Beat the Market

We have the afternoon sell again, which started @ 2:30pm. Indices finished Feb with red records, Dow Jones -4.3%, SP500 -3.9% and Nasdaq -1.8% . Energy and Materials Sectors lead the fall today. We cannot blame bonds today, as yields actually dropped. Crude -2.38% to $61.51 . Gold +0.02% to $1,318.80. UUP +0.3%. Best in Dow 30: UTX +0.6% ; worst in Dow 30: CAT -4.1%. News French GDP grows at 2% in 2017, best since 2011. US 2017Q4 GDP is revised down to 2.5%, vs previous estimate 2.6%. DKS (+0.7%) is going to stop selling all assault-style rifles and high-capacity magazines at its stores, also raise age-limit to 21. Winners ETSY +20.4% after strong revenue outlook. SNAP +6.1% , on a report that 397 brands such as Lyft, Pepsi, Exxon, and Olay bought video ads on Snapchat's 52 Discover channels between November of 2017 and January 2018, according to a new study by MediaRadar, an ad intelligence company. As comparison, Facebook has more than 5 million advertisers.

Market trends lower after new Fed Chair Powell addressed Congress, signaling to keep rate hike pace. Treasury yields rise. Crude -1.6% to $62.89. Gold -1.03% to $1,319.10 . UUP +0.6%. News Jared Kushner has lost access to security clearance is downgraded. Amazon (AMZN -0.6%) will buy video doorbell startup Ring for an undisclosed amount. It has added Blink (security camera) not long ago. Its smart home ambition is competing with Google Nest head-to-head. Berkshire Hathaway is eager to spend its $116B cash, one possible target is airline company. By the end of 2017, Berkshire Hathaway holds $3.12B LUV (~9% of Market Cap $35B), $2.97B DAL (~8% of Market Cap $39B). Winners BA +0.3% , locked the deal with White House on two new Air Force One planes for $3.9B. No comments. INTC +1.6%. Citi calls Intel a "top pick" with 18% upside. M +3.5% reported impressive quarter: Q4 EPS of $2.82 beats by $0.11. Revenue of $8.67B (+1.8% Y/Y) comparable sales on an owned basis

Stock market continues its rally today, lead by Tech (QQQ +1.3%). Utilities Sector is left behind again. There is no particular news. All Dow Jones (+399.28) companies finish green except KO lost $0.01/share. Nasdaq is only 1% shy from all-time high now. It may test that shortly. Commodities: Crude +0.63% to $63.95. Gold +0.35% to $1,335.00 . Treasury yields and US dollar are nearly flat. Winners There are a lot of big gainers, which I don't have to point out. Losers LIT -3.4% , as ALB -7.3%, SQM -8% . MS is forecasting lithium prices to plunge 45% by 2021. Stanley says new lithium projects and planned expansions by the largest producers in Chile “threaten to add” ~500K metric tons/year to global supply by 2025. This is ridiculous. With more wearable and electric car demand, especially in China, on top of all the inflation going on globally, it is hard to imagine lithium price crushes. I think it is buying opportunity. ULTA -4% . The stock price is -11% YTD, and down

Last week we had three weak trading sessions followed by a surprise rally on Friday. I still remain cautious --- not sure if it is a real breakout, as equity market is swung by treasury yields. Next week, earnings will focus on retailers . First the weekend news. News Mexico president shelves his plan to visit to Washington DC in March after a 50 minutes phone call with Trump on Tuesday. China's Communist Party has proposed eliminating a two-term constitutional cap on presidential terms, solidifying signs that Xi Jinping intends to stay in power indefinitely. More companies cut ties with NRA, including CB, MET, SYMC, DAL, UAL, CAR, HTZ and Enterprise Holdings. Samsung reveals galaxy S9, which is similar to S8 expect faster processor and better camera. Huawei shows MateBook X Pro with hidden camera for better privacy (maybe best in class so far), along with two pads. Berkshire Hathaway Inc. (BRK.A): Q4 Net earnings of $19,790 per class A equivalent share. Book value o

The day started with semiconductor sector ( QQQ +2% ) and energy sector ( XLE +2.2% ) rally. It turned into a broader rally in the afternoon amid no particular news. Fixed-income sector (Utilities XLU +2.6% , REITs IYR +1.7% ) has some relief after the 10-year Treasury yield dropped from 2.93% to 2.87% . Crude +1.24% to $63.55. Gold -0.14% to $1,330.90 . UUP +0.2%. The FED semi-annual report comes ahead of semi-annual Congressional testimony next week from the new Chairman Powell. There are no hints for more or less than 3 interest hikes in the report. "The labor market appears to be near or a little beyond full employment at present," say the Phillips Curvers at the central bank. Other News Microsoft and Xiaomi will collaborate on cloud, AI, and hardware. Big companies are cutting ties with NRA (National Rifle Association): Symantec, the cyber security company; Metlife; First National Bank of Omaha; Enterprise Holdings. Winners Semiconductor Sector (ETF: SOXX +2.

It is another choppy day. Dow Jones up, Nasdaq down. Leaders in Dow 30: UTX +3.3%, CAT+2.3%, MMM +1.7%.  Crude +1.52% to $62.62. Gold +0.08% to $1,333.10. UUP -0.34%. Crude oil prices are climbing after U.S. crude stockpiles fell unexpectedly by 1.61M barrels last week, compared with analyst consensus for a 1.8M barrel increase. Energy ( XLE +1.1% ) leads: CHK +21.7%, WLL +25.2%, GPOR +14%, COP +2.2%, APC +1.8%, HES +4.1%, MUR +3.7%, ETP +4.1%, RIG +3.9%, SWN +5.4%... On News Top Ford exec in North America out due to inappropriate actions. Toyota dominates Consumer Reports 2018 Top Picks for vehicles. Korean cars are also climbing up the rankings. ToysRUs may close another 200 stores, on top of the 182 annouced last year. Winners Chesapeake Energy ( CHK +21.7% ): Q4 EPS of $0.30 beats by $0.06. Revenue of $2.52B (+24.8% Y/Y) beats by $240M. Q4 production +15% Y/Y and +10% Q/Q, and oil production +11% Y/Y. CHK forecasts total 2018 production to grow +3% Y/Y, with

Market reversed the course after Fed minutes.  The Federal Reserve’s January meeting showed officials plan to keep gradually raising short-term interest rates this year. Officials believed in January that the economy was set to grow faster than when they met at the end of last year, some remain worried inflation might continue to lag below the central bank’s 2% target. There are no surprises. Wall Street just uses it as an excuse to sell. The yield on the benchmark 10-year U.S. Treasury note rose to 2.94% , a fresh four-year high, from 2.90% Tuesday. At the close, Crude -1.13% to $61.09. Gold -0.38% to $1,326.20 . UUP +0.4%. Best in Dow 30: UTX +2.2%, MCD +0.9%; worst: WMT -2.8%, HD -2%, VZ -2%. It could be buying opportunity for HD after the company reported strong earnings yesterday. Winners LZB (+9.9%) jumps after ER beats: Q3 EPS of $0.51 beats by $0.05. Revenue of $413.64M (+6.1% Y/Y) beats by $10.91M. AAP (+8.2%) also rises after ER: Q4 EPS of $0.77 beats by $

As I said yesterday, market is trying to find direction this week. Nasdaq finishes nearly flat and Dow Jones loses 254 points (-1%) , which is lagging today among indices amid Walmart ( WMT -10.2% ) reported slow online sales growth (23% vs 50% in previous quarter). Best performers in Dow 30: INTC +1.7%, MSFT +0.8%, AXP +0.4%. Tech is the only sector in green today, QQQ +0.2%. Crude +0.13% to $61.63 . Gold -1.77% to $1,332.20 . UUP +0.6%. News An unidentified hacker or hackers broke into a Tesla-owned (TSLA -0.1%) Amazon (AMZN +1.4%) cloud account and used it to “mine” cryptocurrency, security researchers said. The breach also exposed proprietary data for the electric carmaker. Alibaba ( BABA +1.9% ) buys a 15% stake in Chinese furniture chain Easyhome for $851M. General Electric ( GE -2.1% ) is exploring a sale of its industrial gas engine business, worth up to $2B Home Depot (HD -0.1%): Q4 EPS of $1.69 beats by $0.05. Revenue of $23.9B (+7.6% Y/Y) beats by $240M

The market will probably stay in tepid water next week as traders try to find the direction after recent bounce. Crude price continues to rise. News during the Weekend On Monday, Japanese Nikkei +1.9% to 22,142 amid exports grew 12.2% in January from a year earlier, marking their 14th consecutive monthly increase. The increase was led by brisk shipments of China-bound hybrid cars and electronics parts. GS pointed out during the weekend: "Federal fiscal policy is entering uncharted territory. In the past, as the economy strengthens and the debt burden increases, Congress has responded by raising taxes and cutting spending. This time around, the opposite has occurred."  Rising interest rate and debt level will lead to a meaningful increase in interest expense. On their current projections, federal interest expense will rise to 2.3% of GDP by 2021 , and 3.5% by 2027 .  It is hard to imagine what will happen when another recession hits global economy. China has th

Dow Jones and S&P 500 finished green for their 6-day winning strike . Nasdaq ( QQQ -0.4% ) is running out of gas today. Russel 2000 ( IWM +0.4% ) finally outperforms the three indices. JNJ (+1.5%), PFE (+1.5%) and UNH (+1.5%) lead Dow 30 today. CAT (-2.3%) and MCD (-1.9%) are the worst. Crude +0.57% to $61.69. Gold -0.3% to $1,351.20. Dollar bounces back ( UUP 0.7% ) after hitting 3-year low yesterday. Winners Steel ( SLX +2.7% ) and aluminum ( JJU +3.8% ) shares are rallying as the U.S. Department of Commerce recommends tariffs: X +14.8%, AKS +13.6%, MT +3.3%, NUE +4.6%, CLF +7.4%; CENX +8.4%. The DoC recommends a 7.7% tariff on all aluminum exports, with higher duties of 23.6% on products from China, Russian, Venezuela and Vietnam. The Department also recommends global steel duties of 24% on all imports, with a ~53% tariff on steel imports from Brazil, China, India, Russia and several other countries. Trump needs to decide on the proposal by April. Who will be

Market has another strong session. In the past 5-day winning streak, Indices have recovered most of the losses during the correction. Nasdaq ( QQQ, +1.8% ) is only 2% away from all-time high. Retailer investors are again in the "Fear of missing out" ( FoMO ) mode. Crude +1.57% to $61.55. Gold -0.15% to $1,356.00 . UUP -0.43%. On the News Jobless data may calm the tight labor force worries, as " 'bad' news is good news ": Initial Jobless Claims +7K at 230K vs. 229K consensus, 223K prior (revised). Continuous Claims: +15K at 1.942M vs. 1.927M prior. Treasury yields initially jumped before market open, then retreated back with little change. The average rate for 30-year home loans climbed to 4.38% . The 15-year rate averaged 3.84% . Last year at this time, the 30-year and 15-year fixed rates averaged a respective 4.15% and 3.35% . The Buffett Effect : Buffet has added stake in Teva ( TEVA +7.7% ) and Apple ( AAPL +3.4% ), sold IBM ( IBM +0.8% ). O

Today's big rally is a surprise. 10-yr treasury yield jumps to 2.913% after CPI (consumer price index) data: January CPI +0.5% vs 0.3% projected.  Excluding food and energy prices, +0.3% vs 0.2% expected.  Market was very negative in pre-market as Dow Jones dropped as much as 450 points. However, Indices have climbed higher and higher throughout the day. I guess traders are now betting on less rate hikes this year? All in a sudden, treasury yields are not an issue? I really don't have the answer. Crude +2.55% to $60.70. Gold +1.86% to $1,355.10, as dollar drops again (UUP -0.8%) . For the week, UUP has dropped from 23.6 to 23.2. The FBI, CIA and NSA say American citizens shouldn't use Huawei phones. They don't have problems with Samsung or LG... Winners Financial ( XLF +2.4% ) and Tech ( QQQ +1.9% ) lead again: FB +3.6%, NFLX +3%, AMZN +2.6%, AAPL +1.8%, GOOG +1.7%, NVDA +3.8%, LRCX +6.1%, AMAT +4.9%, SNAP +5% ... Chinese stocks perform strong afte

The market shakes off the morning weakness and finishes green. Tech, Retailers and Basic Materials lead.  Treasury yields are stable. 10-yr note 2.83% . Crude -0.17% to $59.19 . Gold +0.43% to $1,332.10 . Winners NVDA (+2%) returns to rally mode after CFO Kress said Nvidia’s data center business continues to benefit from AI growth and management is focused on a wide set of customers and uses rather than specific applications. Nvidia is well positioned to benefit from the adoption of self-driving cars. AMZN (+2%) and AAPL (+1%) contribute a lot to QQQ +0.47%. SQ +5.5%, TWTR +8%. Apple 1st shareholder meeting in its new headquarter CEO Cook says mobile payments haven't taken off like he thought they would.  Wearables are booming. Healthcare opportunities: Apple includes a health app on its iPhones, and it plans to introduce a new Health Records update to iOS to let you store your medical records. Apple spent $12 billion last year on R&D. This year budget will

Market continues its bounce following last Friday. All three indices finish with more than +1.4% gain. Tech, Energy and Materials lead the rally. Commodities: Crude +0.2% to $59.3. Gold +0.7% to $1,324.70. News Some data from last week: investors pulled a record $23.6B from the SPDR S&P 500 ETF ( SPY ), according to Bloomberg. SPY is the most popular SP500 ETF. That's a 8% of the total assets from the beginning of the week. It should be considered bullish because the selling pressure is much less after loose hands got off table. Disney (DIS +0.3%) raises theme park ticket price . In other news, Alibaba (BABA +0.4%) has signed a deal to offer Disney shows on its Youku video streaming platform. Airbus has halted all deliveries of its Pratt & Whitney-powered (UTX) A320neo after the latest disclosure in a series of flaws with the next-generation engine, according to IndiGo, the company's biggest customer for the aircraft. Nevertheless, UTX gains +1.9% today alon

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

Market bounces back in a choppy way (W shape). All three indices finishes strong today after a crazy week. Now everybody is talking about the rising treasury yields . However, 10-yr treasury 2.857% has little change today (in a narrow range 2.79~2.86%). Even for the whole week, 10-yr treasury stays in the range 2.72~2.89%. Well, rising yields may have triggered the correction, But the high frequency trading (HFT) probably play a bigger role than you think. HFT loves high volatility so that they earn money from panic sellers. Compared to relatively quiet bond market, we have experienced storms in equity market --- Dow Jones drops more than 1000 points twice; more than 500 points three times. For the week, all three indices have dropped -5.2%. Commodities: Crude -3.19% to $59.20. Gold -0.2% to $1,316.40. For next week, I think it will probably be less dramatic, but still volatile. Winners NVDA +6.7% . No need to say more after the earnings: great company, great products, soli

Facebook is the biggest online social media and social network. The company is based in Menlo Park, California. Currently the company has market-cap of $500B . History The Facebook website was launched on February 4, 2004, by Mark Zuckerberg, along with fellow Harvard College students and roommates. The company held its initial public offering (IPO) in February 2012, and began selling stock to the public three months later, reaching an original peak market capitalization of $104B, a new record in Wall Street. Facebook makes most of its revenue from advertisements. The company reached one-billion monthly active users (MAUs) by 2013. During 2017Q2, it reached another milestone of two-billion MAUs. The chart below shows the steady growth of daily active users (DAUs) globally. DAUs/MAUs ratio stays stable at 66%. DAUs  in Million Revenue The chart below shows revenue growth in the last 4 years. There is NO sign of slowing down. Growth rate is about 48% per year in 2017.

It is a broad selloff again, which is triggered by a hawkish tone from England's central bank , who hinted faster and larger rate hike. Bond Yields spike globally. The 2-yr massive spending budget bill also plays a role --- meaning more treasury supply. If the buying power for government notes cannot catch up, we will the the yields keep going up. High yields and equity selloff will push more investment into bond market, thus stabilizing both. At this moment, Both markets are struggling to find the equilibrium. One thing is clear to me that meltup (Nov, 2017 ~ Jan 2018) will not happen again. This week it has been a nightmare for long investors. Dow Jones drops another 1,032 points again, the 2nd time to drop more than 1,000 points in a week! Commodities: Crude -2.4% to $60.3 (close to $60 support). Gold +0.4% to $1,320. Qualcomm ( QCOM -4% ) says its board has unanimously rejected the revised buyout offer from Broadcom (AVGO). Broadcom changed its offer to hit $82/share e