Stocks rallied Friday morning to cap off a turbulent week. The Dow rose 163 points, while the S&P 500 jumped 0.94%, and the Nasdaq gained 1%.
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“The Fed, in order to keep this expansion going, needs to provide additional accommodation,” Tiffany Wilding, U.S. economist at Pacific Investment Management, said to Bloomberg. “Whether they are able to arrest the downturn – there is some question around that. Ultimately we think that they will be able to.”
We’re back on Fed watch to end this wild week. St. Louis Fed President James Bullard threw cold water on the speculation that the central bank would call an emergency meeting before its scheduled gathering in September as debate has raged around whether the inversions in the yield curve may be signaling a recession, even as solid economic data rolls in. Chairman Jerome Powell may help shed some light on how he views what has been happening in Jackson Hole next week. The market may get some further insight this coming Wednesday when minutes from the Fed’s July meeting are released. Meanwhile, the muted reaction to an ECB official’s call for major stimulus could be a sign the global economy could be too far along the path to recession for central banks to stop it. Considering negative rates haven’t stimulated the economy, rates that extend further into negative territory won’t make much difference.
Falling bond yields, which have sent markets reeling this week, have recovered slightly from their historic lows, easing some recession fears. The U.S. 30-year Treasury yield fell to a record low of 1.941% Thursday, while the yield on the 10-year note sank to a three-year low of 1.475% as investors ran to safety.
OPEC gave a downbeat oil market outlook for the rest of 2019 as global economic growth slows. The cartel also highlighted challenges in 2020 as rivals pump more oil, building the case to keep an OPEC-led pact to restrict supplies in place. “While the outlook for market fundamentals seems somewhat bearish for the rest of the year, given softening economic growth, ongoing global trade issues and slowing oil demand growth, it remains critical to closely monitor the supply/demand balance and assist market stability in the months ahead,” OPEC wrote in the report. And from black gold to gold gold, the precious metal is set for a sixth weekly gain as investors’ fears send them flocking to the traditional safe haven asset.
Chipmakers led the market Friday morning after Nvidia delivered a quarterly sales and profit beat, giving hope that the slump in chip orders may beeasing as demand for graphic chips and parts used in data centers recovers. “Clearly the last three quarters have not been an enjoyable ride (to say the least), but we view the report as another indication of a clear signal of the company’s growth capabilities,” Evercore ISI analysts wrote. Evercore maintains an Outperform rating on the stock and set their price target at $185, suggesting a nearly 17% gain over the next twelve months. Advanced Micro Devices joined Nvidia in enjoying strong gains in pre-market trading this morning. NVDA is currently up 6.63%, while AMD has gained 3.95%.
Meanwhile, Deere cut its net income guidance for the year for the second time, after reporting adjusted EPS for Q3 that missed estimates. A difficult planting season, and the intensifying U.S.-China trade war have led to crashing grain prices, resulting in farmers putting off new equipment purchases. According to Deere’s CEO, the results demonstrate the “high degree of uncertainty that continues to overshadow the agricultural sector.”
Revlon stock jumped on a report that the company is considering a sale. The cosmetics giant has reportedly retained advisors from Goldman Sachs to consider its options, including a potential sale of parts or all of its business. Earlier this month, Revlon received a $200 million 4-year senior secured loan to help fund its business, which has been struggling. The cash was secured to help the company innovate and prepare for refinancing the more than $3 billion debt on its balance sheet. Still, even if Revlon is open to being acquired, it is unclear whether there is a buyer who would be interested. Other companies in the cosmetics business have had challenges as shoppers increasingly turn away from drugstores and toward Sephora and Ulta Beauty, as well as to startups like Glossier, for beauty products.
Stocks We’re Watching
Canadian Solar (NASDAQ: CSIQ): Canadian Solar shares jumped nearly 15% yesterday after the company crushed Q2 expectations in its report from Thursday. The solar module maker and project developer was expected to report $0.30 per share in profit for the quarter on sales of $990.3 million, but reported earning twice that at $0.77 per share pro forma, and $1.04 per share as calculated according to generally accepted accounting principles (GAAP), on sales of $1 billion – representing a gain of 59% year-over-year. Module shipments grew from 1,757 megawatts in Q1 to 2,143 megawatts in Q2, topping the high end of the company’s quarterly guidance. CEO Shawn Qu said the results put Canadian Solar “in the most competitive position in the company’s history.”
LifeVantage (NASDAQ: LFVN): Sell-side analysts are projecting LifeVantage will grow at an accelerated rate over the next 5 years. Brokerage firms believe the dietary supplements and skin care product company will grow 20% over the next year and 12% over the next five years. The stock is currently up 27.35% over the last 12 months, and is up 14.6% for the week.
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