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Author: skywalker   |   Latest post: Thu, 18 Apr 2019, 7:30 AM

 

Wall Street Breakfast: Focus Returns To Earnings Season

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U.S. stock index futures are dipping into the red ahead of the open, but quarterly reports today from Netflix (NASDAQ:NFLX), Morgan Stanley (NYSE:MS) and others may be able to send Wall Street back to four-week highs. The results come after Netflix said it would raise its U.S. monthly subscription prices and as investors bet bank profits will continue to lead markets. According to FactSet, firms in the S&P 500 are projected to report earnings growth of 11% Y/Y during the Q4 earnings season.

Economy

It's official: China's chief trade negotiator, Vice Premier Liu He, will visit Washington for the next round of talks on Jan. 30-31. The visit comes amid a more challenging economic backdrop for China, making it even more pressing to strike a deal. Recent data has been poor, with worsening factory sentiment, deflation risks and falling exports, triggering various stimulus measures from the PBOC.

Winning a confidence vote in the House of Commons, Theresa May now faces a deadline to set out her Brexit Plan B by Monday. She may be prepared to dissolve some of her red lines to get her opponents onside, like keeping closer ties to the EU or postponing Britain's divorce from the bloc, as Philip Hammond told business leaders that the "threat" of a no-deal Brexit could be taken "off the table" within days.

Greek Prime Minister Alexis Tsipras also won a motion of no-confidence last night after five opposition lawmakers broke ranks to cast votes in favor of the government. The narrow victory paves the way for a final resolution of a long-running name dispute with neighboring Macedonia that will allow the nation this year to begin talks on joining NATO and the EU.

Venezuelan bonds have rallied sharply over the past week as the country's opposition mounted a renewed legislative challenge to President Maduro, who recently assumed a second term in office. Juan Guaido, the new leader of the congress, is willing to assume the presidency due to accusations of fraud in last year’s election. Advisers to President Trump are also considering recognizing Guaido as the country's legitimate leader.

Delivering a bullish signal to the oil market, OPEC got a jump on its output cut deal in December. Led by declines in Saudi production, oil supplies from the group plunged by 751K barrels per day to nearly 31.6M bpd, according to independent figures cited by OPEC in its monthly report. The deal with Russia and nine other nations will also keep 1.2M barrels per day off the market starting this month.

Stocks

A bipartisan group of U.S. lawmakers have introduced bills that would ban the sale of U.S. chips or other components to Huawei, ZTE (OTCPK:ZTCOY) or other Chinese telecom equipment companies that violate U.S. sanctions or steal trade secrets. The proposed law drew sharp criticism from China, where Foreign Ministry spokeswoman Hua Chunying called the U.S. legislation "hysteria" amid a bitter trade war between Beijing and Washington.

Meanwhile, Berlin is now considering ways to bar China's Huawei from a 5G network buildout. It's a shift from the German government's position from October, when it told lawmakers it saw no legal basis to exclude any vendors from an upcoming 5G auction. Competitor watch: Nokia (NYSE:NOK) and Ericsson (NASDAQ:ERIC) could benefit as Western governments increasingly ban Huawei from their markets.

Investing legend Jack Bogle died Wednesday at the age of 89. He helped bring investing to the masses through his creation of the index fund and founding of the Vanguard Group, which now has $5.1T in assets under management. Considered one of the world’s greatest investors, Bogle preached a philosophy of buy and hold investing, and avoidance of market timing.

Tribune Publishing has approached Gannett (NYSE:GCI) about restarting some dormant merger talks in recent weeks, according to the WSJ. That was before Monday's $1.36B hostile bid by MNG to acquire Gannett. While the company was recently cold to resuming talks with Tribune (NASDAQ:TPCO) that broke down two years ago, things may change now that Gannett is a target.

Apple will cut back on hiring for some divisions following disappointing iPhone sales and missing its revenue forecast for the holiday quarter. However, key groups - such as the AI team - will continue to add new employees at a strong pace, Bloomberg reports. CEO Tim Cook is said to have made the disclosure to employees earlier this month in a meeting the day after he sent a letter to investors about Apple's (NASDAQ:AAPL) recent struggles.

In a development that could impact Carter's (NYSE:CRI) and The Children's Place (NASDAQ:PLCE), Gymboree Group has filed for bankruptcy protection for the second time in less than two years. The move will see the children's clothing chain shut Gymboree and Crazy 8 brand stores, and sell high-end line Janie and Jack. More than 20 U.S. retailers, including Sears (OTCPK:SHLDQ) and Toys "R" Us, have filed for bankruptcy since the start of 2017 amid fierce e-commerce competition.

Hoping to gain some market share, Japan Tobacco (OTCPK:JAPAY) has unveiled two "heat-not-burn" products called the Ploom TECH+ and Ploom S, which will be available in Japan from Jan. 29. The country has emerged as a fertile test ground for vaping devices since e-cigarettes using nicotine-laced liquid are prohibited. According to Nomura, Philip Morris's (NYSE:PM) IQOS had a 71.8% share of Japan's HNB market last year, while BAT's (NYSEMKT:BTI) Glo had 20.1% and Ploom TECH had 8.1%.

Showdown with SpaceX? United Launch Alliance, a joint venture between Boeing (NYSE:BA) and Lockheed Martin (NYSE:LMT), said it will conduct the final design review for its new flagship Vulcan rocket within months. It's a crucial milestone for the company as it tries to move into full production ahead of a first flight in spring 2021 after slipping from its initial 2019 timetable.

Looking to bring down the prices of its cars, especially the Model 3, Tesla (NASDAQ:TSLA) is shooting for more cost cuts. "The Tesla customer referral program will end on Feb 1. If you want to refer a friend to buy a Tesla & give them 6 months of free Supercharging, please do so before then," Elon Musk wrote in a tweet.

Offshoring or Brexit fallout? Production is moving out of England for British sports car brand Lotus as Chinese owner Geely (OTCPK:GELYY) transfers manufacturing to a new plant in central China capable of putting out 150K vehicles per year. Geely also owns a suite of automotive businesses, from Volvo Cars to Proton, and has stakes in Mercedes-Benz-owner Daimler (OTCPK:DDAIF) and truckmaker Volvo Group (OTCPK:VOLVF).

Wednesday's Key Earnings

Alcoa (NYSE:AA) -1.6% AH seeing 2019 aluminum deficit.
Bank of America (NYSE:BAC) +7.2% on banking strength, cost controls.
BlackRock (NYSE:BLK) +3.1% hiking its dividend by 5%.
BNY Mellon (NYSE:BK) +2.1% topping profit estimates.
CSX Corp. (NYSE:CSX) -2.1% despite Q4 beat, adding buybacks.
Goldman Sachs (NYSE:GS) +9.5% after blowout Q4 results.
Kinder Morgan (NYSE:KMI) -1.6% AH considering $1/share FY dividend.
PNC Financial (NYSE:PNC) +0.9% needing more bad loan coverage.
U.S. Bancorp (NYSE:USB) +2.4% with net interest income increases.

Today's Markets

In Asia, Japan -0.2%. Hong Kong -0.5%. China -0.4%. India +0.2%.
In Europe, at midday, London -0.7%. Paris -0.5%. Frankfurt -0.4%.
Futures at 6:20, Dow -0.3%. S&P -0.3%. Nasdaq -0.4%. Crude -0.9% to $51.83. Gold flat at $1293.80. Bitcoin -0.6% to $3591.
Ten-year Treasury Yield +1 bps to 2.71%

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
8:30 Housing Starts
10:30 EIA Natural Gas Inventory
10:45 Randal Quarles: “Insurance Regulation and Supervision”
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

 

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