Markets

Is California in Recession? (Part IX)

August employment figures are out. Time to re-evaluate this mid-December Political Calculations assertion that California was in recession. Going by these [household survey based labor market] measures, it would appear that recession has arrived in California, which is partially borne out by state level GDP data from the U.S. Bureau of Economic Analysis. [text as accessed on 12/27/2017] The release provides an opportunity to revisit this question (the 2018Q1 state GDP figures are discussed here). It’s (still) unlikely that a recession occurred. Figure 1: Nonfarm payroll employment in US (black), and in California (blue), both in logs, normalized to 2011M01=0. Blue arrow at timing of Political Calculations recession conjecture. Source: BLS and author’s calculations. According to my work wit...

Record high stocks face Fed rate hike, trade tensions in week ahead

The Fed is expected to announce a quarter point rate hike Wednesday, and is likely to signal another hike is coming later in the year. The Fed’s actions are unlikely to rock markets, but the focus will be on what kind of message the Fed sends and how hawkish it sounds on the economy and future rate hikes. As Joseph LaVorgna, the chief economist of the Americas at Natixis, noted, three quarters of the year are already over since the Fed put its 2018 forecast together and GDP has been faster, inflation is at or above target, and there is anecdotal evidence wage pressures are picking up. “They’re not going to do less, they’re going to do more,” he said. “The fact the equity market just hit an all time high is going to offset any concerns when it comes to ta...

Who Could’ve Known “Crash Brexit” Would Be Problematic?

In the aftermath of the Salzburg summit, where the Chequers plan was dismissed by the EU, and PM May demanded “respect”, the pound has plunged. Source: TradingEconomics.com. Deutsche Bank (Harvey, et al., “Deep impact: DB forecasts in a crash Brexit”) yesterday lays out why: In our analysis, we calculate that UK growth will be around 4% cumulatively lower than under our baseline scenario by end-2020. The UK will enter a two year recession, with output shrinking -0.3% and -0.6% in 2019 and 2020 respectively. The main contributers to the fall in demand are household consumption, which shrinks around 6% relative to our baseline, and business investment which is 13% lower than our baseline. Net trade is assumed to add a moderate boost to GDP, as while trade falls substantially, imports fall sl...

“Spreads between U.S. & Brazil Soybean Export Prices Widen to a Record”

That’s the caption to this graph: Source: Polansek/Reuters. Contrast with this comment posted yesterday: Soybeans are fungible. Actually most oilmeals are fungible. It’s a big world, and US crops will find a market.Brazil et al are not going to increase production at these price levels. Truly, the triump of faith over trade theory.

Huzzah! Three and a Half Years Late, Walker Hits His +250K Jobs Promise

As Wisconsinites will recall, as late as August 2013, Governor Walker was reiterating his promise to create 250,000 new private sector jobs by the end of his first term (January 2015). As of July 2018, Wisconsin’s private sector net job creation surpassed Walker’s promised target — a full 3.5 years late. Figure 1: Wisconsin private nonfarm payroll employment, 000’s s.a. (red), +250K by January 2015 (light gray), +250K by January 2015 trend (dark gray). Source: BLS, DWD, author’s calculations. Note that net job creation will not catch up with the trend implied by Governor Walker’s +250K by January 2015 pledge. By the way, August private NFP declined 100 — essentially flat — after July numbers were revised down by 1900. (Civilian employment, which is poorly estimated at the state level, decl...

There will soon be a new way to play FANG stocks

Starting Monday, investors who have played the momentum in FANG stocks may find some of that juice in a new communications services sector formed by S&P Dow Jones Indices. Three of the four FANG stocks will become part of the new sector, which will replace telecom, as one of the 11 major S&P industry groups. MSCI has partnered with S&P Dow Jones and is revamping global indexes to reflect the new sector. Industry groups are like a road map to the S&P 500 and stock market, and are at the core of many exchange-traded funds. They are also used by major investors as they rate sectors and designate holdings. The changes being made with the communications services sector will affect $2.8 trillion in market cap, according to CFRA. The new communications services industry will retai...

After-hours buzz: MU, UNFI & more

Check out the companies making headlines after the bell: Micron Technology shares rose more than 4 percent in after-hours trading following the release of its fourth-quarter earnings report. The semiconductor company reported earnings per share of $3.53, higher than analysts’ estimates of $3.34 per share. Revenue also beat expectations, with the company reporting $8.44 billion compared to the $8.25 billion analysts estimated. United Natural Foods stock tumbled more than 11 percent in the extended session after reporting earnings numbers for the fourth quarter that missed estimates. Earnings per share came in at 76 cents, compared to the 85 cents analysts expected. The company, which is the largest supplier to Amazon-owned Whole Foods, reported $2.59 billion in revenue versus the $2.6...

Wall Street’s crypto guru says pot stocks feel like bitcoin last year — so he’s shorting them

Former Goldman Sachs macro trader Michael Novogratz sees a lot in common with the cannabis craze and last year’s record-setting crypto gains. For that reason, he’s betting against it. “The prices of cannabis stocks today feel like bitcoin and ethereum did in December of last year,” Novogratz, a closely bitcoin evangelist, said Thursday at the Yahoo Finance All Markets Summit. This week, as pot stock Tilray jumped 50 percent, Novogratz said he “tried real hard” and found a “cool way” to short it. “The companies trade up to $28 billion on almost no revenue,” he said. “If I was long them, I’d sell them and if you’re a speculator, I’d get short them.” Bitcoin, which Novogratz has been a vocal investor in,...

Five bullish signs for stocks that could keep pushing the Dow to new highs

The Dow’s first new high since January, just as the S&P 500 scored another record, is one of a number of positive signs that the bull market still has legs and could be setting up for a breakout, technical analysts say. Stocks surged Thursday as investors pushed aside worries about trade tensions between the U.S. and China, and viewed the latest round of tariffs as less painful for the economy than expected. At the same time, there are a handful of technical signals that make strategists believe the market could be at the beginning of another push higher. Of course, there are headwinds that could disrupt this move, including the potential for more escalation in trade wars and rising interest rates. Some strategists are concerned about the divergence between the U.S. and other glo...

The Dow just triggered a chart signal that could mean ‘six to nine months of a higher stock market’

The Dow’s first new high since January, just as the S&P 500 scored another record, is one of a number of positive signs that the bull market still has legs and could be setting up for a breakout, technical analysts say. Stocks surged Thursday as investors pushed aside worries about trade tensions between the U.S. and China, and viewed the latest round of tariffs as less painful for the economy than expected. At the same time, there are a handful of technical signals that make strategists believe the market could be at the beginning of another push higher. Of course, there are headwinds that could disrupt this move, including the potential for more escalation in trade wars and rising interest rates. Some strategists are concerned about the divergence between the U.S. and other glo...

Danger Signal: Too many global currency values are falling

A review of the values of the 143 currencies, posted on Blo indicates that so far this year (to September 14), 119 have fallen in value, 11 appear to be pegged to the dollar and 13 have risen in value. Of the 13 that have increased in value only 6 are up more than 1 percent versus the dollar. There have been outsized declines in countries like Venezuela (down 99 percent), Argentina (53 percent) and Turkey (38 percent). However, Brazil is down 20 percent, Russia 15 percent, India 11 percent, Sweden 10 percent, and the Philippines 8 percent. Big economies like China are experiencing a 5 percent currency value decline while the Euro is off by 3 percent. The reason for these declines would appear to be the differing monetary policies of the United States and most of the rest of the world. The ...

Olive Garden owner’s shares jump after earnings beat, raised forecast

Darden Restaurants shares hit a 52-week high Thursday after the company posted better-than-expected fiscal first-quarter earnings, buoyed by strong sales at most of its restaurants, and a raised outlook for 2019. Darden’s shares were recently up more than 3 percent. Earlier, the stock traded as high as $124, setting a fresh high. The stock is up more than 22 percent since January. “We are pleased to report another quarter of strong results and market share gains,” Gene Lee, CEO of Darden, said in a statement. “Our competitive advantages continue to work hard for us, allowing us to invest in our people and brands to deliver exceptional guest experiences.” The restaurant group, whose eight brands include Olive Garden and LongHorn Steakhouse, said net income rose...