03 Feb AMAZON, CHINA AND A BIG DATA WEEK
I think there is little disagreement that three of the four mega capitalized technology companies that posted profits last week exceeded expectation. One pundit sounded like Ross Perot when he exclaimed “there is a giant sucking sound” of monies flooding into these issues at the expense of all others.
A case in point until the close on Friday Amazon had the greatest surge in capitalization of any company eclipsing the previous record held be Google by over $30 billion or 38% according to Bloomberg. Amazon’s increase in capitalization is greater than the capitalization of over 450 S & P 500 members. To put into a different perspective, the increase in value of Amazon is almost as much as the capitalization of GE.
The last of the big five report profits at the close. Will Alphabet make it four for five?
In my view, the value of these companies is incomprehensible. What is more incredible that these issues are still regarded as “growth companies.” Four of the five are worth more than $1 trillion. These five companies are the greatest concentration of wealth ever in history, both on absolute and percentage basis of the S & P 500.
Wow! Rhetorically stating, based upon analysts’ and market expectations, trees do grow to the sky.
Commenting about earnings, fourth quarter results have generally exceeded expectations but forward-looking comments have been muted, partially the result of coronavirus.
Speaking of which, will the selloff in Chinese stocks continue? As noted last week the Chinese markets have been closed since January 23 because of the Lunar Holiday thus preventing any response to the virus. According to Bloomberg, leverage in the Chinese market is near a11 month high. How will this unfold?
This week’s economic calendar is crowded with many tier I releases including the ISM and ISM Non-Manufacturing Indices, various employment statistics culminating with Friday’s release of the BLS report as well as inventories productivity data. Will the statistics be ignored given that such were “pre-coronavirus?”
As noted last week, health scares are short term events causing little economic effect. Will it be different this time? Unfortunately, only history can answer this question.
Commenting briefly about Friday’s market activity, markets closed around their lows of the day falling almost 2%, the second 1% move or more in five days. As written last week, the markets went 70 days with out a move of 1%, an eerie sense of complacency, a complacency I suggested that may soon be shattered.
I thought the catalyst may be higher interest rates. The 10 and 30-year Treasury are around the low yields experienced in August/September 2019, the result of coronavirus fears.
Last night the foreign markets were mixed. London was up 0.35%, Paris up 0.19% and Frankfurt up 0.14%. China was down 7.72%, Japan down 1.01% and Hang Sang up 0.17%
The Dow should open nominally higher following China’s overnight plunge. As noted China has been closed since January 23 for a holiday and is playing catch up. The 10-year is off 10/32 to yield 1.55%.