Mike’s Morning Brief – May 8, 2015

Mike’s Morning Report.

Market shooting higher in the final session of an active and eventful week.  Another solid job report is kickstarting trading, as over 200K jobs were created in April, and the unemployment came in at 5.4%, a 6-year low.  Importantly, stocks are higher but interest rates are lower on the news.  Rates have jumped fiercely in recent weeks, with the 10-Year Treasury yield breaking thru 2% and approached a 2.3% yield.  This morning it’s backing off the highs, down to around 2.10%.  It’s been wild.  This job report should still provide enough reason for the Fed to begin its rate hike campaign later this year.  The September meeting has long been our target.  It still is.

U.S. job growth rebounded in April and the unemployment rate dropped to a near seven-year low of 5.4%, signs of a pick-up in economic momentum that could keep the Federal Reserve on track to hike interest rates this year.  This suggests cold weather did put a dent on activity in Feb and March.  Nonfarm payrolls increased in April by 223K as gains in services sector jobs offset weakness in mining, according to the Labor Department. The 5.4% unemployment rate is the lowest level since May 2008.   Still important, March payrolls were revised to show only 85K jobs created, the smallest since June 2012. That resulted in 39,000 fewer jobs added in February and March than previously reported.  Perhaps it was just a temporary slide, and H2 is setting up to be much stronger.  That’s what happened last year.  It could be a repeat.  Wage growth barely budged, increasing by 0.1%.  Inflation is still very very low.
The British election provided a boost to European Markets, as exit polls suggest a strong Conservative victory.  David Cameron would be the first Conservative to win back to back elections in London since Margaret Thatcher.  That’s pretty significant.  However, it was the Scottish National Party that made headlines, claiming most of the seats in Scotland. The Pound sterling jumped 1.5% at $1.5467. A Conservative win would likely also see the U.K. heading to the polls again in 2017, voting on whether or not to remain part of the EU.

Stocks were higher in Asia, following a turbulent stretch.  The heavy three-day selloff earlier still leaves Chinese stocks recording their biggest weekly loss in five years. China’s exports unexpectedly fell 6.4% in April from a year earlier, while imports dropped by a deeper-than-forecast 16.2%, boosting more expectations that Beijing will quickly roll out more stimulus. The Shanghai Composite Index is now up 2.3%, although it remains down nearly 6% for the week.

President Obama is making a strong pitch for the 12-nation Trans-Pacific Partnership today as part of a high-stakes push to win fast-track authority, the ability to submit trade deals for up-or-down votes without amendments. If the authority is passed and the TPP deal is sealed, Nike said, it would accelerate its U.S. investment and spur as many as 10,000 domestic manufacturing and engineering jobs, thousands of construction jobs, and up to 40,000 jobs elsewhere in its supply chain over 10 years.

CBS reported a solid double beat.  EPS came in 3 cents higher than street expectations, at 78 cents.  Sales were down -2% to $3.5 Billion, but were higher than consensus of $3.46 Billion.  Management explained that the network hosted one less NFL playoff game this quarter compared to a year ago. All segments were weak, led by the Entertainment Segment (65% of total sales),which was down -1.8% to $2.26 billion.  Cable Networks (16%) was the only segment that was not in the red at growth of .3% to $539 million.  Succession remains a hot issue, but Chairman Sumner Redstone indicated that no decisions have been made on who will be his successor.  His family foundation owns a ton of CBS stock, and his daughter is involved which has complicated things.  CEO Les Moonves will be interviewed on CNBC this am.  The stock is catching a nice bid off the news.

Splunk is catching a nice bid off a strong Qtr from one of its competitors.  The web analytics company is a fast-grower and is very strategically positioned as activity builds in the cloud.  Splunk reports earnings at the end of the month.  They’re also at the top of the list for M&A candidates, with a likely buyer being IBM or HP among others.  The stock is up 13% in last 3 weeks, back thru $69.

TRIP is higher again this am off positive comments from CS, who raised their PT to $91.  It’s also being helped with the Yelp takeover rumors.  TripAdvisor is quite similar, and is also considered a takeout candidate.  The stock is over $80, this morning, up 3%.

Monster Beverage is getting hit pretty hard off a material earnings miss.  The stock is down over 10% in early trading below $130, after reaching an all-time high of $145 yesterday.



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