The Nasdaq continued to march ever so closer to the 5,000 landmark, while consumer price data showed that low oil prices are still keeping the lid on inflation.
First, the scoreboard:
- Dow: 18,208.70 -15.87 (-0.09%)
- S&P 500: 2,110.59 -3.27 (-0.15%)
- Nasdaq: 4,987.32 +20.18 (0.41%)
And now, for the top stories on Thursday:
- A bunch of economic data came in Thursday morning. Gas prices continued to temper inflation, with consumer prices falling 0.7% in January, while “core” inflation rose slightly more than forecast at 0.2%, compared to the estimate of a 0.1% month-on-month increase. “In one line: Falling goods’ prices do not constitute deflation,” wrote Pantheon Macro’s Ian Shepherdson after the release.
- Durable goods orders rose more than expected in January, climbing 2.8% compared to a forecast of 1.6% and a 3.3% decline in December. “In one line: Headline is flattering; core capex orders are trending down,” wrote Pantheon Macroeconomics’ Ian Shepherdson. Initial jobless claims unexpectedly jumped to 313,000 last week, versus the forecast for claims rise slightly to 290,000 last week’s miss at 283,000. And home prices rose 0.8% in December, more than the forecast of a 0.5% month-on-month increase. In a statement, Andrew Leventis, an economist with the Federal Housing Finance Agency, said: “The key drivers of appreciation over the last few years — low inventories of homes available for sale and improvement in labour markets — likely played a role in driving up prices during the quarter.”
- Meanwhile, Societe Generale’s Albert Edwards again pointed out the disconnect between economic data and stock prices. “We are at that stage in the cycle where I begin to doubt my own sanity,” he wrote in a recent note to clients, adding that most economic data missed economists’ expectations in February.
- In commodities, natural gas prices fell nearly 6% after the Energy Information Administration reported that stockpiles fell less than expected in the week of February 20. After a rally on Wednesday, West Texas Intermediate crude oil fell as much as 4% to around $US49 a barrel, amid calls from some Wall Street analysts that oil prices have stabilised.
- Morgan Stanley initiated coverage on IAC/InterActive, Barry Diller’s internet and media company that owns more than half of Tinder, the online dating app. “The challenge with freemium (charging for re-swipes, undos, read-receipts) is that a very small percentage of single people have shown an interest in paying for online dating,” the bank wrote in a note to clients Wednesday. The firm was rated “Underweight,” with the view that shares can fall 29% from current levels.
- Morgan Stanley also initiated coverage on GrubHub, which is far from being a household name among Americans. But that’s its strongest asset: “Low penetration and consumer awareness could drive a 5x expansion in GRUB’s user base,” Morgan Stanley’s Dean Prissman wrote in a note. GrubHub was rated “Overweight.” As more people order food online, they will be choosing to use GrubHub, according to Prissman.
- Also, Deutsche Bank says American Express’ breakup with Costco does not spell doom for the credit card company. In a note upgrading Amex to “Buy” from “Hold,” Deutsche Bank noted that management may have overestimated the impact to profits from the end of the co-branding agreement earlier in February. And with American Express hiking the Annual Percentage Rates on over 1 million credit cards, “each 250bps rate increase on each $US2B of balances adds about $US0.03 to EPS (or ~1%) — assuming 100% realisation,” Deutsche’s David Ho wrote.