Will Secretary Scott Bessent fire his bazooka to avert yields climbing above 5%?
Initial US jobless claims came in at 4.4 million people yesterday, meaning that over the last five weeks, 26 million people have filed for unemployment. The market didn't pay much attention to the data though, because those people are still getting unemployment cheques allowing them to continue spending. So far the US government has put aside $2.9 trillion, as stimulus/ bailouts for its economy. That is a massive cash injection and is a reason why US stocks have held up well over the last month.
US markets started their trading day well in the green, but then initial trial data for a Gilead (NASDAQ:GILD) anti-viral drug was leaked, indicating that the drug was ineffective. The news changed sentiment in the market, as investors worry that finding a cure will take longer than expected.
Yesterday the JSE All Share closed up 3.10%, the S&P 500 closed down 0.05%, and the Nasdaq closed down 0.01%.
One thing, from Paul
For the record, this is why we remain bullish on Nike (NYSE:NKE). If you are going to take up jogging in South Africa this winter, you are going to need a buff (aka. a face mask), a headlight, some Nike long sleeved tops, Nike shorts or tights and some new Nike shoes. I'm not sure how you are going to get all that, as retail stores remain closed. I assume that online ordering and delivery will be allowed soon? We shall see.
Nike reports results again in June, for the quarter to the end of May 2020. Those will show a sales dent due to store shutdowns, but less than you might think. Their direct-to-consumer online platforms are very strong. Sales in China have been strong lately. So have sales of Jordan branded items in the US, due to a high profile ESPN documentary about Michael Jordan (also available on Netflix (NASDAQ:NFLX)).
The all-time high share price for Nike was $105.62, which was reached three months ago. Now it is at $88.78 which is 16% lower. Given the uncertainty related to the post Covid-19 economic recovery, that seems reasonable. Nike is good stock to buy and hold, right now.
Byron's Beats
If you are like me, you are desperately missing live sports. That natural rush you get from backing a team you love cannot be substituted. Some good news hit the wires a few days ago that a live charity golf 4 ball will take place next month. Tiger Woods, Phil Mickelson, Tom Brady and Peyton Manning will compete in what is expected to be a 2 on 2 contest. Brady and Manning are former NFL players.
The news certainly gets the juices flowing. I am sure many others feel the same. Details are still vague but I imagine millions will tune in. Let's hope we see more of this with the likes of tennis added to the mix.
Bright's Banter
Social media company Snap Inc (NYSE:SNAP). released its earnings for the first quarter which helped the share price soar as much as 20% up in after-hours trading. The company saw its user base grow 20% or 29 million year-on-year to 229 million daily active users, the highest daily active user growth since 2017 thanks to this pandemic and physical distancing.
Revenues came in at $462 million, up 44% slap bang in the middle of a pandemic. Average revenue per user was $2.02 up from $1.68 as their core advertisers stick with the platform during these tough times. Snap has been working on an advertising model that will allow them to accept smaller advertisers, but that could be delayed further due to this pandemic.
The CEO of Snap Inc, Evan Spiegel still strongly believes that Snapchat's goal is to help people build and maintain their friendships and that has been amplified in this stay at home lockdown period. Snap launched App Stories which brings the company's popular Stories feature to third-party software developers, to help maintain user growth. They probably should've done it before Facebook (NASDAQ:FB) stole it, but it's never too late.
I like to look at Snap Inc's. quarterly numbers as that is usually the barometer of what is to come for the social media giant Facebook in terms of engagement and user growth numbers. Paul wrote about the ComScore engagement numbers not so long ago, we expect a decent print from both Facebook and Instagram with solid time spent on these apps.
Signing off
You have survived another week of lockdown. Next week only has 3 working days, if that matters much? For the US market, earnings season continues. The JSE All-share is lower, and the Rand is at $/R 19.10.
Sent to you by Team Vestact.
