Dow rose 107, advancers over decliners better than 3-2 & NAZ crawled up 4. The MLP index gained 3+ to the 226s & the REIT index was fractionally higher to the 399s. Junk bond funds fluctuated & Treasuries remained in demand. Oil added 1+ to the 56s & gold retreated 4 to 1547 on profit taking.
AMJ (Alerian MLP Index tracking fund)
The rate on the benchmark 30-year Treasury bond sank to a new all-time low while the US yield curve inverted even further as fixed-income traders continue to bet on tepid inflation & slower growth around the world. The 30-year bond yield dropped to as low as 1.907%, breaking its prior all-time low of 1.916% clinched earlier in Aug. The 30-year rate later moved off those lows to trade at 1.916%, still below yields on US debt of far shorter duration such as 3-month & 1-month bills. The yield curve inversion, meanwhile, continued to worsen. The yield on the benchmark 10-year Treasury slumped further below that of the 2-year note — at 1.454% & 1.5%, respectively — after closing inverted for the 2nd day in a row yesterday. Yields fall as prices rise. Bond traders consider a 10-year rate below the 2-year yield an notable recession signal, marking an unusual phenomenon as bondholders receive better compensation in the short term. Before Aug, the last inversion of this part of the yield curve began in 2005, 2 years before the financial crisis & subsequent recession. The spread between the 3-month Treasury yield & that of the 10-year note, the Federal Reserve's preferred inversion metric, sank to -54.5 basis points, its lowest level since before the financial crisis. Traders across the board have pointed to a deterioration in US-China trade relations as the catalyst for Aug's dramatic stock & bond moves, including a 60-basis-point drop in the 10-year Treasury rate. But notwithstanding the latest barbs between the 2 largest economies, Treasury demand remains strong & likely symptomatic of traders' belief in a larger, more malignant downturn in the global economy & a secular decline in inflation. Lukewarm inflation expectations & the Fed's perceived inability to goose prices higher have sparked a rash of Treasury buying as traders try to lock in rates they believe will exceed inflation in the long term. Investors tend to sell Treasuries when inflation is high because it erodes the purchasing power of bonds' fixed payments. The Fed tries to keep inflation around its 2% target, a pace it feels is both healthy & sustainable for the US economy. But despite historically low interest rates, price gains have remained tame. The bond market's inflation expectations are perhaps most evident in the yields on Treasury inflation-protected securities, or TIPS.
US 30-year bond yield falls to record low under 2% as global recession fears grow
Tiffany (TIF) reported quarterly earnings that easily topped expectations, but revenue fell short as protests in Hong Kong disrupted the luxury jeweler's sales & tourists spent less across the US. It also maintained its previously lowered outlook for the full year. “With the tough comparison to last year’s strong performance in the first half behind us, and in spite of the headwinds of weak demand from foreign tourists, currency exchange rate pressures and continuing business disruptions in Hong Kong, we are actively managing what is in our control and positioning our brand to win,” CEO Alessandro Bogliolo said. Bogliolo said that TIF lost 6 selling days in Hong Kong, its 4th largest market, during Q2 because of the protests. Management also said that if the situation worsens, full-year sales results could fall closer to the lower end of its current forecast. EPS was $1.12, compared with $1.17 a year earlier. That was beat expectations for $1.04. Sales fell to $1.05 B from $1.08B a year ago, short of expectations for $1.06B. Sales at stores worldwide operating for at least 12 months were down 4%. Excluding the impacts from currency exchange rates, they were down 3% during the qtr. That was worse than an expected drop of 1.3%. Same-store sales in the US were down 4% on a constant-currency basis, while analysts had been calling for a drop of 1.7%. In the Asia-Pacific region, same-stores sales were up 1%, better than an expected drop of 0.2%. TIF said it had “strong growth” in mainland China but “softness” in Hong Kong. Earlier this year, TIF trimmed its full-year outlook, citing the impact it will face due to increased tariffs. It also has blamed a strong $ & lower spending by tourists as hampering recent results. For its fiscal year ending Jan 31, 2020, TIF is still calling for net sales globally to increase by a low-single-digit percentage, & for EPS to increase by a low-to-mid-single-digit percentage. The stock rose 2.92.
If you would like to learn more about TIF, click on this link:
club.ino.com/trend/analysis/stock/TIF?a_aid=CD3289&a_bid=6ae5b6f7
Tiffany revenue falls, hurt by Hong Kong unrest, and sales could be hit harder if protests continue
Stocks are back to meandering with a slight bias to the upside. Until there is dramatic new news, this could put the pattern for the rest of this week.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 56.31 | +1.38 | +2.5% |
| GC=F | Gold | 1,546.80 | -5.00 | -0.3% |
Despite pockets of global weakness, the Trump economy will remain strong thru 2020 & beyond. The economy continues to be lifted by corp tax cuts that are inducing investment, deregulation & cheap energy.
These positive developments are enhancing global competitiveness &
tough trade reforms that are leveling the playing field for American
workers & manufacturers. On
the wings of such growth-inducing policies, the Trump economy has
created over 6M jobs, including about 500K in manufacturing. Unemployment rates for blacks, Hispanics, women & veterans hover
near historic lows. Wages are rising, particularly for blue-collar
workers. Over 1M prime-age workers have returned to the labor
force & strong consumer spending above expectations points to solid Q3 growth. This bullish performance notwithstanding,
the difference between a good Trump economy & a great one thru 2020
will ultimately hinge on a set of actors outside direct White House
control. Key among them are Congress, the Federal Reserve Board, the ECB & the govs of Britain, Germany &
China. According to the independent US Intl Trade Commission,
Congress can increase GDP growth by as much as 1.2% by swiftly passing the US-Mexico-Canada trade
agreement. USMCA would create over 100K jobs while helping to
reshore the US manufacturing base thru tough rules of origin,
strong labor & environmental protections, & clear enforcement
provisions. Pres Trump has kept his promise to renegotiate one of the worst
trade deals in American history. We are confident that Congress will
rise above partisan politics & do what’s right for America's farmers,
ranchers, manufacturers & workers & approve the trade agreement. The
Federal Reserve can contribute as much as a point of additional GDP
growth in 2020 by promptly & aggressively lowering interest rates.
This is necessary not because the Trump economy is weak, but rather
because it has plenty of room to grow without triggering inflation. With
an initial 25 basis point cut in Jul, an early end to balance sheet
normalization & the likelihood of more rate cuts to come, the Fed
seems to have reconsidered its growth message. The ECB likewise seems to have gotten the message that the European
economy is underperforming. Finland's Olli Rehn, who sits on the ECB's
rate-setting committee, has clearly signaled an aggressive monetary
stimulus package for Sep. As this new ECB stimulus bolsters
economic activity in Europe, it should ripple thru to the Trump
economy by fueling demand for US exports – but only if the Federal
Reserve matches any ECB cuts. Otherwise, upward pressure on the $ from the ECB rate cuts will dampen demand for American exports. In summary, the Trump economy is strong. It will be even stronger if
Congress, the Fed, the ECB, Britain, & Germany all implement
commonsense policies.
Peter Navarro: Trump economy will stay strong – New trade pact and interest rate cut would make it stronger
The rate on the benchmark 30-year Treasury bond sank to a new all-time low while the US yield curve inverted even further as fixed-income traders continue to bet on tepid inflation & slower growth around the world. The 30-year bond yield dropped to as low as 1.907%, breaking its prior all-time low of 1.916% clinched earlier in Aug. The 30-year rate later moved off those lows to trade at 1.916%, still below yields on US debt of far shorter duration such as 3-month & 1-month bills. The yield curve inversion, meanwhile, continued to worsen. The yield on the benchmark 10-year Treasury slumped further below that of the 2-year note — at 1.454% & 1.5%, respectively — after closing inverted for the 2nd day in a row yesterday. Yields fall as prices rise. Bond traders consider a 10-year rate below the 2-year yield an notable recession signal, marking an unusual phenomenon as bondholders receive better compensation in the short term. Before Aug, the last inversion of this part of the yield curve began in 2005, 2 years before the financial crisis & subsequent recession. The spread between the 3-month Treasury yield & that of the 10-year note, the Federal Reserve's preferred inversion metric, sank to -54.5 basis points, its lowest level since before the financial crisis. Traders across the board have pointed to a deterioration in US-China trade relations as the catalyst for Aug's dramatic stock & bond moves, including a 60-basis-point drop in the 10-year Treasury rate. But notwithstanding the latest barbs between the 2 largest economies, Treasury demand remains strong & likely symptomatic of traders' belief in a larger, more malignant downturn in the global economy & a secular decline in inflation. Lukewarm inflation expectations & the Fed's perceived inability to goose prices higher have sparked a rash of Treasury buying as traders try to lock in rates they believe will exceed inflation in the long term. Investors tend to sell Treasuries when inflation is high because it erodes the purchasing power of bonds' fixed payments. The Fed tries to keep inflation around its 2% target, a pace it feels is both healthy & sustainable for the US economy. But despite historically low interest rates, price gains have remained tame. The bond market's inflation expectations are perhaps most evident in the yields on Treasury inflation-protected securities, or TIPS.
US 30-year bond yield falls to record low under 2% as global recession fears grow
Tiffany (TIF) reported quarterly earnings that easily topped expectations, but revenue fell short as protests in Hong Kong disrupted the luxury jeweler's sales & tourists spent less across the US. It also maintained its previously lowered outlook for the full year. “With the tough comparison to last year’s strong performance in the first half behind us, and in spite of the headwinds of weak demand from foreign tourists, currency exchange rate pressures and continuing business disruptions in Hong Kong, we are actively managing what is in our control and positioning our brand to win,” CEO Alessandro Bogliolo said. Bogliolo said that TIF lost 6 selling days in Hong Kong, its 4th largest market, during Q2 because of the protests. Management also said that if the situation worsens, full-year sales results could fall closer to the lower end of its current forecast. EPS was $1.12, compared with $1.17 a year earlier. That was beat expectations for $1.04. Sales fell to $1.05 B from $1.08B a year ago, short of expectations for $1.06B. Sales at stores worldwide operating for at least 12 months were down 4%. Excluding the impacts from currency exchange rates, they were down 3% during the qtr. That was worse than an expected drop of 1.3%. Same-store sales in the US were down 4% on a constant-currency basis, while analysts had been calling for a drop of 1.7%. In the Asia-Pacific region, same-stores sales were up 1%, better than an expected drop of 0.2%. TIF said it had “strong growth” in mainland China but “softness” in Hong Kong. Earlier this year, TIF trimmed its full-year outlook, citing the impact it will face due to increased tariffs. It also has blamed a strong $ & lower spending by tourists as hampering recent results. For its fiscal year ending Jan 31, 2020, TIF is still calling for net sales globally to increase by a low-single-digit percentage, & for EPS to increase by a low-to-mid-single-digit percentage. The stock rose 2.92.
If you would like to learn more about TIF, click on this link:
club.ino.com/trend/analysis/stock/TIF?a_aid=CD3289&a_bid=6ae5b6f7
Tiffany revenue falls, hurt by Hong Kong unrest, and sales could be hit harder if protests continue
Stocks are back to meandering with a slight bias to the upside. Until there is dramatic new news, this could put the pattern for the rest of this week.
Dow Jones Industrials
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