Saturday, April 25, 2015
- Airline stocks continue to outperform in 2015 as Q1 reports show strong efficiency gains and significant fuel expense savings.
- Investors get a crack at a sector ETF this week with the launch of the U.S Global Jets ETF (Pending:JETS) on April 30.
- A few tidbits from the fund company on the airline industry are listed below.
- Global ancillary revenue is a major source of growth in the the sector. The add-on sales (a la carte food/drink, advertising, frequent flyer programs, service commissions, baggage fees) are up to $31.5B after airlines only took in about $2.5B in 2007.
- Fleet upgrades and technology initiatives continue to boost efficiency.
- A shortage of pilots could reel in some of the concerns on capacity increases.
- Previously: Fuel savings and earnings give lift to airline stocks (April 24)
- Airline stocks: AAL, UAL, DAL, RYAAY, OTCPK:CPCAY, OTCPK:SINGY, CEA, ZNH, CPA, GOL, LFL, OTCPK:DLAKF, OTCPK:QUBSF, ALK, HA, OTCPK:AIRYY, OTCPK:MLYAF, OTCPK:AFLYY, VLRS, LUV, OTC:RYAOF, RJET, VA, LFL, SAVE, ALGT, CEA, OTC:EJTTF, OTCQX:ESYJY, AVH, OTC:AFRAF, OTCPK:ICAGY, AVH, OTCPK:JAPSY.
- Texas regulators have ordered Exxon Mobil's (NYSE:XOM) XTO Energy subsidiary and another company to prove their wells near Fort Worth are not causing earthquakes.
- On Friday the Texas Railroad Commission, which regulates the state’s oil and gas industry, told both companies they need to appear at hearings scheduled for June to justify why their wells should not be shut down.
- The action follows a Southern Methodist University study released this week that linked a rash of small earthquakes in the area to nearby natural gas wells and the injection of wastewater deep underground.
- Also this week, the U.S. Geological Survey reported that an increase in seismic activity in Texas, Oklahoma and six other states "very likely" was caused by wastewater injection from oil and gas operations.
- ETFs: XLE, VDE, ERX, OIH, XOP, ERY, DIG, DUG, XES, IYE, IEO, IEZ, FENY, PXE, PXJ, RYE, FXN, DDG
Friday, April 24, 2015
- Investors have rushed $13B into WisdomTree's (NASDAQ:WETF) Europe Hedged Equity ETF (NYSEARCA:HEDJ) this year, bringing AUM to $20B, and making it 2015's most popular ETF, the largest Europe ETF out there, and the largest currency-hedged ETF, according to Ned Davis Research.
- The fund is also ahead 30% YTD - not too shabby. However, says NDR, all of the gains have come from the euro's depreciation. A strategy of buying the MSCI EMU Index (NYSEARCA:EZU) and shorting the euro would have returned 70% over the same period. In other words - amid a nice bull move in Europe - HEDJ's strategy of owning exporters, which should theoretically gain as the euro slides, hasn't worked (the fund must own mega-cap stocks deriving more than 50% of revenue from outside Europe).
- What gives? First, Europe's exporters have been hit by exposure to struggling LatAm countries. Second, the companies in the HEDJ already hedge currency exposure, booking it as an expense. Finally, the valuation of stocks in HEDJ trade at a 52% premium to a broad MSCI eurozone index.
- Source: Barron's
- Previously: WisdomTree stumbles as GMO questions value of currency-hedged ETFs (April 14)
- Previously: WisdomTree hedged small-cap Europe ETF opens for business (March 4)
- ETFs: VGK, FEZ, HEDJ, IEV, EPV, EZU, FEU, EURL, FEP, UPV, DBEU, ADRU, HEZU, FEEU, IEUR, FIEU, DBEZ, FEUZ, SBEU
- Though the Nasdaq is up 0.7% thanks to market-pleasing earnings from Google, Microsoft, and Amazon, chip stocks (SOXX -2.1%) are adding to their Thursday losses after Freescale, Altera, Microsemi, and Maxim joined the ranks of chipmakers offering soft Q2 guidance; Texas Instruments, Xilinx, and Qualcomm did so on Wednesday afternoon.
- NXP (NXPI -4.3%), set to merge with Freescale in a cash/stock deal, is selling off ahead of its April 29 Q1 report. RF chipmakers Skyworks (SWKS -3.8%), Qorvo (QRVO -4.4%), and Avago (AVGO -5.2%) are also seeing steep declines.
- Other decliners include a slew of telecom/networking, microcontroller, and analog/mixed-signal chipmakers. The group includes Marvell (MRVL -3%), ON Semi (ON -6.9%), Atmel (ATML -3.3%), Cypress (CY -4%), Lattice (LSCC -3.9%), Semtech (SMTC -6.9%), Cavium (CAVM -6%), PMC-Sierra (PMCS -2.9%), InPhi (IPHI -3.8%), and Silicon Labs (SLAB -2.9%). Chip packaging/testing firm Amkor (AMKR -5.7%) is also off; its Q1 report arrives on Monday.
- As was the case with TI and Xilinx, soft telecom equipment chip demand was often blamed by those guiding light yesterday afternoon. Freescale (FSL -3.5%) stated it expects network processor division sales to be down Q/Q and RF (base station power amplifier) division sales to be flat. Microcontroller, automotive, and analog and sensor division sales are expected to rise.
- Altera (ALTR -3.3%) stated its "telecom and wireless business, and particularly our wireless business globally looks to be quite weak in [Q2], while the rest for our business will in aggregate be flat to slightly up." Regarding its Q1 miss, the company notes "Industrial, test, compute and storage, and to a lesser extent military, fell short of our forecast" (share loss to Xilinx?).
- Maxim reports seeing "broad-based softness in communications infrastructure demand" and soft industrial bookings to go with healthier mobile/auto demand. The Galaxy S6 appears to be giving a lift to Maxim's mobile sales.
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
- U.S. oil drillers took another 31 rigs out of service last week, falling for the 20th consecutive week and bringing the total number of active rigs down to 703 from their October peak of ~1,600, according to the latest weekly survey from Baker Hughes (NYSE:BHI).
- More than half of the oil rigs idled this week were in in Texas, as the state’s rig count fell by 19 to 393, down from 894 a year ago; of that number, a dozen were sidelined in the Permian Basin in west Texas.
- The total U.S. natural gas rig count rose by eight to 225 rigs; the overall total U.S. rig count declined 22 to 932 (four rigs were listed as miscellaneous).
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, TWTI, OLEM
- A mid-morning slide in gold has it lower by 1.5% on the session to $1,176 per ounce. The metal is down by about 2.5% for the week.
- After opening the year at about 1,200 per ounce and rallying to more than $1,300 by the end of January, gold reversed and bottomed at $1,150 in mid-March.
- In the news today is another soft economic report from the U.S. and comments out of Greece suggesting the government is prepared to make whatever concessions are necessary to prevent a default and/or EMU exit.
- GLD -1.6%
- ETFs: GLD, IAU, SGOL, UGL, DGP, GLL, UGLD, DZZ, GLDI, OUNZ, DGL, DGZ, DGLD, AGOL, TBAR, GEUR, UBG, GYEN, BAR
- China’s decision to scrap export quotas and taxes on rare earth elements may boost stalled demand for the products, Lynas (OTCPK:LYSCF, OTCQX:LYSDY) CEO Amanda Lacaze tells Bloomberg.
- Users have been drawing down on stockpiles while awaiting clarity over China’s policy on the export of the elements, Lacaze says.
- China, which produces ~85% of global supply, announced yesterday it will remove export tariffs on rare earths beginning May 1.
- Lynas, which said March was the first month in the company’s history in which it was cash flow positive, is seeking to restructure its debt before September, the CEO says.
- Relevant tickers: MCP, REE, AVL, GSM, GMO, OSN, REMX
- Continuing details on numerous corruption scandals, sluggish economic growth, and credit downgrades are garnering most of the headlines out of Brazil, but the Bovespa's 2.1% gain today has that index higher by 21% since a late-January bottom.
- A 70% gain in Petrobas over the last month and 25% for Vale lead the way. The banks are also on the move, though less subdued: Banco Santander Brasil (NYSE:BSBR) and Itau Unibanco (NYSE:ITUB) are up 13% and 16%, respectively. Banco Bradesco (NYSE:BBD) - recently the subject of a Goldman downgrade - is off 6% over the last month and 19% YTD.
- The iShares MSCI Brazil ETF (NYSEARCA:EWZ) has lagged - its top three holdings are Itau Unibanco, Ambev (NYSE:ABEV), and Banco Bradesco. The ETF is flat YTD, though higher by 15% over the last month.
- ETFs: EWZ, BRF, BRZU, EWZS, BRXX, BRAQ, BZQ, BRAZ, BRAF, UBR, DBBR, FBZ
- Investor exuberance has hit a "frighteningly high level," says Mark Hulbert, as his Hulbert Stock Newsletter Sentiment Index rises to 72.9% - one of its highest prints ever - alongside the Nasdaq's record close, with the S&P 500 not far behind.
- Putting the 72.9% reading in context, the HSNSI has averaged 39.4% since the bull market began six years ago. Over the past decade, there were only two occasions when it was higher - end of 2013/start of 2014, and February of this year - and both times the market fell soon after.
- ETFs: VV, SCHX, FEX, JKD, EEH, EQL, IWL, ERW, FWDD, ZLRG, SYE, SBUS
- Following this morning's disappointing durable goods orders report - the latest in a long line of weaker-than-expected economic numbers - Deustche's Joe Lavorgna cuts his Q1 GDP growth estimate to just 0.7% from 1.7% previously.
- Leaving aside the questions of how one sluggish report could lop a whole percentage point off of an analyst's estimate, and why we should be concerned about Q1 when we're already several weeks into Q2, one wonders how the Fed hawks will be able to push through a rate hike without a substantial bounce in the numbers.
- Previously: Core durable goods orders decline for 7th straight month (April 24)
- The 10-year Treasury yield is lower by three basis points to 1.93% following the report. TLT +0.2%
- Short-term rate futures are pricing in a move by the Fed no sooner than late Q3/early Q4.
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, TMF, PST, TTT, ZROZ, TLH, SBND, VGLT, IEI, TYO, UBT, DLBS, DTYS, UST, TLO, STPP, VGIT, FLAT, TBX, SCHR, GSY, TENZ, TYD, LBND, ITE, DTYL, DLBL, TYBS, DFVL, FIVZ, TBZ, DFVS, TYNS, SYTL
- Is the retail rally over? After a 10-month period in which the SPDR S&P Retail ETF (NYSEARCA:XRT) outperformed the S&P 500 by 1.2K basis points, since April 2 the XRT has underperformed by 270 basis points - off 0.4% as the S&P 500 has added 2.3%.
- The reversal comes alongside a major bounce in oil, up more than 30% since bottoming in mid-March. The thinking isn't too complicated - falling oil prices put more money in consumers pockets to spend at places like Wal-Mart, and surging oil prices is pulling money out.
- As it turns out though, consumers didn't spend as much of the saved money as thought, with core retail sales shy of estimates for the last four months, and the savings rate hitting its highest level since December 2012.
- Source: Bloomberg
- Retail ETFs: XLP, XLY, VDC, XRT, VCR, RTH, RETL, FXG, PBJ, IYK, IYC, FXD, PEJ, FDIS, RHS, FSTA, SCC, UCC, RCD, PMR, PEZ, UGE, PSL, PSCC, PSCD, SZK
- S&P 500 and DJIA futures are marginally higher, but Nasdaq 100 (NASDAQ:QQQ) futures are ahead by 0.6%, thanks to big gains in Google and Amazon post-earnings.
- Europe's ahead by 1% and Asia was mixed overnight.
- The 10-year Treasury yield is flat at 1.96%, gold is down $7 per ounce to $1,187, an oil is lower by $0.14 per barrel to $57.61.
- ETFs: SPY, QQQ, DIA, SH, SSO, SDS, VOO, IVV, UPRO, PSQ, SPXU, TQQQ, SPXL, RSP, QID, SQQQ, QLD, DOG, DXD, RWL, UDOW, EPS, SDOW, DDM, BXUB, QQEW, QQQE, SPLX, SFLA, BXUC, QQXT, SPUU
- Previously: Google rises in spite of Q1 miss; strong dollar a major headwind (April 23)
- Previously: Amazon beats estimates, guides in-line (April 23)
- Tacking a fresh two-week high against a soft dollar, the euro is heading higher following weakening fears of a Grexit and Germany's Ifo survey,
- Germany's business climate index rose to 108.6 in April from 107.9 in March - its highest level since June 2014.
- "The upswing in the German economy continues," Ifo President Hans-Werner Sinn declared, pointing to stronger growth in 2015.
- Euro +0.7% to $1.0896.
- ETFs: FXE, EUO, ERO, DRR, EUFX, ULE, URR
- Quickly running out of cash, Greece appeared to offer concessions on some key reforms on Friday, ahead of the Eurogroup meeting in Riga which will discuss the progress of the country's reform pledges.
- "Our government is eager to rationalize the pension system (for example, by limiting early retirement), proceed with partial privatization of public assets... and create a fully independent tax commission," Greek Finance Minister Yanis Varoufakis announced.
- Yesterday, Germany's Angela Merkel said everything must be done to prevent Greece from running out of money
- ETFs: GREK
- Asian shares took a breather today following a solid week, unmoved by the record session for tech stocks on Wall Street and Nasdaq's milestone.
- Yesterday, the Nasdaq closed 0.4% higher at 5,056, finally surpassing its tech-boom peak of 5,048 set in March 2000.
- Barclays economists point to downside risks of Chinese growth and inflation: "We expect the slowdown in growth to stretch into the June quarter before a pick-up in momentum in the September and December quarters, which assumes stepped-up policy easing measures."
- Nikkei -0.8%; Shanghai -1%
- ETFs: FXI, DXJ, EWJ, ASHR, CAF, YINN, KWEB, PGJ, GXC, FXP, HAO, YANG, TAO, CHIX, PEK, CHIQ, CQQQ, DFJ, MCHI, QQQC, DBJP, NKY, XPP, YAO, EZJ, JPNL, DXJS, EWV, ASHS, YXI, CN, CHXF, FCA, CNXT, CHNA, CHII, CHIE, ECNS, SCJ, EWHS, CHIM, HEWJ, JSC, ITF, KBA, KFYP, JPP, QJPN, FJP, JPMV, DXJT, DXJC, DXJR, AFTY, DXJH, JHDG, DXJF
Thursday, April 23, 2015
- The Global X MSCI Pakistan ETF (Pending:PAK) tracks the MSCI All Pakistan Select 25/50 Index, making it the first ETF to focus on Pakistan's economy.
- "The broad Pakistan equity universe includes securities that are classified in Pakistan according to the MSCI Global Investable Market Index Methodology, together with companies that are headquartered or listed in Pakistan and carry out the majority of their operations in Pakistan," as stated in PAK's prospectus.
- Broad frontier market ETFs: FM, FRN, EMFM
- While the Nasdaq is up 0.3%, chip stocks are selling off (SOXX -1.8%) after Texas Instruments, Xilinx, and Qualcomm all provided soft calendar Q2 guidance. TI and Xilinx also missed Q1 sales estimates, while Qualcomm beat.
- Decliners include Avago (AVGO -3.7%), Qorvo (QRVO -2.5%), Freescale (FSL -3%), STMicroelectronics (STM -3.6%), Atmel (ATML -2.3%), PMC-Sierra (PMCS -2.5%), Fairchild (FCS -2.2%), Cypress (CY -2.1%), Audience (ADNC -6.6%), IDT (IDTI -4.5%), Vishay (VSH -2.9%), AppliedMicro (AMCC -2.3%), and Cavium (CAVM -4.4%). NXP, ON Semi, Linear, Microchip, and Maxim remain lower after falling AH yesterday.
- With the decliners including many microcontroller, analog/mixed-signal, and telecom equipment chipmakers, TI (TXN -7.3%) might be the biggest culprit: The analog/DSP giant blamed soft telecom equipment and consumer electronics demand for its numbers, with particular weakness in mobile infrastructure (a 2014 strong point) and PCs; auto and industrial demand was healthier.
- On its CC (transcript), TI attributed the mobile weakness to delayed carrier capacity upgrades. This morning, mobile infrastructure giant Ericsson posted a Q1 miss blamed in part on weak North American 4G spending.
- Likewise, Xilinx (XLNX -1.3%), which has strong 4G infrastructure exposure, stated on its CC (transcript) wireless sales were weaker than expected due to "continued softness in North America and a weakening in China LTE business." Wired infrastructure sales were in-line, and other markets outperformed.
- Qualcomm largely blamed its guidance on the iPhone 6's share gains and a loss of chip share at Samsung, rather than industry demand issues. Altera, Freescale, Maxim, Microsemi, and Synaptics report after the close.
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
- 8 days ago: Chip stocks rally following Intel/Linear's earnings
- New homes at a seasonally adjusted annualized rate of 481K in March were 11.4% below February's revised rate of 543K (originally estimated at 539K). On a year-over-year basis, new home sales rose 19.4%.
- Northeast sales of 20K fell from 30K in February; Midwest 54K vs. 51K; South 267K vs. 317K; West 140K vs. 145K.
- The 10-year Treasury yield slips one basis point to 1.97%. TLT +0.2%, TBT -0.35%
- ITB -1.7%, XHB -0.6%.
- Full report
- Previously: PulteGroup -7.8% as Q1 results disappoint (April 23)
- Previously: New home sales see a sharp decline in March (April 23)
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