Visa (V)

April 26, 2018

Stocks gapped up at the open as investors reacted to better earnings announcements and economic data. The Dow is currently up 147 pts and the SPX is up .65%. Tech, biotech and retailers are leading the way after strong first quarter reports from Facebook (FB), Abbvie (ABBV), and Visa (V). The VIX Index is trading down around 17 and VIX May futures are trading exactly in line. So traders aren’t anticipating any blow-ups over the next month. WTI crude oil is down slightly to trade around $68/barrel. Higher oil prices boosted first quarter profits for Royal Dutch Shell, and traders are getting much more positive on the energy sector. Bonds are taking a breather after selling off hard over the last couple of weeks. While the stock market is roughly flat year-to-date, bonds are down across the board. Long-term Treasuries (iShares 20+ Year Treasury Bond ETF) are down 6.6% on a total return basis. Junk bonds (SPDR High Yield Bond ETF) are down 1.1%. Intermediate high-grade corporate bonds (iShares IG Corporate Bond ETF) are down 4.5%. That’s what happens when interest rates reset to a higher level. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

October 25, 2017

The major stock market averages gapped down at the open (Dow -105 pts; SPX -.9%). Telecoms, utilities, and industrials are leading the market lower, but all eleven market sectors are in the red. Not surprisingly, the VIX Index jumped to 12.4, the highest level since early September. The dollar is weaker today against a basket of foreign currencies but commodities aren’t getting a corresponding life. WTI crude oil is down .5% to $52.20/barrel. Despite weakness in the stock market, the bond market isn’t trading higher. The 5-year Treasury yield ticked up to 2.06% (highest since early March) and the 10-year yield rose to 2.44% (highest since late March). Rates are clearly moving higher and stock investors are a little spooked by it. Rick Rieder of Blackrock says despite recent economic data, inflation is rising because the economy is doing better. But he’s not that worried that rates will move dramatically higher. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

September 7, 2017

Stocks opened modestly lower this morning (Dow -41 pts; SPX -.13%). A 2% slide in bank stocks is holding the market back. Gold miners are up 2% in early trading. A host of other industries—semiconductors, retailers, transports, pharmaceuticals, utilities, real estate—are trading higher as well. WTI crude oil is trading down slightly to $49/barrel as Hurricane Irma approaches Florida. Bonds are trading higher as yields plunge. The 5- and 1-year Treasury yields are down to 1.63% and 2.04%, respectively. Yields haven’t been this low since the day after the presidential election. This is the proximate cause of the decline in bank stocks today.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

April 21, 2017

Stocks are mixed in early trading (Dow flat; SPX -.1%). Traders are exercising caution in front of the French election. Not surprisingly, utilities and gold miners are in the green. But for the most part, individual stocks are responding to their respective earnings announcements (see below). The VIX Index is up around 14.5 but VIX May futures are trading at 14.3. The fact that traders don’t expect a huge spike in volatility suggests a benign outcome for the French election. WTI crude oil is down around $50.50/barrel and most other commodities are down as well. Bonds are slightly higher in price, lower in yield. The 5-year and 10-year Treasury yields are currently at 1.75% and 2.22%, respectively. Those yields are hovering around 5-month lows. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

March 17, 2017

Stocks opened mixed this morning (Dow -11 pts; SPX flat). Some key groups are lower in early trading, including banks, transports, biotechs, and retailers. On the other hand, utilities, energy, telecom and materials sectors are in the green. The VIX Index is up around 11.3 (considered very low). VIX April futures are trading at 13.2, and have been trending lower this month. Commodities are mostly higher on the day. Oil is flat around $48.76/barrel. Over the past month oil prices have fallen about 8%. Bonds are mostly higher in early trading. The 5- and 10-year Treasury yields ticked down to 2.01% and 2.50%, respectively. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

July 12, 2016

The major stock market averages rose again this morning (Dow +95 pts; SPX +.6%). Cyclical sectors and industries are up the most (banks, transports, semiconductors, oil companies). And small-caps (Russell 2000 Index) have been outperforming large-caps for the last week. The SPX is now up 8% from its Brexit low on 6/27. The VIX Index has backed down to 13.5 and VIX August futures are down to 16.4. So less fear out there. The dollar is a bit weaker and commodities are broadly higher today. WTI crude oil is up 2.7% to $46/barrel. Bonds are selling off (finally), with yields heading higher. The 5- and 10-year Treasury yields are up to 1.06% and 1.49%, respectively. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

May 24, 2016

By the way, one of the key bear arguments—articulated by Zacks Investment Research this morning—is that a falling 10-year yield and a rising 5-year yield tells us the stock market is poised for a pullback. That is, a “flattening yield curve” usually portends bad times for the economy and stocks. And it is true that lower long-term rates indicate very subdued inflation and (therefore) growth expectations. If the economy does begin to pick up, we’ll see the 10-year yield rise as well. But the current environment isn’t that easily analyzed. Our own bond yields are distorted by the fact that ultra-low/negative rates around the world are encouraging global investors to run for cover in US Treasuries. So there’s enormous external buying pressure keeping our Treasury rates lower than they ordinarily would be.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

Supplement: April 26, 2016

I'd like to provide a summary of some key earnings announcements over the last several days:

Southwest Air (LUV) beat revenue (up 9% y/y) and earnings (up 33%) expectations for Q1. Fuel expenses fell during the quarter (average down to $1.78/gallon vs. $2 a year ago). Management did their best to talk-down future growth prospects. Fuel costs are expected to rise to $1.85-1.90 this year. Competitors are adding capacity “aggressively” (should be up 4-5% in Q2/3), and that will likely drive revenue-per-seat-mile down. But it’s also true that end demand remains strong. The stock was up 1.8% yesterday after the announcement.

Polaris (PII) reported a 5% year-over-year decline in revenue and a 45% decline in earnings. Sounds terrible, but it was all factored into the stock price and Wall Street forecasts. Actually, revenue was modestly better than expected. Management appears to have issued strong earnings guidance for the year, but gave a very wide range ($6.20/share to $6.80) "due to the persistent unpredictability around overall economic trends and more specifically powersports industry trends for the remainder of 2016." The stock immediately dropped 3% in the wake of the announcement, but clawed its way back through yesterday’s session; it’s up over 3% today.

BB&T Corp. (BBT) beat first quarter earnings estimates and revenue climbed 10% y/y. Traditional banking got a little better: first quarter net-interest-margin rose 8 basis points to 3.43%. Loans to energy companies are in focus. During the quarter, the bank charged-off $154mil in loans, about $30mil of which were energy-related. Non-performing loans (i.e. not current on payments) were up 27% q/q, driven entirely by energy loans. Losses look very manageable. The stock is up 1.7% this morning.  

Schlumberger (SLB) posted first quarter earnings that narrowly exceeded expectations. Revenue also came in slightly better that Wall Street forecasts. Of course, the company noted persistent pricing pressure throughout the industry and said conditions aren’t great. But everybody knows that. The company continues to cut headcount (down by 1/3 since the oil crisis began). The CEO didn’t pull any punches: “This environment is expected to continue deteriorating over the coming quarter given the magnitude and erratic nature of the disruptions in activity.” The stock gapped down at the open this morning but quickly recovered and is now trading flat.   

Starbucks (SBUX) reported first quarter results that matched analyst forecasts. That’s not generally a good thing when your stock trades at 30 times earnings. Overall same-store-sales rose 6% vs. 6.7% expected. Asia-Pacific same-store-sales increased 3% whereas analysts were looking for about 4.5%.  So the stock is down 5.5% this morning, and investors are debating whether this is a good buying opportunity.

Alphabet (GOOGL) missed Wall Street forecasts in the first quarter. Revenue rose 18% y/y and earnings grew 14% y/y. Mobile search and YouTube were very strong. Paid clicks rose 29% vs. 31% in the prior quarter, so a little deceleration there. Investors aren’t pleased with the fact that expenses rose on new hiring activity and investments in non-core areas of the business. The stock is down almost 6% this morning.

Visa (V) narrowly beat Wall Street earnings estimates but came in line with revenue forecasts. In terms of growth, revenue rose 6% y/y and earnings grew about 8%. The company noted weakness in emerging markets economies as well as in regions dependent on oil production. That said, total payments volume grew 12% y/y and transactions processed rose 9%. Management says annual net revenue will grow 7-8% in fiscal 2016 (ending September). They previously guided to double-digit growth. So the stock is down 3.9% this morning. 

Whirlpool (WHR) missed Wall Street forecasts and the stock is down 4% today. Sales fell 4.7% y/y. Excluding the effect of currency (i.e. stronger dollar) sales increased 1%. Earnings shot up 23% y/y but still came up short of expectations. Sales in some regions (Latin America, Europe) were weak. North America, however,  posted growth. Despite disappointing results, management did not reduce earnings guidance for the full year. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.