Stocks are in the doldrums, but this asset is about to go flying – MarketWatch

This post was originally published on this site

August can be a tough month for stocks — and a market that seems to get more listless by the day isn’t making it speed along any faster.

Of course, who’s ready to really push onto autumn and the U.S. election, for one thing?

That lethargy is pretty understandable, says Panmure Gordon & Co.’s David Buik. He notes that over the past couple of months, stock markets “have performed beyond the call of duty,” facing down Brexit, lower global-growth views and ongoing uncertainty about exactly what kind of fuel central banks have left in the tank.

The main reason stocks aren’t going anywhere, Buik says, is that the alternatives still aren’t “very unappetizing.”

Tough out there indeed:

The Dow industrials could be in for an eighth straight loss, if futures are any indication this morning — though there is some pretty important jobs and services data. Oil is up but still hovering below that $40-a-barrel level, though hopes are running high ahead of U.S. supply data later. Obviously, there’s room for disappointment there.

Risk-averse investors pushed the dollar briefly below 101 yen, and there is chatter that sub-¥100 isn’t too far off. Our chart of the day takes a closer look at that.

Jefferies’ chief global equity strategist Sean Darby laid out his biggest worry for stocks in a note to investors this morning, lowering his recommendation for the S&P 500 to modestly bullish:

“While investors might point out the risks of a falling oil price onto high-yield markets and the possibility of rising credit spreads undermining stocks, we believe the more likely derating for stocks will come from a selloff in government bonds as is being seen in Japan currently,” Darby says.

No love for alternative investments out there? Our call of the day says that’s about to change soon for this shiny asset.

Key market gauges

Dow YMU6, -0.01%  and S&P ESU6, -0.02%  futures are down. Across Asia ADOW, -1.81% , the only green seen was just a bit for the Shanghai Composite SHCOMP, +0.24% . But the Nikkei NIK, -1.88%   fell 1.9% as weak oil prices and dashed hopes for Japan stimulus weighed.

The yen USDJPY, +0.42%   soared as Japan stocks fell, pushing the dollar back and forth across the ¥101 mark.

In Europe SXXP, -0.16% , stocks are right at the flat line, but banks are up.

Oil prices CLU6, +1.19% CLU6, +1.19% are holding steady under $40 a barrel, after closing below that key level for the first time since April on Tuesday. Fresh data on crude stockpiles are coming later. Gold GCU6, -0.52%  is off a little. That brings us to our call of the day.

The call

While investors are clearly piling into stocks right now and maybe not so interested in so-called alternative investments, don’t expect things to stay that way, says FXTM’s VP of Market Research Jameel Ahmad.

He notes how recent dollar weakness has given gold the platform it needs to return to levels not seen since the post-Brexit uncertainty above $1,350 an ounce. Gold still has room to rise before end 2016 and he rattles off a few reasons for this:

“Firstly, returned depression in the oil markets should at some point weigh on equity markets. Secondly, while the Federal Reserve are maintaining a bias towards raising U.S. interest rates higher on the outside there is still a lack of confidence over whether U.S. interest rates could really be raised in 2016. On top of this, concerns over the growth of the global economy are gaining endless headline attention and I think this could consider longer-term investors towards gold as an alternative investment,” he says.

Gold is up about 5% over the last three months, but is still getting its lunch handed to it by silver, up 16%.

Also check out: Why China and Russia are buying so much gold

The chart

“It’s just a matter of time (for the dollar) to try the ¥100-line,” said IG Securities market analyst Junichi Ishikawa, who says the market sees the Bank of Japan running out of options.

There’s a lot of that going after the dollar slid as low as ¥100.75 overnight. It’s a chart worth watching, given this week’s big U.S. jobs data.

MarketWatch

Jeroen Blokland, portfolio manager at Robeco, told MarketWatch that the dollar passing ¥100 is not that big of a deal for U.S. stocks. That’s because the dollar’s trade-weighted index DXY, +0.31%  is still lower, kept down by the Federal Reserve’s pushed-out timeline for rate increases.

Blokland says a weak dollar normally delivers a boost for oil prices, but that commodity is now preoccupied by an imbalance in supply/demand . But he says any aversion to risk that sends investors into the yen is also “likely to negatively impact oil.”

The economy

The ADP employment update showed 179,000 private sector jobs added in July. These numbers get extra scrutiny ahead of Friday’s bigger nonfarm payrolls report. Markit’s services PMI is coming at 9:45 a.m. Eastern, followed 15 minutes later by the ISM services data.

Earnings

Kate Spade KATE, -19.29%  is plunging 16% after lower guidance. Humana HUM, +0.16%  delivered an earnings beat , Clorox CLX, +1.56% is down a bit after an earnings miss. Office Depot ODP, +2.58%   is slumping after an earnings miss. Time TWX, +3.15%  is still to come.

Tesla TSLA, +0.44%  is the after-hours earnings highlight, and investors will scrutinize the electric-car maker’s aggressive expansion plans. Square SQ, +1.79%  , MetLife MET, +1.73%  and Fox FOXA, +0.21%  will report late as well.

Electronic Arts EA, -1.02%  shares are off after the video game maker’s forecast fell shorttr. Etsy ETSY, +11.32% is up over 3% after the online craft market posted 39% revenue growth and lifted guidance. 

Global banking giant HSBC’s HSBC, +4.73% HSBA, +4.56%  profit fell 40%, but its shares rose in London after the Asia-focused lender said it plans a $2.5 billion buyback.

The buzz
Bloomberg

Whitman’s all in for Hillary

Meg Whitman says she’ll “vote for Hillary” and “talk to her Republican friends about helping” Clinton, citing GOP presidential candidate Donald Trump’s “reckless and uninformed positions on critical issues.” The CEO of Hewlett-Packard HPE, +1.69%  is only one of Silicon Valley’s most staunch Republicans.

Fitbit FIT, +9.19% is up 8% after an earnings beat. CEO James Park told MarketWatch that upcoming holiday offerings won’t be brand-new devices, but rather upgrades of existing products.

CVS CVS, -0.25%  says it’s dropping coverage of two higher-priced treatments for cancer and diabetes in its drug plans.

The stat
CoinDesk

$65 million — That’s the estimated haul for the thieves who hacked Hong Kong-based digital currency exchange Bitfinix. The news hit bitcoin prices hard, and CoinDesk says prices fell nearly 20% in response.

The quote
Reuters

“The greatest bullfighter of all time, Manolete, was gored to death by a Miura bull, an event that left Spain in a state of shock in 1947. Many contemporary hedge-fund managers can probably relate.” — Caerus Investors, in a second-quarter investment letter. The small New York-based equity hedge fund is stumped as to why stocks are rising when all signs say they shouldn’t be, notes Business Insider.

Random reads

Miraculous, dramatic crash-landing in Dubai this morning.

Tweeters mock Trump’s spokeswoman after she blames Obama for the death of Captain Khan:

Judge rejects Donald Trump’s pretrial bid to get Trump U. lawsuit tossed

Australia accused of ignoring abuse at refugee camps in remote Pacific island.

Watch this pilot do a pretty swift take-down of an unruly passenger

[embedded content]

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. Be sure to check the Need to Know item. The emailed version will be sent out at about 7:30 a.m. Eastern.

More from MarketWatch