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Author: skywalker   |   Latest post: Wed, 4 Sep 2019, 10:34 AM

 

Wall Street Breakfast: First Rate Cut Since The Financial Crisis

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Delivering a mild jolt to an economy that's facing headwinds from tame inflation at home to trade disputes and a global slowdown, the Federal Reserve is almost certain to cut interest rates today for the first time in more than a decade. The decision at 2 p.m. ET, which many expect to be a quarter point reduction, will be followed by a news conference from Jerome Powell, who'll explain why the move was necessary and what comes next. It is still unlikely to assuage President Trump's increasingly strident demands for easy monetary policy, as well as critics who say that cutting rates now will sap the Fed's firepower in the event of an actual recession.

Earnings season going well

Market focus is largely attuned to the U.S. central bank as stock index futures point to gains on expectations of a Fed rate cut, with contracts linked to the DJIA up 79 points, and S&P 500 and Nasdaq ahead by 0.2% and 0.4%, respectively. Meanwhile, more than half of the S&P 500 has now reported Q2 results, and it looks like investors are going to dodge the feared profit recession. According to Refinitiv, earnings are expected to be up a modest 0.9%.

Don't forget about Apple

Record Services revenue and upside revenue guidance propelled Apple (NASDAQ:AAPL) shares up 4.5% AH on Tuesday as the tech giant reported FQ3 figures. Apple's quarterly profit and revenue beat Wall Street estimates, with CEO Tim Cook saying a "marked improvement in greater China" drove the results. While Apple no longer provides a breakout on iPhone unit sales, iPhone revenue for the quarter was down 12% Y/Y, although growth was seen in every other area of its business, including iPad and Mac. Apple also confirmed its credit card will launch next month in a partnership with Goldman Sachs (NYSE:GS).

Slowdown at Samsung

Shares of Samsung Electronics (OTC:SSNLF) slipped as much as 3% in Korea overnight after notching a Q2 net profit of 5.18T South Korean won ($4.4B), a 53% decline from 11.04T won a year earlier. Decreasing appetite for smartphones and other gadgets sapped demand for the company's cash cow components business. The world's largest smartphone and memory chips maker has also come under threat from Japan’s new trade restrictions and the protracted trade war between the U.S. and China.

Eurozone growth halves

Growth in the eurozone has returned to the anemic rates seen in the third and fourth quarters of last year, with GDP growth halving in the April-June period to 0.2% Q/Q (or 1.1% on an annualized basis). Inflation slowed sharply as well in July (from 1.3% to 1.1%) even though the unemployment rate fell to its lowest in 11 years. That strengthens market expectations that the ECB, which wants to keep inflation below but close to 2%, will further loosen monetary policy in September.

Johnson in Northern Ireland

Pushing toward historic lows this week, the pound rose 0.2% overnight to $1.2174 as Boris Johnson visits Northern Ireland to face Brexit's toughest riddle. The EU insists on a "backstop" - an insurance policy to prevent border controls by requiring Britain to obey some EU rules in case both sides fail to agree on a later trade deal. Johnson rejects that demand as "undemocratic," but says technology can ensure a friction-free border even if Britain adopts separate customs and regulatory rules.

Trade talks to nowhere?

China and U.S. negotiators have concluded a new round of trade talks in Shanghai, with little immediate evidence of progress being made toward ending their year-long dispute. It follows yesterday's tweets from President Trump, who let fly at China's perceived unwillingness to buy American agricultural products and said it continues to "rip off" the U.S. Data overnight also showed China's factory sector still contracting, though the manufacturing PMI edged up slightly to 49.7 in July, from last month's reading of 49.4.
Go deeper: China investing analysis at the Global Investing Center.

Big Tech partners on healthcare

Representatives from Apple (AAPL), Google (GOOG, GOOGL), Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) joined up in Washington, D.C. on Tuesday, alongside some of the largest health insurers and hospitals, to announce plans to provide consumers with easier access to their medical information. Those include adopting open health standards, available on the cloud, to accelerate seamless exchange of health data for patients. Some of the real-world applications being tested, according to those who attended the event, also include fraud detection and helping consumers avoid paying erroneous bills.
Go deeper: 'When Harry Healthcare Met Sally Technology' writes The Fortune Teller.

Jump starting self-driving car bill

The House Energy and Commerce Committee and Senate Commerce Committee are reviving efforts to pass long-stalled legislation to speed the adoption of self-driving cars after abandoning efforts last December. The two key committees have sent automakers, safety groups and others interested in the bill a request seeking input and said they are working on a "bipartisan and bicameral basis." In EV news, Colorado this week became the second state after California to sidestep the Trump administration, reaching its own agreement with four automakers setting guidelines for the sale of zero-emissions vehicles.

Tuesday's Key Earnings
Altria (NYSE:MO) -3.6% revealing in-line earnings.
AMD (NASDAQ:AMD) -4.1% AH on downside revenue outlook.
Amgen (NASDAQ:AMGN) +2% AH topping expectations.
Apple (AAPL) +4.5% AH on FQ3 beats, upside revenue view.
ConocoPhillips (NYSE:COP) +2.3% despite missing forecasts.
Corning (NYSE:GLW) -7.9% following in-line earnings.
Eli Lilly (NYSE:LLY) unchanged despite diabetes drug boost.
Gilead Sciences (NASDAQ:GILD) unmoved AH amid flat revenues.
Mastercard (NYSE:MA) -1.2% expecting climbing expenses.
Merck (NYSE:MRK) +1% beating estimates.
Mondelez (NASDAQ:MDLZ) +1.3% AH on impressive organic sales.
Procter & Gamble (NYSE:PG) +3.8% after an earnings smasher.
Sirius XM (NASDAQ:SIRI) +0.3% raising 2019 revenue outlook.
Under Armour (NYSE:UAA) -12.2% struggling in North America.

Today's Markets

In Asia, Japan -0.9%. Hong Kong -1.3%. China -0.7%. India +0.2%.
In Europe, at midday, London -0.7%. Paris +0.1%. Frankfurt +0.3%.
Futures at 6:20, Dow +0.3%. S&P +0.2%. Nasdaq +0.4%. Crude +0.6% to $58.37. Gold +0.1% to $1443.80. Bitcoin +2.7% to $9765.
Ten-year Treasury Yield -1 bps to 2.05%

Today's Economic Calendar
7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
8:30 Employment Cost Index
8:30 Treasury Refunding Quarterly Announcement
9:45 Chicago PMI
10:00 State Street Investor Confidence Index
10:30 EIA Petroleum Inventories
2:00 PM FOMC Announcement
2:00 PM Chairman Press Conference
3:00 PM Farm Prices

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