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Author: skywalker   |   Latest post: Wed, 23 May 2018, 07:43 AM

 

Wall Street Breakfast: U.S. Stock Recovery In Doubt?

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A recovery for U.S. equities showed signs of faltering overnight, with DJIA futures dropping 186 points, or 0.8%, to 24,397, and S&P 500 and Nasdaq futures down 0.7%. Yesterday marked the second-straight winning session for U.S. stocks as investors went bargain hunting following the biggest weekly loss for all three indexes since 2016, sparked by signs of increasing inflation and rising bond yields.

Economy

"U.S. producers are enjoying a second wave of growth so extraordinary that in 2018 their increase in liquids production could equal global demand growth," the IEA said in its latest monthly report. That could soon spark another dramatic change of policy from leading oil producers, currently sitting on "shut-in production capacity and facing a renewed challenge to their market share."

Meanwhile, Venezuela's oil output in January fell to its lowest level in nearly 30 years, excluding a brief oil strike in 2003, according to S&P Global Platts. The staggering decline is also forcing state-owned PDVSA to turn to ally Russia for crude for its refineries. It's another sign of Venezuela's economic crisis as oil makes up about 95% of the nation's exports.

Kim Jong Un wants to boost the "warm climate of reconciliation and dialogue" with Seoul after his delegation returned from a visit to its neighbor during the Pyeongchang Olympics. South Korean President Moon Jae-in also said the U.S. is open to talking with North Korea, according to Yonhap, marking a change from last year when it insisted Pyongyang commit itself to denuclearization before negotiations.

The rand extended its gains to the dollar on reports that South Africa's African National Congress party executive committee decided to "recall," or remove, President Jacob Zuma as head of state. Deputy President Cyril Ramaphosa, who won a leadership vote in December and is widely expected to succeed Zuma, has put a focus on rooting out corruption and revitalizing economic growth.

British inflation held to its highest level in nearly six years in January, remaining at an annual rate of 3%, after the BOE surprised markets last week by indicating that it wanted to return price growth to 2% within two years instead of three. Inflation has surged in the U.K. since the Brexit decision in June 2016, which hammered the value of the pound and pushed up the cost of imports.

President Trump plans to announce as soon as this week what he called a "reciprocal tax" on goods imported to the United States from other nations. "We are going to charge countries outside of our country - countries that take advantage of the U.S.," he said at a White House event on infrastructure. "Some of them are so-called allies, but they're not allies on trade."

Stocks

Walgreens Boots Alliance has made a takeover approach to drug distributor AmerisourceBergen (NYSE:ABC), shooting up the latter's shares almost 22% in AH trading on Monday. Walgreens (NASDAQ:WBA) already owns about 26% of Amerisource and has a representative on its board. A transaction would be substantial: AmerisourceBergen has a market cap of $19.6B, while Walgreens is valued at $67.8B.

Xerox's plan to sell itself to Fujifilm (OTCPK:FUJIY) for $6.1B has come under further pressure from Carl Icahn and Darwin Deason, who own a combined 15.2% of the U.S. printer and copier maker. "The transaction has a tortured, convoluted structure... Vote against the Fuji scheme to send a clear message that we will not be fooled into giving up control of our company [Xerox (NYSE:XRX)] for $9.80 in cash."

At a time of surging revenues in Macau, MGM Resorts (NYSE:MGM) has opened its $3.4B casino resort in the Chinese-controlled territory, just days ahead of the Lunar New Year holiday. MGM Cotai will more than triple the number of MGM’s hotel rooms in Macau to 1,972, while increasing MGM's overall gaming table count in the hub by 29% to 552.

Days after canceling an outside law firm's investigation into alleged sexual misconduct involving former CEO Steve Wynn, a special committee of the Wynn Resorts (NASDAQ:WYNN) board has given that assignment to a new law firm - Gibson, Dunn & Crutcher - with longstanding connections to the casino company. The committee's investigation is also being broadened to include "an expanded and comprehensive review of Wynn Resorts' internal policies and procedures."

General Motors is closing one of its four vehicle assembly plants in South Korea, in a move it called a "first step" in a broader overhaul of its Korean operations. GM will incur an $850M impairment charge as part of the restructuring and decide the fate of its other local facilities within weeks, amid ongoing talks with the government and labor unions.

Attendees of the Winter Olympic games in Pyeongchang are experiencing the future of wireless technology. The "5G.Connected" showcase, engineered by KT Corp. (NYSE:KT), uses technology from Intel (NASDAQ:INTC), Ericsson (NASDAQ:ERIC) and Samsung Electronics (OTC:SSNLF), for the world's first broad-scale 5G network. At 10 gigabits a second, it's about 100 times faster than 4G.

Snap's head of sales, Jeff Lucas, is leaving the social media company less than two years after joining from Viacom (VIA, VIAB). He was responsible for leading worldwide sales during the rollout of Snap's programmatic ad system, which now accounts for 90% of ad sales at the company. Lucas is the seventh executive to leave SNAP since its IPO last year.

"I believe at least 10 years is what we can see in the U.S. for our print products," New York Times (NYSE:NYT) CEO Mark Thompson told CNBC, but admitted that printing presses might face an expiration date. "The key thing for us is that we're pivoting, he declared. Revenue from digital subscriptions increased more than 51% in Q4, while the company added 157,000 digital subscribers.

Top Wall Street executives will be speaking at the 19th Credit Suisse annual financial services conference today, including Goldman Sachs (NYSE:GS) CEO Lloyd Blankfein, Wells Fargo (NYSE:WFC) CEO Tim Sloan, Bank of America (NYSE:BAC) CEO Brian Moynihan and Citigroup (NYSE:C) CEO of Latin America Jane Fraser. Investors are expecting an update on how 2018 is shaping up and how sales and trading units have fared after a difficult 2017.

Today's Markets

In Asia, Japan -0.7%. Hong Kong +1.3%. China +1%. India +0.9%.
In Europe, at midday, London +0.1%. Paris -0.5%. Frankfurt -0.5%.
Futures at 6:20, Dow -0.8%. S&P -0.7%. Nasdaq -0.7%. Crude -0.3% to $59.14. Gold +0.4% to $1331.30. Bitcoin -3.9% to $8541.
Ten-year Treasury Yield -2 bps to 2.83%

Today's Economic Calendar

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

 

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