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Wall Street Articles

Author: skywalker   |   Latest post: Fri, 17 Feb 2017, 07:44 AM

 

Wall Street Breakfast: Samsung Faces Strategic Challenge

Author: skywalker   |  Publish date: Fri, 17 Feb 2017, 07:44 AM


Samsung Group heir Jay Y. Lee will be indicted tomorrow, according to South Korea's special prosecutor, after he was arrested over his alleged role in the nation's widening corruption scandal. It throws the firm into a leadership crisis for the first time in its corporate history, and is a huge blow to Samsung Electronics (OTC:SSNLF), the key unit where Lee serves as vice chairman. Other key executives may also be arrested at the sprawling conglomerate.

Economy

Eurozone finance ministers and the IMF seem likely to miss next week's deadline to agree on a €7B bailout for Greece. The two sides remain at loggerheads over an IMF demand that Athens be granted debt relief and easier surplus targets, meaning a pact may now be months away. While Greece won't face bankruptcy trouble until July, eurozone officials were racing to strike a deal so the drama wouldn't be forced into the upcoming Dutch and French elections.

More trouble? Spain's public debt rose by €6.3B in December. According to Reuters' calculations using National Statistic Institute data for gross domestic product, that increase meant debt as a percentage of economic output stood at 100% at the end of 2016. The government said in a statement it estimated the year-end rate at 98.98%, using its latest GDP forecasts.

The country is rushing "over the cliff's edge," Tony Blair warned in a rallying cry to opponents of Brexit, urging them to fight Theresa May's plans to take Britain out of the EU. "I agree the will of the people should prevail... But as these terms become clear, it is their right to change their mind," the former prime minister said. "The road we're going down is not simply hard Brexit. It is Brexit at any cost."

French bonds are being traded at volumes not seen since the eurozone crisis as the tumultuous presidential election race takes another twist. Socialist Party presidential candidate Benoit Hamon is now in talks with far-left candidate Jean-Luc Melenchon about a united ticket. On average, about €16B government bonds have been traded each day in February, double the €8B average recorded last year by Trax.

Complications in restructuring Saudi Arabia's state-owned oil company and disentangling its finances from those of the government are slowing the march toward what is expected to be the biggest IPO in history. The hotly anticipated listing of a minority stake in Saudi Aramco (Private:ARMCO) is now unlikely to happen until late 2018 at the earliest, WSJ reports, and if foreign advisers have their way, it won't happen until 2019.

Stocks

Toshiba shares sank 10% overnight after S&P Global said it could slash the conglomerate's rating several notches if financial support from lenders includes any form of debt restructuring. Any further downgrade would prompt banks to charge Toshiba (OTCPK:TOSYY) even higher rates for credit, at a time when it's dealing with a crippling nuclear writedown and still working to recover from a financial scandal in 2015.

Seeking to avoid a repeat of last year's disastrous recall, Samsung Electronics (OTC:SSNLF) is adding a third battery supplier for its next flagship smartphone, the Galaxy S8. According to WSJ, the tech giant will use lithium-ion packs from a unit of Sony (NYSE:SNE), in addition to its two longtime suppliers: Samsung SDI (OTC:SSDIY) and Amperex Technology (OTCPK:TTDKY).

All that remains of Hanjin Shipping will be liquidated following a South Korean court order which pulled the plug on the company. Previously the world's seventh-largest container shipper, Hanjin (OTC:HNJSF) applied for court receivership in late August after its creditor banks halted further support. Its troubles can be traced to the global financial crisis in 2008 and a more recent downturn in trade.

Kicking off manufacturing in India, Apple (NASDAQ:AAPL) will soon start assembling the 4-inch iPhone SE at its new Bengaluru plant, a facility that's being set up by contract manufacturer Wistron (OTC:WICOF). The company is targeting an initial production of 300K-400K units, according to the Economic Times, and will go ahead with the plan without waiting for the government’s nod on a list of tax concessions.

Amazon might be muscling its way into delivery services, but this is not necessarily a competitive issue for traditional logistics companies, according Ross McCullough, UPS's president for Asia Pacific. "[AMZN is] investing in areas where there are shortages of capability in markets and if we don't have the capability... or if a competitors of ours doesn't have it, they're going to put it in to serve their customers," he told CNBC's Managing Asia.

Just days after Verizon (NYSE:VZ) began offering unlimited plans for the first time since 2011, AT&T (NYSE:T) is opening up its unlimited wireless data plans to all potential customers, not just those who buy its television service. The move leaves all four national wireless carriers, including T-Mobile (NASDAQ:TMUS) and Sprint (NYSE:S), offering the same plan and leaving price and network claims as the major differences.

When Google launched Project Loon a few years ago, the idea was to provide internet access to underserved areas with the help of a series of balloons that would constantly circumnavigate the earth. But the team recently found a way to keep the Loons in one spot for an extended time, accelerating the project's path toward becoming an actual commercial operation. It follows moves across Alphabet (GOOG, GOOGL) to curb costs at its riskier, more expensive projects.

General Motors CEO Mary Barra made assurances at Opel's headquarters in Germany that the carmaker is to remain an independent company and leave current management in place in any deal with France's PSA Group (OTCPK:PEUGF), Manager Magazin reports. The two companies previously said they were in talks regarding a PSA purchase of GM's European car operations, a move that could shake up the global auto industry.

Volkswagen delivered nearly half a million vehicles in January - down almost 5% from the previous year - but an executive for the automaker said the decline was "solely due to special effects in China," where deliveries slipped 11.8%. Positive trends were seen in Europe and the U.S., where VW (OTCPK:VLKAY) brand deliveries rose by over 4% and 17%, respectively.

A Florida man has been charged over making at least 10 explosive devices in hopes of blowing up Targets (NYSE:TGT) along the East Coast. Mark Barnett "theorized the company's stock value would plunge after the explosions, allowing him to cheaply acquire shares before an eventual rebound in prices." He paid someone $10,000 to place the bombs on shelves, but before the plan moved forward, the man went to the authorities and explained the situation.

Theranos is on the rocks. The embattled blood diagnostics firm did not have any material revenue in 2015 or 2016, WSJ reports, and hasn't set aside funds for any potential liability that could arise from its pending legal challenges. Theranos (Private:THERA) also had only $200M of cash on hand at the end of 2016, less than a quarter of the funding it raised from investors and partners.

Thursday's Key Earnings

Duke Energy (NYSE:DUK) +2.8% following in-line earnings.
WebMD (NASDAQ:WBMD) +3.8% AH pursuing strategic options.

Today's Markets

In Asia, Japan -0.6%. Hong Kong -0.3%. China -0.9%. India +0.6%.
In Europe, at midday, London +0.2%. Paris -0.8%. Frankfurt -0.2%.
Futures at 6:20, Dow -0.2%. S&P -0.2%. Nasdaq -0.1%. Crude -0.5% to $53.49. Gold flat at $1241.10.
Ten-year Treasury Yield -2 bps to 2.42%

Today's Economic Calendar

10:00 E-Commerce Retail Sales
10:00 Leading Indicators
1:00 PM Baker-Hughes Rig Count

 

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Wall Street Breakfast: Snap IPO On The Horizon

Author: skywalker   |  Publish date: Thu, 16 Feb 2017, 08:48 AM


Snap Inc. sees its upcoming initial public offering priced at between $14 and $16 per share, according to new regulatory filings. That could value the owner of ephemeral messaging app Snapchat at $19.5B-$22.2B, near the low end of what the company had earlier targeted. The stock could get a final price as soon as March 1 and begin trading the following day on the NYSE under the ticker "SNAP."

Economy

Two days of testimony from a more hawkish Janet Yellen has cemented the idea that the U.S. central bank will raise interest rates by midyear if not sooner. Yellen also said she opposes an intrusion on the Fed's independence after House Financial Services Committee Chairman Jeb Hensarling announced a plan to include congressional audits of interest rate policy. "It would result in poor economic performance," she said during the hearing.

With his confirmation looking increasingly imperiled, Labor Secretary nominee Andy Puzder has taken his hat out of the cabinet ring. The CEO of CKE Restaurants was at the center of a swirl of controversies, complaints and potential conflicts. Reports also suggest President Trump has offered his vacant national security adviser post to Vice Adm. Robert Harward, a former Navy SEAL and deputy commander of U.S. Central Command.

President Trump hosted Israeli Prime Minister Benjamin Netanyahu at the White House yesterday, in their first talks since he took office. At a joint press conference, Trump asked Netanyahu to "hold back on settlements for a little bit," but stopped short of committing to a two-state solution, declaring his support for a peace agreement that both sides "like the best."

A three-week-old scandal may have cost conservative Francois Fillon his status as favorite to win the French presidency. The country's financial prosecutor announced today that a case involving €830K in taxpayers' money - brought against his wife for a "fake job" as her husband's parliamentary assistant - will remain open. The first round of the election is less than 10 weeks away.

Free trade deal resurrection? The European Parliament has approved a landmark global trade pact with Canada, backing the Comprehensive Economic and Trade Agreement by a vote of 408-254. Parts of the deal, such as tariff reduction, will come into force immediately, while more controversial aspects, such as the investor court system, will require ratification by EU member states.

Stocks

A South Korean judge questioned Samsung Group (OTC:SSNLF) leader Jay Y. Lee and another executive behind closed doors today to decide whether they should be arrested over their roles in a corruption scandal that has engulfed President Park Geun-hye. The same Seoul court rejected a request for a warrant in January, but a spokesman said it had since expanded the charges to include hiding the proceeds of a criminal act.

According to CNBC, Toshiba (OTCPK:TOSYY) may delay the sale of its prized flash-memory chip unit after the conglomerate said it would consider selling most, even all, of the marquee business. Loosening the deadline would ease concerns about trying to hurry any antitrust reviews, increasing the number of potential buyers and improved offers. Among the possible bidders: MU, WDC, OTC:FXCOF, OTC:HXSCF and Bain Capital.

Production workers at Boeing's South Carolina plant have overwhelmingly voted not to join the Machinists, maintaining southern reluctance toward unionization. It was a high-profile test for organized labor in the nation's most anti-union state. The plant will get additional attention this week as President Trump visits the facility on Friday to mark the completion of the first 787-10, Boeing's (NYSE:BA) newest version of the Dreamliner.

"In most states and cities, there are no rules about driverless cars," said UBER's Emil Michael, explaining why the company doesn't always know who's going to be welcoming until after it puts test vehicles on the road. "Relationships are hard sometimes, so you have to invest in a lot of them," he added, citing the need to find more "friendly cities" and get more "real road miles to make the thing work."

Organic growth of 3.2% for 2016 was at the high end of the industry, but "there is no beating around the bush - it came in lower than we expected," said Nestle's (OTCPK:NSRGY) new CEO Ulf Mark Schneider. It was the fourth straight year Nestle had missed its 5-6% growth objective, known as the "Nestle Model." As a result, the company is stepping up "restructuring" and cutting its sales growth target to 2-4% for 2017.

Kombucha drinkers (or brewers) rejoice! Colorado lawmakers have introduced the KOMBUCHA Act in Congress, which would increase the tax limit on drinks from 0.5% ABV to 1.25%, making it exempt from federal alcohol tax and regulation. The trendy fermented tea is a growing industry, with an economic impact of $600M expected to be worth $1.8B by 2020. Related tickers: PEP, HAIN, SBUX, WFM, OTC:PUSH

Twitter's jump into live events has largely been about sports, but Sunday night's Grammy Awards attracted more viewers than any NFL game. Some 5.1M people tuned into the event, a number topped only by the presidential election and Donald Trump's inauguration. Twitter (NYSE:TWTR) plans to double the amount of live programming it shows in 2017, as it attempts to boost engagement in a highly competitive online media world.

Shareholders of Time Warner have approved the company's $86B takeover by AT&T (NYSE:T). The OK came with 78% of outstanding shares in favor, and 99% of shares voted, but tough regulatory aprovals are seen ahead. The mega-merger would pair entertainment creators such as HBO, CNN and Warner Bros. (NYSE:TWX) with AT&T's wired and wireless networks and DirecTV.

Verizon's discount on its $4.8B deal to acquire Yahoo (NASDAQ:YHOO) may amount to as much as $300M, WSJ reports. It follows weeks of tense talks after a pair of massive data breaches were revealed by Yahoo, affecting 500M and 1B users respectively. If the revision is quickly agreed to, Verizon's (NYSE:VZ) deal could close in April - though an SEC probe into the breaches could still slow that timeline.

Federal prosecutors are examining whether Fox News settlement payments for sexual harassment claims should have been reported to the shareholders of parent company 21st Century Fox (FOX, FOXA). The information first surfaced during a court hearing in which Judd Burstein, the attorney for Fox News personality Andrea Tantaros, said another one of his clients had recently been subpoenaed to discuss the matter.

Spotify is moving its U.S. headquarters to 4 World Trade Center in Manhattan, and adding more than 1,000 new jobs in New York, Governor Andrew Cuomo announced in a press release. Empire State Development will give Spotify (Private:MUSIC) up to $11M in rent credits as an incentive. It has also offered similar credits to other tech companies, including Snapchat (Pending:SNAP) and ETSY, to retain talent and expand across New York.

Wednesday's Key Earnings

Applied Materials (NASDAQ:AMAT) +1.1% AH topping estimates.
Barrick Gold (NYSE:ABX) +1.8% AH hiking its dividend.
CBS Corp. (NYSE:CBS) -0.9% on declining revenues.
Cisco (NASDAQ:CSCO) -1.2% AH hit by a weak networking market.
Kraft Heinz (NASDAQ:KHC) -2.4% AH expecting more cost-cuts.
Groupon (NASDAQ:GRPN) +23.3% with a good deal on LivingSocial.
Marriott (NYSE:MAR) inched up AH boosted by Starwood.
PepsiCo (NYSE:PEP) -0.2% after guidance fell short.
SodaStream (NASDAQ:SODA) +4.6% accelerating sales.

Today's Markets

In Asia, Japan -0.5%. Hong Kong +0.5%. China +0.5%. India +0.5%.
In Europe, at midday, London -0.5%. Paris -0.5%. Frankfurt -0.4%.
Futures at 6:20, Dow -0.2%. S&P -0.2%. Nasdaq -0.1%. Crude +0.5% to $53.86. Gold +0.5% to $1238.80.
Ten-year Treasury Yield -3 bps to 2.47%

Today's Economic Calendar

8:30 Housing Starts
8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
9:45 Bloomberg Consumer Comfort Index
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

 

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Wall Street Breakfast: Time Warner Votes On AT&T Merger

Author: skywalker   |  Publish date: Wed, 15 Feb 2017, 08:21 AM


Bringing together two industry titans, Time Warner (NYSE:TWX) shareholders will meet today to decide on the company's proposed $86B merger with AT&T (NYSE:T). A "yes" vote is expected, but the transaction still needs approval from federal regulators. In October, President Trump said his administration would oppose the deal, citing "too much concentration of power," but Time Warner CEO Jeffrey Bewkes feels confident it will be approved in 2017.

Economy

Two of today's key reports - retail sales and the Consumer Price Index - may provide more clues than Janet Yellen about how soon the Fed could raise interest rates. The Chair testifies for a second day, this time before the House Financial Services Committee, following her comments on Tuesday that helped drive stocks to new highs. "Waiting too long for accommodation would be unwise," she said when pressed on rate hike timing. "I would say every meeting would be live."

With the water level at Lake Oroville dropping, Californian authorities have lifted a mandatory evacuation order, allowing residents to return to their homes near the reservoir's dam. But Butte County Sheriff Kory Honea warned the region to "maintain situational awareness." How much will it cost California to fully fix the dam? The Department of Water Resources estimates around $100M-$200M.

Shaping Middle East policy for the years ahead, President Trump will host Israeli Prime Minister Benjamin Netanyahu at the White House today in their first meeting since the inauguration. Likely items on the agenda: the war in Syria, the Iran nuclear deal, the Israeli-Palestinian conflict, settlement-building, moving the U.S. embassy to Jerusalem and whether a Palestinian state will ever emerge.

"We don't give back our own territory. Crimea is territory belonging to the Russian Federation," said Maria Zakharova, a spokeswoman for the Russian Foreign Ministry. It came as a response to yesterday's comments from White House press secretary Sean Spicer. "President Trump has made it very clear that he expects the Russian government to de-escalate violence in the Ukraine and return Crimea," he told a news briefing.

Turmoil in Washington over the resignation of Michael Flynn has overshadowed Defense Secretary Jim Mattis' trip to NATO headquarters. He's still expected to deliver a message declaring the Trump administration stands behind its allies, but believes Europe should step up its defense contributions. According to the latest figures, only five allies (Estonia, Greece, Poland, the U.K. and U.S.) met or exceeded the required 2% of GDP defense spending benchmark in 2016.

Stocks

Shares in Toshiba tumbled almost 9% overnight after the conglomerate said it would book a $6.3B hit to its U.S. nuclear unit. Facing a March 27 deadline to avoid a delisting, CEO Satoshi Tsunakawa said he would consider selling the entire memory chip division, a reversal of a previous plan to limit the sale to 20%. That would leave Toshiba (OTCPK:TOSYY) with few growth prospects, relying on public infrastructure projects, elevators and a struggling consumer electronics business.

SoftBank's Masayoshi Son, who has boasted of creating the "Berkshire Hathaway of tech," has thrown himself into the world of private equity and hedge funds with a $3.3B acquisition of Fortress Investment Group (NYSE:FIG). The deal comes as SoftBank (OTCPK:SFTBY) emerges as one of the world's largest investors with the imminent launch of its record-setting $100B technology fund. FIG climbed 27.2% in after-hours trading.

The Obamacare exodus continues... this time with a major health insurer. Humana (NYSE:HUM) said it will pull out of the Affordable Care Act marketplace in 2018, making the announcement after it ended a merger agreement with Aetna (NYSE:AET). President Trump said the decision was proof that "Obamacare continues to fail" and "will repeal, replace & save healthcare for ALL Americans."

Meanwhile, Cigna is looking to terminate its merger agreement with Anthem (NYSE:ANTM), seeking a $1.85B break-up fee and additional damages exceeding $13B. The suit comes in the wake of a federal court's decision blocking the planned $54B merger between the two insurers - a deal Cigna (NYSE:CI) argues is effectively dead. Wave good-bye to U.S. health insurer consolidation?

In its biggest year to date, the U.S. solar market nearly doubled its annual record, according to Greentech Media, topping out at 14,625 megawatts of solar PV installed in 2016. More records? For the first time ever, U.S. solar ranked as the number one source of new electric generating capacity, while growth of nonresidential installations surpassed residential solar for the first time since 2011. 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

Due to problems with the output voltage, Toyota (NYSE:TM) is recalling all of its Mirai fuel cell vehicles. The automaker has about 2,800 of the zero-emissions cars on the road in Japan, the U.S., some markets in Europe and the UAE. Toyota dealers will update the fuel cell system software at no cost to the customer (the process will take about half an hour).

Pilots at American Airlines have denounced the carrier's chief executive, Doug Parker, citing his decision last week to skip a meeting with President Trump. The Allied Pilots Association issued a symbolic vote of "no-confidence" in his leadership abilities, and cited lagging pay increases and "questionable economic and strategic decisions." At the time, American (NASDAQ:AAL) said Parker would miss the meeting due to a previously scheduled event.

With more countries engaging in cyber attacks against each other, more civilians are being caught in the crossfire. That's why Microsoft (NASDAQ:MSFT) President Brad Smith is calling for a "Digital Geneva Convention." World governments would pledge not to hack the private sector or stockpile security vulnerabilities to steal user data, and promise to work with businesses to identify security threats when they occur.

Currently in charge of Today, Noah Oppenheim has been named the new president at NBC News (NASDAQ:CMCSA), replacing Deborah Turness. Alongside, NBC News is tapping into the international market with its purchase of a 25% holding in Euronews (to be renamed Euronews NBC). The network reaches 277M households across EMEA, but has a small viewership. NBC reportedly spent about $30M for its stake.

Facebook has announced a soon-to-come app that will allow users to stream videos in their news feed through set-top boxes such as Apple TV (NASDAQ:AAPL), Samsung Smart TV (OTC:SSNLF) and Amazon Fire TV (NASDAQ:AMZN). The move extends Mark Zuckerberg's effort to transform Facebook (NASDAQ:FB) into a "video-first" company and compete for TV ad dollars.

CEO Jack Dorsey bought $7M worth of TWTR shares this week, showing investors just how much confidence he has that Twitter can turn around its business. He tweeted about the stake on Valentine's Day, appropriately adding the hashtag "Love Twitter." The 426,000 shares ranged in price from $15.84 to $16.60.

Around the industry, it's known as getting "blanked," or getting a "goose egg," or "doughnut." Goldman Sachs (NYSE:GS) didn't pay any 2016 bonuses to about 100 investment bankers, according to Bloomberg, signaling that their services are best provided elsewhere. According to sources, the move is more draconian than in the past when underperformers still got a little something and the absolute number (100) is also larger than past years.

Investor moves: Procter & Gamble (NYSE:PG) +2.7% premarket after Nelson Peltz's Trian Fund Management took a $3.5B stake in the company. Warren Buffett's Berkshire Hathaway (BRK.A, BRK.B) sharply increased bets on airlines (LUV, DAL, AAL), Apple (AAPL) and Sirius XM (NASDAQ:SIRI) in Q4, while taking a stake in Monsanto (NYSE:MON). In another 13F filing, Carl Icahn listed increased holdings in Herbalife (NYSE:HLF) and Hertz (NYSE:HTZ), but exited his stake in Voltari (NASDAQ:VLTC).

Tuesday's Key Earnings

AIG (NYSE:AIG) -4.5% AH due to a large reserve charge.
Devon Energy (NYSE:DVN) +1% AH beating expectations.
LendingClub (NYSE:LC) -6.5% AH plagued by its scandal.
T-Mobile (NASDAQ:TMUS) +1.2% after topping estimates.

Today's Markets

In Asia, Japan +1%. Hong Kong +1.2%. China +0.2%. India -0.7%.
In Europe, at midday, London +0.4%. Paris +0.5%. Frankfurt +0.2%.
Futures at 6:30, Dow +0.1%. S&P -0.1%. Nasdaq flat. Crude -0.5% to $52.93. Gold +0.2% to $1227.30.
Ten-year Treasury Yield +1 bps to 2.48%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Consumer Price Index
8:30 Retail Sales
8:30 Empire State Mfg Survey
9:15 Industrial Production
10:00 Atlanta Fed's Business Inflation Expectations
10:00 Business Inventories
10:00 NAHB Housing Market Index
10:00 Yellen testifies before House Financial Services
10:30 EIA Petroleum Inventories
12:00 PM Fed's Rosengren speech
12:45 PM Fed's Harker: Economic Outlook
4:00 PM Treasury International Capital

 

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Wall Street Breakfast: Yellen Has Date With Congress

Author: skywalker   |  Publish date: Tue, 14 Feb 2017, 09:17 AM


The hot seat could be a bit more fiery than usual when Janet Yellen begins her semi-annual Congressional testimony at 10:00 a.m. ET. The Fed Chair is expected to defend the post-crisis banking rules President Trump has pledged to undo and investors will be interested to see if her economic outlook aligns with his. When it comes to interest rates, Yellen isn't expected to do much more than repeat the "gradual" pace guidance that was used in the Fed's last statement.

Economy

The trade situation with Canada is already "less severe," than that with Mexico, President Trump said yesterday, holding a joint press conference with Canadian Prime Minister Justin Trudeau. "We will be tweaking it, doing certain things with both of our countries." Canada sends 75% of its exports to the United States, equivalent to 20% of the country's gross domestic product.

Chief executives of some of America's largest retailers, including Target (NYSE:TGT), Best Buy (NYSE:BBY), Gap (NYSE:GPS) and AutoZone (NYSE:AZO), will head to Washington tomorrow to make their case that an import tax would raise consumer prices and hurt their businesses. Best Buy has even circulated a flyer to lawmakers, which cites an analyst forecast that a 20% tax would wipe out the company's projected annual net income of $1B and turn it into a $2B loss.

Meanwhile, the EU and other U.S. trading partners have begun laying the groundwork for a legal challenge to an American border tax proposal in a move that could trigger the biggest case in World Trade Organization history. Should the U.S. ignore a WTO ruling, as Trump has threatened in the past, it could lead to the unraveling of the international system designed to prevent global trade wars.

Following days of speculation, National Security Adviser Michael Flynn has resigned, apologizing to VP Mike Pence for misleading him about his conversations with Russia. Retired Army Lt. Gen. Keith Kellogg has been named as acting national security adviser in his stead. In Cabinet news, the U.S. Senate confirmed Steven Mnuchin as Treasury Secretary last night, with yet another vote mostly along party lines.

Evacuation orders for 188,000 Northern California residents remain in effect today as engineers work around the clock at America's tallest dam. "It would be a massive blow to the state's water system if they lose Oroville," said Peter Gleick, a water researcher at the Pacific Institute. The big worry doesn't center on the dam itself, but that a collapse of the spillway could cut into the hillside and lead to a "cascading failure."

Due to rising food and travel prices during the Lunar New Year, China's consumer inflation hit the highest level in almost three years, rising 2.5% in January, while producer inflation accelerated 6.9%, reaching an almost six-year high. Inflation expectations have been rising in most major developed economies, except Japan, since mid-2016 in line with a global recovery in manufacturing.

European data dump: The eurozone economy grew 0.4% in the fourth quarter, slightly less than initially reported as German and Italian expansion disappointed. In the U.K., inflation rose to 1.8% in January, a smaller increase than expected, pushing the pound down 0.5% to $1.2459. Lastly, ZEW's Indicator of Economic Sentiment for Germany fell to 10.4 vs. 16.6 last month due to weak data and political uncertainty.

Stocks

Credit Suisse +1.6% premarket after pre-tax profits beat expectations, boosted by a strong quarter in investment banking and capital markets. The bank still reported a heavy Q4 net loss of 2.3B Swiss francs ($2.3B) as it felt the impact of a $5.3B fine from the DOJ. More restructuring measures? Credit Suisse (NYSE:CS) intends to cut between 5,500 and 6,500 jobs in 2017.

After a day of delays and confusion, Toshiba (OTCPK:TOSYY) Chairman Shigenori Shiga has resigned as the struggling conglomerate said it expected to book a $6.3B writedown on its U.S. nuclear business. The massive hit raises concerns about whether it can survive its latest financial woes and "would even impact Japan's sovereign credit rating if there’s a knock-on effect," said Tom O'Sullivan, a Tokyo-based energy analyst.

South Korea's special prosecutor's office will decide no later than Wednesday whether to request an arrest warrant for Samsung Group (OTC:SSNLF) chief Jay Y. Lee, a suspect in a graft probe that may topple President Park Geun-hye. The office will decide at the same time on whether to seek arrest warrants for four other Samsung Group executives identified as suspects in its investigation.

Amazon Web Services is taking on Skype (NASDAQ:MSFT), WebEx (NASDAQ:CSCO) and GoToMeeting (NASDAQ:CTXS) in videoconferencing, pushing deeper into the productivity-application market to broaden its appeal to business customers. AWS's (NASDAQ:AMZN) new service, called Chime, lets users host video meetings and share content on computer and mobile-phone screens. It's available on Windows, Mac, iOS, and Android.

Disney has dropped PewDiePie, the world's highest-earning YouTube (GOOG, GOOGL) star, after a series of videos that featured anti-Semitic messages, WSJ reports. "Although Felix has created a following by being provocative and irreverent, he clearly went too far in this case," said a spokeswoman for Maker Studios (NYSE:DIS). The Swedish vlogger has over 53M subscribers and reportedly makes $15M a year from YouTube.

For the first time, Wal-Mart (NYSE:WMT) will combine its own buying for products sold at its stores with purchases it makes for its website, a significant move to stamp out duplicate efforts as it consolidates buying operations to better fight Amazon (AMZN). Vendors contacted by Wal-Mart about the change told Reuters the store and online buying teams of the world's largest retailer currently operate independently.

According to Business Insider, Burlington Stores (NYSE:BURL) has become the latest retailer to decide not to sell products of Ivanka Trump's brand online. Nordstrom (NYSE:JWN), Neiman Marcus (Pending:NMG), Gilt, Sears (NASDAQ:SHLD) and Belk (OTCPK:BLKIA) dropped the line in the past two weeks. Reports also suggest that other discount sellers including TJ Maxx (NYSE:TJX) and Marshalls have instructed employees to mix the clothing into racks and ditch brand signage.

Defending her decision to advise President Tump, IBM CEO Ginni Rometty sent a memo to employees stressing the company "does not espouse a political point of view" and has "engaged directly with every U.S. president since Woodrow Wilson." At her last meeting, Rometty, Trump and Homeland Security Secretary John Kelly talked about "ways that advanced technology could address national security imperatives while also permitting lawful immigration and travel."

The owner of Burger King and Tim Horton's has approached Popeyes Louisiana Kitchen (NASDAQ:PLKI) to express interest in an acquisition, sources told Reuters. A deal would be a bet by Restaurant Brands (NYSE:QSR) that it can use its international reach to introduce Atlanta, Georgia-based Popeyes' famous Louisiana-style fried chicken and buttermilk biscuits to more diners globally.

Running out of options... U.S. District Court Judge James Boasberg has denied a request from the Standing Rock Sioux and Cheyenne River Sioux tribes, seeking to halt construction of the final link in the Dakota Access Pipeline. The tribes argued the project would prevent them from practicing religious ceremonies at a lake they contend is surrounded by sacred ground. Related tickers: ETP, ETE, SXL, PSX, MPC, ENB, EEP

Apple has reclaimed its throne as the only $700B publicly-traded U.S. company, riding a post-earnings rally and a more favorable outlook on Wall Street. Goldman Sachs raised its price target on the stock on Monday, citing Apple's (NASDAQ:AAPL) 3-D sensing technology, while UBS released a note stating the market is undervaluing the firm's services business. The last time Apple broke above the $700B level was in February 2015.

Monday's Key Earnings

Noble Energy (NYSE:NBL) +1.3% AH following a strong Q4.
Teva Pharma (NYSE:TEVA) +5.6% after topping expectations.

Today's Markets

In Asia, Japan -1.1%. Hong Kong flat. China +0.1%. India flat.
In Europe, at midday, London +0.2%. Paris +0.2%. Frankfurt +0.1%.
Futures at 6:20, Dow -0.1%. S&P -0.1%. Nasdaq flat. Crude +0.8% to $53.33. Gold +0.4% to $1230.70.
Ten-year Treasury Yield +1 bps to 2.45%

Today's Economic Calendar

6:00 NFIB Small Business Optimism Index
8:30 Producer Price Index
8:50 Fed's Lacker speech
8:55 Redbook Chain Store Sales
10:00 Yellen delivers semi-annual testimony
1:00 PM Fed's Kaplan: Monetary Policy

 

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Wall Street Breakfast: Trudeau Arrives In Washington

Author: skywalker   |  Publish date: Mon, 13 Feb 2017, 10:09 AM


Trade talk is set to dominate the first meeting between Donald Trump and Justin Trudeau as the Canadian Prime Minister arrives in Washington today for his first face-to-face encounter with the U.S. President. Aside from NAFTA negotiations, the two leaders may discuss Trump's decision to conditionally approve TransCanada's (NYSE:TRP) Keystone XL pipeline from Alberta's oil sands, a project blocked by the Obama administration.

Economy

Japan's economy grew at an annualized pace of 1% in the final quarter of 2016, roughly in line with analysts' expectations, as yen weakness spurred a pick-up in exports and business investment. For calendar 2016, the economy also grew by 1%, following an expansion of 1.2% in 2015. That's well above Japan’s long-run growth potential of about 0.5%, suggesting "Abenomics" is working to boost demand.

In the wake of Pyongyang's latest missile launch, South Korea's finance ministry has pledged to act "swiftly and firmly" to combat financial market volatility, although the reaction from stocks has been muted so far. "The United States of America stands behind Japan, its great ally, 100%," President Trump said yesterday in a joint press conference with Shinzo Abe, who called the launch "absolutely intolerable." He made no further comments.

Swiss voters have rejected plans to overhaul the nation's corporate tax system, sending the government back to the drawing board as it tries to abolish ultra-low tax rates for multinational companies without triggering a mass exodus. Most Swiss recognize the country needs reform to avoid being blacklisted as a low-tax pariah, but new measures proposed to help firms offset the loss of their special status breaks had created deep divisions.

Greek Prime Minister Alexis Tsipras believes the country's drawn-out bailout review will "conclude positively," but repeated that Athens will not accept "illogical" demands and already "made so many sacrifices in the name of Europe." European Commission President Jean-Claude Juncker may feel a bit different. He said the deal was "on shaky ground" because the IMF had not yet decided what role it would play and expressed his doubt that the "EU will remain united during Brexit talks."

Italy is leading eurozone bond yields higher after former Prime Minister Matteo Renzi looked set to trigger a leadership contest of his ruling Democratic Party, highlighting risks in the bloc's third largest economy. The move could delay the early election he has been pushing for since he was toppled as premier last year and increase the political uncertainty taking hold in the broader eurozone.

"There is quite significant uncertainty about what's actually going to happen," Fed Vice Chairman Stanley Fischer said at the Warwick Economics Summit on Saturday in response to a question about the Trump administration's fiscal and trade plans. He also voiced hopes that capital requirements for lenders will not be overly reduced, and believes Dodd-Frank won't be repealed, though there might be some adjustments.

Meanwhile, the U.S. Senate has some more busy sessions on tap as it considers economic policy makers chosen by President Trump. A confirmation vote for Treasury Secretary Steven Mnuchin is scheduled for today, while a committee hearing for Labor Secretary nominee Andrew Puzder and a confirmation vote for Wilbur Ross to head the Commerce Department could come later this week.

Traders are awaiting the release of OPEC's monthly oil market report, and if production cuts come through as suggested, oil prices could push higher. Crude futures are currently down 0.6% to $53.53/bbl. On Friday, the IEA said compliance was about 90% in January, the first month of cuts in oil production that the group agreed to late last year.

Stocks

Amazon may face penalties after disclosing that it may have violated American law by selling goods covered by U.S. sanctions. "We determined that, between January 2012 and December 2016, we processed and delivered orders of consumer products for certain individuals and entities located outside Iran covered by the Iran Threat Reduction and Syria Human Rights Act," Amazon (NASDAQ:AMZN) said in a securities filing.

Trump-branded consumer products have suffered new blows, with Sears (NASDAQ:SHLD) and Kmart discontinuing online sales of 31 Trump Home items. The retailers said their decision was part of a push to focus their online business on the most profitable items. New details have also emerged showing Ivanka Trump's fashion line tumbling 32% at Nordstrom (NYSE:JWN) last fiscal year, with the declines deepening more than 70% around the U.S. presidential election.

Several years after it backed away from bottomless data packages, Verizon (NYSE:VZ) is bringing them back for $80 a month; or $180 for four separate smartphone lines. Sprint (NYSE:S) and T-Mobile (NASDAQ:TMUS) have been chipping away at Verizon's customer growth, thanks in part to those carriers' aggressive pricing for unlimited data. Last year, AT&T (NYSE:T) also started offering unlimited data plans to customers who sign up for DirecTV.

One of Japan's largest beer makers, Kirin Holdings (OTCPK:KNBWY), has thrown in the towel on its troubled Brazilian unit, selling it to Heineken (OTCQX:HEINY) for €664M, or €1.025B including debt. The deal will make Heineken the No. 2 brewer in the world's third-largest beer market, with a share of some 19%, but still far behind market leader AB InBev (NYSE:BUD).

Royal Bank of Scotland is expected to launch a new cost-cutting program when it publishes its full-year results next week, likely posting its ninth consecutive annual loss. According to the Sunday Times, RBS may close branches and cut up to 15,000 jobs as it targets savings of around £800M. The taxpayer-owned bank has lost more than £50B since the financial crisis.

Looking to stay competitive in the future vehicle market, Hyundai (OTC:HYMTF) has established a new self-driving vehicle technology center and recruited a renowned researcher who had developed related technologies at General Motors (NYSE:GM). Hyundai Motor and Kia (OTC:KIMTF), together the world's fifth-largest automaker, aim to develop highly automated vehicles by 2020 and fully autonomous vehicles by 2030.

Ex-Volkswagen Chairman Ferdinand Piech, who resigned after a showdown with former chief executive Martin Winterkorn, has refused to testify to German lawmakers investigating a possible governmental role in Dieselgate. A Bild am Sonntag report last week said Piech had informed top directors at VW (OTCPK:VLKAY) about potential cheating with diesel emissions tests in the U.S. six months before the scandal became public in September 2015.

According to the Nikkei, Toshiba (OTCPK:TOSYY) probably suffered a group net loss of about ¥400B ($3.52B) in the nine months through December, largely due to a goodwill impairment of around ¥600B on its U.S. nuclear unit. The conglomerate will announce its latest earnings tomorrow, along with a full-year outlook, and will likely explain the cause of the losses, measures to prevent similar events and plans to rebuild its nuclear business.

South Korea's special prosecutor again summoned Samsung Group leader (OTC:SSNLF) Jay Y. Lee today to question him over bribery allegations, as it investigates a graft scandal that has engulfed the country's president. The move could potentially deal another blow to South Korea's biggest business empire after a court rejected a request to issue an arrest warrant for him last month.

"The Happiest Place on Earth" is getting a bit more expensive. One-day prices at Disney's (NYSE:DIS) U.S. theme parks have increased by up to 4.9%, while some annual passes also got a price hike. Theme parks are Disney's second-largest division, bringing in nearly $17B in revenue and $3.3B in operating income for the fiscal year that ended in September.

Today's Markets

In Asia, Japan +0.4%. Hong Kong +0.6%. China +0.6%. India +0.1%.
In Europe, at midday, London +0.1%. Paris +0.9%. Frankfurt +0.7%.
Futures at 6:20, Dow +0.2%. S&P +0.1%. Nasdaq +0.1%. Crude -0.6% to $53.53. Gold -0.4% to $1231.50.
Ten-year Treasury Yield +2 bps to 2.43%

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Wall Street Breakfast: Blow To Health Care Consolidation

Author: skywalker   |  Publish date: Thu, 9 Feb 2017, 10:06 AM


After 18 months of courtship and court cases, two massive deals that would have reshaped the U.S. health insurance industry have both been declared dead. Anthem's (NYSE:ANTM) $48B deal to buy Cigna (NYSE:CI) was blocked by a federal judge late Wednesday, weeks after another judge halted Aetna's (NYSE:AET) bid for Humana (NYSE:HUM). Reasons given: The mergers would have lead to less competition and higher prices for Americans. CI -1% premarket.

Economy

Breaking the ice? President Trump has written to Chinese President Xi Jinping, saying he looks forward to working with him to build a "constructive relationship that benefits both the United States and China." Since his inauguration, Trump has yet to speak directly with Xi, but the two countries' foreign ministries have been "in close touch," according to Beijing.

The Senate has confirmed Jeff Sessions as attorney general largely along party lines. The 52-47 vote capped weeks of divisive battles over Sessions, an early supporter of President Trump and one of the Senate's most conservative lawmakers. Next up is Representative Tom Price, Trump's pick for health secretary and a staunch advocate of repealing Obamacare. A vote come could come later tonight.

Secretary of State Rex Tillerson met his Canadian counterpart for the first time on Wednesday for talks that touched on NAFTA, the trade agreement President Trump has pledged to renegotiate. The top U.S. diplomat also met with Mexico's foreign minister to discuss collaboration on law enforcement, migration and security, and agreed to visit the country in the coming weeks.

The formerly "solved" Greek debt crisis is raising its ugly head again. The past week has seen the IMF suggest that a looming debt Armageddon could potentially pose a risk to the broader eurozone, while German Finance Minister Wolfgang Schaeuble declared the country would have to leave the bloc in order to win a debt haircut. Greece's real problem "isn't debt, but rather competitiveness," he said.

Britain's House of Commons has given final approval to a bill authorizing the government to start exit talks with the EU, without attaching extra conditions, such as protecting EU citizens in the U.K. The bill now goes to the House of Lords, which has the power to delay - but not derail - the legislation, and will also debate several amendments; it should become law within weeks.

Stocks

A Dallas federal judge has upheld the Labor Department's fiduciary rule, dealing a setback to the financial industry's attempts to kill the measure. But the legal move may not mean much for the regulation's fate. Last Friday, President Trump issued a memorandum to study the rule's impact and rescind or revise it if it isn't consistent with his administration's regulatory principles. A status report will be published on March 10. Related tickers: JPM, C, BAC, WFC, GS, MS, USB, BK, STT, PNC, COF, KRE, KBE, RF, KEY, IVZ, TROW, LM, AB, FII, WDR, LPLA

Wells Fargo is likely to eliminate 2016 bonuses for the bank's top executives, sources told WSJ, after a fake-accounts scandal rocked the lender during the second half of last year. The WFC board met in late January to discuss withholding bonuses for senior executives, including CEO Timothy Sloan and CFO John Shrewsberry, and is expected to finalize its decision in the coming weeks.

There has been market chatter relating to some big banks moving employees from London to other European cities, but Goldman Sachs (NYSE:GS) is closing its London hedge fund and moving the staff to the U.S. The fund was launched in 2007 with $7B in assets and currently manages about $3.5B. A Goldman spokesman confirmed the move, but added that the reasons for the staff shift were not related to Brexit

China's bitcoin exchanges risk being shut down in the virtual currency's largest market if found to be skirting rules on "money laundering, foreign exchange management, payment and settlement and other financial laws." The People's Bank of China said it held a meeting with nine bitcoin trading platforms yesterday to remind them about potential legal, policy and other risks. Related tickers: OTCQX:GBTC, OTCQB:BTCS, COIN

Giving hope to the more than 370,000 customers who put deposits down for the Model 3, Tesla (NASDAQ:TSLA) will begin test-building the vehicle on Feb. 20, Reuters reports. The automaker also plans to shut down production at its California assembly plant for a week this month, as it targets Model 3 production for July. According to Tesla, the "brief, planned" pause is not expected to have any material impact.

A South Korean court has ruled against Nissan (OTCPK:NSANY) in an emissions case, siding with the government in its accusations the automaker used a so-called defeat device in its Qashqai SUV. The environment ministry last year fined Nissan for diesel emissions cheating, halted local sales of the model and ordered a recall of Qashqai vehicles.

In a deal that could be described as if-you-can't-beat-em-join-em, Zipcar parent Avis Budget (NASDAQ:CAR) will supply UBER drivers with the opportunity to ferry passengers around in Zipcar-branded sedans. Although the deal is limited to 20 sedans in Boston for now, it opens the door for similar collaboration in other cities. It could still be tricky for Uber drivers, however, to bring in much of a profit even with the special rental rates.

Boeing is the front-runner for a major Singapore Airlines (OTCPK:SINGY) wide-body aircraft order that could be valued at around $13.8B at list prices, Bloomberg reports. The deal, which could be unveiled this week, would include 20 of Boeing's (NYSE:BA) long-range 777-9 jets and at least 19 787-10s, the longest Dreamliner model.

Winter weather across the U.S. has grounded and delayed thousands of flights, while blizzard-like conditions are expected in New York, Boston and Washington D.C. Just hours after record-challenging warmth, temperatures will plunge around 15 to 30 degrees in many areas for the U.S. Northeast, but conditions are expected to improve for the weekend. Related tickers: AAL, DAL, JBLU, LUV, SAVE, UAL

The latest sign of a changing media landscape? CenturyLink (NYSE:CTL) is considering a streaming video service such as AT&T's (NYSE:T) DirecTV Now in addition to its in-house TV service. "Content costs have really gone out of sight in recent years," CEO Glen Post said on a call with analysts. "We are looking at every option. If we can get a better deal.. we will certainly take a look at that."

Whether it's Trump's American manufacturing drive or the company was going to do it any way, Intel (NASDAQ:INTC) CEO Brian Krzanich has promised $7B to resume construction of a chip factory near Phoenix that could one day employ 3,000 people. The announcement was made in the Oval Office. Some chips that will be made there will be used in emerging technologies that Intel is seeking to grow, like 5G networks and drones.

Abandoning its goal to open 1,200-plus stores, Whole Foods (NASDAQ:WFM) said it will close nine outlets in the second quarter. "We're going to continue to grow, but I think we're going to be a more disciplined growth company than we have been in the past," CEO John Mackey declared on an earnings call. Whole Foods also cut its profit forecast for 2017 and outlined a $30M charge for Q2 related to the store closings.

High spirits? The initial public offering for Jose Cuervo has priced at the top of the expected range at 34 pesos per share, marking the first Mexican IPO since Donald Trump won the U.S. presidency. The pricing of the 476.6M share offer means the tequila maker raised at least 16.B pesos ($791M), excluding the overallotment option. According to sources, it was more than eight times oversubscribed.

Kellogg will stop distributing its U.S. snacks business' products directly to stores and switch to its more widely used warehouse model to cut costs and adapt to a shifting retail landscape. The change, which will include distribution center closures and layoffs, is part of an expanded "Project K" program, which Kellogg (NYSE:K) launched three years ago to save up to $475M annually by 2018.

The White House has defended President Trump's criticism of Nordstrom (NYSE:JWN), saying the firm's decision to drop his daughter Ivanka's clothing line for the coming season was a politically motivated attack. "I think this was less about his family's business than an attack on his daughter," spokesman Sean Spicer told a news briefing. Nordstrom said its decision was based on performance.

"We're running out of options, but that doesn't mean that it's over," said David Archambault II, chairman of the Standing Rock Sioux Tribe, regarding its battle against the $3.8B Dakota Access Pipeline. "We're still going to continue to look at all legal options available to us." The 1,170-mile line will move crude from the shale oilfields of North Dakota to Illinois en route to the Gulf of Mexico, where many U.S. refineries are located. Related tickers: ETP, ETE, SXL, PSX, MPC, ENB, EEP

Wednesday's Key Earnings

Allergan (NYSE:AGN) +3.7% after topping expectations.
Centurylink (CTL) -1.4% AH light guidance, Q4 miss.
Exelon (NYSE:EXC) -2.1% amid lower capacity, energy prices.
Humana (HUM) +2.3% beating earnings estimates.
Time Warner (NYSE:TWX) +0.4% boosted by Fantastic Beasts.
Whole Foods (WFM) -1.5% AH on falling comparable sales.

Today's Markets

In Asia, Japan -0.5%. Hong Kong +0.2%. China +0.5%. India +0.1%.
In Europe, at midday, London +0.2%. Paris +0.9%. Frankfurt +0.7%.
Futures at 6:20, Dow +0.2%. S&P +0.2%. Nasdaq +0.1%. Crude +1% to $52.85. Gold +0.1% to $1240.30.
Ten-year Treasury Yield +2 bps to 2.36%

Today's Economic Calendar

8:30 Initial Jobless Claims
9:10 Fed's Bullard: U.S. Monetary and Economic Policy
9:45 Bloomberg Consumer Comfort Index
10:00 Wholesale Trade
10:30 EIA Natural Gas Inventory
1:00 PM Results of $15B, 30-Year Note Auction
1:10 PM Fed's Evans speech
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

 

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