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Author: skywalker   |   Latest post: Wed, 18 Jul 2018, 07:33 AM

 

Wall Street Breakfast: High Stakes For Earnings Season

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The volatile stock market will see a major test in the coming weeks as traders size up first-quarter results. Tax cuts should help Corporate America post its biggest quarterly profit growth in seven years, with S&P 500 profits expected to rise 18.4%, but any disappointments could further upset investor sentiment. Earnings season will kick off in earnest today and tomorrow, with reports from big financial institutions like BlackRock (NYSE:BLK), JPMorgan (NYSE:JPM), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC) and PNC Financial (NYSE:PNC).

Economy

Fed officials appeared to lean hawkish at their most recent policy meeting, with "all participants" expecting the economy to strengthen and inflation to rise "in coming months." Minutes will also be released today from the ECB's March 7-8 meeting, when the bank dropped a long-held pledge to accelerate its bond buying program if the region's economy deteriorates.

Ahead of fast-approaching congressional elections, House Speaker Paul Ryan said he will not seek re-election, leaving his post at the start of 2019. Majority Leader Kevin McCarthy or Majority Whip Steve Scalise would likely replace him. The GOP is also burdened by the planned retirements of an unusually large number of House Republicans, though many hope a strong economy will provide a boost for their party.

China will "unquestionably" retaliate if the U.S. further escalates trade tension, according to Commerce Ministry spokesman Gao Feng. While the government has further prepared a comprehensive counter-punch plan, it hasn't recently conducted any negotiations with American counterparts. "We can't talk under the unilateral threat from the U.S.," he added.

On the heels of a strengthening peso, the Bank of Mexico will release its policy statement today, with some analysts expecting the central bank to raise rates again after doing so at its last meeting in February. In its policy statement from that meeting, the bank left the door open to additional rate increases, stating it "will act in a timely, firm way to keep inflation expectations anchored."

Missile strikes? Theresa May has ordered British submarines to move within missile range of Syria, the Daily Telegraph reports, adding that strikes could begin as early as tonight. Meanwhile, Saudi Arabia intercepted a Houthi ballistic missile over Riyadh and shot down two drones, marking the latest attack by pro-Iranian rebels, who also support the Assad regime.

Stocks

Strategic review? General Electric (NYSE:GE) is exploring a public offering for one of its divisions and is discussing hybrid deals with public companies to combine assets in a way that avoids a big tax bill, WSJ reports. Such moves would give GE and its shareholders a chance to participate in the turnaround of struggling businesses rather than risk selling at inopportune times. GE +1% premarket.

The antitrust trial over AT&T's (NYSE:T) $85B takeover bid for Time Warner (NYSE:TWX) is on another break, with the Justice Department wrapping up its case against the merger with its star witness. Economic expert and Cal-Berkeley professor Carl Shapiro testified that the tie-up would lead to higher cable bills - to the tune of an extra $571M per year by 2021. "The harm is significant," he told the court.

Britain's takeover regulator has ruled that Disney (NYSE:DIS) would have to bid £10.75 per Sky (OTCQX:SKYAY) share if it succeeds in acquiring Fox's (NASDAQ:FOX) existing 39% stake in the British broadcaster. The decision may disappoint some Sky shareholders betting that Disney would be forced to offer a higher price than Fox, but it also means investors have a guaranteed bidder for the business should the Fox transaction be blocked.

The City of Birmingham Relief and Retirement System has sued Netflix (NASDAQ:NFLX), alleging that board members "rigged the compensation process" and breached their fiduciary responsibilities. The lawsuit comes three months after Netflix converted its executives' cash bonus system into salary under new U.S. tax law - a change that ensures executives are paid in full regardless of the company's performance.

Walmart is likely to reach a deal to buy a majority stake in India's Flipkart (FPKT) by the end of June in what could be the company's biggest acquisition of an online business. Walmart's (NYSE:WMT) deal could be worth between $10B-$12B, according to Reuters. Local media have also reported that Amazon (NASDAQ:AMZN) is exploring a possible counter offer for the Indian e-commerce player.

According to research firm Gartner, global shipments of personal computers fell 1.4% to 61.7M units during Q1, marking the 14th consecutive quarter of decline. However, average selling prices continued to rise amid a smartphone deceleration, uncertainty in PC replacement demand and as component companies remained cautious about expanding production.

A federal appeals court has revived a lawsuit seeking to hold Barnes & Noble (NYSE:BKS) responsible for customer losses from a 2012 data breach. Damages were sought for buying credit monitoring services, as well as closing access to their money while banks reversed unauthorized charges. Fraudsters had tampered with PIN pads at 63 bookstores in nine U.S. states.

Takeda Pharmaceutical has sounded out creditors for loans as it moves closer to making an offer for rare disease specialist Shire (NASDAQ:SHPG). Under U.K. takeover rules, it has until April 25 to decide whether to make a bid. At around $40B, the deal would be the largest ever overseas acquisition by a Japanese company and would propel Takeda (OTCPK:TKPYY) into the top ranks of global drugmakers. SHPG +3% premarket.

Full speed ahead... Tesla (NASDAQ:TSLA) is targeting November 2019 as the start of production for its Model Y SUV, with production in China to begin two years later, sources told Reuters. It's also accepting preliminary bids for supplier contracts. Elon Musk said earlier this year that Tesla was aiming for initial output of one million Model Ys per year.

South Korea expects to complete due diligence on General Motors' (NYSE:GM) local subsidiary by early May as the government considers whether to inject taxpayer money into the automaker's embattled unit. In February, GM said it planned to shut one of its local factories, while the fate of its remaining three depended on government support and union wage concessions.

The U.S. Department of Defense has stopped accepting most of Lockheed Martin's (NYSE:LMT) F-35 deliveries, Reuters reports, because of a dispute over who will foot the costs for fixing a production error. The defect, found on more than 200 jets, likely requires a complex logistical fix that could require technicians to travel around the world to mend the aircraft.

Wednesday's Key Earnings

Bed Bath & Beyond (NASDAQ:BBBY) -14% AH on a dim outlook.

Today's Markets

In Asia, Japan -0.1%. Hong Kong -0.2%. China -0.9%. India +0.5%.
In Europe, at midday, London +0.1%. Paris +0.3%. Frankfurt +0.5%.
Futures at 6:20, Dow +0.4%. S&P +0.5%. Nasdaq +0.5%. Crude -0.2% to $66.67. Gold -0.9% to $1348.20. Bitcoin steady at $6944.
Ten-year Treasury Yield flat at 2.8%

Today's Economic Calendar

Chain Store Sales
8:30 Initial Jobless Claims
8:30 Import/Export Prices
9:45 Bloomberg Consumer Comfort Index
10:30 EIA Natural Gas Inventory
1:00 PM Results of $12B, 30-Year Note Auction
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

 

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