Micron (MU) earnings beat, and its solid guidance lifted the stock after the close, and the rest of the chip sector is looking to come along for the ride. 

The company is committing up to $8.0 billion on capex.

Industry Guidance	DRAM	NAND
Calendar Year 2019	+20%	+mid 40%
Calendar Year 2020	+mid-teens	+ high 20% to low 30%

Semiconductors’ wild swings have been worth the ride:

• 5 Day +3.5%
• YTD +58%
• 5 Years +96%

Yield Curve Steepens

Don’t look now, but the ten-year yield climbed to 1.94% overnight. Now, the spread with the two year is 30 basis points.   There are several implications, and over the next few days, we will hear all kinds of interpretations of this move, especially once the ten-year closes above 2.0%. 

One story will mention more competition for stocks for yield-seeking investors. Outflows from bonds in general probably finds a home in equities.  

This is building into a big story, factoring for economic and stock market models.

The Philly Fed manufacturing report came in less than expected, although most of the individual categories actually improved month-to-month.  Moreover, expectations remain elevated, which bodes well for 2020.

Philadelphia Fed Manufacturing	Present	Expectations
General Business	0.3	35.2
New Orders	9.4	35.6
Shipments	15.9	39.09
Prices Paid	19.0	50.9
Prices Received	11.9	49.3
Employees	17.8	28.6
Work week	7.7	19.6

The market paused yesterday, but it does that from time to time, even more so after monster rallies.

Portfolio Approach

 

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