Market 2018-01-30 (interest rate, health insurers, and more)

The main reasons of selloff today are probably: (a) fear of high interest rate; (b) profit taking. 

 FED is holding regular meeting today and tomorrow. We will learn more tomorrow noon. Street in general is expecting 3 interest hikes in 2018. The new chairman Jerome Powell is considered dovish. However, FED is under the pressure to hike 4 times as treasury yields keep going higher (2.73% now, was below 2.1% 5 months ago). A hawkish may trigger more selloff.

 Crude oil prices sank for 2nd straight session amid today's broad selloff: March WTI -1.5% to settle at $64.5/bbl and March Brent -0.6% at $69.

 The biggest news today: Amazon/Berkshire/JPMorgan team up to form a healthcare venture, which provides health insurance to their own employees. This shocks health insurers: Cigna (CI -7.1%), UnitedHealth (UNH -4.8%), Aetna (AET, -2.9%), Anthem (ANTM -5.2%), Express Scripts (ESRX -2.8%), Humana (HUM -2.9%), and drug retailers such as CVS (-5.6%), Walgreens Boots Alliance (WBA, -5.1%). However, some analysts think the market is over-reacting. Health insurance is no easy job. The new company needs to work from state to state, and as a small player now, they may not have the leverage to negotiate with health providers to bring down the cost. Big pharma also face pressure: ABBV -5.2%, AMGN -3.4%, PFE -3.1%, LLY -1.7%, GILD -1.7%, BIIB -1.6%, CELG -1.6%, MRK -1.6%, ABT -1.4%...

 Bitcoin drops -10%, hovering around $10K. According to Bloomberg, Bitfinex and Tether last week were sent subpoenas by the CFTC (Commodity Futures Trading Commission). Both companies have the same CEO, with Bitfinex being Hong Kong's largest cryptocurrency exchange, and Tether claiming its tokens are backed with dollars on a 1:1 basis. Tether a few days ago confirmed it's broken off its relationship with its auditor. Facebook bans ads promoting cryptocurrencies, ICOs.

 More on news:

 Needham raises its Alphabet (GOOG, GOOGL, -1%) PT from $1,150 to $1,350 ahead of Thursday’s ER.

 The U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) are investigating Apple’s (AAPL) slowing of older iPhone models, according to Bloomberg sources.

 NetEase (NTES -1.2%) and Mattel (MAT -0.9%) are forming a joint venture to collaborate on digital products, focused on mobile games. The project, called Mattel163, will be divided 50-50 and develop content based on toy franchises including Barbie, Hot Wheels and Fisher-Price, and starting with a game based around Mattel's Uno card game early this year. The move might bring a digital breakthrough for Mattel after previous tries; NetEase's online game division last year drew about $5.5B in sales, more than Mattel's total revenue of $5.1B.

Winners

WYNN +4.9% bounces back after the recent selloff amid CEO scandal.

 UAL +1.8% also bounces back a little.

Losers

Chipotle (CMG -3.1%) plunges again with some reports of food poisoning making their way around.

 MCD -3% despite ER beats. Investors were expecting more share buybacks and dividend hike.

 Harley-Davidson (HOG -8.1%) slides after 2018 shipment guidance of 231K-236K fell short of the expected 240K. During the quarter retail motorcycles sales fell 11.1% in the U.S. and 11.8% in Asia Pacific. The company is closing Kansas City plant.

 Cornings (GLW -5.6%) despite ER beats, boosted by healthy Gorilla Glass. GAAP net sales +8%, by segment: Display Technologies, $745M (down 10%); Optical Communications, $928M (up 13%); Environmental Technologies, $291M (up 19%); Specialty Materials, $393M (up 17%); Life Sciences, $225M (up 9%). It starts to look attractive to me.

 AKS -13% plunges amid investor concerns that rising costs. X -6.2%, NUE -3.2%, MT -1.7%, STLD -1.1%.

 CHK (-5.3%) says it will lay off ~13% of its workforce, or ~400 workers, primarily at its Oklahoma City headquarters.

 Metlife (MET -8.6%) postpones ER amid finding a material weakness in internal controls in a review of its annuity reserves.

 TEVA -4.4% on planning to raise $5B debt.

AH Earnings

Advanced Micro Devices (AMD): Q4 EPS of $0.08 beats by $0.03. Revenue of $1.48B (+33.3% Y/Y) beats by $70M. Shares -0.4% in AH.

 ILMN beats. Q4 results: Total revenue: $659M (+25.5%); Service & other: $119M (+26.6%). non-GAAP net income: $212M (+68.3%); non-GAAP EPS: $1.44 (+69.4%); cash flow ops: $294M (+12.2%). 2018 Guidance: Revenue growth: 13-14%; non-GAAP EPS: $4.50-4.60. 

 Electronic Arts (EA) Q3 EPS of -$0.60 vs consensus of $2.19 (176M tax overhaul). Net revenue was $1.16B: digital net revenue of $780M (+14%) and packaged goods/other net revenue at $380M (-18%). Shares +6% in AH.

 Juniper Networks (JNPR): Q4 EPS of $0.53 beats by $0.01. Revenue of $1.24B (-10.8% Y/Y) beats by $10M. Shares -8% in AH amid disappointing guidance: revenues of $1.02B-$1.08B (light of expectations for $1.156B) and EPS of $0.22-$0.28 (below consensus for $0.42).

 Chubb (CB): Q4 EPS of $3.17 beats by $0.88. Net written premium of $6.5B (+1.7% Y/Y) misses by $120M.

My Trades Today


  • Sold 1/3 GME @ $17.2.
  • Added CELG, NTES, BOTZ, RUBI, FIT. Initiate AMAT @ $53.4  

Earnings Tomorrow

  • pre-market: BA, DHI, SIRI, SLAB
  • post-market: AGNC, EBAY, FB, MAA, MSFT, PYPL, QCOM, T, TSCO, X

Comments

Post a Comment

Popular posts from this blog

Wanna Retire Early, Start Planning Now!

Image
It is very important to plan your retirement  as early as possible.  Why? It is because the money you put into investment will grow fast. If you put $1k into your retirement account at age 20, it will grow into $15k when you reach age 60, assuming 7% annual return rate. As comparison, if you put $1k at age 30, it will only grow into only $7.6k, about half of the former case! One popular topic these days is to get retired early, for instance, at the age 50. Assuming the average yearly expense (including medical cost) is $100k and you live to age 90, you need at least $4M by age 50. Of course if you plan to get retired at age 60, then the retirement fund will be smaller ( $3M ). There is a new phrase " Million Dollar Poor "  ---- $1M may only support you from age 70 to 80 --- retire @ age 70 and decease @ age 80. In this article, I would like to introduce the possible stable income sources for retirement. (This is a brief introduction, for more details, p...
Read more

Impacts of Tax Reform --- My First Thoughts

Senate passed the messy tax reform bill last night. The new tax code will start in 2019 (not 2018). The next step will be negotiation between Senate and the House to put together the final bill for Trump to sign. Put aside how the tax reform will affect personal finance, one thing is for sure --- corporate tax rate will drop from 35% to 20% . Multinational companies will also bring cash back to US. Corperate Tax Rate Drop Well, many big companies have already managed to pay low tax rate, for instance, IBM pays only ~10%. You can find tax rate information in companies' ER. Therefore, not everyone benefits from the 20% tax rate. Following are a few companies who are paying tax rate > 35% (most in retailers and restaurants). Restaurant: CMG, DENN... Retailers: CVS, LVS, GPS, JWN, M... Auto retailers: AN, KMX... Healthcare: Anthem, HUM, DGX, DVA... Transportation: JBHT, LUV... Energy: COP, PSX... Industrial: GWW... Financial: SCHW, PAYX... Utility: WEC... ...
Read more

Market 2018-02-05 (WOW.... Bloody)

The quick bounce in the morning turned out to be a trap. The selloff is so violent that there are almost no survivors. The deep dip  around 3pm is especially evil. The market is definitely in panic mode. Dow -4.6% to 24,343. S&P -4.1% to 2,649. Nasdaq -3.8% to 6,967. And the selloff continues in AH. The money floods into Treasuries : 30-year +1.12%. 10-yr +0.74%. 5-yr +0.51% . 10-yr note drops from above 2.85% to 2.7% (about last Tuesday/Wednesday level). This may calm some nerve. Currently it is hard to predict how much lower indices will go. I would suggest to prepare your own shopping list and start to add positions. I am fully positioned myself. I plan to hold and wait. Commodities: Crude -2.73% to $63.66 . Gold +0.28% to $1,341.00 . Bitcoin is also facing another run of selloff as major US & UK banks ban Bitcoin credit card purchases . The lowest price today is below $6600 from coindesk. To be honest, there is no particular bad economic news today. Ins...
Read more

US Treasuries and Yields

Image
Rising Treasury Yields have been a hot topic in the past few weeks, which is blamed to be the reason behind recent  market correction. Some people are totally panicked as 10-year yield approaches 3%. I would suggest to " Keep Calm and Carry On ". In this article, I would like to give you some background, and possible trend. US Treasuries Basically US treasuries, including short-term and long-term, are the national debt of United States (国债). US currently have debt of $20T . Debt/GDP ratio is 104% in 2017 , as shown in the chart below (grey bars represent recessions). As comparison, China Debt/GDP ratio is 46% in 2016; Japan is 238% . The debt falls into two broad categories: Intragovernmental Holdings and Debt Held by the Public. Intragovernmental Holdings $5.6T, 30% of total. This is the portion of the federal debt owed to 230 other federal agencies, such as the Social Security Trust Fund. This part is not affected by market. Debt Held by the Public $1...
Read more

Market 2018-02-06 (XIV, MU, MOH, and more)

It is a choppy day. The early tradings are similar to yesterday --- opened low followed by a quick bounce. However, indices hung around afterwards and marched north around 2:30 pm. Dow +2.3% , S&P +1.7% & Nasdaq +2.1% . I think the -10% correction is over. The indices retreated back to pre-TAX-Reform level in the intraday low. However, it could remain the choppy way for near-term. Utilities has the worst performance, XLU -1.5% despite the broad market rally in late hours. Treasurys: 30-year -0.9%. 10-yr -0.6%. 5-yr -0.4% . 10-yr note stays @ 2.8%. Commodities: Crude -1.1% to $63.45. Gold -0.9% to $1,324 . The American Petroleum Institute (API) reportedly shows -1.05M barrels of crude oil for the week ending Feb. 1 vs. last week's build of +3.23M barrels. Gasoline reportedly shows -227K barrels and distillates show a build of +4.52M barrels. I think refiners face margin challenges. Yesterday, many analysts called for buying dip instead of being panic. Goldman's D...
Read more