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Wall Street Articles

Author: skywalker   |   Latest post: Fri, 23 Jun 2017, 07:33 AM

 

Wall Street Breakfast: Brace For The Russell Reconstitution

Author: skywalker   |  Publish date: Fri, 23 Jun 2017, 07:33 AM


Today will be one of the biggest and busiest trading days in the U.S. equity market as investment managers adjust their portfolios to the rebalancing of Russell indexes. Why is it so important? Indexes rule the world because passive investing rules the world, and these indexes determine what go into many mutual funds and many ETFs. There's about $8.5T in assets benchmarked to or invested in products based on Russell U.S. indexes.

Economy

Theresa May unveiled an offer last night to allow at least 3M EU citizens living in the U.K. to stay after Brexit, but didn't reveal the exact date after which new arrivals are no longer guaranteed the status. European heads of state, including German Chancellor Angela Merkel and Austrian Chancellor Christian Kern, welcomed the initial offer, which came on the first anniversary of the Brexit vote.

A closely watched survey showing economic growth across the eurozone slipped back to 55.7 in June, from 56.8 the previous month, but the region still enjoyed its best quarter in more than six years. The flash composite PMI index was still way above the 50 level that marks expansion. "At the moment I'm not too worried about it," said Chris Williamson, chief business economist at IHS Markit.

Four Arab states boycotting Qatar over alleged support for terrorism have sent Doha a list of 13 demands, including closing Al Jazeera and reducing ties to their regional adversary Iran. It also demands shuttering of a Turkish military base in Qatar and surrendering all designated terrorists on its territory. The countries gave Doha 10 days to comply, upon which the list would become "void."

North Korea has carried out another test of a rocket engine that the U.S. believes could be part of its program to develop an intercontinental ballistic missile. The news comes a day after Secretary of State Rex Tillerson urged China, Pyongyang's sole ally, to put more pressure on the North to rein in its atomic weapons and ballistic missile programs.

Venezuelan police shot dead a protester who was attacking the perimeter of an airbase on Thursday, bringing renewed scrutiny of the force used to control riots that have killed at least 76 people. Hundreds of thousands of Venezuelans have taken to the streets in recent months to protest against shortages of food and medicine, and President Maduro's plan to overhaul the constitution.

A new ruling from Brazil's Supreme Court says it has the right to reject plea bargains made in corruption probes, potentially undercutting investigations that have threatened President Michel Temer's government. Meanwhile, American imports of fresh Brazilian beef have been halted, according to the USDA, after a high percentage of shipments failed to pass safety checks. Related tickers: BRFS, OTCQX:MRVSY, OTCQX:JBSAY

Stocks

The 34 largest U.S. lenders have all cleared the first stage of the Fed's annual stress test, showing they would be able to maintain enough capital in an extreme recession to meet regulatory requirements. Banks are still subject to a second portion of the test in which the Fed approves or denies their capital plans, which will be released next week.

The healthcare sector closed at the top of yesterday's leaderboard as the Senate released its healthcare reform bill. "The initial proposal I think is more generous and more positive to the industry than expected," said Jeff Jonas, portfolio manager with Gabelli Funds. Changes were aplenty in the new bill, but were not seen as a radical departure from ACA for individuals.

"Yes, are competing for TV ad dollars that were previously exclusively TV ad dollars," said YouTube's (GOOG, GOOGL) head of original programming, adding that the next step is professional-created content with big-name stars. YouTube recently hit the threshold of 1.5B viewers every month, equivalent to one in every five people on the globe, and said its users on average watch more than an hour of mobile videos per day.

Amazon is looking to charge advertisers $2.8M for packages that include 30-second spots during the Thursday night NFL games it will stream this coming season, Reuters reports. Amazon (NASDAQ:AMZN) paid the league $50M to stream the 10 games, taking over from Twitter's (NYSE:TWTR) prior live-streaming deal, as it makes its first high-profile push into live sports.

Estimating bigger losses for the past financial year, Toshiba's (OTCPK:TOSYY) stock listing has been demoted to the second section of the Tokyo Stock Exchange. The conglomerate also received regulatory approval to delay its annual filing by more than a month amid a prolonged accounting investigation. It marks the sixth time since 2015 that Toshiba has delayed an earnings report.

According to a Reuters investigation, Cisco (NASDAQ:CSCO), IBM, SAP and other Western tech firms are acceding to demands by Moscow to access security product source code to determine whether foreign spy agencies hid any "backdoors." While a number of U.S. businesses are playing ball to preserve their entry to Russia's huge tech market, Symantec (NASDAQ:SYMC) has stopped cooperating over security concerns.

The FCC has proposed a record $120M fine against a Miami resident said to be responsible for almost 97M robocalls, which used a tactic known as "neighbor spoofing," over the last few months of 2016. That would be its largest financial penalty ever leveled against an individual. The calls offered deals from companies like TripAdvisor (NASDAQ:TRIP), Expedia (NASDAQ:EXPE), Marriott (NYSE:MAR) and Hilton Worldwide (NYSE:HLT).

It's not been a good few weeks for CenturyLink (NYSE:CTL). While in the midst of a $34B merger, the firm has been hit with a pair of lawsuits seeking up to $12B in damages for a Wells Fargo-like scheme. Now, a video has emerged of Odell Riley, recently VP Human Resources and Chief Diversity Officer at CenturyLink, railing against the sins of homosexuals at a church in Mississippi.

Is Google Glass still alive? The device just received its first update in nearly three years, including bug fixes, performance improvements and Bluetooth input device support. It's a totally unexpected move from Google (GOOG, GOOGL), prompting speculation of an impending return for Glass. Sales of the futuristic gadget were halted back in 2015 after many considered it ugly, creepy and overly expensive.

In a hospitality industry crossover, Ritz-Carlton (MAR) has revealed plans for a luxury cruise line scheduled to hit the water in late 2019. It's building three 298-passenger yachts that will cater to the "1% of global travelers," according to Bloomberg. While home ports for the ships have not yet been announced, bookings will begin next May.

Sears is preparing to close 20 more stores in the United States. That's on top of 245 closings already announced, Sears (NASDAQ:SHLD) employees told Business Insider, and will bring the company's store count down to about 1,180. Yesterday, Sears Canada (NASDAQ:SRSC) announced it would close a quarter of its 59 locations as part of court-ordered restructuring.

Volkswagen has agreed to buy back diesel cars equipped with illicit emissions software after deciding not to appeal a German court ruling backing plaintiffs' calls for compensation. VW (OTCPK:VLKAY) said its decision was an exception to its position to "not compensate, but fix" vehicles of European customers, and stemmed from the low value of the cars in question.

After losing the 2017 Paris Air Show to rival Boeing (NYSE:BA), Airbus (OTCPK:EADSY) sales chief John Leahy, one of the dominant figures of modern aviation, has hinted he would retire this fall. He pledged to ensure a smooth transition to his designated internal successor, Kiran Rao. The 67-year-old New Yorker has overseen the sale of more than 10,000 aircraft worth $1T since 1994.

SpaceX is about to kick off a busy weekend with today's launch of a previously flown Falcon 9 rocket. If successful, it will be the fastest turnaround time between two SpaceX (Private:SPACE) launches ever. The company is also targeting a Sunday launch of more Iridium (NASDAQ:IRDM) satellites, putting it on track to launch more rockets than its competitors for the first time in a calendar year.

Thursday's Key Earnings

Accenture (NYSE:ACN) -4% after lowering guidance.
Bed Bath & Beyond (NASDAQ:BBBY) -7.9% AH on slipping sales.
Carnival (NYSE:CCL) -1.1% despite beating estimates.

Today's Markets

In Asia, Japan +0.1%. Hong Kong flat. China +0.3%. India -0.5%.
In Europe, at midday, London -0.5%. Paris -0.6%. Frankfurt -0.7%.
Futures at 6:20, Dow -0.2%. S&P flat. Nasdaq -0.2%. Crude +0.2% to $42.81. Gold +0.7% to $1257.80.
Ten-year Treasury Yield flat at 2.16%

Today's Economic Calendar

9:45 PMI Composite Flash
10:00 New Home Sales
11:15 Fed's Bullard: U.S. Monetary and Economic Policy
12:40 Fed's Mester speech
1:00 PM Baker-Hughes Rig Count
2:15 PM Fed's Powell speech

 

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Wall Street Breakfast: First Look At Senate Health Bill

Author: skywalker   |  Publish date: Thu, 22 Jun 2017, 07:16 AM


Senate Republicans plan to release their version of healthcare reform legislation at 9:30 a.m ET, the first time the public will get to see what they have been working on behind closed doors. The Congressional Budget Office is then expected to release its analysis of the bill early next week, with a Senate vote possible before the July 4 recess. Related tickers: UNH, AET, ANTM, CI, HUM, WCG, CNC, MOH, GTS, HQY, QHC, HCA, THC, UHS, LPNT, CYH, HCP, SEM

Economy

EU leaders are gathering today for a summit in Brussels, where U.K. Prime Minister Theresa May is expected to outline her plan for Brexit and set out proposals for EU citizens in the U.K. Ahead of the summit, Valdis Dombrovskis, VP of the European Commission, said Britain cannot hope to retain its financial passporting privileges if it pursues a so-called "hard Brexit."

French President Emmanuel Macron is getting down to business with a crew that includes many political newcomers following a series of high-profile resignations, all for ethical reasons. The re-shuffled cabinet will meet today for the first time since Sunday's legislative election when En Marche! and its allies won a commanding majority.

President Trump's son-in-law and senior White House adviser, Jared Kushner, has returned to the U.S. after a 15-hour visit to Jerusalem and Ramallah to meet with Bibi Netanyahu and Mahmoud Abbas. He was joined by Jason Greenblatt, the president's top representative on Israeli-Palestinian negotiations, and David Friedman, the U.S. ambassador to Israel, to advance U.S. efforts toward reaching a peace deal.

A North Korean diplomat has raised the possibility of the hermit regime holding bilateral talks with the U.S., but it's unclear whether Kim Jong-un shares the views of his Indian envoy. "If our demands is met, we can negotiate in terms of the moratorium of such [programs] as weapons testing," declared Kye Chun Yong, adding that Pyongyang first wants to see the U.S. and South Korea stop joint military exercises.

Stocks

Uber's board of directors is undergoing more changes, a day after the resignation of CEO Travis Kalanick. Bill Gurley is handing his board seat to Matt Cohler, his partner at VC firm Benchmark, while TPG Capital's David Trujillo will replace David Bonderman. Any word on a new UBER CEO? According to the NY Post, Facebook's (NASDAQ:FB) Sheryl Sandberg and former Disney (NYSE:DIS) COO Tom Staggs are on the short list.

At its annual shareholders meeting, Foxconn (OTC:FXCOF) said it will continue to pursue Toshiba's (OTCPK:TOSYY) chip business, a day after the troubled conglomerate chose a rival suitor as its preferred bidder. Foxconn is also looking at six U.S. states for a display-making plant, which could be valued at more than $7B, and will make a decision on it next month.

The proposed merger between DraftKings (Private:DRAFT) and FanDuel (Private:DUEL) has been temporarily halted by a federal judge, days after the FTC announced it would attempt to block the union. According to the commission, the deal would allow the companies to dominate more than 90% of the daily-fantasy-sports market, thwarting competition and essentially making them a monopoly.

Executives and investors from some 25 companies are heading to the White House today to discuss the potential impact of emerging technologies on industrial workers in the U.S. The meeting was organized by the Office of Science and Technology Policy, now led by Deputy CTO Michael Kratsios, and will feature firms specializing in 5G wireless and drone-related technologies. Related tickers: CTL, GE, HON, MSFT, NDAQ, S, T, VZ

Altice USA has raised $1.9B in its U.S. IPO, making it the second largest American offering of the year. Priced at $30 a share, it will begin trading on the NYSE later today under ticker symbol "ATUS." It's the fourth-largest cable company in America, consisting of Suddenlink Communications (which Altice acquired in 2015) and Cablevision Systems (acquired in 2016).

"We're thinking about building the [border] wall as a solar wall, so it creates energy, and pays for itself. And this way Mexico will have to pay much less money," President Trump said at a campaign rally in Iowa. Despite congressional refusal thus far, Trump has maintained that the wall, mentioned frequently during his electoral campaign last year, will go ahead as planned. Related tickers: ASYS, AXTI, CSIQ, CSUN, CVV, DQ, EMKR, ENPH, FSLR, GEX, GLBL, HQCL, JASO, JKS, RGSE, SEDG, TSLA, SOL, SKYS, SPWR, TAN, TERP, TSL, VSLR, YGE

A U.S. District Court judge has set up a series of hearings through the summer to determine what will happen to the Dakota Access Pipeline while authorities conduct an additional review of the project's environmental impact. Project developer Energy Transfer Partners (NYSE:ETP) is "pleased with the decision" as oil will continue to flow through the pipeline during the hearings.

Facing billions of dollars in liabilities, Takata (OTCPK:TKTDY) will seek bankruptcy protection from creditors on Monday, Reuters reports. SMBC is to provide a bridge loan worth tens of billions of yen after the filing in Tokyo. Takata shares have fallen about 75% since last Friday, as the company seeks to wrap up the biggest recall in automotive history.

The race is on... Harley-Davidson (NYSE:HOG) is considering a bid for Italian rival Ducati in a deal that could be valued at up to €1.5B. Volkswagen (OTCPK:VLKAY), whose Audi division controls the Italian motorcycle maker, has also drawn interest from Indian firm Bajaj Auto, while several buyout funds are also reportedly eyeing one of the most famous names in the industry.

Elon Musk is already planning the first manned SpaceX (Private:SPACE) flight to Mars in 2023, but he just laid out plans to colonize Mars with a million inhabitants - within 50 years - in the journal New Space. "I think there are really two fundamental paths. One path is we stay on Earth forever, and then there will be some eventual extinction. The alternative is to become a space-bearing civilization and a multi-planetary species."

Novartis +2.2% premarket after its drug designed to reduce inflammation showed surprising efficacy in cutting cardiovascular risk for people who had survived heart attacks. Canakinumab, also called ACZ885, met Novartis' (NYSE:NVS) primary endpoint in a pivotal clinical trial in reducing the danger of further heart attacks or strokes, when used with current standard therapies.

While a new healthcare bill is in sight, Cigna (NYSE:CI) will continue to offer individual coverage under Obamacare for now, while rival Anthem (NYSE:ANTM) announced it was shrinking its participation. Wednesday was the deadline for insurers to submit their 2018 rates for individual plans sold on HealthCare.gov - amid uncertainty over the fate of the government-subsidized program.

Toast to George Clooney! The actor has sold his upscale tequila brand to Diageo (NYSE:DEO) for up to $1B, after founding Casamigos with some friends in 2013. Seeing high potential for growth in Europe, Diageo is paying $700M up front, but bigger payments could follow if performance targets are met.

Sycamore Partners is in advanced talks to acquire Staples (NASDAQ:SPLS), Reuters reports, in a deal for the office supplies retailer that could top $6B. The acquisition would come a year after a U.S. federal judge thwarted a merger between Staples and Office Depot (NYSE:ODP) on antitrust grounds. SPLS +7.4% premarket.

Plagued by price manipulation and a fragile structure, a committee of global banks will vote today on an alternative to Libor for use as a benchmark U.S. interest rate for derivatives contracts. The two alternatives under proposal are the U.S. Overnight Bank Funding Rate and a rate based on overnight lending in the U.S. Treasury collateralized repo market.

U.S. bank regulators have room to "eliminate" or "relax" aspects of the Volcker Rule, Fed Governor Jerome Powell declared in prepared remarks to the Senate Banking Committee. He is due to deliver testimony later today, along with several other regulators, at a hearing discussing how the Trump administration might reform banking rules.

Dividend-focused bank investors will be paying attention today to the first round of the Fed's annual stress tests on 34 of the largest U.S. financial institutions. The quantitative part will show the impact of hypothetical scenarios on banks' capital levels. The second round, which will take place on June 28, will say whether any firm failed because of either insufficient capital or on qualitative grounds.

Wednesday's Key Earnings

Oracle (NYSE:ORCL) +10% AH bolstering cloud-based services.

Today's Markets

In Asia, Japan -0.1%. Hong Kong -0.1%. China -0.3%. India flat.
In Europe, at midday, London -0.4%. Paris -0.3%. Frankfurt flat.
Futures at 6:20, Dow flat. S&P flat. Nasdaq flat. Crude +0.7% to $42.83. Gold +0.5% to $1251.70.
Ten-year Treasury Yield flat at 2.15%

Today's Economic Calendar

8:30 Initial Jobless Claims
9:00 FHFA House Price Index
9:45 Bloomberg Consumer Comfort Index
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

 

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Wall Street Breakfast: Look Out Below! Oil Is Growling

Author: skywalker   |  Publish date: Wed, 21 Jun 2017, 07:39 AM


Crude fell into a bear market on Tuesday, sinking another 2.2% to settle at a nine-month low of $43.23/bbl. The big fear gripping the energy industry is that the world continues to have too much oil, despite a deal between OPEC and Russia to pump less. Game of chicken? The supply glut could be deepened by U.S. shale producers that have ramped up output in recent months.

Economy

In a major shakeup, Saudi Arabia's King Salman has relieved his nephew, Muhammad bin Nayef, as crown prince, replacing him with his son, Mohammed bin Salman. The 31-year-old prince has led a complete overhaul of the Saudi economy, diversifying the kingdom beyond oil under Vision 30 and a planned IPO for Saudi Aramco (Private:ARMCO). He has also frequently praised the country's relationship with the U.S.

A suspected suicide bomber who reportedly screamed "Allahu Akbar" before triggering an explosion at Brussels Central Station has been gunned down and killed by soldiers. No other casualties were reported. Belgium has been on terror alert Level 3 for months, one below the top level, following an attack in March 2016 at the national airport and the Maelbeek metro station that killed 32 people.

A host of proposed new laws designed to prepare the U.K. for a "smooth and orderly" departure from the EU have been announced today in the Queen's Speech. Of 24 bills, eight relate to Brexit and its implications for key industries. Meanwhile, Prime Minister Theresa May has promised to work with "humility and resolve" as she continues coalition negotiations with the DUP.

Reform timelines: Gary Cohn, director of the National Economic Council, doesn't expect the White House to get a tax bill in front of Congress until September. At around the same time, Senate Majority Leader Mitch McConnell said a draft of the Senate's healthcare bill will be released Thursday. A vote would happen after the CBO releases its analysis, possibly before the July 4 recess.

Georgia Republican Karen Handel has won the most expensive congressional race in history. Spending on the race reached at least $57M, nearly twice the previous record, according to the Center for Responsive Politics. Seen as an early proxy for whether Democrats can flip certain Republican-leaning districts in the Trump era, the election drew national attention from around the country.

"While I greatly appreciate the efforts of President Xi & China to help with North Korea, it has not worked out. At least I know China tried!" President Trump wrote in a tweet. It follows the death of 22-year-old Otto Warmbier, whom Pyongyang held for more than a year. According to White House spokesman Sean Spicer, it's also getting less likely that Trump will meet with Kim Jong-un.

About $17B-$18B should initially flow into China's mainland stock market once some stocks are added to the key MSCI Emerging Markets Index EEM. The long-awaited A-shares decision was announced on Tuesday afternoon, in what was seen as a major milestone. "International investors have embraced the positive changes in accessibility... over the last few years," said Remy Briand, Chairman of the MSCI Index Policy Committee.

A bill that slaps new sanctions on Russia and Iran, and passed the Senate almost unanimously, has hit a stumbling block in the House. House Ways and Means Committee Chairman Kevin Brady said the legislation may violate the Origination Clause of the Constitution, referring to the constitutional requirement that revenue bills originate in the House.

Brazil's federal police say they have discovered solid evidence that President Temer received bribes to help businesses and deserves to be investigated for "passive corruption." Temer has denied any wrongdoing and insists he will not resign, but it raises a new threat that the embattled leader could be suspended from office.

Stocks

One week after taking a leave of absence, UBER CEO Travis Kalanick has resigned from the $70B company he founded, NYT reports. "I have accepted the investors' request to step aside so that Uber can go back to building rather than be distracted with another fight," he said in a letter. The ride-hailing firm has been plagued by allegations of sexual harassment and misconduct, which saw the firing of more than 20 employees.

"Turns out that Tesla isn't a good fit for me after all," said autopilot software head Chris Lattner, who quit the company after just six months on the job. He worked at Apple (NASDAQ:AAPL) for more than a decade before joining the automaker in January. Following the resignation, Tesla (NASDAQ:TSLA) hired Andrej Karpathy, a researcher at OpenAI, as director of artificial intelligence and the Vision team.

Toshiba has selected a consortium consisting of the INCJ, Bain Capital and the Development Bank of Japan as a preferred bidder for its memory chip business, estimated to be worth around $20B. Western Digital (NYSE:WDC) responded to the news, saying Toshiba (OTCPK:TOSYY) continued to ignore both its subsidiary SanDisk's rights and the dual-track legal process currently underway.

Jack Ma is in Detroit making a high-profile pitch to small American businesses. He's hosting an event called Gateway '17, aimed at convincing smaller enterprises to work with Alibaba (NYSE:BABA). It expands on a meeting Ma had with President Trump in January, when they talked about how independent businesses could grow by selling to China's growing market and thereby creating a million U.S. jobs.

Forget about disrupting the grocery sector, Amazon (NASDAQ:AMZN) is heading into fashion. Amazon Prime Wardrobe will let users try before they buy, and only pay for what they keep (free shipping and discounts are also available). Market reaction? Retailer stocks were hit by the news on Tuesday, including Nordstrom (NYSE:JWN), J.C. Penney (NYSE:JCP), Ascena (NASDAQ:ASNA), Chico's (NYSE:CHS), TJX and Ross Stores (NASDAQ:ROST).

Sears Canada has "significant doubt" about its ability to continue as a going concern and is exploring a possible sale of the business. Sears Canada (NASDAQ:SRSC), whose Q1 net loss more than doubled from a year ago, also abruptly called off its annual meeting scheduled for today, postponing it to an undetermined future date.

The world's largest home appliance maker has lost its captain. Whirlpool's (NYSE:WHR) CEO Jeff Fettig will step down on Oct. 1 after thirteen years at the helm and will be replaced with current COO Marc Bitzer. Fettig steered the company through the recession and oversaw the acquisition of Italy's Indesit and China's Hefei Rongshida Sanyo Electric.

"If I had to pick one word that IBM's reinventing around, it's 'data,'" CEO Ginni Rometty told Mad Money host Jim Cramer. "The cloud is in its early stages and it's changing," she declared, emphasizing IBM's current focus on collecting data. "20% of the world's data is searchable... "But 80% of the world's data, which is where I think the real gold is - that is all with our clients.

Ericsson has signed an agreement with software firm Flex to sell its power modules business, the first exit of assets under a new strategy to focus on its core business. Ericsson (NASDAQ:ERIC) announced the strategy in March, saying it would concentrate on its main product areas of networks, digital services and Internet of Things.

A Supreme Court ruling has led St. Louis Circuit Judge Rex Burlison to declare a mistrial in a case claiming J&J's (NYSE:JNJ) talcum powder caused ovarian cancer. It centers on whether state courts can hear claims against companies that are not based in the state, or if the injuries did not occur there. Juries in four St. Louis trials have already hit J&J and a talc supplier with $307M in verdicts.

Get ready for Cigna's investor day, its first since its deal with Anthem (NYSE:ANTM) officially broke off. The insurer is expected to unveil its post-Anthem plans for growth, addressing issues such as mergers and acquisitions, the Obamacare individual market and legislative reform. Cigna's (NYSE:CI) event starts at 8:30 a.m. ET and will end at 1:00 p.m.

Former Barclays CEO John Varley has resigned from BlackRock's (NYSE:BLK) board, where he served as an independent director since 2009. He was among those from Barclays (NYSE:BCS) charged yesterday with conspiracy to commit fraud in connection with an emergency fundraising in Qatar in 2008. "BlackRock and its management team have benefited greatly from his contributions," said CEO Larry Fink.

Tropical Storm Cindy has caused the suspension of service at a major Gulf of Mexico oil terminal and evacuations at rigs and platforms as it moves toward an expected landfall early Thursday. "While the storm may not be a whopper, it will influence shipping and may impact imports and exports of oil for next week," said a senior market analyst at Price Futures Group. Related tickers: LNG, ENB, APC, BHP, ETR, RDS.A, RDS.B

Today's Markets

In Asia, Japan -0.5%. Hong Kong -0.6%. China +0.5%. India flat.
In Europe, at midday, London -0.4%. Paris -0.8%. Frankfurt -0.5%.
Futures at 6:20, Dow flat. S&P -0.2%. Nasdaq -0.3%. Crude flat at $43.50. Gold +0.4% to $1248.
Ten-year Treasury Yield flat at 2.15%

Today's Economic Calendar

7:00 MBA Mortgage Applications
10:00 Existing Home Sales
10:30 EIA Petroleum Inventories

 

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Wall Street Breakfast: MSCI's Big China Decision

Author: skywalker   |  Publish date: Tue, 20 Jun 2017, 10:00 AM


In what has become an annual event, MSCI will decide this afternoon whether to include China's mainland stock market - which has restricted access for foreign investors - into its ETFs, including funds EEM and ACWI. It's a major decision: Indexers now rule the world. MSCI has more than $10T of active and passive assets benchmarked against it, with emerging markets alone accounting for $2T.

Economy

Sterling fell by almost a full cent vs. the dollar to $1.2669 after BoE Governor Mark Carney said now was not the time to raise interest rates, dashing some investors' hopes that the central bank had shifted in that direction. What about Brexit talks? Day one of negotiations between the U.K. and EU ended with Brussels getting its way on the timetable for Britain's exit from the bloc.

Renegotiating NAFTA could spill into next year, according to Commerce Secretary Wilbur Ross, but he still sees "plenty of reasons" to finish the trade talks in 2017. Mexico has a general election in July 2018, while the U.S. holds midterms elections a few months later. "We're certainly mindful of the calendar and the fact that the calendar is fundamentally not our friend."

A new group is looking to support carbon-cutting, less than three weeks after President Trump pulled the U.S. out of the Paris climate accord. The Climate Leadership Council took out a full page ad in today's WSJ, stating that America needs a consensus climate solution that "bridges partisan divides, strengthens our economy and protects our shared environment." Founding members: BP, XOM, GM, JNJ, PG, PEP, SAN, TOT, UL, RDS.A, RDS.B

The threat of direct Russian-American confrontation in Syria is escalating. Moscow said it would treat any plane from the U.S.-led coalition flying west of the Euphrates river as a potential "aerial target" and suspended communications via a military hotline. It comes after the U.S. downing of a Syrian government jet over the weekend.

More century bonds? Argentina sold $2.75B of a hotly demanded 100-year bond in U.S. dollars on Monday, which will go toward financing its budget and refinancing existing debt. The country only removed currency controls in 2015, and has yet to gain an investment-grade credit rating, but investors have been encouraged by President Macri's selection of market-friendly reforms.

Stocks

Tech is back on a tear as Apple (NASDAQ:AAPL) helped the Nasdaq yesterday log its best day of the year, with the S&P and Dow closing at new record highs. "Tech got beat up unfavorably over the past week or two, but as the group's earnings remain strong, we expect buyers are coming in to take advantage of the depressed prices," said Murphy Capital Management's Peter Lewis. More gains look in store for today's open.

"Like an old traditional marriage, where there are all kinds of rules and chaperones, we can't consummate the marriage, until we're actually officially hooked up," Whole Foods (NASDAQ:WFM) CEO John Mackey declared, describing the company's $13.7B deal with Amazon (NASDAQ:AMZN). Expansion of products? "Over time, there could be other formats that evolve that - that might - wouldn't be branded Whole Foods Market, potentially, wouldn't be our standards."

The tradeoff between time and quality looms large for McDonald's (NYSE:MCD) as it begins to roll out its fresh burgers. An on-demand Quarter Pounder takes about a minute longer to land in a customer's hands than does the original sandwich, according to restaurant managers and analysts, because grilling begins only after a patron orders. Speed-minded drive-through patrons account for 70% of McDonald's U.S. revenue.

Dumping sweets, chasing health? Nestle (OTCPK:NSRGY) has acquired a minority stake in Freshly, a provider of direct-to-consumer freshly prepared meals that are made without refined sugars or artificial ingredients. The investment will help Freshly build a new East Coast distribution center and kitchen in 2018 as it prepares to expand its U.S. service nationwide.

UPS plans to charge retailers extra fees to deliver packages during the busiest weeks before Christmas, creating a new challenge for an industry seek to offset declining foot traffic to shopping centers. UPS's fees will force retailers like Amazon (AMZN) and Wal-Mart (NYSE:WMT) to decide over the next few months whether to raise prices, a difficult to do when online shoppers are reluctant to pay shipping fees.

The U.K. Serious Fraud Office has charged Barclays (NYSE:BCS) and four former senior executives over fundraising from Qatari investors in 2008. The investigation, which has taken five years, centered around undisclosed payments to investors in the country amid a £12B emergency fund raising at the height of the financial crisis. BCS -0.3% premarket.

Don't believe everything Martin Shkreli says, at least what he tweets, his lawyer told a federal judge in an attempt to reduce his bail from $5M to $2M. The motion was rejected. The plea came ahead of Shkreli's fraud trial next week, which will decide whether the "Pharma Bro" looted millions of dollars from Retrophin (NASDAQ:RTRX) to repay investors in two hedge funds.

The FTC is filing an antitrust lawsuit seeking to block the proposed merger of DraftKings (Private:DRAFT) and FanDuel (Private:DUEL), alleging the deal would harm consumers who play daily fantasy contests. "We are disappointed by this decision and continue to believe that a merger is in the best interests of our players, our companies, our employees and the fantasy sports industry," the companies said in a joint statement.

Samsung is hoping the Galaxy Note 8 will be able to put last year's exploding Note 7 fiasco behind it and be a major challenger to Apple's (AAPL) iPhone 8. Alleged leaked images of the upcoming smartphone were posted overnight and sources say Samsung (OTC:SSNLF) will unveil the device at a media event in New York City on Aug. 26.

A merger between Sprint (NYSE:S) and T-Mobile (NASDAQ:TMUS) is "financially compelling," according to Moody's, but it faces a long road and daunting challenge from an operational standpoint. "A successful integration would likely take significant time, enabling competitors such as Verizon (NYSE:VZ) and AT&T (NYSE:T) to advance their own strategies and take market share."

A federal judge in San Francisco has named lawyer Elizabeth Cabraser to lead the case brought against Fiat Chrysler (NYSE:FCAU) by owners over allegations it bypassed diesel emission controls. She also served as lead attorney in Volkswagen's (OTCPK:VLKAY) Dieselgate scandal that led to the automaker agreeing to buy back 500K vehicles and spend billions compensating owners.

A man killed in a crash last year while using the semi-autonomous driving system on his Tesla (NASDAQ:TSLA) Model S kept his hands off the wheel for extended periods of time despite repeated audible warnings not to do so. That's according to the NTSB, which released 500 pages of findings. Tesla is also nearing a deal to open its first production plant in China, Bloomberg reports, which would help it avoid a 25% import tariff.

The U.S. Air Force is resuming local flying operations of Lockheed Martin's (NYSE:LMT) F-35 at Luke Air Force base in Arizona after an 11-day suspension. They were stopped earlier in the month when five "physiological"problems, like irregularities in pilots' oxygen supplies, occurred during flights between May 2 and June 8.

Boeing received more than three dozen pledges to buy the planned Max 10 on the first day of the Paris Air Show, as the planemaker stretched its 737 workhorse to challenge Airbus's (OTCPK:EADSY) sales lead for the largest single-aisle airliners. Boeing expects to win 240 orders or commitments for the new model - valued at roughly $30B - during the industry event this week.

Today's Markets

In Asia, Japan +0.8%. Hong Kong -0.3%. China -0.1%. India flat.
In Europe, at midday, London +0.1%. Paris +0.3%. Frankfurt +0.3%.
Futures at 6:20, Dow +0.1%. S&P +0.1%. Nasdaq +0.2%. Crude -1.7% to $43.66. Gold +0.1% to $1247.30.
Ten-year Treasury Yield flat at 2.18%

Today's Economic Calendar

8:30 Current Account
8:55 Redbook Chain Store Sales
3:00 PM Fed's Kaplan: Monetary Policy

 

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Wall Street Breakfast: Day One Of Brexit Negotiations

Author: skywalker   |  Publish date: Mon, 19 Jun 2017, 07:15 AM


Almost a year to the day after Britons voted to leave the European Union, Brexit talks are finally underway in Brussels. EU chief negotiator Michel Barnier is sitting down with U.K. Brexit Secretary David Davis, who struck a conciliatory tone overnight, emphasizing Britain and the EU's "shared European values" and promising Brexit will deliver "a deal like no other in history." The two-year divorce process is due to end by March 2019.

Economy

"Because we're leaving the EU, we will be leaving the single market. And, by the way, we'll be leaving the customs union," U.K. Treasury chief Philip Hammond declared, despite the Conservative Party's recent election setback. What about a possible €55B-€60B divorce bill? "I don't recognize these sums at all," he said. "I think this is the most egregious pre-negotiation posturing that I've seen for a very long while."

One person has been killed and 10 injured after a man drove a van into worshippers leaving a London mosque early Monday. Investigation of the incident is being carried out by the British police's counter-terrorism command, while Theresa May said it's being treated as a potential terrorist attack. The news isn't moving sterling, which continues to trade around the $1.27 handle seen through the last week.

President Emmanuel Macron won a commanding majority in France's parliamentary elections on Sunday, securing a powerful mandate to push through his pro-business reforms. According to exit polls, year-old En Marche! was on track to take around 361 seats in the 577-seat national assembly, marginalizing the long-dominant Republican and Socialist parties.

New American sanctions under consideration would damage U.S.-Russian relations, Vladimir Putin told news agency RIA, but he said it was too early to talk about retaliation. Meanwhile, the European Union in the coming days is set to extend sanctions again on Russian companies and others who gained from the Kremlin's annexation of Crimea in 2014.

Deepening involvement? An American warplane shot down a Syrian army jet on Sunday, marking the first such occurrence in the country's years-long civil war. Meanwhile, Iran launched missiles over the weekend at ISIS targets in Syria in response to the recent attacks in Tehran. The Syrian pound has lost four-fifths of its value since 2010, while the IMF said Syria's GDP today is less than half of what it was before the war.

Efforts to end a two-week-old crisis in the Persian Gulf have shifted to the U.S., with Rex Tillerson canceling a trip to Mexico to try to end a Saudi-led coalition's isolation of Qatar. "The Secretary of State will continue his efforts to de-escalate tensions in the Middle East region through in-person meetings and phone conversations with Gulf and regional leaders," according to the State Department.

Australia's economy is capable of stronger growth, according to central bank governor Philip Lowe, but he said lawmakers must first overcome political gridlock over needed economic reforms. Separately, Moody's downgraded the long-term credit rating of Australia's "Big Four" banks, saying surging home prices, rising household debt and sluggish wage growth pose a threat to the lenders.

U.S. index provider MSCI is likely to promote Argentina to its $1.5T Emerging Markets Index (ETF: EEM) this week, prompting investment funds from all over the world to buy Argentine equities. The Merval stock index has risen 24% YTD, while the country recently commenced several sovereign bond sales, ending a decade of isolation from international credit.

Taking a big step towards loosening the shackles on Wall Street, President Trump has nominated James Clinger as chairman of the FDIC, one of the U.S.'s most powerful bank regulators. If confirmed by the Senate, he would begin his term in November. Clinger currently serves as chief counsel for the House Financial Services Committee and has been involved in efforts to rip up Dodd-Frank.

Just days after the U.S. central bank hiked interest rates, several Fed Presidents will make appearances across the country. New York's William Dudley will kick off the full week of Fedspeak today, taking part in a roundtable with local business leaders in Plattsburgh, NY. Later tonight, Chicago Fed President Charles Evans will speak about current economic conditions and monetary policy in NYC.

Stocks

The aircraft industry is descending on Paris for the biennial aviation and defense industry gathering that alternates with Farnborough, England. More than 350K people visited the Paris Air Show in 2015 and 91 countries were represented. It will go some way in determining whether the recent orders slowdown will reverse, or is simply a cooling-off period after years of supercharged growth.

First news... Airbus (OTCPK:EADSY) has unveiled the A380plus, the world's new largest passenger jet, while Boeing (NYSE:BA) is expected to launch the 737 MAX 10. Raytheon (NYSE:RTN) plans to announce it will restart its Standard Missile 2 production line after a $650M order from four U.S. allies, and Lockheed Martin's (NYSE:LMT) F-35 is set to score a load of customers.

Brexit boost? Jaguar Land Rover (NYSE:TTM) will hire 5,000 staff as it boosts skills in autonomous and electric vehicle technology. It's a business endorsement for Theresa May as she starts Brexit negotiations following a botched election. The additional personnel will include 1,000 electronic and software engineers, as well as 4,000 employees for manufacturing.

Fiat Chrysler is not pulling the plug on its Chrysler brand in Japan, shooting down rumors stating it would stop selling the cars due to poor sales. "Although FCA Japan has already announced its intention to concentrate its resources on the Jeep brand ahead, no decisions have been made regarding (the) Chrysler brand," Fiat (NYSE:FCAU) said in a statement.

General Electric is looking at opportunities to invest in transportation in the Middle East and Africa after signing a $575M railway deal in Egypt. "Demand for infrastructure continues unabated, the region is shifting to renewables, which is becoming more and more important," said GE Vice Chairman John Rice. "We don't expect that to change."

Bitcoin traded higher on Saturday near $2,680, according to CoinDesk, up more than 20% from a June low of $2,185.96 hit Thursday that had erased gains for the month. The cryptocurrency still remains more than 150% higher since Jan. 1, while rival ethereum has skyrocketed over 4,000% YTD and came closer this week to topping bitcoin in market value.

"Some thought we shouldn't broadcast this interview because his baseless allegations aren't just offensive, they're dangerous. But here's the thing: Alex Jones isn't going away," Megyn Kelly told viewers Sunday night. Kelly, who gained prominence as an anchor at Fox News (NASDAQ:FOX), joined NBC (NASDAQ:CMCSA) this year. The network is banking on her as its next flagship star, who is drawing a salary reported to be about $15M.

"While we and others have worked for years to identify and remove content that violates our policies, the uncomfortable truth is that we, as an industry, must acknowledge that more needs to be done. Now," Google (GOOG, GOOGL) wrote in a weekend blog post. The tech giant will implement more measures to identify extremist videos and up the number of experts that flag them, while taking a tougher stance and expanding its counter-radicalization efforts.

Investors are still talking about Amazon's (NASDAQ:AMZN) deal to acquire Whole Foods Market (NASDAQ:WFM) for $13.7B, a move that catapults the e-commerce giant into hundreds of physical stores and fulfills a long-held goal of selling more groceries. The deal sent shockwaves across both the online and brick-and-mortar industries on Friday. Wal-Mart (NYSE:WMT) fell as much as 7.1%, while Kroger (NYSE:KR) tumbled 17% on fears of an increasingly cutthroat industry.

Today's Markets

In Asia, Japan +0.6%. Hong Kong +1.2%. China +0.7%. India +0.8%.
In Europe, at midday, London +0.6%. Paris +0.9%. Frankfurt +0.8%.
Futures at 6:20, Dow +0.3%. S&P +0.3%. Nasdaq +0.6%. Crude +0.2% to $45.08. Gold -0.3% to $1252.90.
Ten-year Treasury Yield flat at 2.15%

Today's Economic Calendar

7:00 PM Fed's Evans: Monetary Policy

 

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Wall Street Breakfast: Havana Au Go-Go?

Author: skywalker   |  Publish date: Fri, 16 Jun 2017, 09:26 AM


President Trump is expected to announce a revised Cuba policy today, which would stop the flow of U.S. cash to the island's military, while maintaining diplomatic relations and service by U.S. airlines and cruise ships. The directive also doesn't intend to "disrupt" existing business deals like the one recently struck by Starwood Hotels (NYSE:MAR), and there won't be any changes to the "wet foot, dry foot" policy. Related tickers: CUBA, JBLU, AAL, DAL, ALK, CCL, NCLH, RCL

Economy

Greece's creditors have agreed to release the next €8.5B tranche of its bailout program, but put off a final decision on debt relief until August 2018. The delay will make it more challenging for Athens to reenter capital markets after its current rescue ends, possibly risking the need for another bailout down the road.

New polls show French President Emmanuel Macron's party is on course to win a commanding majority in the final round of parliamentary elections on Sunday. En Marche! and its allies may take as many as 470 seats out of 577, marginalizing the long-dominant Republicans and Socialist Party. Also on watch: Formal Brexit talks are due to begin Monday.

The Bank of Japan kept its negative interest rates on hold in its June review, pledging to keep asset purchases around the current target of ¥80T ($727M) and sounding more upbeat on the economy. "Private consumption has increased resilience against a background of steady improvement in the employment and income situation," the BOJ said in a statement.

The DOJ has seized $540M in assets from embattled sovereign wealth fund 1MDB, which was set up by Malaysian Prime Minister Najib Razak in 2009 to promote economic development. The action claims financiers related to the fund stole around $4.5B, which included a Picasso painting gifted to Leonardo DiCaprio and the rights to movies Daddy's Home and Dumb and Dumber Two.

Cairo isn't concerned about potential financial fallout from its political rift with Doha, according to Egyptian finance minister Amr El-Garhy. "It's not a matter of a loss of money... it's a matter of principle," he said on the sidelines of the AIIB's second annual meeting. Egypt, alongside six other Middle Eastern countries, severed ties with Qatar last week, accusing the nation of supporting terrorism.

The Russian Defense Ministry is checking on information indicating that Islamic State leader Abu Bakr Al-Baghdadi was killed in an air strike near Raqqa at the end of May. "The strikes destroyed high-ranking commanders of the terrorist group who were part of the so-called military council of ISIS, along with 30 field commanders and up to 300 militants," according to the ministry.

Vice President Mike Pence has hired an outside lawyer, Richard Cullen, to aid him with both congressional committee inquiries and a special counsel probe into possible collusion between the Trump campaign and Russia. The decision comes less than a month after Trump hired his own private attorney, Marc Kasowitz, to help navigate the Russia investigations.

Stocks

Investors raced into exchange-traded funds this past week despite market jitters, according to Lipper, delivering the most cash to those funds since late last year. Stock ETFs listed in the U.S. attracted $17.7B during the week ended June 14, while their mutual fund counterparts recorded $6.8B of outflows in their largest week of withdrawals since April.

Following a record surge in price, bitcoin sunk as much as 19% on Thursday, putting it on pace for its worst week in more than two years. Eyes are also on the selloff that has erased $250B from the value of tech shares. While the sector rebounded overnight, others fear it could be an end to the industry's longest uptrend stretch in more than two decades.

"People keep saying, what happens to jobs in the era of automation? I think there will be more jobs, not fewer," said Alphabet's (GOOG, GOOGL) Eric Schmidt. Besides the need to work alongside computers, he cited a study by McKinsey, which suggested 90% of jobs are not fully automatable. In other news, the EU is set to hit Google with a record antitrust fine for manipulating its shopping search results.

Fighting extremism... While Twitter (NYSE:TWTR) continues to face criticism over its user controls, Facebook (NASDAQ:FB) is discussing new tech to fight terrorist propaganda using machine learning. The company said it's expanded the use of artificial intelligence to identify possible terrorist postings and even block or remove them without human intervention.

The U.S. government is trying to stave off China and others challenging American dominance in the next generation of fast computers. The Department of Energy has awarded $258M over three years to be shared by six tech firms as part of a plan to develop new supercomputers that can crunch data at least 50x faster than the nation's most powerful systems today. Award recipients: AMD, CRAY, HPE, IBM, INTC, NVDA

CEO Bob Iger is in Shanghai today to celebrate the one-year anniversary of Walt Disney's (NYSE:DIS) $5.5B local theme park as speculation surfaces whether the group is planning a second park in China. Disney is also pursuing a path to build brand and profit in downtown classrooms in six major Chinese cities, where children study English with the help of Winnie the Pooh and Captain America.

Losing its sweet tooth? Nestle (OTCPK:NSRGY) is exploring options for its $900M U.S. confectionery business, which includes brands like "Butterfinger" and "BabyRuth," in a potentially significant effort to focus on its health strategy. However, the company said it will push ahead with its U.S. investments in other product areas. In February, Nestle's CEO said he was open to strategic M&A opportunities.

The newest and costliest U.S. aircraft carrier, built by Newport News Shipbuilding (NYSE:HII), has been dogged by trouble with fundamentals: launching jets from its deck and catching them when they return. It turns out that the General Atomics system used to capture jets landing on the USS Gerald R. Ford ballooned in cost, tripling to $961M, while the Navy swallowed the charges thanks to a cost-plus contract.

Takata is preparing to file for bankruptcy protection in the U.S. and Japan - as early as next week - amid mounting liabilities stemming from its exploding airbags, WSJ reports. Takata (OTCPK:TKTDY) is also finalizing details for an acquisition of the group's best assets by Key Safety Systems, a U.S. airbag manufacturer owned by China's Ningbo Joyson Electronic.

With expectations of billions of dollars in cost and growth synergies, DuPont (NYSE:DD) and Dow Chemical (NYSE:DOW) have confirmed an agreement with the DOJ that will permit them to proceed with their proposed merger. DuPont will divest certain parts of its crop protection portfolio, and Dow will offload its global ethylene acrylic acid copolymers and ionomers business.

Done deal! Johnson & Johnson (NYSE:JNJ) has completed its acquisition of Actelion (OTCPK:ALIOY) for around $30B in cash and expects the purchase to be accretive to adjusted earnings in 2017. In connection with the deal, Actelion has spun off its drug discovery business and clinical development assets into Idorsia, a newly created biopharmaceutical company.

Youth tobacco use in the U.S. fell to historic lows in 2016, leading public health experts to speculate that a smoke-free generation may be within reach. According to the CDC, the number of middle and high school students who used any tobacco product fell to 3.9M last year from 4.7M in 2015. The decline in e-cigarette use was also notable, falling to 11.3% of high schoolers in 2016 from 16% in 2015. Related tickers: LO, PM, MO, VGR, RAI, BTI, VPCO

The Trump administration is preparing an executive order aimed at lowering U.S. drug costs, a move that could come within weeks on a campaign issue that has been largely left out of GOP legislative work in Congress. According to Bloomberg, top health and budget officials in the administration will meet today to discuss the effort, which is being led by Office of Management and Budget Director Mick Mulvaney.

Today's Markets

In Asia, Japan +0.6%. Hong Kong +0.2%. China -0.3%. India -0.1%.
In Europe, at midday, London +0.7%. Paris +0.7%. Frankfurt +0.3%.
Futures at 6:20, Dow +0.1%. S&P +0.1%. Nasdaq +0.2%. Crude +1.1% to $44.95. Gold +0.3% to $1258.60.
Ten-year Treasury Yield flat at 2.17%

Today's Economic Calendar

8:30 Housing Starts
10:00 Atlanta Fed's Business Inflation Expectations
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count

 

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