250.02 -3.03 (-1.20%)
Pre-Market: 5:08AM EDT
|Bid||250.12 x 1000|
|Ask||250.36 x 1000|
|Day's Range||252.20 - 255.44|
|52 Week Range||232.35 - 269.28|
|PE Ratio (TTM)||N/A|
|Beta (3Y Monthly)||1.07|
|Expense Ratio (net)||0.15%|
Cleveland-Cliffs (CLF) released its third-quarter earnings before the markets opened on October 19. The company’s management held a conference call with analysts on the same day.
On October 12–19, US equity indexes had mixed performances. Last week, the S&P 500 (SPY) and the S&P Mid-Cap 400 (IVOO) were unchanged, while the Dow Jones Industrial Average (DIA) rose 0.4%, respectively. Energy stocks form ~5.9%, 5.1%, and 5.2%, respectively, of these equity indexes.
On October 20, Saudi Arabia admitted that US resident Jamal Khashoggi died during his visit to the Saudi consulate in Istanbul on October 2. The tension between the Western world and Riyadh might escalate. Previously, Saudi Arabia denied its involvement in the journalist’s disappearance.
Caterpillar (CAT) is scheduled to report revenues of $13.28 billion in the third quarter—an increase of 16.4% on a year-over-year basis. In the third quarter of 2017, Caterpillar reported revenues of $11.41 billion. If Caterpillar manages to meet analysts’ expectations, its third-quarter revenues would increase for the second consecutive year.
In the previous article, we noted that several miners, including BHP Billiton (BHP), Vale (VALE), and Rio Tinto (RIO), have announced share buybacks. While stock prices get all the attention, for mining companies with a significant amount of debt, we should also look at EV (enterprise value). Freeport has an EV of ~$28 billion.
Earlier this year, Goldman Sachs said US stock buyback authorizations could top $1 trillion this year, which would be the highest absolute level of buybacks since 2007. Recently, Alcoa (AA), the largest US-based aluminum producer, announced a $200 million share buyback. Other metals and mining companies including Vale (VALE) and BHP Billiton (BHP) have also announced share buybacks this year.
The stock market has staged a partial rebound from its recent pullback, but Jim Paulsen, chief investment officer (CIO) at The Leuthold Group, sees "overheat pressure" building in the economy that, in turn, poses a severe risk for stock prices. Meanwhile, in a recent report entitled "No Margin For Error," Morgan Stanley indicates that a number of macro forces are exerting downward pressure on corporate profit margins, and this ultimately means downward pressure on stock prices. Among those forces are the two big threats that Paulsen sees, inflation that raises business costs in general and wage growth in particular.
On October 18, US crude oil’s implied volatility was 25.8%—almost on par with its 15-day average. The inverse relationship between oil prices and oil’s implied volatility is illustrated in the following graph. Since reaching a 12-year low in February 2016, US crude oil active futures have risen 161.9%. Crude oil’s implied volatility has fallen ~65.7% since February 11, 2016.
According to FactSet's "Earnings Insight," early S&P 500 third quarter earnings have shown a blended 19.1% growth rate. The growth rate would be the highest since Q1 2011 – if it continues for the remaining 94% of S&P 500 companies – and help moderate forward price-earnings ratios to 15.7x, which is below their five-year average.
On October 11–18, US equity indexes had the following correlations with US crude oil December futures: the S&P Mid-Cap 400 (IVOO): 54.4% the Dow Jones Industrial Average (DIA): 53.6% the S&P 500 (SPY): 43.3%
Cleveland-Cliffs (CLF) released its third-quarter earnings today before the markets opened. Its revenue came in at $741.8 million, which was 24.3% higher YoY (year-over-year), beating analysts’ estimate of $732 million according to the consensus compiled by Thomson Reuters. In its second-quarter results, it beat the consensus estimate.
On Oct. 19, 1987, the Dow Jones plunged 22.6 percent for its worst daily drop in history. With the New York Stock Exchange nearly doubling its record trading volume (604 million), the Dow fell from an intraday high of 2,164 to a low of 1,677 — conceding about $500 billion in a matter of hours.
Is the Sell-Off in US Steel Stocks Overdone? Steel prices are the key driver of steel companies’ earnings. Earlier this year, spot HRC (hot rolled coil) prices hit a decade high, with prices topping $900 per ton.
To help investors keep up with the markets, we present our ETF Scorecard. The Scorecard takes a step back and looks at how various asset classes across the globe are performing. The weekly performance is from last Friday’s open to this week’s Thursday close.
In the week that ended on October 12, the S&P 500 Index (SPY) fell 4.1%, but it bounced back earlier this week. In the last three sessions, the S&P 500 Index has recovered 1.5% as of October 17, primarily due to solid bank earnings and a sharp recovery in tech stocks. In contrast, the market turned negative again today, and at 1:45 PM EDT, the S&P 500 benchmark was down 1.8%, while the Dow Jones Industrial Average Index (DIA) and the NASDAQ Composite Index (QQQ) were down 1.8% and 2.3%, respectively, from the previous session’s close.
On October 17, US crude oil November futures fell 3% and closed at $69.75 per barrel—below $70 for the first time since September 18. Bearish inventory data might be behind the downside in oil prices.
Yesterday, the Federal Reserve released the minutes from its September 25–26 meeting. Read When Will Fed Tightening Start to Hurt the US Economy? for a summary of the Fed’s actions at the meeting and the market’s reaction to them. The meeting minutes were slightly more hawkish than expected, and they signaled that most Fed officials believe that interest rates must continue to rise.
US steel stocks, which have been subdued for the last few months, have seen fresh selling pressure this month. Earlier this week, Credit Suisse downgraded US steel stocks from “overweight” to “equal weight.” Several other brokerages have also taken a bearish view of US steel stocks.
The EIA (U.S. Energy Information Administration) reported an increase of 6.5 MMbbls (million barrels) in US crude oil inventories to 416.4 MMbbls for the week ended October 12. A Reuters poll had indicated a potential rise of ~2.16 MMbbls.
Cleveland-Cliffs (CLF) has come a long way with respect to its debt levels. The company’s change in management in 2014 and its focus on debt reduction have somewhat allayed investors’ concerns. During the Q2 2018 earnings call, Cleveland-Cliffs maintained that bringing its net debt below $1 billion is its second priority, after the focus on the HBI (hot-briquetted iron) plant.
According to the latest BAML (Bank of America Merrill Lynch) survey, investors’ outlook for economic growth has worsened further. In August, a net 7% of the managers surveyed expected global growth to slow down next year. In September, a net 24% of the managers surveyed expected global growth to slow down in the next 12 months.
BAML (Bank of America Merrill Lynch) conducted a survey that polled 231 global investors with $646 billion in total assets under management from October 5–11. The sell-off and concerns of peaking growth in the US might have tempted investors to shift into emerging markets (EEM). The emerging market currencies were in a free fall with many countries like Argentina, Turkey, India, Indonesia, and Brazil bearing the brunt.
The greenback's gains against emerging market currencies have been steeper. The MSCI Emerging Markets Currency Index, which tracks the performance of 25 emerging market currencies against the U.S. dollar, has declined 5.5 percent.