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- Purchasing Manufacturers Index Rebounds in August
- Dollar Hits New Record High Against Euro
- Unusual Options Activity: NIO Inc. (NIO)
- Insider Activity: JM Smucker Co (SJM)
| Purchasing Manufacturers Index Rebounds in August Posted: 02 Sep 2019 03:00 AM PDT
Data shows expansion after contraction in prior month. The Chicago Purchasing Manufacturers Index, a measure of real goods being created and distributed throughout the economy came in with a read of 50.4 in August. That number was a jump over the July data of 44.4. The index is structured on a scale from 1 to 100, with 50 as a break-even point. The current read shows modest growth, compared to the July data which indicated a sharp contraction. Several components of the PMI showed good news for an expanding economy. Prices paid for goods rose at a faster pace. New orders rose—and even reversed their prior contraction number from last month. Supplier delivers and order backlogs have risen as well. And in 8 of the past 12 months, business activity has been seen as positive. Within the data were some negative points as well, including a decline in the rate of employment, which tends to signal a contracting economy (or at least one nearing such a point at full employment). And production fell at a slower pace, also signaling potential contraction as well. Action to take: Overall, this latest data shows a trend of a slowing, but still growing economy. It is a warning sign to investors, along with other signals like slowing home, employment, and yield curve data, suggesting that the economy may slide in the coming months. Traders should scale back on aggressive trades, and investors should look to raise some extra cash to take advantage of future bargains.  |
| Dollar Hits New Record High Against Euro Posted: 02 Sep 2019 03:00 AM PDT
Dollar at record strength against other major currencies. The Euro hit a price of $1.09 compared to the dollar, its weakest performance against the U.S. currency since May 2017. As Europe shows even slower growth than the United States, the U.S. dollar will continue to look like a haven for currency investors. Currency moves are binary in nature. A weak Euro means that the dollar looks relatively stronger. This is a situation that can have severe implications on trade issues. The weak Euro makes Eurozone goods more competitive on global markets relative to U.S. goods. While currencies tend to fluctuate between periods of strength and weakness, the relative economic strength of the U.S. to other industrialized nations right now portends for the current strength of the dollar to continue, and for U.S. interest rates to remain higher than those of weaker economies around the world. Action to take:Investors looking at international investments may want to scale back and have more money in dollar-denominated assets, where a strengthening dollar can lead to bigger returns on a currency-adjusted basis. While Eurozone goods may look cheaper, and therefore potentially a better investment, the weaker fundamentals in the Eurozone spell more danger for European stocks compared to American stocks at this time. Currency traders should look to go long the dollar and short currencies like the Euro for the foreseeable future.  |
| Unusual Options Activity: NIO Inc. (NIO) Posted: 02 Sep 2019 03:00 AM PDT
October put-buying suggests big drop soon. On Friday, over 20,240 contracts traded on the October 2019 $2.50 put option on NIO Inc (NIO). As the contract had a prior open interest of 422, this represents a 48-fold increase in volume on the bearish trade on shares. With shares of NIO trading around $2.90, the $2.50 bet is out-of-the-money at the moment, but could move to that strike price before these options expire in 46 days. NIO designs, manufactures, and sells electric vehicles around the world, primarily out of its home country of China. The company offers 5 to 7 seater SUVs, charging solutions, and battery services among others. The company went public in September 2018 and has seen shares slide from nearly $14 to under $3. Action to take: The company's large losses, lack of cash flow, and high debt suggest continued trouble ahead. While China may want to bail out the company, the put option trade, at just $0.23, or $23 per contract, looks like a cheap bet on a company that is continuing to decline. Speculators who want more time for the trade to play out should look at the January 2020 $2.50 put options, which trade for around $0.46, or $46 per contract. Given the company's current operating numbers, there is no price at the moment at which we would recommend shares, and given the cost of borrowing shares to short, we still prefer the option.  |
| Insider Activity: JM Smucker Co (SJM) Posted: 02 Sep 2019 03:00 AM PDT
Senior Vice President makes six-figure buy. On Thursday, August 29th, Geoff Tanner bought 1,000 shares of JM Smucker Company (SJM), where he serves as a senior vice president. By picking up shares around $103, his total cost to pick up those shares was $103,000. The buy increases his stake by 17 percent, leaving him with just under 14,400 shares. This is the first insider buy at the company this year, following some insider sales at higher prices in the past few months. The JM Smucker Company is a consumer brands giant, known for preserves, peanut butter under the Jif brand, Folgers coffee, and pet foods under the Meow Mix and Kibble n Bits brand, among others. Action to take: The insider buy came after the company missed on earnings and the share price fell by 10 percent on the day—following up on weak performance in the past few months. Over the past few years, shares have tended to rally off the low-$100 range shares now trade at, and look like a good buy for investors up to $107.50. At that price, investors will pick up a 3.3 percent dividend yield. Given the company's propensity to bounce, speculators may want to look at the April 2020 $115 calls, which trade around $4.40, or $440 per contract. Should shares get up into the $120 range again before April, these out-of-the-money calls could become a double.  |
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