Written by Gary
US equities rebounded today (SPY +0.5%), led by gains in industrial shares and reports of renewed trade negotiations between the United States and China.
Todays S&P 500 Chart
The Market in Perspective
|Here are the headlines moving the markets.|
Jeffrey Gundlach, chief executive of DoubleLine Capital, said on Tuesday that short-maturity U.S. Treasuries “look as good” relative to stocks and long-maturing bonds than they have in a long time.
U.S. stocks rebounded on Tuesday, led by gains in industrial shares following reports of renewed trade negotiations between the United States and China.
Mexican presidential winner Andres Manuel Lopez Obrador said on Tuesday that he expected there would be an agreement in the renegotiation of the North American Free Trade Agreement (NAFTA) in the coming days.
Billionaire investor David Einhorn, whose Greenlight Capital lost 18.3 percent in the first six months of the year, told clients on Tuesday he has been trying to repair the damage.
Los Angeles prosecutors said on Tuesday that they had declined to pursue three accusations of sexual abuse against CBS Corp Chief Executive Les Moonves dating back to the 1980s because the statute of limitations had expired.
MGM Resorts International said on Tuesday it signed an agreement with the NBA to become the basketball league’s first sports betting partner.
Stock markets edged up globally on Tuesday on a report that the United States and China were seeking to resume talks to defuse a budding trade war, while the dollar rose against the yen after the Bank of Japan said it intends to keep interest rates low.
China will keep its economic growth within a reasonable range and achieve this year’s target despite challenges, the state-run Xinhua news agency said on Tuesday as a trade war with the United States intensifies.
More than 100 people said they had fallen sick after eating at a Chipotle Mexican Grill Inc restaurant in Ohio, sending shares of the burrito chain down as much as 9 percent on Tuesday.
One month ago, in our ongoing chronicle of the pain suffered by David Einhorn’s Greenlight Capital, we reported that based on interim monthly numbers, the fund had lost a massive 8% in the month of June, bringing his – and his LPs’ – total loss for the year to 19%. The reason: Einhorn got clobbered on both side of his portfolio, with his 20 biggest long positions falling sharply, while his 20 largest shorts – most of which are the prominent growth and tech names that have been beaten down recently – surged.
Today, in his just released Q2 letter to investors, Einhorn not only confirms the poor performance, but also notes that “over the past three years, our results have been far worse than we could have imagined” and while hoping he will be vindicated in the end, he admits that “Right now the market is telling us we are wrong, wrong, wrong about nearly everything. And yet, looking forward from today we think this portfolio makes a lot of sense.”
Will readers, and more importantly, his LPs agree, or will they decide to pull their capital from the hedge fund? That remains to be seen.
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Below are key excerpts from the letter:
Q2 earnings season has not been kind to tech stocks: while all but one of the 36 tech firms that had reported results through this weekend exceeded analyst estimates, over the next five days their stocks were down an average 3.5%. That compares with a gain of 0.9 percent for all S&P 500 stocks, according to Bloomberg calculations.
As a result, there has been a furious rotation out of growth and into value names, which as we noted earlier today saw the biggest 3-day move in the past decade, which Nomura defined as a 4.3-sigma event.
Over the weekend, we reported that as a result of rising tariffs and escalating trade war, various US companies had passed on rising input costs to consumers, resulting in higher prices, in some cases significantly so, for a variety of products.
The first industry hit by higher prices was in discretionary purchases such as recreational vehicles. Earlier this month, Winnebago Industries warned that the recreational-vehicle boom seen in the last several years could have popped: “We’ve had to go to the market a bit more frequently and a bit more aggressively with some price increases as of late,” said Michael Happe, chief executive of recreational-vehicle manufacturer Winnebago Industries Inc, who spoke with The Wall Street Journal. The CEO of the Iowa-based company said that trade tensions and rising inflation could lead to a gloomy outlook for the company. “Uncertainty is never a great thing for the economy and the more noise there is there’s a risk that consumers will press pause,” he said.
Another RV company, Polaris Industries, announced it was hiking prices on its vehicles including boats, motorcycles, snowmobiles to cover $15 million of the $40 million in tariff-related charges to pay for steel, aluminum, and components from China this year. The company is facing severe headwinds from retaliatory tariffs from other countries on products it exports from the U.S., including the Indian-brand motorcycles it ships to Europe.
And while higher costs for recreational-vehicles – and soon cars if auto tariffs are implemented – are slowly but surely being passed along to the American consumer, at least these are discretionary purchases for membe …
The bond-market tide may be on the turn. After weeks of inaction, 10-year Treasury yields are eyeing 3% once more. Continued momentum in the global economy could lead yields higher still.
Market Extra: The stock market just experienced the most seismic shift from growth to value since Lehman Brothers, says Nomura
Some of the most popular bets in the U.S. stock market have gotten pummeled in recent days, leading one analyst on Wall Street to declare it one of the biggest rotations from growth to value stocks since the gyrations that occurred in the aftermath of the bankruptcy of Lehman Brothers back in mid September 2008.
Black, Hispanic and white graduates carrying student debt all face different outcomes.
Emotions are an enemy of investors; prudent investors try to get them under control, says Nigam Arora.
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