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

 

Wall Street Breakfast: Investors Climb Back Into Risk Markets

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Equities somewhat stabilized yesterday after days of wild swings, with DJIA futures now up by 260 points and S&P 500 and Nasdaq futures ahead by 1% and 1.4%, respectively. After threatening retaliation against incoming American tariffs, China urged the U.S. to meet it "half way," while President Trump talked up formal negotiations and said he expected the trade dispute to be short-lived. The yield curve has also righted itself by about 4 bps, while July retail sales surprisingly picked up - though industrial production numbers disappointed again - in the face of trade war fallout.

Boost from Walmart, Nvidia

Walmart (NYSE:WMT) was easily the biggest gainer on both the S&P and Dow on Thursday, jumping 6.1% for its largest advance in a year, after reporting a nearly 2% rise in Q2 revenues to $130B and raising full-year earnings guidance. Walmart has now racked up a 20-quarter, or five-year, streak of U.S. growth, unmatched by any other retail chain. Shares of Nvidia (NASDAQ:NVDA) are giving tech shares an extra boost premarket as the chipmaker soared more than 5% after gaming strength saw sales and profits top estimates.
 

Stimulus bazooka

A day after Hong Kong unveiled a stimulus package worth $2.4B, China's state planner said Beijing would roll out a plan to boost disposable income, though details were lacking. Europe is also prepping a major stimulus injection, according to Olli Rehn, who sits on the ECB's rate-setting committee. That could include "substantial and sufficient" bond purchases, cutting rates deeper into negative territory and purchasing equities under the QE program. Not much more needs to be said about the Federal Reserve, which is facing trade war problems and the inversion of the U.S. yield curve.

Culpability

"This is market manipulation - pure and simple" declared GE (NYSE:GE) CEO Larry Culp in response to allegations of financial misconduct, scooping up another $2M worth of stock after spending $3M on shares earlier this week. The fraud report came from Madoff whistleblower Harry Markopolos, who alleges GE's accounting problems amount to $38B, or 40% of the conglomerate's market value. Disclaimer: Markopolos and his colleagues are working with an undisclosed hedge fund, which is betting GE's stock price will decline (it plunged 11.3% yesterday to $8.01 per share).
 

Space tourism

At Spaceport America, Virgin Galactic's "Gateway to Space" building is now functionally operational, ready to host remaining test flights before welcoming its very first future astronauts. In addition, VMS Eve - the carrier mothership and launch platform for Virgin SpaceShips - arrived at the facility this week, bringing the company closer to starting commercial service. In July, Virgin Galactic said it would go public by merging with Social Capital Hedosophia (NYSE:IPOA).
 

New largest creditor

Japan has again surpassed China as America's largest overseas creditor, a record it last held in 2016. After adding about $21B since May, Tokyo now holds $1.12T of Treasurys vs. Beijing's $1.11T. Market players have speculated that one trade war retaliatory action China could take is to unload its U.S. holdings, and while there are no signs that is happening, it has been a less aggressive buyer of U.S. sovereign debt.

Hong Kong protest fallout

The territory's economy contracted more than originally estimated in the second quarter after escalating protests dampened activity. Gross domestic product contracted by 0.4%, more than the 0.3% contraction released in the first estimate on July 31. Other big news overnight saw Cathay Pacific (OTCPK:CPCAY) CEO Rupert Hogg resign as the Hong Kong flag carrier reels from a series of controversies over the involvement of its employees in the city's simmering anti-government protests.
 

Thursday's Key Earnings
Alibaba (NYSE:BABA) +3% posting beats, core commerce strength (earnings call transcript).
Applied Materials (NASDAQ:AMAT) -0.3% amid chip recovery lag (earnings call transcript).
J.C. Penney (NYSE:JCP) +2.2% on smaller-than-expected loss.
Nvidia (NVDA) +5.6% AH as gaming strength offset data center revenues.
Walmart (WMT) +6.1% hiking profit guidance (earnings call transcript).

Today's Markets

In Asia, Japan -0.2%. Hong Kong +0.9%. China +0.3%. India +0.1%.
In Europe, at midday, London +0.6%. Paris +1%. Frankfurt +1%.
Futures at 6:20, Dow +1%. S&P +1%. Nasdaq +1.4%. Crude +1.8% to $55.43. Gold -0.7% to $1520. Bitcoin -0.1% to $10063.
Ten-year Treasury Yield +4 to 1.56%

Today's Economic Calendar

8:30 Housing Starts
10:00 Quarterly Services Report (Advance)
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count

 

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