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Jumat, 03 Mei 2019

Soft Wage Growth, Short Hours Mar April Jobs Report; Dow Jones Rises - Investor's Business Daily

The U.S. economy added 263,000 jobs in April as the unemployment rate fell to 3.6%, a half-century low, the Labor Department reported on Friday. The headline jobs numbers looked stellar, but the jobs report looked pretty lousy below the surface. Wage growth came in on the soft side for a second straight month, even as workers clocked fewer hours. So why did the Dow Jones and broader stock market add to modest stock market gains after the April jobs report?

Wall Street may have dismissed the bad news as a likely statistical quirk. Or else, investors celebrated the not-too-hot report as welcoming for Goldilocks — and a dovish Fed.

The bottom line for any jobs report is the aggregate change in weekly pay. That factors in net hiring, average hourly wage growth and the change in total hours worked across the economy. In April, aggregate weekly payrolls rose just 0.1%, matching the low since late 2016. But official data suggest this wasn't just a one-month blip: The year-over-year change in weekly payrolls slowed to 4.9%. That matches the weakest growth in a year and is down a half-percentage-point from average growth in the second half of 2018.

Has Job Growth Slowed?

The private sector added 236,000 jobs. That's the number to key in on in coming months as the government ramps up hiring for the decennial census.

Wall Street economists expected 180,000 new jobs, including 178,000 in the private sector. The consensus forecast called for 3.8% unemployment and 3.3% average hourly wage growth.

After a combined 16,000 upward revision to job gains for March and April, the economy averaged a pretty solid 169,000 new jobs per month over the past three months. But the monthly pace of private-sector hiring has slipped to 154,000.

In April, the private sector added 33,000 construction jobs and 202,000 service-sector jobs. But there were two weak spots. Automakers shed 1,500 jobs, while retailers cut 12,000.

The economy is still adding more than enough jobs for new labor market entrants, allowing for more declines in unemployment. But it does look like job growth is slowing. Still, three months is too short of a period to make any conclusions. Recall that the economy added 300,000 jobs during a mild January, which contributed to February's weak print.

Blame Soft Wage Growth On The Calendar?

Ian Shepherdson, chief economist at Pantheon Economics, suggested that the jobs report's soft wage growth shouldn't be taken at face value. He noted that the survey week didn't include the 15th and April had an extra work day. "When both quirks come in the same month, AHE (average hourly earnings) tends to be depressed," Shepherson tweeted.

Yet that doesn't explain the shorter average workweek, which slipped to 34.4 hours from 34.5 hours.

Still, it's best not to make too much of a single month's data.

Dow Jones And Treasury Yield Reaction

In Friday's stock market trading, the Dow Jones rose 0.4%, the S&P 500 0.6% and the Nasdaq composite 1.1%, near session highs. The 10-year Treasury yield, which rose to 2.56% ahead of the report, fell to 2.52% after the data.

The bond market seemed to key in on the soft wage and hours worked data, and stocks took their cue from the bond market. Slowing job growth, if it continues and inflation stays muted, could raise the odds of a Fed rate cut later this year.

Wage Growth, Labor Market Slack Key To Outlook

Wage growth has shown no sign of letting up. After Amazon (AMZN) hiked its minimum wage to $15 an hour starting November, Costco (COST) followed suit in March. Last month, Target (TGT) raised its minimum wage to $13 an hour, up from $12.

Now that the tax-cut boost to consumer incomes has begun to fade, a key question is whether companies will slow hiring. That depends, in part, on whether employers can attract sidelined workers back into the labor market. As an example, McDonald's (MCD) is teaming up with AARP as it turns to seniors to help fill 250,000 summer jobs.

Faster productivity growth also could help sustain higher wage growth, as worker output rises. On Thursday, the Labor Department reported that productivity rose 2.7% from a year ago in the first quarter, the biggest jump since 2010. It's not yet clear whether that's a blip or higher productivity is here to stay.

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2019-05-03 15:22:30Z
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Last time unemployment rate was this low, most Americans weren't born yet - Washington Examiner

The U.S. unemployment rate has gotten so low, that most Americans were not alive the last time it was at this level.

On Friday, the Department of Labor reported that the unemployment rate dipped to 3.6% in April, which was the lowest level since December 1969.

That means anybody younger than 49 years and four months hasn't been alive long enough to see the unemployment rate this low.

According to the U.S. Census Bureau, as of 2017, the median age of all Americans was 38.1, meaning that half of the population was younger than that age.

A further breakdown of ages shows that 64% of Americans were aged 49 or under. While some of them would have been born before December 1969, primarily the age group would have been born after.

The robust economy is likely the biggest factor working in President Trump's favor in his reelection bid, even as other factors, such as his low approval rating, cut against him. If the numbers remain strong in 2020, it will become more challenging for Democrats to campaign against the him on economic issues. The arguments are going to have to be more structural, such as arguing that the boom has been unequally felt due to deeper flaws in the American economic model.

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2019-05-03 13:49:00Z
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Stocks Jump; Amazon Gets Buffett Boost, April Jobs Surge - Investor's Business Daily

Stocks popped out of the starting gate Friday, with a strong push from earnings news and a blow-out April jobs report.

The Nasdaq led the early advance, up 1% shortly after the starting bell. The Dow Jones industrials climbed 0.5% and S&P 500 rolled up a 0.6% gain.

MercadoLibre (MELI) and Monster Beverage (MNST) topped the Nasdaq, surging on earnings news. Weight Watchers (WW), Adidas (ADDYY) and Universal Display (OLED) also posted powerful early gains on earnings results. Arista Networks (ANET) led the downside, tanking nearly 18% on weak second-quarter sales guidance.

Amazon.com (AMZN) climbed more than 2%, leading its FANG stock peers in early trade, after a boost from Warren Buffett. Marijuana stocks were in motion, with Canopy Growth (CGC) and Tilray (TLRY) surging in early action. Beyond Meat (BYND), which spiked in its Thursday initial public offering, traded sharply higher early Friday.

Chip stocks were mixed Friday, with Cree (CREE) and Taiwan Semiconductor (TSM) rising in morning trade. The iShares PHLX Semiconductor ETF (SOXX) dipped just below the breakeven line, giving it a 0.8% gain so far for the week.

Jobs Growth Soars; Services Data Mixed

U.S. non-farm payrolls swelled by 263,000 new workers in April, the Labor Department reported Friday. That was a full 34% above March's 196,000 new hires, confounding estimates for a drop to 189,000 hirings. Business services, construction and healthcare saw the largest growth, while manufacturing, retail and mining remained largely flat.

The unemployment rate slipped to 3.6%, from 3.8% in March. Average hourly earnings ticked up 0.2%, vs. a 0.1% increase a month earlier. The labor participation rate eased to 62.8%, from 63%.

Markets received a mixed dose of economic news just after the open. Researcher Markit reported the reading for its April services purchasing managers index decreased to 53. That was down from 55.3 in March, while holding just above expecttions for a drop to 52.9.

The Institute For Supply Management reported its April Non-Manufacturing ISM easing to 55.5 for the month, down from 56.1 in March and disappointing forecasts for an increase to 57.3.

Federal Reserve officials could provide some impact on afternoon trade, with speeches scheduled from Chicago Federal Reserve Bank President Charles Evans, Fed Vice Chairman Richard Clarida, New York Federal Reserve President John Williams and Fed Governor Michelle Bowman before the market's close.

Amazon Rises On Berkshire Stake

Amazon climbed 2%, retaking some ground after a four-day decline. Warren Buffett told CNBC Thursday that Berkshire Hathaway (BRKB) established a new stake in the e-commerce, cloud services giant.

Amazon shares touched their highest level since October on Monday. The stock has formed a seven-month cup base with a 2050.60 buy point. This week's pullback leaves the stock chart one day shy of a handle on that base pattern, which could potentially lower the buy point to 1956.44. The IBD Leaderboard stock also cleared an earlier entry for aggressive investors at 1736.51.

MercadoLibre Enters Gap-Up Buy Zone

Latin America e-commerce giant MercadoLibre rocketed 14% higher after reporting its first profit in six quarters. Earnings rose 145%, sales surged 48% — both above analyst targets. The stock had pulled back to test support at its 10-week moving average after a run-up that followed an February breakout.

MercadoLibre's big earnings gap-up set up a breakaway gap buying opportunity, beginning at the stock's opening price of 541.85.

Nasdaq, S&P 500 Pause At Prior Highs

The stock market slipped into May, after a strong April, with the Dow Jones Industrial Average down 0.9% for the week heading into Friday session. The Nasdaq is off 1.4%, and the S&P 500 is toting a 0.8% decline.

All four of the top stock market indexes rose for a fourth straight month in April. The Dow gained 2.6% for the month, the Nasdaq jumped 4.7% and the S&P 500 grabbed a 3.9% gain. That moved the Nasdaq and S&P 500 briefly to new highs early in the week. The Dow Jones industrials ended Thursday 2.4% below its October high.

The current stock market uptrend remains in good standing, logging a technical distribution day on Thursday, but flashing a number of bullish signals.

For more detailed analysis of the current stock market and its confirmed uptrend, study the Big Picture.

IPO Watch: Beyond Meat, Jumia Rise, Warrior Dives

Stock market newbie Beyond Meat spiked nearly 7% in early action. The maker of plant-based meat products soared 163% in its first day of trade on Thursday. IPOs can be highly volatile on both the up and down sides. Investors should wait until the stocks form a valid IPO base, which provide entry points that help reduce downside risk.

O'Neil Manager: Debut Of Google A 'Picture Perfect' IPO Template

Jumia Technologies (JMIA) traded 5.3% higher early Friday. The Germany-based e-commerce website tumbled more than 13% on Thursday, ending the session 23% below a 49.87 buy point in its IPO base. Shares are up 181% from their April 12 initial offering price.

Warrior Coal (HCC) tanked 12% in opening trade. The stock swung wildly Thursday, dropping more than 8% early, then ending 4.6% higher after its first-quarter report. Shares are up 73% from their April 2017 IPO.

Oil Prices In Flux

Oil prices remain on watch, after diving amid mixed news on Thursday. Energy stocks sold off as West Texas Intermediate swooned more than 3% to settle back below $62 a barrel. Rising U.S. stockpiles were widely cited as the cause for the price drop, even as expiring Iran oil purchase waivers should, in theory, have forced prices higher.

The Trump administration allowed the waivers to expire, putting China, India and six other nations in violation of U.S. sanctions if they purchase oil from Iran. The administration says it will attempt to drive Iran's oil exports to zero, and analysts are forecasting oil exports out of Venezuela — also under U.S. sanctions — are at risk of total collapse.

WTI oil prices inched higher Friday, up a fraction to $61.85. Europe's Brent crude benchmark eased a few pennies, to trade at $70.69 a barrel. The Citigroup Global Markets VelocityShares 3x Long (UWT) gained 1.6% in early trade. The United States Oil Fund (USO) was up 0.5%.

Oil prices may see some impact from BakerHughes (BHGE) weekly rig count survey, due out at 1 p.m. ET.

Find Alan R. Elliott on Twitter @IBD_Aelliott

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2019-05-03 14:15:00Z
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Beyond Meat soars 163% in biggest-popping U.S. IPO since 2000 - MarketWatch

Beyond Meat Inc. stock skyrocketed Thursday in the best-performing public offering by a major U.S. company in almost two decades.

Shares of the plant-based meat maker — which priced its IPO at $25 a share Wednesday evening — started trading at $46 a share shortly after noon on the Nasdaq, and surged to $65.75 by the end of the session, for a gain of 163%. Prices hit almost $73 a share at their intraday peak. Shares were up another 4% after hours.

It was the biggest-popping IPO for a U.S. company with a market cap of at least $200 million since 2000, according to Dealogic data. That was when Palm Inc. made its debut in March 2000, at the peak of the dot-com boom. The last comparable pop in U.S. markets came in December 2010, when Chinese internet company Youku.com rose almost 115% in its debut on the New York Stock Exchange.

Beyond Meat’s BYND, +5.55% market cap jumped from about $1.5 billion Wednesday night to around $3.8 billion Thursday afternoon.

The company sold 9.5 million shares in the IPO to raise at least $240 million. Proceeds of the deal will be used to expand current manufacturing facilities and open new ones, to finance research and development and to boost sales and marketing, along with “general corporate purposes,” according to its prospectus.

Read: Beyond Meat IPO: 5 things to know about the plant-based meat maker

Beyond Meat was founded by vegan Ethan Brown in 2009, and its Beyond Burger is sold at Whole Foods and restaurant chain TGIF, among others.

While the company has never made a profit, it is expecting the alternative meat category to become a multibillion-dollar market over time and to take significant share from the $1.4 trillion global market for meat.

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2019-05-03 12:51:00Z
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Berkshire buying Amazon is a wake-up call for retail investors, says this portfolio manager - MarketWatch

There will be no coasting into the weekend, with Friday looking like a kitchen-sink kind of day for investors.

What we lack in big earnings news, with the bulk now past us, we’ll make up with data as big U.S. jobs numbers roll in, stronger than forecast, and then later we’ll get an ark full of Fed speakers. On Saturday, we’ll get Berkshire Hathaway’s BRK.A, -0.52% BRK.B, -0.36% annual meeting, and a chance to tap into the thinking of an all-time investing legend, the conglomerate’s billionaire chief executive and chairman Warren Buffett.

Opinion: This investor’s pilgrimage to Berkshire’s annual meeting is about more than Buffett

The so-called Sage of Omaha has already been busy, with Amazon AMZN, -0.56% up after he told CNBC late Thursday that “one of the fellows in the office that manages money... bought some” shares of the e-commerce giant. While Buffett himself didn’t push the button on that trade, he admitted being “a fan” and ”an idiot for not buying” the e-commerce giant before.

Our call of the day, from Byron Lotter, portfolio manager at South African-based Vestact Asset Management, says Berkshire’s latest move holds an important lesson for investors, given the company has traditionally focused on value-oriented companies — stocks that tend to trader cheaper than fundamentals would warrant — and Amazon’s share price is fairly eye-popping.

“Look forward, don’t look back at what the share price has done. Looking at the company’s history is important, and just because it’s gone up and it’s done incredibly well, don’t let that deter you from buying a share,” Lotter told MarketWatch, in a telephone interview on Friday.

He said if Berkshire isn’t scared off by the fact Amazon shares trade at $1,900 each, neither should investors get intimidated by a share price, and sit on the sidelines because they think they’ve missed out.

“Investors think that because a share is trading at an all-time high and has a market cap of a trillion dollars, Berkshire wouldn’t be buying Amazon,“ he said. “When we were buying (Amazon) at $350 we thought it was high.”

Shares of Amazon, Vestact’s third-biggest holding have gained roughly 100% (ex-dividend) over 2 years, 517% over 5 years, 2,307% over 10 years and 2,109% over 20 years, according to FactSet.

“There’s still huge potential for this company. You have to look at where you think the company is going. Cloud services is in its infancy and so is online retail,” said Lotter.

He’s also a fan of Google parent Alphabet Inc. GOOG, -0.47% GOOGL, -0.58% which has seen a rough ride this week on disappointing earnings.“Google is growing at an expected 20% per annum, trading at 19 times earnings. In my opinion, it’s offering a lot of value.”

And another lesson from the Sage of Omaha? It also may be time for value investors to change their thinking a little. Berkshire has long stuck to companies that are considered less risky, with slow and steady growth, like American Express and Coca-Cola. That’s as opposed to growth stocks, companies with strong momentum like Amazon and Apple, which Berkshire also dipped into back in 2017 for the first time. Both those stocks though, have value qualities, argues Lotter.

“In this day and age, with so much information out there, and markets so transparent and liquid, if you stay in that deep-value box, you’re going to miss out and underperform the markets ,” said Lotter. “Gone are the days when you can find a quality company that has good potential trading at 10 times earnings.”

Read: At Milken Conference, investors place their late-cycle bets

The market

Dow US:YMH9 S&P 500 US:ESH9 and Nasdaq US:NQH9 futures are moving higher. Stocks saw their worst multiday loses in five weeks on Thursday, with a triple digit loss for the Dow DJIA, -0.46% Read more in Market Snapshot.

The dollar DXY, +0.22% is up, along with gold US:GCU8 and crude US:CLU8 is also up. Oil logged the lowest finish in a month on Thursday.

Europe stocks SXXP, +0.39% are mostly higher as a batch of companies report. Asian equities had a cautious session, with China and Japan stocks still out for a holiday.

The economy

U.S. payrolls for April jumped 263,000, better than forecast, and the jobless rate hit a 49-year low, while hourly wages rose. After that, the Markit services purchasing managers index, the Institute for Supply Management’s nonmanufacturing index.

As for Fed speakers, the day starts with a speech from Chicago Fed President Charles Evans in Sweden. Then an all-day conference at the Hoover Institute will feature appearances by Fed Vice Chair Richard Clarida and these Fed presidents—New York’s John Williams, St. Louis’s James Bullard, San Francisco’s Mary Daly and Dallas’s Rob Kaplan.

Read: Mortgage rates tumble as one economist waves the white flag

The chart

Jesse Felder, of The Felder Report says investors have been shying away from riskier sectors of the stock market, and that could mean this year’s rally could prove unsustainable. Here’s his chart and our chart of the day:

The chart stacks up the S&P 500 and a custom index Felder made to track sector preferences. When investors are embracing riskier sectors, that red line moves up, though those lines have been diverging this year. He said that also happened at the stock market’s top in 2007 and at last summer’s new high.

The buzz

Wild about non-meat. Plant-based meat maker Beyond Meat BYND, +163.00% is up another 13% after shares soared 163% in its Wall Street debut on Thursday, the biggest IPO pop since 2000.

Read: 5 things to know about Chinese Starbucks competitor Luckin Coffee ahead of its IPO

Facebook FB, -0.26% is building a cryptocurrency-based payments system, says The Wall Street Journal, citing sources.

In Europe, banking giant bank HSBC HSBC, +0.63% posted a strong first quarter. Sportswear maker Adidas ADS, +6.69% topped forecasts and shares are flying high in Frankfurt.

In the U.S., earnings news is slowing to a trickle. U.S. Steel X, -5.76% shares are up on profit news, while shares of travel group Expedia EXPE, -0.45% and videogame publisher Activision ATVI, +2.04% are down on disappointing results.

Rubbermaid maker Newell Brands NWL, +2.09% satellite provider Dish Networks DISH, -3.09% and hydrocarbon exploration group Noble Energy NBL, -2.08% are reporting Friday.

The stat

9.1% — That marked the first-quarter return for Norway’s $1 trillion sovereign wealth fund, marking the best-ever quarter for the biggest such fund in the world. The Government Pension Fund Global is managed by Norges Bank, which credited a strong bounce for global stocks to that hefty gain, specifically tech stocks.

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2019-05-03 11:40:00Z
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Tesla to raise even more capital than expected, including a bigger share purchase by Elon Musk - CNBC

Elon Musk

Mike Blake | Reuters

Tesla said Friday it increased the size of the stock and bond offering that electric car maker announced a day before and that CEO Elon Musk intends to buy even more equity.

The company is selling 3.1 million shares at a price of $243 per share through underwriters Goldman Sachs and Citigroup, according to filing. That's up from the 2.7 million shares previously expected to be sold at the offering. The company also said it was boosting its convertible notes offering to $1.6 billion, according to filings.

Musk now intends to purchase up to 102,880 shares in stock worth $25 million, more than double his previous indication to buy 41,896 shares. The updated figures bring the total value of the offering to about $2.7 billion, up from the $2.3 billion expected following the Thursday announcement.

"As for the upsize of the deal - it's usually driven by greater demand. When they shop around the deal and it ends up being larger, it's usually because there's significant demand," Nomura Instinet analyst Christopher Eberle told CNBC in an email.

"As for why now? I think a better question is 'why not now?' It was pretty well telegraphed after the autonomous driving day that they were going to do a cap raise," Eberle added. "Rather than let the rumors dictate the movement of the stock, it's better to just stop delaying the inevitable and get it done. This buys them some breathing room for the next several quarters in the case of a weaker demand environment."

Wall Street's positive reception on Thursday to Tesla's plans to raise additional capital may have encouraged the underwriters to augment the size of the offering. Tesla shares rose 1.2% in premarket trading Friday following a 4.3% pop on Thursday to close at $244.10.

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2019-05-03 12:19:01Z
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Tesla’s value will grow 10x to $500 billion due to its self-driving tech, says Elon Musk - Electrek

At Tesla’s Investor Autonomy Day last week, Elon Musk laid out the automaker’s plan when it comes to self-driving, but now the CEO attaches a valuation prediction to it as the company attempts to raise over $2 billion.

Yesterday, Tesla filed for a capital raise of up to $2.3 billion.

Following the announcement, Citigroup and Goldman Sachs, two of the underwriters of Tesla’s new capital raise, held a call for investors with some Tesla executives, including CEO Elon Musk.

According to people on the call (via CNBC), Musk focused on Tesla’s self-driving effort – going as far as saying that all of Tesla’s current businesses, electric vehicles, energy storage, and solar, are just a backstop of value.

He reiterated many things that he already said last week during Tesla’s Autonomy day, but he also added that he sees Tesla achieving a $500 billion market capitalization thanks to its self-driving technology:

Musk confidently told investors on the call that autonomous driving will transform Tesla into a company with a $500 billion market cap, these people said. Its current market cap stands around $42 billion. He also said that existing Teslas will increase in value as self-driving capabilities are added via software, and will be worth up to $250,000 within three years.

It would represent a more than 10x increase over Tesla’s current market capitalization of about $42 billion.

The CEO reportedly refused to answer some questions relating to Tesla’s current business efforts in order to focus on autonomy:

“But he also tried to drive the conversation back to autonomy, calling it the fundamental driver of value for Tesla, and urged investors to stop nit-picking over vehicle margins.”

Musk plans to himself participate in the capital raise by buying an additional $10 million worth of Tesla shares.

Electrek’s Take

Here’s the thing: if Elon is right about Tesla’s self-driving strategy, then he is also right about the valuation.

If Tesla can indeed turn virtually all the vehicle it produced since October 2016 (after some computer retrofits) into self-driving cars/robotaxis with a software update at some point next year, the company would indeed create hundreds of billions in value overnight.

Of course, it’s not as simple as that. The rollout will most likely be gradual as regulatory approval will happen based on jurisdiction, but you get the point.

As I previously stated, I agree with Tesla’s approach to autonomy and therefore, I think Tesla can get there.

But Tesla’s current business of selling vehicles to customers at a decent gross margin remains extremely important.

The problem is that Tesla needs to get there and Elon has been historically inaccurate when it comes to the timeline of self-driving.

What the first quarter showed is that Tesla can really be at risk with just a few months of issues. In other words, Tesla needs to survive while delivering as many vehicles as possible until its self-driving technology works

$2 billion more in the bank should help and give them something like a year of buffer.

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2019-05-03 10:31:00Z
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