🍨 Daily Scoop: No French Fries For You
By Wed, Dec 4, 2019
Hello Scoopers,
The start of December was a mood-killer for investors, mostly because of lower hopes for a trade deal, and lower-than-expected performance in the manufacturing sector.
Beyond the overall market, President Trump’s plan for a new tariff war boosted steel manufacturing stocks. At the same time, financial analysts turned their back to the beloved winner of the streaming war.
Oh, and by the way, soon, there may not be enough French fries to go with your burger …
— more on that in the “Water Cooler” section.
Also, don’t forget to scroll down to the “Economy,” “What’s Up?” and “What’s Down?” sections to learn more.
MARKETS
- U.S. markets: All three indices started December with lousy mood and finished Monday almost 1%lower than where they started it. Scroll to the “ECONOMY” section to learn more.
- Cryptocurrency: Bitcoin’s price is in the mid- $7,000 range. Technical analysts are talking about the possibility of a $5,000 floor and a sky-high ceiling. For now, the world’s largest cryptocurrency is fluctuating as bulls insist on a rapid price increase, and bears predict sudden price falls. As we all know, “extreme” is the middle name of all cryptocurrencies.
ECONOMY
The manufacturing sector doesn’t get a break.
What happened?
As the overall economy grew for the 127th consecutive month, manufacturing in the U.S. took the other direction and got smaller. According to the Institute for Supply Management (ISM), the latest Purchasing Managers Index (PMI) in the manufacturing sector went down 0.2 percentage points compared to October. The stock market ended Monday in the red, partially due to the decline in this economic indicator.
Why does this matter?
The index decline wasn’t significant. What bothered investors was most likely the decline in Inventories and the New Order index. These two supplementary figures indicate how much raw material and inventory manufacturers are holding.
Lower inventories mean manufacturers are going to decline their production in the upcoming months further. In other words, the sector is not getting a break anytime soon, and it will further shrink in the coming months. Such a gloomy future outlook is what investors took away for the latest ISM report.
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WHAT’S UP
Yay, new tariffs are coming.
So, what happened?
Shares of United States Steel Corp (Ticker: X) were up almost 4% on Monday. Lately, the company has been struggling to grow due to lower prices imposed by steel imports from several countries, including China, Brazil, and Aregentina. However, Monday, President Trump came to the rescue with an announcement that he will immediately resume steel and aluminum tariffs on imports from Brazil and Aregentina. More expensive imported steel means a higher competitive advantage for domestic steel manufacturers such as United States Steel Corp.
WHAT’S DOWN
Morgan Stanley turned its back.
So, what happened?
Shares of Roku (Ticker: ROKU) were down more than 14% on Monday. Nothing has changed about the company’s operations, except that analysts at Morgan Stanley decided the company’s stock price has grown irrationally high and doesn’t reflect the risks associated with the future growth potential of the company. The analysts from Morgan Stanley admitted that the company has been performing well. However, they believe it cannot continue to grow as fast as it has been in the last few quarters as the streaming war continues into 2020.
WATER COOLER
Holy moly, there may not be enough French fries to go with your burger …
So, what happened?
As if the possibility of a new trade war with steel-importing countries and the dimming lights of a possible trade deal with China were not enough, we heard about the French fries shortage. Actually, it’s potato shortage, which consequently will cause a shortage in French fry.
That’s it… We are quitting… we can’t take this anymore …
Breath in … breath out … breath in … breath out…
Okay, we are not quitting… but, what’s going on here, you ask?
Apparently, the recent frost and cold weather across America and Canada ruined a big portion of potato crops.
Up to 20% of the acreage dedicated to potato crops was damaged in some of the largest potato growers in Canada. Also, growers in North Dakota and Minnesota have lost some of their crops to last month’s frost hit.
The potato producers are now buying potatoes from across the continent to make up for the shortage. Firstly, if you have a potato plant in your backyard, this may be the time to think of expanding it commercially (kidding). Also, maybe it’s time to try that sweet potato fry …
We know.. we know… it’s blasphemy… But what can you do?
About the Author
The authors of this Scoop are the editorial team at Stock Card, led by Hoda Mehr. Hoda Mehr is CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 40,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism, and storytelling to all aspects of her work. Before starting Stock Card, Hoda worked as a strategy and insights lead at technology companies including Symantec, Aimia and Sony. Create a free account to do your stock market research easily and mistake-free: Stock Card Stock Card
