Why aren’t China Stocks Breaking Down?

The Tale of the Tape

Good evening folks. Tech led the way higher with the $XLK (Tech Sector ETF) closing up 1.35%, while small caps and Energy lagged. 

You’d think that Energy stocks would get tired of sucking but they seem to love it just fine. At some point, someone will see value there but don’t hold your breath.

Sector SPDR Real Estate ETF $XLRE closed at an all-time high today. Here’s a chart and what looks like a clean break out:

Couple factors at work here:

  1. Simon Properties agreed to purchase mall REIT Taubman in a $3.6B deal (see more below) 
  2. Treasury yields remain stubbornly low. In fact, if the 10 year yield sinks below 1.5%, dividend stocks like real estate and utilities could get even stronger.

Here’s the closing levels and daily percentage changes on the major indices:

S&P 5003,352+0.73%
Nasdaq9,628+1.13%
Russell 20001,667+0.66%
Dow Jones29,276+0.60%

China Stocks Keep Their Mouths Shut So Far

Markets are not fully efficient but they’re not dumb either and you have to give them some benefit for sometimes getting the direction right before the narrative is even told.

We bring this up because nobody knows what’s really going on in China with the coronavirus. You hear all kinds of stuff but Chinese State Media is opaque and who knows the motivations of social media posters. 

So tonight we take a look at the iShares China Access ETF ($MCHI), which reflects a broad range of large and midcap China stocks that trade internationally, in order to get a sense of what story price might be telling here.

$MCHI has been trading in a range for 20 months – well before the Wuhan coronavirus outbreak. Despite some pick up in volatility, $MCHI has not broken down from the range or up out of it.

Keep an eye on this and other ETFs like $FXI – Chinese large caps – as they might be a tell for the severity of the situation in China. See the weekly chart below for some levels…

A $3.6B Cash Deal

Simon Property Group said it would pay $3.6B for 80% of Taubman Centers. The deal is expected to be all cash at $52.50/share. $TCO was up 53% on the news, closing at $53.12, just above the sale price.  

The Wall Street Journal breaks it down further.

IBM is moving to Slack

Slack shares jumped 15.62% and the stock was halted into the close. This morning, news broke that IBM will add 350,000 employees to the messaging platform. IBM would become Slack’s largest customer. 

$WORK was down 7% after hours. 

Here’s more on the story via The Street.

Fastest Flight Across the Atlantic

A little breeze goes a long way… Over the weekend, British Airways set the record for the fastest subsonic flight between New York and London. It took the Boeing 747 4 hours and 56 minutes to make the journey, the average trip usually takes 6 hours and 13 minutes. 

We should note the jet stream winds boosted the plane by nearly 150 mph. 

Here’s NPR with the full details.

Win A Trip To NYC

Win a trip to NYC to ring the Nasdaq Opening Bell with us in the heart of Times Square on February 24th. Enter here.

Earnings Tomorrow:

Be sure to know when your stocks are reporting. Here’s the full earnings calendar.

The Biggest Firework, a Guinness World Record

At the annual Steamboat Springs Winter Carnival, a 2,797-pound firework was launched into the sky. 

Here’s the full video. It’s pretty lit. 

Links that Don’t Suck

Disney CEO Robert Iger – The Bill Simmons Podcast
American Living Standards Have Never Been Better – Pragmatic Capitalism
Chicken War Spurs Popeyes Sales – WSJ
The WIRED Guide to the Internet of Things – Wired