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Wall Street Articles

Author: skywalker   |   Latest post: Mon, 16 Oct 2017, 08:07 AM

 

Wall Street Breakfast: Catalonia - Independence Or Not?

Author: skywalker   |  Publish date: Mon, 16 Oct 2017, 08:07 AM


Catalan leader Carles Puigdemont has not given a clear answer about the future status of the region, according to a letter sent to the Spanish government, in which he reiterated an offer to meet Prime Minister Mariano Rajoy as soon as possible and asked that dialogue take place over the next two months. The Catalan government had until 10:00 a.m. local time to state its position. The benchmark IBEX 35 Index is down 0.8% on the news, Spanish bonds are selling off, while the euro is 0.3% lower at $1.1793.

Economy

Investors are also digesting the latest election news coming out of Austria. 31-year-old Sebastian Kurz has declared victory for his People's Party, setting him up to become Europe's youngest leader and putting the country on course for a rightward turn. Austria's ATX has so far returned 27% YTD, making it the continent's best-performing developed stock market this year.

"Let me be clear, I think people are convinced that stocks and shares right now and bonds can go up as well as down," Mario Draghi said over the weekend, in response to a question on whether the securities were overpriced in Europe. "Where we see some signs of valuations that tend to be stretched is in the prime commercial real estate [in the eurozone]."

Negotiators at talks to modernize NAFTA look set to extend the remaining rounds in a bid to meet a year-end deadline, according to Reuters. Most recently, the Trump administration demanded that U.S.-made content account for half the value of the cars and trucks sold under the trade agreement, raising further doubts about any potential deal to renew the pact.

"My best guess is that these soft [inflation] readings will not persist, and with the ongoing strengthening of labor markets, I expect inflation to move higher next year," Janet Yellen told a Group of 30 conference on Sunday. While the FOMC left rates unchanged at its September meeting, it made clear its expectation of another boost before the end of the year. Three more rate hikes are seen in 2018.

The annual meetings of the IMF and the World Bank wrapped up on Saturday with Treasury Secretary Steven Mnuchin urging them to help move economic powers away from large trade surpluses. He also pushed for curtailing lending to middle-income countries that have developed significant resources on their own, stating programs should "be tailored to help fully transition these borrowers off donor assistance."

Meanwhile, the IMF has begun preparations for a possible rescue of Venezuela that could require $30B or more in international help annually, and result in a complex bond restructuring and big test of Fund rules. It follows a surprise win for the ruling socialists in a weekend regional election, which could potentially rekindle protests and new foreign sanctions on the moribund economy.

Crude futures were in the green overnight, up 1.2% to $52.07/bbl, after President Trump refused to certify that Iran is complying with its nuclear accord. During the previous round of sanctions against Tehran, around 1M bpd of oil supplies were cut off from global markets. Prices were also boosted as Iraqi troops seized parts of the oil-rich Kurdish region, while an oil rig exploded in Louisiana's Lake Pontchartrain.

Stocks

Seeking to preserve their spectrum holdings, T-Mobile (NASDAQ:TMUS) and Sprint (NYSE:S) plan to announce a merger agreement - in late October or early November - that wouldn't include any immediate asset sales, sources told Reuters. Reports last week suggested that some of the DOJ's antitrust staff were skeptical about the deal, which would combine the third and fourth largest U.S. wireless carriers.

With channels still running past yesterday's 7 p.m. negotiation deadline, Viacom (VIA, VIAB) and Charter Communications (NASDAQ:CHTR) have agreed to a short-term extension of their carriage deal. Charter's Spectrum service feeds Viacom's networks (including MTV, VH1, Comedy Central, Nickelodeon and BET) to 16.6M subscribers, and Viacom has about 16% of affiliate revenue (some $760M) at risk in the partnership.

Aramark has agreed to buy hospitality services company Avendra, majority owned by Marriott (NYSE:MAR), and linen supplier AmeriPride Services for $2.35B, before tax benefit adjustments. "These strategic and financially compelling transactions represent the next step in our commitment to drive sustainable shareholder value," said Aramark (NYSE:ARMK) CEO Eric Foss.

Tesla fired about 400 employees last week, including associates, team leaders and supervisors, according to multiple reports over the weekend. The dismissals, which Tesla (NASDAQ:TSLA) said were part of a company-wide annual review, came even as the automaker pushes to increase vehicle production five-fold and reach a broader market with its new Model 3.

Facing pressure from potentially crippling U.S. tariffs, Bombardier (OTCQX:BDRAF, OTCQX:BDRBF) is exploring options for its aerospace businesses, including a sale of some operations or new aerospace partnerships. The Montreal-based manufacturer is studying the disposal of its Q400 turboprop and CRJ regional-jet unit, sources told Bloomberg, stating that Airbus (OTCPK:EADSY) was among the suitors.

Long history of safety failures? Passengers that were aboard an AirAsia (OTCPK:AIABF) flight from Perth to Bali on Sunday are criticizing the flight crew for screaming when the plane suddenly dropped 20,000 feet in a matter of minutes. The flight was diverted after a "technical issue," but it brings up memories of the AirAsia X engine failure last June and Flight 8501, which crashed into the Java Sea in December 2014.

Blackstone is targeting retail investors with $5M or less for its next leg of growth, betting it can raise as much from them over the long term - via direct access - as it does from the pension funds and other institutions. "The goal is not to raise as much money as possible," Blackstone's (NYSE:BX) Joan Solotar declared. "We want to grow assets at what we deem are appropriate returns."

U.S. banks are stepping up anti-fraud controls after the data breach at Equifax put about half the nation's population at risk of identity theft, FT reports. Executives at Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) said customers would face new checks because of the increased risk of identity fraud, a problem that already costs an estimated $16B a year across the country.

With stiffer competition from the 24/7 business of Amazon.com (NASDAQ:AMZN), Macy's (NYSE:M) is preparing for another early kick off to Black Friday shopping on Thanksgiving. The so-called creep from Friday to Thursday began in 2010 with Sears (NASDAQ:SHLD), but many retailers have made the jump in the years following. Still, companies like TJ Maxx (NYSE:TJX), Costco (NASDAQ:COST) and Home Depot (NYSE:HD) are sticking with tradition and staying dark on Turkey Day.

Today's Markets

In Asia, Japan +0.5%. Hong Kong +0.8%. China -0.4%. India +0.6%.
In Europe, at midday, London +0.1%. Paris +0.1%. Frankfurt +0.2%.
Futures at 6:20, Dow +0.1%. S&P +0.1%. Nasdaq +0.1%. Crude +1.2% to $52.07. Gold +0.2% to $1307.20.
Ten-year Treasury Yield flat at 2.29%

Today's Economic Calendar

8:30 Empire State Mfg Survey
2:00 PM Treasury Budget

 

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Wall Street Breakfast: The Beat Goes On For Global Stocks As Records Continue To Fall

Author: skywalker   |  Publish date: Fri, 13 Oct 2017, 11:13 AM


World stocks could be on track for more new record highs, as the MSCI World benchmark of large and mid-cap stocks is poised for a new all-time high amid gains in most Asian and European bourses. Japan’s Nikkei is ahead by 1% to pass the 21,000 level, the highest since 1996. China released figures showing imports last month jumped by a larger than expected 19% in dollar terms from a year ago. European shares have climbed to four-month highs, aided by some well-received earnings reports. Equity markets also are supported by gains in commodity prices, as Brent crude oil futures rose by nearly 2% to about $57.25 per barrel. In the U.S., investors await quarterly results from other big banks, with Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC) reporting, following results yesterday from JPMorgan Chase and Citigroup.

Economy

The Trump administration says it plans to cut off billions of dollars in payments to health insurers that offset their costs for providing subsidies to consumers. The payments will stop immediately, with no transition period, Acting HHS Secretary Eric Hargan and Centers for Medicare and Medicaid Services Administrator Seema Verma said tonight; the next payments were due next week. Given the ongoing uncertainty over the payments, many health insurers had dramatically raised the premiums they planned to charge for next year in anticipation of not getting the funds. The move, coming just hours after President Trump signed an executive order that paves the way for a proliferation of pared-down insurance plans for individual buyers, marks the start of what promises to be a long and contentious campaign to unravel the Affordable Care Act. Relevant tickers include CNC, MOH, UNH, AET, WCG, CI, HUM, ANTM, GTS, HQY, QHC, HCA, THC, UHS, LPNT, CYH, HCP, SEM.

President Trump is expected to announce today he will not certify that Iran is complying with the 2015 nuclear accord, starting an uncertain process in which Congress has a 60-day period to consider whether to reinstate sanctions that had been lifted under the agreement. The U.S. is not expected to completely abandon the deal, and the European governments that backed the Obama administration - the U.K., France and Germany - likely will acknowledge U.S. concerns about Iran’s regional behavior and missile tests, but say that those issues, which were not part of the previous talks, should be dealt with separately. Fresh doubt about the agreement’s fate threatens to raise uncertainty for businesses such as Boeing (NYSE:BA), General Electric (NYSE:GE), Airbus (OTCPK:EADSF, OTCPK:EADSY) and Total (NYSE:TOT) that have worked out their own deals with Iran and for others that already were hesitating.

U.S. negotiators have presented a proposal for a "sunset clause" that would see the North American Free Trade Agreement expire after five years unless the parties can agree to extend it, Bloomberg reports. Canada and Mexico rejected the idea of a sunset clause after Commerce Secretary Wilbur Ross floated it last month, saying it would create so much uncertainty for businesses that it could hurt long-term investment. The U.S. has “miscalculated badly” in proposing the provision and “doesn’t understand how much damage the uncertainty would do to private sector investment,” according to Nate Olson, director of the Trade21 program at the Stimson Center in Washington, D.C.

Stocks

Amazon has suspended the head of its entertainment studio, Roy Price, following allegations that he harassed a female producer and that the company ignored an actress’s claim of a sexual assault by disgraced producer Harvey Weinstein. The suspension comes after The Hollywood Reporter cited a female producer of an Amazon (NASDAQ:AMZN) show saying Price had made lewd advances to her in 2015, and actress Rose McGowan launched a Twitter storm that she had been assaulted by Weinstein and ripped AMZN for doing business with Weinstein's company. Price has been integral to AMZN's movie business, helping steer it through an attempt to crowd-source television scripts and winning Hollywood awards for shows such as Transparent.

HP Inc. offered upbeat 2018 earnings guidance, sending shares higher after the close. HP (NYSE:HPQ) expects EPS of $1.74-1.84 in FY 2018 ending in October, compared with the $1.76 analyst consensus estimate, and it forecasts 2018 free cash flow of at least $3B with plans to return 50-75% of the amount to shareholders through dividends and stock buybacks. The board also approved a 5% increase in the quarterly dividend. HP has been gaining market share in worldwide PC shipments, as it battles with Lenovo (OTCPK:LNVGY, OTCPK:LNVGF) for the title of largest maker of personal computers, while focusing on higher-profit segments such as gaming and convertible laptops.

Shares of optical equipment makers fell sharply after the close following preliminary Q3 results from Applied Optoelectronics (NASDAQ:AAOI) that came in well short of estimates. The company now expects non-GAAP Q3 earnings of $1.04-1.09 per share, down from its prior outlook of $1.30-1.43, on revenue of $88-89 million, below previous expectations of $107-115 million; the consensus forecast among analysts was for EPS of $1.31 on revenue of $111 million. AAOI says results were hurt by lower than expected sales to one of its large datacenter customers, but that it continues to experience “solid” demand with its other top datacenter customers. Shares slid 18% to $48.10 in after-hours trading, and peers including Lumentum (NASDAQ:LITE), Finisar (NASDAQ:FNSR) and Oclaro (NASDAQ:OCLR) all turned sharply lower.

In a surprising development, Samsung (OTC:SSNLF) CEO and Vice Chairman Kwon Oh-hyun said he will exit his post in March, calling for new leadership amid an "unprecedented crisis." Observers are scratching their heads, since the company has forecast a record Q3 operating profit of 14.5 trillion won ($12.8 billion) driven by the memory chip business that Kwon built up. "We are fortunately making record earnings right now, but this is the fruit of past decisions and investments... We are not able to even get close to finding new growth engines by reading future trends right now," Kwon said. The move creates huge uncertainty for Samsung's leadership, as Kwon was expected to take a bigger role after the arrest of de facto leader Jay Lee in February in a bribery scandal, followed by other key executive departures.

The Federal Aviation Administration has ordered an emergency inspection of about 120 A380 superjumbo jets made by Airbus (OTCPK:EADSF, OTCPK:EADSY), just two weeks after an engine violently broke apart on an Air France flight. The inspections, to take place worldwide, cover engines made for the Airbus SE A380s by the joint venture of General Electric (GE) and Pratt & Whitney (NYSE:UTX), which supplies engines for about 60% of the global A380 fleet. While the engine that failed will be given a detailed analysis by GE, the FAA wants operators to inspect front fan hubs on most of the global fleet for possible defects or damage.

Bayer has agreed to sell significant parts of its crop science business to rival BASF (OTCQX:BASFY) for €5.9 billion ($6.98 billion), which it says will partially finance its planned acquisition of Monsanto (NYSE:MON). Bayer (OTCPK:BAYRY) says the assets to be sold include its global glufosinate-ammonium business and related LibertyLink technology for herbicide tolerance, nearly all its field-crop seeds businesses, as well as respective R&D capabilities. The businesses included in the agreement generated about €1.3 billion in net sales in 2016. The deal is contingent upon the completion of Bayer's acquisition of Monsanto, but the takeover still faces scrutiny from European regulators.

Thursday's Key Earnings

EXFO (NASDAQ:EXFO) +13.6% AH on Q4 earnings and better than expected Q1 guidance.

Today's Markets

In Asia, Japan +0.96%. Hong Kong +0.06%. China +0.13%. India +0.78%.
In Europe, at midday, London -0.17%. Paris +0.01%. Frankfurt +0.08%.
Futures at 6:20, Dow +0.06%. S&P +0.04%. Nasdaq +0.06%. Crude +1.76% to $51.49. Gold -0.02% to $1,296.30.
Ten-year Treasury Yield +2bps to 2.325%

Today's Economic Calendar

8:30 Consumer Price Index
8:30 Retail Sales
8:30 Fed's Rosengren speech
9:00 Janet Yellen Speech on Sunday
10:00 Business Inventories
10:00 Consumer Sentiment
11:30 Fed's Kaplan speech
1:00 PM Baker-Hughes Rig Count
1:00 PM Fed's Powell speech
2:00 PM Treasury Budget

 

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Wall Street Breakfast: FOMC Minutes Don't Move Rate Hike Expectations

Author: skywalker   |  Publish date: Thu, 12 Oct 2017, 10:01 AM


Minutes from the FOMC's September meeting gave a little more time to the doves than most had expected, but markets continue to have priced in about a 75% chance of another rate hike before the end of the year. Many at the Fed aren't buying the company line that too-low inflation is due to transitory factors, according to the minutes. They would prefer waiting until the data clearly show the inflation rate moving towards its 2% target before hiking again. Others, however, believe another rate hike this year is appropriate, and markets believe this group - which no doubt includes Janet Yellen - has the upper hand at the FOMC.

Economy

Japan's wholesale prices rose 3% in September, the fastest annual pace in nine years, but the news isn't likely to help the Bank of Japan hit its 2% inflation target, as many firms prefer to absorb input price increases without passing them on to consumers. Core consumer prices rose 0.7% Y/Y in August; the BOJ is now looking to hit its 2% goal by March 2020.

Ten years ago, just as the world was about to enter the financial crisis, Warren Buffett famously bet $1M that the S&P 500 would beat a basket of hedge funds over the next decade. Despite the vicious plunge in markets that shortly followed, the Oracle won the bet by a mile. Buffett recently told CNBC he would be willing to make that bet again - an offer quickly accepted by hedge funder Mark Yusko. However, in an email to Yusko, Buffett says he'll be 97 by the time the wager is decided, and will thus pass. Buffett: "[The] bet proved the point and has stimulated a re-evaluation of professional management ... There's no doubt in my mind, however, that the S&P 500 will do better than the great majority of professional managers achieve for their clients after fees."

The Treasury Secretary is "strongly pushing" for the White House to nominate current Fed Governor Jerome Powell as the central bank's next chairman, reports Politico. Those close to the process says Mnuchin knows Powell and thus feels he can exert at least some influence, though, of course, the Fed is supposed to operate independently from the Executive Branch. Unlike current Fed boss Janet Yellen, Powell is a lawyer by training, not an economist. He has worked in the financial world for most of his career - including a stint in Bush I's Treasury Department, and later as a partner at Carlyle Group. Other candidates on the short list: Yellen, Gary Cohn and Kevin Warsh.

Stalwart bulls on long-dated Treasurys for as long as most can remember, Van Hoisington and Lacy Hunt haven't had their faith shaken by the past month's 30 basis point rise in the 10-year Treasury yield. "The worst economic recovery of the post-war period will continue to be restrained by a consumer sector burdened by paltry income growth, a low and falling saving rate and an increasingly restrictive Federal Reserve policy," they say. Further, the government's deteriorating fiscal condition means any debt-financed tax changes won't likely benefit the economy. Nobody talks about the money supply anymore, but the two note a sharp slowdown in M2 growth this year, and they expect negative growth in 2018 if the Fed continues down its tightening path. Long-term yields, they say, are headed lower.

Stocks

In a scandal that is reverberating through global supply chains, General Motors (NYSE:GM) said it is checking whether any of its cars contain falsely certified aluminum parts or components sourced from Japan’s Kobe Steel (OTCPK:KBSTF). Fresh revelations yesterday showed data fabrication at the steelmaker was more widespread than it initially said, as the company joins a list of Japanese manufacturers involved in scandals over product quality control in recent years. Toyota (NYSE:TM), Nissan (OTCPK:NSANY) and Honda (NYSE:HMC) all said that aluminum from Kobe Steel was used in their car hoods and doors, Subaru (OTCPK:FUJHY) and Mazda (OTCPK:MZDAY) said they believed the aluminum could have been used in car hoods, Mitsubishi Motors (OTCPK:MMTOF) said it used Kobe Steel aluminum in the past and was assessing the situation, and Suzuki (OTCPK:SZKMY) said the aluminum was used in its motorcycles; ~200 companies used the metal in their products. Boeing (NYSE:BA) said it is inspecting its supply chain but “nothing in our review to date leads us to conclude that this issue presents a safety concern." No one yet knows the extent of the problem, but Kobe Steel is the largest supplier of aluminum panels for automobiles in Japan, and it has a large share of the global market for forged aluminum pieces used in suspension systems.

China's government regulators are pushing some of the country's biggest tech firms to give the state a stake, and a greater role in making corporate decisions, according to the WSJ. Internet regulators are discussing the prospect of 1% stakes in a number of firms, including Tencent Holdings (OTCPK:TCEHY), Weibo (NASDAQ:WB) and Youku Tudou - now part of Alibaba (NYSE:BABA). The stakes come with the stipulation that investors appoint a government official to company boards and have say in their operations. Even with a heavy hand in existing rulemaking, the regulators are concerned about the growing power of private business. The government has begun its "special management shares" project with two media start-ups, taking stakes of less than 2% in mobile news site Yidian Zixun (NYSE:FENG) and Beijing Tiexue Tech, which operates a "patriotic news site." The report comes ahead of the Communist Party Congress, with the party pressing to take a greater role in Chinese society.

Career staff at the Justice Dept. charged with investigating the impact of a merger between Sprint (NYSE:S) and T-Mobile (NASDAQ:TMUS) are likely to recommend against it, sources tell Reuters. Staffers are likely to push for allowing T-Mobile to keep doing what it's doing: using aggressive promotion to soak up customers from Verizon (NYSE:VZ) and AT&T (NYSE:T), as a stand-alone company. One consideration they'll likely weigh heavily is that a combined Sprint/T-Mobile would have more than half the prepaid market, a factor that could drive up prices for more limited-income consumers that favor prepaid plans. While a fraction of deals end up blocked, T-Mobile and Sprint were headed off from a 2014 merger by regulatory opposition, and observers think there is a good chance that any deal announced this month would head for the same fate. On the other hand, the FCC recently declared the market "competitive," and government stats show wireless phone prices have fallen an impressive 13.2% from August 2016-August 2017.

Five of the six major Hollywood studios have launched Movies Anywhere, their latest effort to give consumers a "digital locker" to store movies bought from various retailers, to be watched on any device. Owned by Disney (NYSE:DIS), the Mouse House is joined by Sony (NYSE:SNE), Fox (FOX, FOXA), Universal (NASDAQ:CMCSA) and Warner Bros. (NYSE:TWX). Out for now: Paramount (VIA, VIAB) and Lions Gate (LGF.A, LGF.B).

Car retailers had a rough session ahead of the Cargurus.com (Pending:CARG) IPO, with some worried the offering might price below expectations. AutoNation (NYSE:AN), Advance Auto (NYSE:AAP), Sonic Automotive (NYSE:SAH), Lithia Motors (NYSE:LAD) and Asbury Automotive (NYSE:ABG) were all down 2% or more. They needn't have worried. CarGurus last night priced its 9.4M share IPO at $16 per share vs. the expected range of $13-15.

The Oculus Go, a $199 untethered VR headset that could redefine the emerging market, was announced by Facebook (NASDAQ:FB). Unlike current untethered headsets, the Go doesn’t require the use of a smartphone or special sensors around the room. The headset alone creates the VR experience. Price comparison: Sony’s PlayStation VR costs $349.99 for the headset alone and, unlike the Go, the PS VR needs more parts to work. Samsung’s Gear VR costs $129 for the headset and a controller, but a user needs a compatible smartphone. The AR/VR market grew 25.5% on the year in Q2 to total 2.1M shipments, according to IDC. Samsung led with 568K units and a 26.7% market share, with Sony in second place, and Facebook coming third with an 11.6% share and 246.9K units. The Oculus Go will ship in early 2018 and could push Facebook to the front of the VR market.

A stunning failure of the U.S. men's national soccer team to make the 2018 World Cup weighed heavily on Fox (FOX, FOXA), with both share classes down more than 2%. The broadcaster paid $425M for U.S. rights to broadcast the FIFA World Cups from 2015-2022; next year, it will do it without the huge draw of the American men. The men's team lost to Trinidad and Tobago 2-1 in what's termed as the most embarrassing defeat in U.S. soccer history. The team was eliminated from World Cup qualifying for the first time since the 1986 cycle. It's still the "greatest sporting event on earth," Fox says. “Last night’s World Cup qualifying results do not change Fox Sports’ passion for the world’s biggest sporting event. While the U.S. was eliminated, the biggest stars in the world from Lionel Messi to Cristiano Ronaldo stamped their tickets to Russia on the same day, and will battle teams ranging from Mexico to England that have massive fan bases in America.”

Wednesday's Key Earnings

Blackhawk Network (NASDAQ:HAWK) -7.2% AH on Q3 revenue miss.

Today's Markets

In Asia, Japan +0.35%. Hong Kong +0.24%. China -0.06%. India +1.1%.
In Europe, at midday, London +0.14%. Paris -0.14%. Frankfurt +0.05%.
Futures at 6:20, Dow -0.04%. S&P -0.10%. Nasdaq -0.01%. Crude -0.80% to $50.89. Gold +0.63% to $1,297.10.
Ten-year Treasury Yield -8 bps to 2.337%

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 Producer Price Index
9:45 Bloomberg Consumer Comfort Index
10:30 EIA Natural Gas Inventory
10:30 Fed's Reserve Gov. Lael Brainard speech
10:30 Fed's Powell speech
11:00 EIA Petroleum Inventories
1:00 PM Results of $12B, 30-Year Note Auction
2:00 PM Treasury Budget
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
7:00 PM Fed's Bostic Speech

 

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Wall Street Breakfast: Bull Market Reaches 'Epic Proportions'

Author: skywalker   |  Publish date: Wed, 11 Oct 2017, 07:36 AM


"We say this not as hyperbole, but based on a quantitative perspective," said the team at Morgan Stanley. "Dispersions in valuations and growth rates are among the lowest in the last 40 years; stocks are at their most idiosyncratic since 2001; and equity hedge fund beta is at its highest since March 2008.” Record highs seem to come on a daily basis, just two of 11 S&P sectors are in the red for the year, and even the most modest of pullbacks have been nonexistent. Similar action is being seen across Europe and in emerging markets. Morgan Stanley said it is seeing evidence of boosted investor risk appetite of late - noting cyclical sectors are doing better than defensive ones, and small-caps outperforming big-caps.

Economy

Catalan President Carles Puigdemont defused at least a little bit of tension with Madrid, declaring independence but then stopping the separation process to instead propose talks with the Spanish government. Puigdemont and his team remain in danger of arrest for sedition, and Spanish President Mariano Rajoy had previously rejected any talks until secession plans are abandoned. A Rajoy spokesman said following Puigdemont's speech: "He has made a deferred declaration of independence ... [Puigdemont] has taken his irresponsibility to the absolute extreme by ignoring the laws, citizens." Spanish stocks are rallying, up 1.25% vs. flat action in the rest of Europe.

China is closing in on its first dollar-denominated debt sale in 13 years, a move that could serve to help set reference borrowing rates. With a $2B sale of five-year and 10-year bonds, if China can draw low rates (and the bonds are expected to go a half-point above comparable Treasurys), it could indicate confidence despite S&P's sovereign downgrade.

A longtime $56B deal to swap currencies between China and South Korea was allowed to expire, with tensions higher over Seoul's determination to host a U.S. missile defense system. But Communist Party Congress preparations may play a role, and South Korea says the sides are still talking.

The Nikkei gained a modest 0.3% overnight to close at 20,881, its highest level since late 1996. Before getting too excited, some will remember the Nikkei as breaking above the 20K level a number of times over those 20-plus years, only to pull back. It's never come anywhere close to its record of nearly 39K hit on the last trading session of 1989. Bulls, however, will note corporate profits as up 23% Y/Y in Q2 and corporations actually making shareholder-friendly moves like bringing in independent directors and buying back stock. Federated Investors portfolio manager Dariusz Czoch: "It was difficult for us to invest in Japan because of lack of transparency and corporate governance issues, and also the country itself for the last two decades was quite difficult ... We are changing our mindset.”

Stocks

Working to preserve profit at its longstanding brands, Time Inc. (NYSE:TIME) is cutting back on its print - both in circulation and in frequency of key magazine titles - as it intends to cut circulation of the weekly Time magazine by a third to 2M copies. In part this will be done by cutting back on promotional copies and focusing more on an ad-friendly core audience. It will cut circulation for People en Espanol as well. Meanwhile, seven other titles will come out less often, including Sports Illustrated, Entertainment Weekly and Fortune. In 2018, SI will publish 27 issues rather than this year's 38, but there will be 23% more editorial pages in each, on a weightier paper stock. The moves are effective January 1. A revenue hit is expected, as the company will likely lower ad rates to make up for reduced circulation, but the bet is that expense savings will be bigger.

Driver's license data for roughly 10.9M Americans were compromised during the cyberattack on Equifax (NYSE:EFX), according to the WSJ. This, of course, is in addition to the personal information of more than 140M Americans, not all of whom would have had DL information with Equifax. In a separate announcement, the company said a file with 15.2M U.K. consumer records was also part of the breach (roughly double the previous number of those in the U.K. thought to be affected). Shares gained another 1.15% yesterday, and are now ahead about 25% since touching a low in mid-September. They remain down by 20% since the news of the attack was first disclosed in early September.

Looking to reduce the theft of unattended packages sitting on porches or stoops, Amazon (NASDAQ:AMZN) is exploring creative ways to get packages to consumers by delivering to car trunks or the inside of houses, reported CNBC. Amazon is talking to smart license plate company Phrame, which makes a small key storage box that fits around a car’s license plate. The box is accessible through an app, and the car owner can also give key permission to others like delivery drivers. Amazon is also reportedly developing a smart doorbell device that could grant drivers a one-time pass to the home for delivery. Wal-Mart (NYSE:WMT) announced an in-home delivery service last month and partnered with smart doorbell maker August on the project. Dogs across the country wag their tails in approval.

A forecast for 3% or more sales growth and a new $20B buyback plan helped send Wal-Mart (WMT) shares surging by 4.5% yesterday. Holding its annual investment company meeting, management also said it expected 40% growth at its U.S. eCommerce unit. Perhaps most interesting were company plans to add 1K online grocery locations in the U.S., but fewer than 15 Supercenters in 2019.

Influential proxy advisers ISS and Glass Lewis are determined to challenge the results at Toshiba (OTCPK:TOSYY), which they note can't get an unqualified auditor endorsement. The firms are also against putting President Satoshi Tsunakawa on the board. Shares were significantly lower in Tokyo until the TSE took the stock off its delisting watchlist, propelling shares into the green.

With an eye to building even more film properties out of its popular toy franchises, Hasbro (NASDAQ:HAS) has hired an ex-Paramount executive to head up a film division it hopes can grow into a studio to rival Disney's (NYSE:DIS) Marvel. Greg Mooradian, taking over Hasbro's Allspark Pictures in January, has relevant experience working on the Teenage Mutant Ninja Turtles, G.I. Joe and Transformers films.

The biggest-ever San Francisco office lease now belongs to privately held Dropbox (Private:DROPB), which is taking all 736,000 square feet in a new complex in Mission Bay. The project is the last prime headquarters site in that area, and it will become home to about 1,500 Dropbox employees (and perhaps 102 more to come from current job listings).

Tuesday's Key Earnings

IntelliPharmaCeutics (NASDAQ:IPCI) +11.3% AH on Q3 earnings.

Today's Markets

In Asia, Japan +0.28%. Hong Kong -0.36%. China +0.16%. India -0.28%.
In Europe, at midday, London -0.08%. Paris -0.18%. Frankfurt +0.02%.
Futures at 6:20, Dow -0.06%. S&P -0.11%. Nasdaq -0.11%. Crude +0.82% to $51.34. Gold -0.16% to $1,291.70.
Ten-year Treasury Yield +1bps tp 2.346%

Today's Economic Calendar

7:00 MBA Mortgage Applications
9:00 Fed's Evans: Monetary Policy
10:00 Job Openings and Labor Turnover Survey
1:00 PM Results of $24B, 3-Year Note Auction
1:00 PM Results of $20B, 10-Year Note Auction
2:00 PM FOMC minutes

 

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Wall Street Breakfast: European Stocks Sluggish Amid Spanish Separatist Uncertainty

Author: skywalker   |  Publish date: Tue, 10 Oct 2017, 07:57 AM


European stock markets are treading cautiously amid concerns about political instability in Spain as well as a strengthening euro, offsetting a solid showing in Asian trading. “Investors are yearning for confirmation today that the Spanish situation can calm down,” according to strategists at Commerzbank, as Catalonia's president is expected to address the regional parliament at 6 p.m. local time today and possibly declare independence from Spain. Yet Europe’s economic recovery continues to broaden, as German exports surged in August due to strong eurozone demand, surging 3.1% from July and 7.2% from August 2016, and factories in the U.K. wrap up their strongest two-month period of the year so far.

Economy

The Trump administration will formally withdraw from the Obama-era Clean Power Plan today, EPA Administration Scott Pruitt announced. “Regulatory power should not be used by any regulatory body to pick winners and losers,” Pruitt said yesterday at a speech in the coal mining state of Kentucky. The Clean Power Plan, which required states to reduce greenhouse gas emissions by one-third by 2030, was blocked by the Supreme Court in February 2016 as it worked its way through the courts. New York state Attorney General Eric Schneiderman says he will sue to stop the repeal, likely one of several lawsuits in what promises to be a broad legal fight from states and environmental groups to preserve the plan.

Oil prices are stable so far today, with OPEC pointing to a rebalancing market even as the U.S. looked forward to getting production back on track following Hurricane Nate. "There is clear evidence that the market is rebalancing," OPEC's secretary general Mohammad Barkindo says. "The process of global destocking continues, both onshore and offshore, with positive developments in recent months showing not only a quickening of the process but a massive drainage of oil tanks across all regions. OPEC and other producers are looking to create an extension of their deal to cut production ahead of the official November meeting of the cartel; the cuts currently are set to expire in March.

Finance experts from the eurozone are weighing in on comments made by outgoing German finance minister Wolfgang Schäuble, who warned in a weekend interview of the potential for another global financial crisis driven by debt and liquidity problems. Eurozone officials told CNBC that they largely share Schäuble's concerns, and believe debt and liquidity should be closely monitored. The influential Schäuble, who is due to leave his post as finance minister and become president of Germany's parliament in the next Merkel administration, said high debt levels - attributable to the loose monetary policies of central banks across the world, which were adopted in response to the global financial crisis in 2008 - present a threat to the global economy.

Stocks

General Electric tumbled nearly 4% yesterday en route to its lowest level since August 2015, as investors were rattled by a management shakeup that included the exit of the CFO and two other top executives and what the move might portend about Q3 results to be announced next week. J.P. Morgan analyst Stephen Tusa views the departures as a “clear negative” for the stock, which indicates that the fundamental challenges facing GE are worse than Wall Street has expected. Tusa also thinks the chance of a dividend cut has moved “materially higher.” Meanwhile, GE has given Trian Fund founding partner Ed Garden a seat on its board, evidently with more critical items on its plate than the distraction of a potential proxy fight.

Google has uncovered evidence that Russian operatives used its platforms to interfere with the November 2016 U.S. election, according to multiple reports. The disinformation campaign hit YouTube, Google’s DoubleClick ad network and Gmail (GOOG, GOOGL). The ads reportedly were funded with tens of thousands of dollars but did not trace back to the same “Kremlin-affiliated troll farm” that advertised on Facebook (NASDAQ:FB), a sign that the Russian effort to spread fake news online may be a much broader problem than previously understood. Google is said to have shared some of the Russian-bought ads with congressional investigators.

Procter & Gamble is set to become the biggest company ever to face a shareholder vote over a proxy contest, seeking to prevent Trian Fund CEO Nelson Peltz from securing a seat on its board of directors. After the two sides collectively spent more than $100 million on mailings, phone calls and advertisements to woo investors, the outcome as of late Monday reportedly was too close to call. Peltz wants PG to reorganize into three business units: beauty, grooming and healthcare; fabric and home care; and baby, feminine and family care. The vote will be influenced more than usual by individual stock owners, who collectively hold about 40% of PG’s stock, a much higher proportion than at most big companies.

Online users have slammed Mark Zuckerberg as a "heartless billionaire" after the Facebook (FB) CEO live-streamed a virtual reality cartoon avatar of himself in hurricane-ravaged Puerto Rico. The tone-deaf display was part of Zuckerberg's demonstration of Facebook Spaces, a product that allows users to create a 3-D virtual avatar of themselves to use with an Oculus Rift VR headset and communicate with each other by having their avatars be in the same space, even if the real people talking are not. Zuckerberg also talked about features such as Safety Check, which allows Facebook users to mark themselves safe when a natural disaster hits, and said the company had donated more than $1.5M to Puerto Rico relief efforts.

A scandal has erupted beyond company borders in Japan over false data supplied by Kobe Steel (OTCPK:KBSTY) over the strength and durability of its products used in some mission-critical applications in cars, aircraft and perhaps a rocket. The falsification was intended to make metals look like they met clients' quality standards. Kobe Steel has acknowledged shipping products including copper and aluminum products to more than 200 customers but did not disclose their names. Toyota (NYSE:TM), Honda (NYSE:HMC) and Subaru (OTCPK:FUJHY) all said they used materials from Kobe Steel that were subject to such falsification. Boeing (NYSE:BA) gets some parts from Subaru but says nothing so far has raised safety concerns. Other top Kobe customers by revenue: Shinsho Corp., Mitsubishi (OTCPK:MSBHY), General Motors (NYSE:GM), Ford Motor (NYSE:F), Nissan Motor (OTCPK:NSANY).

Today's Markets

In Asia, Japan +0.64%. Hong Kong +0.58%. China +0.26%. India +0.24%.
In Europe, at midday, London +0.20%. Paris -0.09%. Frankfurt -0.14%.
Futures at 6:20, Dow +0.15%. S&P +0.13%. Nasdaq +0.17%. Crude +0.89% to $50.01. Gold +0.65% to $1,293.40.
Ten-year Treasury Yield -14 bps to 2.354%.

Today's Economic Calendar

6:00 NFIB Small Business Optimism Index
8:55 Redbook Chain Store Sales
10:00 Fed's Kashkari speech

 

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Wall Street Breakfast: White House Eyes Healthcare Action

Author: skywalker   |  Publish date: Mon, 9 Oct 2017, 08:16 AM


Senate Democratic leader Chuck Schumer says he rejected an offer from President Trump to work on replacing the Affordable Care Act. Schumer said the Democrats will only work on fixing problems with the ACA, instead of looking to replace it. Trump tweeted on Saturday morning that he had placed a phone call to Schumer to discuss the issue. Behind the scenes, Republican Senator Lamar Alexander and Democrat Senator Patty Murray are working on a bipartisan fix to calm the insurance markets amid the unrest. Also, all eyes are on the White House to see if the administration will fire off an executive order to ease some ACA insurance rules in its most substantial move yet to set healthcare policy. The Trump order is expected to allow certain small businesses to band together to buy insurance coverage as a group.

Economy

Federal Reserve Bank of Boston President Eric Rosengren argued in a speech for the continued gradual removal of monetary policy accommodations and for a slow pace of interest rate increases not tied to short-term economic data. The comments by Rosengren followed September's hurricane-impacted jobs report that showed the first decline in employment in seven years amid a higher labor force participation rate. There's been some building consensus from economists there might be more slack in the job market than what Fed officials forecast when they called a 4.6% unemployment rate an economy firing on all cylinders. Traders can rest easy on the question for the day with the bond market closed for the Columbus Day holiday.

European stocks are slightly higher, with the Stoxx Europe 600 Index up 0.13%. Spain's IBEX 35 is in positive territory following a large demonstration in Barcelona over the weekend to protest the Catalonia secessionist movement. Chinese stocks were mixed after a weak nonmanufacturing print and more concerns over Golden Week traffic. The Shanghai Composite Index rose 1%, while the Hang Seng Index fell back 0.5%. U.S. stock futures are riding confidently into the beginning of Q3 earnings season. Dow and Nasdaq futures are up 0.1% in early trading action.

Hurricane Nate has weakened to a tropical storm after making separate landfalls near the mouth of the Mississippi in Louisiana and in Biloxi, Mississippi. Oil operators shut in 1.62m b/d of U.S. Gulf oil production in preparation for Hurricane Nate. The tally represents about 92% of all production. Key ports in Mobile and New Orleans were also closed as Nate approached. Early reports indicate minimal damage to Gulf operations.

Industrial production in Germany blazed to its best month in six years in August with a 2.6% jump. The mark topped the 0.7% gain forecast by analysts as German exporters benefited from international demand. On a year-over-year comparison, industrial production tracked 4.7% higher.

Crude oil prices are looking to recover today after a 2% decline on Friday, sparked in part by some concerns over overproduction. On the U.S. Gulf Coast, producers and ports in Louisiana, Mississippi and Alabama are expected to be back up and running today after a shutdown in front of Hurricane Nate. WTI crude oil future -0.18% to $55.52/bbl at last check. Brent crude +0.28% to $49.43/bbl.

Stocks

In an aggressive move, Qualcomm (NASDAQ:QCOM) indicated in a European regulatory filing that it will offer concessions in an attempt to get a green light for its $38B acquisition of NXP Semiconductors (NASDAQ:NXPI). The European Commission has raised concerns that a Qualcomm-NXP combination could squeeze out rivals and then raise prices. A spokesperson for the EU said the deal deadline is still suspended despite the new remedies.

A major shakeup may be in the cards for Honeywell (NYSE:HON). Sources indicate that the company is considering a plan to spin non-core assets in a streamlining strategy that could see at least two new publicly listed companies created. The development arrives with hedge fund Third Point applying pressure on the Honeywell board.

After a consistent build-up in criticism from military chiefs and President Trump over the cost of the F-35 fighter jet, the Pentagon is taking over cost-cutting efforts on the $400B program. The move is an implicit rejection of the most recent efforts championed by the key partners on the F-35: Lockheed Martin (NYSE:LMT), Northrop Grumman (NYSE:NOC) and BAE Systems (OTCPK:BAESY).

A defensive move out of Bentonville, Arkansas could rattle the exploding smart speaker market. Wal-Mart (NYSE:WMT) is offering a $25 discount to users who purchase a Google (NASDAQ:GOOG) Home product and link their online Wal-Mart account to Google Express. The strategic move appears to be a countermeasure to Amazon's (NASDAQ:AMZN) aggressive Echo/Alexa push. On a broader scale, the recent e-commerce acquisitions by Wal-Mart of Jet.com and Bonobos are a clear indication that Wal-Mart intends to keep challenging Amazon directly.

In a bid that marks a 23% premium, France's Accor hotel group (OTCPK:ACRFF) has offered A$1.2B (about $932M) for Australia's Mantra Group. Due diligence on the deal is underway to see if Mantra will agree to the offer. The proposed deal would double Accor's size in Australia and is more expensive than prior deals at a purchase price of 13 times 2018 EBITDA. Mantra Group closed 16% higher in Sydney trading.

Steve Wynn said the behavior of the Las Vegas mass shooter would have set off warning signals at Wynn Resorts (NASDAQ:WYNN) properties. For starters, Wynn noted that an inquiry is launched by the hotel when a guest has a "do not disturb" marker on their room for more than 12 hours as happened at the Mandalay Bay. The casino exec also pointed to additional security measures instituted at Wynn Las Vegas and Encore Resort, including guarding all doors and installing magnetometers at high-traffic areas.

M&A radar: It could be an active week for deals with SeaWorld Entertainment (NYSE:SEAS) being circled by Merlin Entertainment, the Nordstrom (NYSE:JWN) family scrapping for a go-private deal and a casino marriage of Penn National Gaming (NASDAQ:PENN) and Pinnacle Entertainment (NYSE:PNK) brewing. BroadSoft (NASDAQ:BSFT) is in play, while Marriott Vacations (NYSE:VAC) is said to be stalking ILG (NASDAQ:ILG). Sprint (NYSE:S) and T-Mobile (NASDAQ:TMUS) are also seemingly heading for the runway.

The number of visitors to Macau during the first four days of Golden Week fell 2% from last year's level, according to tourism officials. At the gambling mecca's casinos, VIP betting volume is expected to have fallen slightly, while mass gaming revenue is anticipated to have posted a gain despite the slip in traffic. Wynn Macau (OTCPK:WYNMF, OTCPK:WYNMY, WYNN), Sands China (OTCPK:SCHYY, OTCPK:SCHYF, LVS), MGM China (OTCPK:MCHVF, OTCPK:MCHVY, MGM) and Galaxy Entertainment (OTCPK:GXYEF) fell today in Hong Kong to extend on last week's slide. The sector could see some extra volatility this week as analysts start pumping out their revenue projections for October.

The estimated box office numbers for Blade Runner 2049 fell below expectations after the film's running of over three hours held back the number of showings that exhibitors such as AMC Entertainment (NYSE:AMC), Regal Entertainment (NYSE:RGC) and Cinemark Holdings (NYSE:CNK) could squeeze in. The Warner Bros. (NYSE:TWX) sci-fi sequel brought in about $32M to fall short of the $45M to $55M range forecast by analysts. The film brought in $50.2M across 63 global markets, a mark much closer to expectations. The film cost Warner about $150M to make before market costs.

Today's Markets

In Asia, Japan closed. Hong Kong -0.46%. China +0.76%. India 0.10%.
In Europe, at midday, London -0.20%. Paris -0.09%. Frankfurt -0.05%.
Futures at 6:20, Dow +0.12%. S&P +0.12%. Nasdaq +0.19%. Crude +0.10% to $49.34. Gold +0.81% to $1,285.20.
Ten-year Treasury Yield +11 bps to 2.361%

 

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