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Author: skywalker   |   Latest post: Mon, 20 Aug 2018, 11:31 AM

 

Wall Street Breakfast: Signs Of A Top Or Just Noise?

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Continuing their recent selloff, equities are sharply lower this morning after the DJIA closed more than 600 points lower Friday, marking only the ninth time in history that has happened. Bears appear to be fearful about the sudden acceleration in bond yields, which increases companies' borrowing costs, amid increasing concerns over inflation and aggressive policy tightening. U.S. stock index futures: Dow -0.8%; S&P 500 -0.5%; Nasdaq -0.4%.

Economy

The number of defaults by highly leveraged companies could rise significantly amid tightening credit conditions, according to S&P Global Ratings. The agency estimates that the proportion of corporations whose debt-to-earnings exceeds 5x - stood at 37% in 2017, compared to 32% before the financial crisis, and removing the "easy money punch bowl" could trigger the next default cycle.

"Canada is willing to walk away from NAFTA if the U.S. proposes a bad deal. We will not be pushed around," Prime Minister Justin Trudeau said at a town hall event in Nanaimo, British Columbia. "Canceling it would be extremely harmful and disruptive to people in the U.S.... We are going to keep negotiating in good faith, [but] we are not going to take any old deal."

Markets in Germany are in the red after Chancellor Angela Merkel's CDU and the Social Democrats failed to agree to a coalition government on Sunday. Talks between the parties are now set to continue this week, extending months of political uncertainty within Europe's economic powerhouse. The parties reportedly reached a deal on migration, energy and agriculture but continue to debate healthcare and labor policies.

IHS Markit's main gauge of business activity across the eurozone struck a near 12-year high in January, with the composite purchasing managers index rising to 58.8, from 58.1 the previous month. If the surge in manufacturing and services is repeated in February and March, the bloc could be headed for quarterly growth of 1%, which is way above the area's long-run average.

Stocks

The Philadelphia Eagles withstood a trademark New England rally to win their first Super Bowl in franchise history, beating the Patriots 41-33 at U.S. Bank Stadium. There's reason to believe viewership will be smaller than last year's, with NFL TV ratings down across the board this season, but the game will still provide a massive audience for advertisers who paid around $7.7M per commercial and a boost to broadcaster NBC (NASDAQ:CMCSA).

Best known for its Rocket Mortgage, Quicken Loans overtook longtime leader Wells Fargo (NYSE:WFC) to become the largest retail mortgage lender in Q4 with $25.1B in direct-to-consumer home loans. Wells was still bigger than Quicken if including correspondent loans, or mortgages purchased from other lenders shortly after they were originated. The last company to edge out Wells Fargo was Countrywide Financial in 2004.

The Consumer Financial Protection Bureau has put a full-scale probe of how Equifax (NYSE:EFX) failed to protect the personal data of some 143M Americans on ice, sources told Reuters. The effort has sputtered since Mick Mulvaney was named director in November, raising questions about how he will police a data-warehousing industry that has enormous sway over how much consumers pay to borrow money.

Amid fears of running up huge losses, Lloyds (NYSE:LYG) is barring its credit card customers from buying bitcoin and other cryptocurrencies. It follows similar moves by U.S. rivals JPMorgan (NYSE:JPM), BofA (NYSE:BAC) and Citigroup (NYSE:C), which all announced similar bans on crypto purchases via credit cards on Friday. Worries over a global regulatory clampdown led bitcoin - which is still trading below $8,000 - last week to record its biggest weekly loss since December 2013.

Samsung Electronics Vice Chairman Jay Y. Lee is free to leave prison after a high court shortened his five-year jail sentence in a bribery scandal that had rocked South Korea. The ruling may end a leadership vacuum at the country's biggest business empire - controlled by the Lee family through an intricate structure of cross-shareholdings - as well as key affiliates like Samsung Electronics (OTC:SSNLF).

Competition is heating up among the two of the biggest music streaming services: Spotify (Private:MUSIC) and Apple Music (NASDAQ:AAPL). Citing "people in the record business," the WSJ reported that Apple has been adding 5% to its U.S. subscriber base every month versus "just" 2% for Spotify. Assuming that clip continues, Apple would overtake Spotify in the world's biggest music market this summer.

Broadcom intends to unveil a new $120B offer today for Qualcomm (NASDAQ:QCOM), aiming to ratchet up pressure on its U.S. rival to engage in negotiations, sources told Reuters. The offer would value the semiconductor giant at $80-$82 per share and comes ahead of a Qualcomm shareholder meeting scheduled for March 6, when Broadcom (NASDAQ:AVGO) will seek to replace Qualcomm's board of directors. QCOM +5.2% premarket.

Bayer has offered concessions to allay EU antitrust concerns about its $63.5B bid for U.S. rival Monsanto (NYSE:MON), according to the European Commission, extending its investigation of the deal to April 5. Bayer (OTCPK:BAYRY) already struck a deal with BASF (OTCQX:BASFY) in October 2017 to sell seed and herbicide businesses for €5.9B, but it's prepared to do more to gain EU approval.

More robo-taxis? Daimler (OTCPK:DDAIF), the world's No.1 maker of premium cars, and Bosch (OTC:BSWQY), the world's No.1 automotive supplier, will begin testing the vehicles in the coming months. "Apart from highly autonomous level 3 vehicles we will also bring fully autonomous vehicles - level 4/5 - to the streets in the foreseeable future," Daimler's Wilko Stark told Automobilwoche.

Sprint is the latest carrier to make noise about 5G, promising to launch a commercial network in early 2019. While none of today's smartphones would work on the technology, 5G networks have implications for other machines, such as self-driving cars. It could benefit parent company SoftBank (OTCPK:SFTBY), which - in addition to owning Sprint (NYSE:S) - has a major investment in UBER.

Although it's still studying the matter, Boeing (NYSE:BA) may express interest in a fighter jet competition in Canada despite a recent trade row with Bombardier (OTCQX:BDRAF, OTCQX:BDRBF), VP Gene Cunningham said on the eve of the Singapore Airshow. The contract for 88 jets is worth between C$15B-C$19B ($12.1B-$15.3B). Meanwhile, UPS has handed Boeing a lifeline order for 14 more 747-8 freighters, easing doubts over the jumbo's future.

Aiming to be ubiquitous across the continent within "a few years," JD.com (NASDAQ:JD) plans to challenge Amazon (NASDAQ:AMZN) in Europe as early as 2019. The company will first launch its e-commerce platform and delivery services in France, then the U.K. and Germany, FT reports. Unlike domestic rival Alibaba (NYSE:BABA) and U.S. giant Amazon, JD owns and runs its logistics network, which it cites as the reason for its fast deliveries.

Today's Markets

In Asia, Japan -2.6%. Hong Kong -1.1%. China +0.7%. India -0.9%.
In Europe, at midday, London -1.2%. Paris -1.2%. Frankfurt -0.8%.
Futures at 6:20, Dow -0.8%. S&P -0.5%. Nasdaq -0.4%. Crude -0.5% to $65.12. Gold +0.2% to $1340.30. Bitcoin -7.4% to $7584.
Ten-year Treasury Yield +1 bps to 2.85

Today's Economic Calendar

9:45 PMI Services Index
10:00 ISM Non-Manufacturing Index
12:30 PM TD Ameritrade IMX

 

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