Louis Fed’s database, they have TIPs yields data for the five-, seven-, 10- and 20-year Treasuries going back over 16 years.
However, the one I wanted to test was the 30-year. That data only starts in February 2010. I ran the numbers and compared the 30-year TIPs to the stock market. I used the Wilshire 5000 Total Return index for stocks.
As it turns out, 1% is a nice dividing line. Since 2010, the 30-year TIPs yield has been 1.00% or higher, 42% of the time. It’s been 0.99% or lower, 58% of the time.
When the 30-year TIPs yield is 1.00% or more, the stock market has averaged an annual return of 3.02%. That’s probably less than how well TIPs performed. In other words, cash was king.
But when the 30-year TIPs yield was 0.99% or less, the stock market averaged an annual return of 22.01%. That’s quite a spread.
For context, the 30-year TIPs yield has been below 1% continuously for the last 16 months. It recently struck an all-time low of -0.46%. It’s now up to -0.37%.
This relationship seems quite obvious to me. I suspect this comparison will become more popular as we get more TIPs data.
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Strongest Core Inflation in 30 Years
Eddy Elfenbein, August 12th, 2020 at 10:30 am
This morning’s CPI report showed that consumer prices increased by 0.6% last months. That’s on top of a 0.6% increase in June. Wall Street had been expecting an increase of 0.3% for July. The increase for July was the strongest in 11 years.
The “core rate,” which excludes volatile food and energy prices, also rose by 0.6%. That’s the largest increase since January 1991.
A few news items. AFLAC (AFL) increased its buyback authorization by 100 million shares. That’s on top of the previous authorization which was down to 21.9 million shares.
Hormel Foods (HRL) said it will release its earnings before the market opens on August 25. The stock is at a new high today along with FactSet (FDS), Stepan (SCL) and Sherwin-Williams (SHW).
Here’s a Bloomberg article on Disney’s (DIS) new CEO.
Intercontinental Exchange (ICE) said last week that it will buy Ellie Mae, a mortgage services provider, for $11 billion.
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Morning News: August 12, 2020
Eddy Elfenbein, August 12th, 2020 at 7:03 amUK Enters Recession After GDP Plunged By A Record 20.4% In The Second Quarter
Gold’s Wild Ride Continues as Prices Bounce Back
Trump Pledges Big Tax Cuts That May End Up Nowhere as Stimulus
Investors Revalue Chinese Tech Giants After U.S. Ban
U.S. Ban On TikTok Could Cut It Off From App Stores, Advertisers
Disney’s CEO Is Scrapping Once-Sacred Businesses
Tesla Splits Stock to Make Lofty Shares Attainable Again
In Victory for Qualcomm, Appeals Court Throws Out Antitrust Ruling
Games Help Tencent Smash Second-Quarter Earnings Expectations As Potential WeChat Ban Looms
Coronavirus Tests the Leadership Style of Goldman Sachs’s C.E.O.
Kodak Raised Spending On Lobbying Government In Months Before Loan Awarded
Six Things You’re Doing Wrong When Buying Stocks On Your Own
Ben Carlson: The Pros and Cons of Miniscule Savings Account Yields
Nick Maggiulli: The Definitive Guide to the All Weather Portfolio
Joshua Brown: Nasdaq Is The New S&P 500
Michael Batnick: The Investor’s Dilemma
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Broadridge Beats Earnings and Hikes Dividend
Eddy Elfenbein, August 11th, 2020 at 11:29 amThis morning, Broadridge Financial Solutions (BR) released a solid earnings report. For its fiscal Q4, BR’s earnings rose 25% to $2.15 per share which beat estimates by six cents per share. Recurring revenue, which is a key stat for them, rose 14% to $930 million.
Let’s look at guidance. For the new fiscal year, which ends on June 30, Broadridge expects earnings growth of 4% to 10%. Since the company made $5.03 per share last year, that implies earnings this year between $5.23 and $5.53 per share. Wall Street had been expecting $5.44 per share.
The company also increased its quarterly dividend from 54 cents to 57.5 cents per share. That’s a 6.5% increase. This is BR’s 14th consecutive annual dividend increase.
The stock has been up as much as 5.8% today and it reached a new 52-week high.
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Q2 2020 Earnings Calendar
Eddy Elfenbein, August 11th, 2020 at 8:05 amTwenty-two of our 25 Buy List stocks have reported their Q2 earnings during this earnings season. Here’s a list of reporting dates, Wall Street’s consensus estimates and actual reported results.
Eddy Elfenbein is a Washington, DC-based speaker, portfolio manager and editor of the blog Crossing Wall Street. His