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Closing Stock Market SummaryThe stock market eked out small gains on Monday. The major averages struggled to find direction, but the S&P 500 (+0.02%), Dow Jones Industrial Average (+0.1%), and Nasdaq Composite (+0.2%) did manage to set new record closes. The small-cap Russell 2000 underperformed with a loss of 0.5%.
Citigroup (C 71.73, -0.04, -0.1%) kicked off the second quarter earnings-reporting season with better-than-expected results, but the response was underwhelming as some questioned the quality of its report. On a related note, shares of JPMorgan Chase (JPM 113.90, -1.40, -1.2%), Wells Fargo (WFC 46.70, -0.66, -1.4%), and Goldman Sachs (GS 211.58, -2.36, -1.1%) each lost over 1.0% ahead of the companies' results tomorrow morning.
Their collective weakness weighed on the S&P 500 financials sector (-0.5%), while lower oil prices ($59.51/bbl, -$0.13, -2.9%) put some pressure on the underperforming energy sector (-0.9%). The industrials sector (-0.4%) was the one other group to finish lower amid weakness from its top-weighted components, including Boeing (BA 361.61, -3.72, -1.0%) and General Electric (GE 10.27, -0.10, -1.0%).
Specifically, Boeing's 737 MAX issues continued to weigh on the stock with the planes possibly being grounded into next year, according to The Wall Street Journal. General Electric was downgraded to Neutral from Buy at UBS.
It was still a mostly positive day, though, with gains in the other eight S&P 500 sectors providing offsetting support. The utilities (+0.4%), consumer discretionary (+0.3%), and information technology (+0.3%) sectors showed relative strength on Monday. The Philadelphia Semiconductor Index was a notable standout with a gain of 0.8%.
Semiconductor company Broadcom (AVGO 288.34, +2.95, +1.0%) outperformed on reports that acquisition talks with Symantec (SYMC 22.84, -2.73, -10.7%) broke down. The China-sensitive industry might have also drawn some interest after Beijing reported better-than-expected data for industrial production, fixed asset investment, and retail sales for June.
U.S. Treasuries finished slightly higher in a quiet session. The 2-yr yield and the 10-yr yield declined one basis point each to 1.83% and 2.09%, respectively. The U.S. Dollar Index advanced 0.1% to 96.95.
The Empire State Manufacturing Survey for July was Monday's lone economic report:
- It checked in at 4.3 versus a June reading of -8.6. That was below the Briefing.com consensus estimate of 5.0, yet above the 0.0 demarcation line between expansion and contraction. Furthermore, there was a bump in the index for future business conditions to 30.8 from 25.7.
Looking ahead, investors will receive the following economic reports on Tuesday: Retail Sales for June, Import and Export Prices for June, Industrial Production and Capacity Utilization for June, Business Inventories for May, the NAHB Housing market Index for July, and Net Long-Term TIC Flows for May.
- Nasdaq Composite +24.5% YTD
- S&P 500 +20.2% YTD
- Dow Jones Industrial Average +17.3% YTD
- Russell 2000 +15.8% YTD
Facebook: Head of Calibra David Marcus Testimony ahead of tomorrow's Senate hearing: Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals.
https://www.banking.senate.gov/imo/media/doc/Marcus%20Testimony%207-16-19.pdf
Donald Trump’s uranium move tipped to revive demand
US president says imports of the nuclear fuel are not a threat to national security
Neil Hume, Natural Resources Editor 15 MINUTES AGO Print this page0
Uranium is tipped to regain momentum after US president Donald Trump surprised the market and said imports of the nuclear fuel were not a threat to national security.
Late on Friday, Mr Trump declined to impose tariffs or quotas on foreign shipments of the metal, against the advice of the US commerce department, led by Wilbur Ross.
Instead, he ordered a 90-day review of the entire nuclear supply chain to identify ways to revive and expand domestic production of uranium. The US imports 93 per cent of its commercial uranium, up from 85.8 per cent a decade ago.
Analysts said getting the “232 decision” — a reference to a section of the 1962 Trade Act — out of the way would help end some of the uncertainty that had seen buyers pull back from the uranium market.
The commodity has been in the doldrums since Japan ordered the shutdown of 40 reactors following the 2011 Fukushima disaster. That upended demand projections for the fuel in Japan and other countries such as Germany, which also closed nuclear plants and cancelled plans to build new ones.
However, the price of uranium started to pick up in 2018, helped by production cuts and interest from financial investors. It hit $29 a pound in December but has drifted back to about $25. In 2011, before the Fukushima disaster, it was trading above $70 a pound.
“The Section 232 investigation has created an 18-month period of uncertainty which has severely restricted activity in the uranium market,” said Andre Liebenberg, chief executive of Yellow Cake, a London-listed investment vehicle that has made a big bet on the price of the commodity through a purchase agreement with Kazatomprom, the world’s biggest producer. Shares in Yellow Cake rose 3.2 per cent to 222.5p on Monday.
After a petition by two domestic miners, the commerce department launched an investigation last year into the national security implications — both from a military and civilian perspective — of buying so much uranium from overseas. They wanted the US nuclear industry and military to purchase 25 per cent of its uranium domestically.
While more clarity was needed, analysts said the investigation ordered by Mr Trump was likely to be focused on the requirements of the defence department in terms of fuelling submarines and aircraft carriers and as a source for nuclear weapons.
“In this context, we believe that the working group will focus far more on the later stages of the fuel manufacturing supply chain than on the import of uranium oxide and the impact of the domestic mining industry,” said Michael Stoner, an analyst at Berenberg.
Slowing Growth Raises Pressure on China’s Stimulus Efforts
Expectations grow that Beijing will ease credit to increase spending after GDP growth slows to 6.2%
BEIJING—A strategy by Chinese policy makers to stimulate the economy with tax and fee cuts hasn’t stopped growth from slowing, stoking expectations that Beijing will roll out more incentives such as easier credit conditions to get businesses and consumers spending.
Chinese economic growth slipped to 6.2% in the April-through-June quarter, as measured by gross domestic product, after holding steady at 6.4% in the previous two quarters, official statistics showed Monday.
Barring a modest recovery in June, signs accumulated that business activity struggled to pick up in the quarter. Consumer spending, which Chinese leaders hoped would support growth, is adding to the picture of cooling demand. The breakdown of second-quarter figures shows how roughly 2 trillion yuan ($291 billion) of stimulus, introduced by Premier Li Keqiang in March, is failing to make business owners less risk-averse.
“I wouldn’t say it’s not working, but it’s not as big an impact as people thought,” said Bo Zhuang, an economist at research firm TS Lombard.
The trade dispute with the U.S. is dragging on China’s economy and creating an uncertain business environment. To avoid the latest round of President Trump’s tariffs, some manufacturers are shifting production out of China, fueling worries about layoffs and declining demand.
Foshan Gaoming Xingnuo Machine Equipment Co.,which produces equipment used in the pharmaceutical, chemical and rubber industries, was supposed to benefit from April’s cut in the value-added tax. Its rate fell to 13% from 16%, but clients then asked for lower prices, and the company still cut its investment this year because of lower revenue and profit, according to Liang Yongwen, a manager.
“A lot of old clients slashed or canceled their orders this year as they scaled back equipment purchases or stopped expanding their production lines,” Mr. Liang added at a recent trade expo in Beijing.
While Beijing has repeatedly said it wouldn’t resort to flooding the economy with credit, economists say it is growing more likely that policy makers will use broad-based measures to ensure economic stability. That would include fiscal and monetary stimulus that risks inflating debt levels.
Policy makers could lower interest rates, relax borrowing restrictions on local governments and ease limits on home purchases in big cities, economists say. Measures they could use to stimulate consumption include subsidies to boost purchases of cars, home appliances and other big-ticket items.
Complicating stimulus efforts: Total debt climbed in the first quarter to over $40 trillion, or 304% of China’s economy, as measured by GDP, according to data Monday by the Institute of International Finance. The country saw one of the biggest increases in debt ratio among emerging markets during that quarter, after its debt ratio reached 298% at the end of 2018, it said.
Analysts say Beijing is unlikely to cut benchmark interest rates as it tries to get banks to lower the rates at which they lend. Instead, they say, it could cut the rates at which banks borrow from the central bank and the amount of reserves they have to keep with it.
Although policy makers have relaxed controls on credit, Larry Hu, an economist at Macquarie Group, said Beijing has to do more to make credit growth sustainable. He said policy makers might have to artificially create demand for credit by loosening the property sector.
Many companies that sell to the U.S. are vulnerable to the twists and turns of the trade dispute, which is weighing on business sentiment. Battery maker Zhongyin Battery Co., of Ningbo, enjoyed a rush of orders after the U.S. unveiled planned higher tariffs on $200 billion yuan of Chinese goods including the company’s products, said salesman Sun Xiaodong. But the front-loading ended when the 25% duties kicked in. “Buyers don’t want to pay,” he said.
Consumption contributed 60% of economic growth in the first half, down from 76% in the whole of 2018. Growth got a lift from a widening trade surplus, a trend analysts don’t expect to continue, as exports will likely slow faster than imports.
If Beijing doesn’t dig deeper into its policy tool box, economists predict that growth will gradually trend to the lower end of the official targeted range of 6% to 6.5% for the year. “Domestic demand is anemic,” said Lombard’s Mr. Zhuang, who expects 6.1% growth in the second half.
Fixed-asset investment growth slowed to 5.8% in the first half of the year, from 6.3% in the first quarter, weakening across the board, including in property and infrastructure. Manufacturing investment growth slowed to 3% in the first half from 4.6% in the first quarter.
Underpinning the lack of business demand is a slump in confidence. A survey conducted by private research firm IHS Markit Ltd. showed that business confidence and hiring expectations in June were at their lowest since at least 2009. Less than a 10th of the roughly 7,000 respondents expect an increase in business activity in the next 12 months as companies predict flat profits, the survey found.
Cellphone Tower Companies Race Higher
American Tower, SBA Communications are winning big as wireless companies expand 5G
In the race toward 5G, tower companies are asking investors, “Do you hear us now?”
As the biggest wireless companies in the U.S. prepare to bring 5G to more customers, cellphone-tower operators are shaping up to be big winners in the stock market. They could be ready to get another boost if or when the deal between T-Mobile US Inc. TMUS 1.52% and Sprint Corp. S 2.75% closes, some analysts say.
Shares of Crown Castle International Corp. CCI -1.26% , American Tower Corp. AMT -0.13% and SBA Communications Corp. SBAC -0.51% all hit records in 2019, and are currently up at least 20% from where they traded six months ago. Cellphone companies like Verizon, AT&T and T-Mobile pay these tower companies fees to use their high-up real estate.
A concern among some investors is that these companies soared too high too fast. Of the trio, only shares of SBA Communications have risen in the past month. Part of the reason for that is a slowdown in talks between T-Mobile and Sprint.
While final conditions for the merger deal remain to be seen, a key component of the Federal Communications Commission’s conditions is an accelerated 5G rollout in rural areas, UBS notes. That stands to benefit American Tower most, as about 65% of its macro portfolio covers the most rural part of the U.S., according to a research report by UBS last month that looked at the FCC’s antenna registration database of tower locations throughout the U.S.
Another potential overhang has been worries that private operators could be competition for these three big public tower owners as wireless carriers seek out lower rents. However, UBS’s report also found that the big three public tower companies remain the dominant players in a hot business, with the largest private owner of tower sites accounting for just about 2% of all towers. That bodes well for SBA Communications, American Tower and Crown Castle.
“While the private operators have increased their tower counts…this competitive threat is far more limited in practice at this time,” UBS said in its note.