Popping Bottles

Popping bottles.  Stocks propelled to new all time highs yesterday riding a positive wave of earnings. The S&P landed back on top with a record high close as earnings exceeded a low bar for expectations.

WHAT YOU NEED TO KNOW:

1)  The S&P500 closed at an all time high 145 days after its last record high.  Investors have the Fed and the diminishing threat of the US-China trade war to thank for the index’s meteoric rise.

2)  US-Chinese negotiations continue to progress.  WHILE YOU SLEPT it was reported that a tanker full of US crude oil is awaiting release in the Chinese port of Qingdau.  This would represent positive movement as US crude has been avoided by the Chinese over the past several months.  US negotiators are heading to China to resume talks next week and Chinese Vice Premier Liu will be back in the US in the second week of May.

3)  Sell in May and go away.  The old Wall Street rhyme may actually have some credibility when markets behave as they have so far this year.  A Bloomberg study showed that when the S&P 500 grew more than +15% through the end of April, it significantly underperformed in the remaining 8 months.  A performance of +13% to +15% in the first 4 month’s has historically led to similar or greater returns. The S&P 500 is up +17% this year so far.

THE MARKETS:

The news is out, the S&P hit a new all time high close yesterday as traders rewarded earnings beaters with applause and a dash of exuberance.  While it is true that reporting companies are beating estimates at a greater percentage than in Q4, earnings growth is still declining.  As reported here often, earnings beats are easily orchestrated by companies’ setting low expectations with investors.  So beating expectations is good, but in a slowing growth environment, earnings need to be more carefully scrutinized.  All equity indexes were up in yesterday’s session as the S&P 500 surged by +0.88%, the Dow Jones Industrial Average climbed by +0.55%, the RUSSELL 2000 traded up by +1.61% (now back above its 200 day moving average trend-line), and the NASDAQ 100 bumped up by +1.26%.  Bonds traded up in yesterday session as well with the ten year treasury yield ending the session down by -3 basis at 2.53%.  The front end of the yield curve continues to undulate and remains inverted in some places, but the most highly watched metrics: 2 year/10 year and 3 month/ten year still remain positive.  With markets hitting new highs and notable IPO’s of tech unicorns Lyft, Zoom Video, and Pinterest (only one which is slightly profitable) one can’t help but recall the exuberance that drove the markets from boom to bust in the 80’s and late 90’s.  Of the three recent unicorn IPO’s Zoom (ZM) and Pinterest (PINS) are holding their own above their IPO price, while Lyft (LYFT) continues to trade below its IPO price.  Following on last week’s geek-out topic of IPO’s ( https://www.siebertnet.com/blog/wp-content/uploads/2019/04/geek-out-topic-Initial-Public-Offerings.pdf ), I thought that this week I would cover Unicorns and Venture Capital Investing in the attached geek-out PDF.

WHAT TO LOOK FOR TODAY:

This morning we will get weekly Initial Jobless Claims which are expected to be 200k versus last weeks record 192k.  Also this morning we will get a preliminary read on March Durable Goods Orders which is expected to show a growth of +0.8% versus last month’s decline of -1.6%.  We will get a number of earnings reports before the open which include Caterpillar, AT&T, Biogen, General Dynamics, and Boeing.  After the market we will hear from Microsoft, Facebook, Tesla, Paypal, Visa, and Chipotle, amongst others.  The treasury will auction $20 million 2 year notes and $41 billion 5 year notes.

daily chartbook 2019-04-24

geek out topic – Unicorns and Venture Capital Investing