It's Powell Time
Want to know why the stock market is sizzling hot again? It knows full well the new Federal Reserve Chairman Jerome Powell won't rock the boat in his first testimony to Congress over the next two days. Powell is one of the few knowledgeable folks at the Federal Open Markets Committee on how markets work, and he will unlikely want to spook investors weeks removed from a correction that saw the Dow shed 1,500 points almost instantly in a day. Moreover, Powell strongly resembles Janet Yellen in terms of his approach to monetary policy based on multiple indications. And inside the Fed, there continues to be a leaning toward keeping rates lower for longer (so think three rate hikes this year opposed to four). The data sets Fed officials use is simply not showing enough inflation to suggest a more aggressive tightening of policy is needed right now. All in all, it would be surprising if Powell beats the surging market down Tuesday or Wednesday. BUT, what the market is not prepared for is a new, more-plain spoken Fed chair in Powell. Whereas Alan Greenspan, Ben Bernanke and Yellen talked in another language (aka Fedspeak) so as to not freak out markets, Powell is more plain-spoken and direct. I am not sure investors understand that and how it could impact stocks negatively during a rate-hiking cycle. Nevertheless, here is a good quick read from TheStreet's Tom Bemis on how markets tend to react on the days that Fed chair's give testimony. Be sure to share the chart in the piece.
At this pace, money-losing Tesla (TSLA) will be worth more than 126-year-old industrial powerhouse (one-time?) General Electric (GE) . GE shares continue to fall out of favor with investors as the company struggles with a host of issues. From a recent cut to its dividend to a material earnings restatement for 2016 and 2017, it seems GE hits new market lows with each passing day. Shares have plunged 52% over the past year, and now hover around $14. Interestingly, GE's dividend yield of 3.13% hasn't been enough to attract investors in their constant search for yield. It's as if the market thinks GE will slash its dividend again and announce a cash raise. On the other hand, Tesla shares have skyrocketed 45% the past year. The company's market cap broke through $60 billion on Monday. Should we all hail the new industry powerhouse Tesla (who might have to raise cash of its own)?
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The internet always showers retailers that launch same-day delivery services with love as if it's some amazing new thing brought down from the heavens. Case in point is the buzz Walmart's (WMT) Sam's Club is receiving for a new same-day delivery launch in partnership with Instacart. The service will debut in Austin, Texas; Dallas-Fort Worth and St. Louis, and obviously takes aim at Amazon's (an Action Alerts Plus holding) budding same-day grocery delivery service. What no one realizes though is that all retailers haven't solved the major issue of the last mile. It's a major impediment to making same-day delivery a nationwide reality. The United States Postal Services has long subsidized the last mile, but their finances are in shambles and won't be around in current form for much longer. I think there is a silent bidding war for last-mile delivery king XPO Logistics (XPO) going on that will lead to an acquisition within the year. My bet is Amazon or Home Depot (HD) .
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