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Weekend News & Next Week Preview (2/5 ~ 2/9)

战胜市场 9月前 99

So far, most companies (80% in S&P 500 beat) have reported great earnings and encouraging guidance. With the Thomson Reuters data out this Friday, the 2018 "estimated" S&P 500 earnings growth rate is 17.7%, up from last week's 16%. After the selloff last week, the average P/E of the S&P 500 17.8. On Friday, I have written a brief analysis on the earnings of Apple / Amazon / Google / Facebook (LINK).

I think there is no reason to be panic at this moment. After tax reform, the companies have more cash to invest or reward their shareholders. With rising salary and low interest rate (4.5% 30-year fixed mortgage is still considered low), US economy is doing fine now.

As Earnings cool down, the stock market will focus on Treasury yields and politics. If treasury yield falls, I expect the stock market to bounce.

Weekend News

From Treasury Department

Government expects to borrow $955B this fiscal year (Trump's 1st full year in charge of the budget). This is about double from $519B last year (Obama's last year for budget). The peak borrowing happened in 2009 (right after the recession) of $1,786B. However, this is the first time borrowing has jumped this much in a non-recession time since Reagan era. The rising deficits cast the shadow over White House infrastructure plan. This also adds pressure on treasuries when FED is shrinking its balance sheet --- selling treasuries instead of buying during QE.  All these factors cause the fast rising treasury yields, the dollar weakness and the panic selloff last week. Higher treasury yields mean higher interest rates, higher borrowing cost, which may trigger inflation and economy slowdown.

Politics in Washington DC

After Nunes' 4-page memo is released, it is a mess in DC during the weekend. To be fair, there is no new information in the memo. However, Nunes was trying to undermine FBI and Mueller's investigation. Ironically, Comey (former FBI director), Rosenstein (Deputy Attorney General), Wray (current FBI director, appointed by Trump) and Mueller are all Republicans. For stock market, the worst news is that Government is facing shutdown again! deadline is 2/8 (Thursday). This is the 4th time since Oct 2017. You know what, The House could vote as early as Tuesday on a stopgap bill to fund the government through March 22. It will be the 5th time for a short-term extension since last Oct.

Apple Data Center & iPhone Repair

Apple will be ready to open its first data center for iCloud service in China in 2020。 The company will launch the $1B project's construction in Guizhou later this year.

More on Apple, it is launching a free repair program to address a component failure afflicting a "small percentage" of iPhone 7 devices. A failure on the phone's main logic board makes the status bar show that the phone isn't connected to cell networks even when service is available.

Wells Fargo's Headwind

Yellen's last Act as FED chairman: WFC plunged in Friday after hours after the Fed takes action to oust 4 board members and restrict the company's growth until governance is improved. "Until the firm makes sufficient improvements, it will be restricted from growing any larger than its total asset size as of the end of 2017," the Fed says. It required each current Wells director to sign the cease and desist order.

Wells Fargo responds: “We take this order seriously and are focused on addressing all of the Federal Reserve’s concerns,” says CEO Timothy Sloan. “It is important to note that the consent order is not related to any new matters, but to prior issues where we have already made significant progress." He reiterated Wells is in strong financial position.

Well, enjoy the Super Bowl show today!

Earnings Next Week

Monday
  • pre-market: BMY
  • post-market: CRUS, NOV
Tuesday
  • pre-market: BP, EMR, GM, GPK
  • post-market: BZH, CMG, DIS, GILD, NTGR, PAYC, SNAP, ZEN
Wednesday
  • pre-market: HUM, KORS
  • post-market: NTES, PRU, TSLA, YELP, YUMC, ZNGA
Thursday
  • pre-market: CAH, CVS, GRUB, TSN, TWTR, VIAB, VSTO, YUM
  • post-market: AIG, EXPE, NVDA, UIS
Friday
  • pre-market: MCO, NWSA


source: defeat market
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