How Did Markets React To Release Of Whistleblower Report?

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Posted: Sep 26, 2019 10:39 AM
How Did Markets React To Release Of Whistleblower Report?

Source: AP Photo/Evan Vucci

Yesterday was the best session in a couple of weeks for the stock market. It continues to be range-bound but well above resistance levels of August, although it’s unable to mount a serious challenge to forge new records on the upside. 

Perhaps what’s more telling for investors isn’t the resolve of stocks, but panic assets giving up the ghost.  Gold shed 1.9% to close at $1,510. Bitcoin (BTC) meandered but has given up huge gains since peaking in June.

On June 25th, Bitcoin closed at $12,913, after hitting an intra-day high of $13,826. I was impressed by how well the cryptocurrency performed at the height of the recession talk, rallying more than its safe-haven rival Gold, which also posted strong gains.  Bitcoin ended 2018 at $3,686. Even at $8,437, this has been an impressive year, but I am not sure if it’s the coming-out party that it appeared to be in the early days of summer.

On the other end of the spectrum are old-school Financials, which have lost so much of their old cache.  It’s not just cryptocurrencies and direct stock listings, but the move into Fintech also possess real competition. However, valuations and potential speak louder now than lame investment propositions, such as buying banks on a hunch where there would be higher interest rates.

We added a new Financial idea to the model portfolio, leaving cash at the lowest level in some time. 

Home Sweet Home - Homebuilder Stocks

The stealth rally in homebuilder stocks is now gaining the attention of a wider audience. After the close, KB Home (KBH) posted very impressive financial results and solid guidance.

Fourth Quarter 2019 (4Q19) Guidance:

  • Revenue: $1.64 billion, Street: $1.53 billion
  • Average Selling Price: $410,000 +19,5%
  • Operating Margin of 10.5%
  • Community Count: +10%

Management is focused on taking market share, which could be good news for homebuyers, as median prices have far outpaced incomes over the past decade. The shares were a little lower, but the fundamentals for the company and industry have gotten better.

Scrambling

I was accused of being heartless earlier this week when I said it was a blessing that many people (myself included) have multiple jobs. Of course, those working two jobs simply to survive are obviously struggling. Many are working multiple jobs or side hustles to make extra money. They called it “scrambling” in my old neighborhood. It’s something to be admired.

For the record, most Americans are not working two or more jobs.

August Employment Metrics

2019

2018

Want a Job

5,331,000

5,534,000

Multiple Job Holders

8,038,000

7,540,000

Percentage of total jobs

5.1%

4.8%

Men

3,951,000

3,639,000

Percentage of total jobs

4.7%

4.4%

Women

4,086,000

3,901,000

Percentage of total jobs

5.5%

5.4%

Portfolio Approach

We added a Financial as mentioned above. If you need help with the model portfolio, contact your rep or research@wstreet.com.

Communication Services

Consumer Discretionary

Consumer Staples

1

2

2

Energy

Financials

Healthcare

1

2

2

Industrial

Materials

Real Estate

3

2

1

Technology

Utilities

Cash

3

0

1

 

Skipping Peloton

Peloton is set to go public today. I’m skipping it, as there are too many issues, from music rights to competition, to ever making a profit. 

Today’s Session

The futures are lower after the whistleblower report was released. The major indices are mixed. The news also sent yields on the 10-year treasury down to 1.69%, lower by 4 basis points, and the dollar is slightly higher.

On the economic front, initial claims for the week ending September 14 were up by 2,000 to 208,000.  A better gauge, the 4-week moving average decreased by 750 to 212,500. Claims have been lower than 300,000 for 237 consecutive weeks, indicative of a tight labor market.

  • Continuing claims for the week ending September 7 declined 13,000 to 1.661 million
  • The four-week moving average for continuing claims were 3,750 less to 1,677,500