Market Morning: Treasury Bear, Fed Fuss, Square FANGAS, And Dunkin’ Not Donuts

Asia Up, Treasuries Flirt with Bear Market

Hong Kong and China are up strongly today, with Hong Kong’s Hang Seng up 6.1% since bottoming earlier this month. China is in a similar situation, wiggling around and teasing a new uptrend, but both could fall especially now that the trade war between the United States and China is kicking into high gear. US Treasury yields are floating dangerously higher, with the 10Y just 3 basis points away from highs not seen since 2013. Confirming those highs and breaking them would make a pretty good case that we are now in a long term Treasury bear market, with serious consequences for the US budget deficit and the national debt, now at $21 trillion. At some point the interest on that debt becomes unpayable and we head into a spiraling Treasury catastrophe without drastic spending cuts. The $21 trillion question that almost nobody is asking, is when is that point? Meanwhile, America can continue to be Great Again, until that point at least.

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Federal Reserve Expected to Raise Rates For 8th Time Since 2015

The Federal Open Market Committee ends its two day monetary policy meeting today and will announce its interest rates decision at 2pm EST. It is almost certain that that FOMC will vote to raise interest rates 25 basis points, which would put the upper target overnight rate at 2.25%. Given that everyone is expecting the same thing, volatility will hinge on the language of the press release and Fed Chair Jay Powell’s tone while he makes his statement. He’s likely to try the best he can not to shake things up and every word will be measured. Investors should keep an eye on precious metals and interest rates to see if anything springs loose on what is expected to be unsurprising news. Emerging market currencies could also be hurt in the aftermath as they have already been crushed since the new rate hiking cycle began 3 years ago. Also interesting to watch will be the dollar index itself (NYSEARCA:UUP).

Square a FANG? That Would Mean FANGAS

Square Inc. (NYSE:SQ), the payment services company, is making shareholders very happy. Up nearly 11% yesterday on an analyst named Dan Dolev likened it to FANG stocks, the now $40 billion company is up nearly 1000% since May 2016 in an almost perfect parabola that has yet to break. The company offers payroll services focusing on time cards for employers, and an ever higher percentage of its customers are large volume, over $125,000 annual in card sales. As long as consumer spending continues higher and employers battle each other to fill slots, Square should continue to rack up wins. But beware the next recession.

America No Longer Runs on Donuts

Dunkin’ Donuts is no more. Now it’s just Dunkin (NASDAQ:DNKN), or more specifically Dunkin Brands Group, Inc. The company wants to move away from its emphasis on donuts and focus more on coffee and other beverages. Despite the name change though, its 12,500 stores will still offer the doughnuts that it is famous for, and it will maintain its signature pink and orange color scheme, reminiscent of an actual doughnut. Without the doughnut, indeed, what would customers be dunkin’ anyway? Gotta be dunkin’ somethin’.

Johnson & Johnson New Depression Drug Fails Phase III

In a blow to treatment resistant depression patients, Johnson & Johnson (NYSE:JNJ) TRD candidate esketamine, a nasal spray based off of the anesthetic ketamine which has been shown to improve depression symptoms, failed its Phase III trial endpoint of statistical significance when combined with traditional antidepressants over 4 weeks of use. This was one of 5 Phase III trials that the company will use to underpin an approval application with the FDA, and there is still a chance at approval if the other trial data come in positively.

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