Maybe Americans have moved from broad fixer upper projects to furnishing homes, as there are signs of greater household formation amid an upturn in single family home starts and permits. There is a sense of excitement in the housing market marked by a spike in the NAHB Housing Market Index (HMI), especially the six-month outlook, which spiked six points to 76.0 from 70.0. That was the largest month to month jump since November 2016 when the index surged on the election of President Trump.
In September, furniture sales stood out in a report that came in below consensus.
Retail Sales September
Building Materials & Garden
In addition, August CPI showed a strong bounce, prices for bedroom furniture +0.3% and living room/kitchen and dining room +1.4%, which correlated with strong earnings releases last week from Sleep Number and Bassett Furniture.
I’m looking closely at La-Z-Boy (LZB), which dovetails nicely with this emerging theme.
Message of the Market
Energy popped nicely on Haliburton’s (HAL) earnings results.
Financials, which came out the gate nicely last week, continued to outperform, as there is a growing feeling the sector is living up to the hype.
S&P 500 Index
Communication Services (XLC)
Consumer Discretionary (XLY)
Consumer Staples (XLP)
Health Care (XLV)
Real Estate (XLRE)
Perhaps the most bullish action of the session came with the +2.6% move in the ten-year yield, which closed at 1.79 versus the two-year 1.619. Moving further away from inversion, soon the bears will say this is also a bad sign. LOL
Taking Peloton for a Spin
Last week, I was very critical of big Wall Street firms that placed buy recommendations on Smile Direct Club even after its disastrous debut. The lead underwriter, JP Morgan even placed a $31.00 share price target on the stock, then changing hands at $14.00.
Looks like the practice happens again.
Yesterday fifteen Wall Street firms, all underwriters, placed buy recommendations on Peloton (PTON), the high-end fitness (or media) company that made an inauspicious debut earlier in the month. In fact, the same day, those major firms were telling individual investors it was time to buy the dip on Smile, October 7th, Peloton began trading.
The stock priced at the high-end of the range, $29.00, opened lower, and stumbled throughout the first day of trading closing at $25.76. Yesterday, Wall Street gave Peloton its second blessing, but after opening higher, the share price reversed closing at $22.26 -5.4% for the session.
Its one thing for major firms to bring companies public that aren’t ready or have been bid up too much in the private market. Its another thing to keep pounding the table even after the public has rejected the hype.
We’ll see where Peloton goes as well as Smile Direct and so many others. It’s hard to phantom Wall Street blatantly putting its investment banking clients ahead of their fiduciary responsibility to individual investors, so maybe of these stocks will work out. We’ll see.
- Goldman Sachs $37
- Sun Trust $30
- Telsey Group $29
- Cowen $34
- Canaccord $33
- Evercore ISI $33
- UBS $30
- Stifel $35
- JMP $33
- JP Morgan $32
- Barclays $32
- Keycorp $32
- Oppenheimer $29
- Raymond James $32
Stocks opened higher as strong earnings reports kept rolling in.
- Monster Results and (initial) Moves
- Monster beat huge drug pipeline news
The Procter & Gamble Company (PG)
- $17.798 billion revenue street $17.424 billion
- EPS $1.37 versus $1.24 estimate
United Technologies Corporation (UTX)
- $19.496 billion revenue street $19.297
- EPS $2.21 versus $2.03
Lockheed Martin Corporation (LMT)
- $15.17 billion revenue street $14.86
- EPS $5.66 versus $5.02
PulteGroup, Inc. (PHM)
- $2.71 billion revenue street $2.58 billion
- EPS $1.01 versus $0.92
- The Travelers Companies, Inc. (TRV) on earnings
- United Parcel Service, Inc. (UPS) on Revenues