By Barbara Kollmeyer, MarketWatch
Earnings and politics. That’s where the thrills are being found for this stock market right now.
Signs of a disharmonious GOP have some worried, with Sen. Jeff Flake the latest GOP member to cross POTUS. Some fear that growing political strife could hinder the passage of Trump’s tax plan and put this rally in peril.
Or will it? This market is pretty good at taking bad news and relegating it to the Upside Down, betting that lurking dangers won’t bust through.
Our call of the day offers a reprieve from calling the ups and downs of this market, as it lays out yet another reason to stick with two of the biggest names in retail when it comes to the future of e-commerce.
In a note to clients, Edward Yruma and a team of analysts at KeyBanc Capital laid out what they see happening — “e-commerce to continue to grow low double digits to mid-teens over the next five years.” But that won’t be without its challenges, as rising industrial real estate rents and delivery costs mean “box to home” delivery will get a rethink.
“We believe a combination of cost pressures and consumer behavior is leading retailers to more closely integrate stores and e-commerce operations. We think ‘digitally driven’ growth will increasingly involve a consumer pickup component,” said Yruma and the team.
As for who is ready to meet this challenge, Wal-Mart /zigman2/quotes/207374728/composite WMT -0.21% is “one of the best positioned retailers in an omnichannel environment and is one of the only traditional retailers innovating at a pace even remotely close to Amazon,” say the KeyBanc analysts. (“Omnichannel” basically means able to link up online, bricks-and-mortar and mobile shopping so they appear seamless to the customer.)
Another winner? Amazon /zigman2/quotes/210331248/composite AMZN -0.74% , as KeyBanc says its Whole Foods acquisition gives the e-commerce pioneer much-needed physical outlets.
On the transportation and logistics side, they like FedEx /zigman2/quotes/203047719/composite FDX -1.22% and XPO /zigman2/quotes/205483484/composite XPO -1.01% . On the paper and packaging side, KeyBanc points to Graphic Packaging /zigman2/quotes/203517136/composite GPK -1.90% , the U.S. boxboard producer.
And as retailers look to modernize their supply chains further, to get ship-from-store and in-store pickup nailed down, they might look to big business software from Oracle /zigman2/quotes/202180826/composite ORCL -0.99% to get the job done.
Key market gauges
The Dow /zigman2/quotes/210598065/realtime DJIA -0.48% , S&P 500 /zigman2/quotes/210599714/realtime SPX -0.91% and Nasdaq /zigman2/quotes/210598365/realtime COMP -0.91% are off to a slow start. Gold is at nearly three-week lows and crude are softer.
In Asia /zigman2/quotes/211618636/realtime XX:ADOW +0.35% , the Nikkei /zigman2/quotes/210597971/delayed JP:NIK +0.58% broke a record-smashing win streak. Europe stocks /zigman2/quotes/210599654/delayed XX:SXXP -0.88% are wavering in an earnings deluge.
See the Market Snapshot column for more.
The dollar /zigman2/quotes/210598269/delayed DXY +0.34% is mostly up on bets over the next Fed Chairman. The euro /zigman2/quotes/210561242/realtime/sampled EURUSD -0.3315% will be a big focus Thursday due to an ECB meeting, where a hawkish surprise could push it to $1.23.
Investors have been obsessing about the wrong impending crash, says Bill Blain, who runs the capital markets division at brokerage Mint Partners.
“While everyone is watching the stock markets looking for a bubble to burst, or stressing about Europe, the real risk is probably complete mayhem in bond markets,” he says in a post on Blain’s Morning Porridge .
He cites research by Mint’s macro economist Martin Malone, who says the 36-year-old bull market for 10-year Treasurys /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +2.68% ended in August. Malone looked at 700-year bond-market cycles, nominal rates and inflation, and found the average length of nine nominal bull markets has been 32 years. Bear markets last 26 years on average.
Here’s his chart of the last 60 years’ bond cycle:
Blain says they’re looking for Treasurys to spike at least 100 basis points in the medium term, which would mean trouble for corporate bonds. But in the long run, it is good news for stocks, because investors will be seeking alternative investments, he says.