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Author: skywalker   |   Latest post: Thu, 21 Mar 2019, 10:05 AM

 

Wall Street Breakfast: Big Day For Fedspeak

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Investors today will be looking for new clues on interest rate policy after yesterday's minutes from the FOMC's December meeting indicated patience for upcoming rate hikes and possible changes to the central bank's balance sheet plan. Fed Chairman Jerome Powell will speak this afternoon before the Economic Club of Washington, and other Fed officials, including Tom Barkin, James Bullard, Charles Evans, Neel Kashkari and Richard Clarida, are set to give presentations throughout the day.

Economy

U.S. stock index futures are pointing to the first loss in five sessions for Wall Street amid further concerns of a slowdown in the world's second largest economy. China's consumer price index dropped to 1.9%, well below the 3% upper limit set by the PBOC, and producer prices grew at the slowest pace in two years. The latest breakdown in talks over the U.S. government shutdown also weighed on sentiment, with President Trump calling a meeting with Democratic lawmakers last night "a total waste of time."

The shutdown may be having another adverse effect on U.S. markets: IPOs. 2019 was being touted as the biggest year for flashy public market debuts, but UBER and LYFT now believe the shutdown could slow the timeline of their listings, Bloomberg reports. The final outcome, which also concerns active mergers and acquisitions, likely depends on how long it takes for the SEC to reopen.

Venezuela's Nicolas Maduro will be sworn in for a second term as president today amid a collapsing economy that shows no sign of bottoming out. "Prices will go up again. He'll most likely raise the minimum wage, but that means the prices on everything go up also. So we'll be stuck in the same situation," according to Fitch director Richard Francis. In fact, the IMF predicts inflation will hit 10 million percent in 2019.

The recent visit to China by the North Korean leader, Kim Jong-un, indicates that his second meeting with President Trump is imminent, according to South Korean President Moon Jae-in. Over the last few weeks, Pyongyang has signaled that Washington should loosen the broad sanctions hobbling its economy, but the White House has refused, saying it will keep them in place until it can verify North Korea has dismantled its nuclear weapons program.

Stocks

Sears Chairman Eddie Lampert has reportedly submitted a revised $5B takeover bid for the company, boosting the chances the U.S. department store operator will escape liquidation. The new bid, which Sears (OTCPK:SHLDQ) will consider during a Jan. 14 bankruptcy auction, proposes assuming up to about $300M of tax and merchandise expenses the 126-year-old icon has racked up since its Oct. 15 bankruptcy filing.

Amazon CEO Jeff Bezos and his wife, MacKenzie, are divorcing after 25 years of marriage, a period during which he built the world's most valuable company. Jeff is expected to remain one of the firm's largest holders, but if MacKenzie ends up with a chunk of his stake, she could influence shareholder votes on resolutions and press for changes at the company. Jeff "remains focused on and engaged in all aspects of Amazon (NASDAQ:AMZN)," a spokesman declared.

The need for warehouse automation has also led Amazon (AMZN) to ink a seven-year commercial agreement with robotics firm Balyo (OTCPK:BYYLF) that would allow the e-commerce giant to build a stake of almost a third in the French company. The deal could boost sales of the latter's self-driving forklift trucks and help Amazon cut costs and speed up deliveries. Amazon currently uses robots developed by Kiva Systems, a company it bought for $775M in 2012.

The European Commission has opened an in-depth investigation into the tax treatment of Nike (NYSE:NKE) in the Netherlands. According to the EU executive, the U.S. sportswear maker may have been given an illegal and unfair advantage. At this stage it is concerned with royalty payments endorsed by five tax rulings from 2006 to 2015 that might not "reflect economic reality."

Breaking a five-year winning streak, Airbus (OTCPK:EADSY) lost out to Boeing (NYSE:BA) in 2018, with orders falling 33% to 747 (including 135 for the A220 jetliner which it took over from Bombardier in July) vs. Boeing's 893 net orders. What about deliveries? The French aerospace giant also came up short, with 800 deliveries vs. the 806 of its U.S. rival, although the 1,606 planes handed over was a new high for the commercial airliner industry.

Japanese prosecutors plan to indict former Nissan (OTCPK:NSANY) Chairman Carlos Ghosn on two more claims of financial misconduct tomorrow, bringing the total number of charges to three. Nissan also faces an indictment over the latest compensation reporting issue, sources told Reuters. At a court appearance this week, Ghosn said all accusations against him were "meritless" and "unsubstantiated."

Tesla will stop selling the lowest-priced versions of its Model S sedans and Model X SUVs - equipped with a 75 kWh battery - from Monday, according to a late night tweet from Elon Musk. While a reason wasn't given, retiring the vehicles may push prospective customers to buy Tesla's (NASDAQ:TSLA) high-end Model 3, or might help the company control costs or reallocate materials and labor to other initiatives.

More auto news... Ford (NYSE:F) said it will cut thousands of jobs in Europe as part of a turnaround effort, while Jaguar Land Rover (NYSE:TTM) is expected to make a similar layoff announcement due to plunging demand for diesel, falling Chinese sales and Brexit uncertainty. VW (OTCPK:VWAGY) is further setting up a network of fast-charging stations in China as part of its multibillion-dollar push to boost EVs and Fiat Chrysler (NYSE:FCAU) is set to announce a $700M settlement today over the DOJ's diesel emissions claims.

U.S. District Judge William Alsup has issued a proposed order to restrict utility PG&E (NYSE:PCG) from using power lines deemed to be unsafe during high winds in the 2019 California fire season. The proposal, which also requires PG&E to re-inspect its grid, comes after PG&E reportedly hired Citi and Morgan Stanley to evaluate asset sales, including its natural gas local distribution unit.

The former CEO of Insys Therapeutics, Michael Babich, has pleaded guilty to participating in a nationwide scheme that sought to bribe doctors into prescribing Subsys, an addictive opioid medication, and has agreed to become a government witness. His plea comes less than three weeks before five former Insys (NASDAQ:INSY) executives and managers including John Kapoor, its onetime billionaire founder, face trial after being charged with participating in the scheme.

Industry observers expected that the marijuana legalization trend in the U.S. would hurt liquor sales, but a new study from the Distilled Spirits Council finds that hasn’t been the case in the three states where weed has been legal the longest. Recreational marijuana is now legal in ten states and Washington, D.C. and several more are considering legalization in 2019. Related tickers: DEO, BF.A, BF.B

Starbucks is installing needle-disposal boxes in some locations following reports from workers of discarded syringes in bathrooms. "These societal issues affect us all and can sometimes place our employees in scary situations," Starbucks representative Reggie Borges declared. In May 2018, Starbucks (NASDAQ:SBUX) announced that it would allow the public to use the bathroom "100% of the time" following years of loose bathroom regulations. SBUX -0.6% premarket.

Wednesday's Key Earnings

Bed Bath (NASDAQ:BBBY) +16.8% AH soaring on a positive outlook.
Constellation Brands (NYSE:STZ) -12.4% on disappointing guidance.
KB Home (NYSE:KBH) +3.8% AH beating estimates.
Lennar (NYSE:LEN) +7.9% with improved buyer traffic.

Today's Markets

In Asia, Japan -1.3%. Hong Kong +0.2%. China -0.4%. India -0.3%.
In Europe, at midday, London -0.2%. Paris -0.8%. Frankfurt -0.4%.
Futures at 6:20, Dow -0.4%. S&P -0.6%. Nasdaq -0.6%. Crude -0.8% to $51.96. Gold +0.2% to $1294.20. Bitcoin -6.2% to $3769.
Ten-year Treasury Yield -3 bps to 2.7%

Today's Economic Calendar

8:30 Initial Jobless Claims
8:35 Fed's Barkin Speech
10:00 Wholesale Trade
10:30 EIA Natural Gas Inventory
12:40 PM Fed's Bullard: U.S. Monetary and Economic Policy
12:45 PM Jerome Powell Speech
1:00 PM Fed's Evans Speech
1:00 PM Results of $16B, 30-Year Note Auction
1:20 PM Fed's Kashkari Speech
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
7:00 PM Richard Clarida: Economic Outlook and Monetary Policy

 

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