Highlights

Wall Street Breakfast

Author: bmotrader   |   Latest post: Fri, 7 Aug 2020, 11:21 AM

 

Wall Street Breakfast: Jobs Report Overshadowed By Tech Tensions

Author: bmotrader   |  Publish date: Fri, 7 Aug 2020, 11:21 AM


President Trump has taken aim at China again, signing a pair of executive orders targeting not only TikTok but also widely used WeChat. The action references national security concerns and (starting in 45 days) bars any transactions with the apps' China-based owners - ByteDance (BDNCE) and Tencent Holdings (OTCPK:TCEHY) - by any person or involving any property subject to the jurisdiction of the U.S. While TikTok said it will pursue all remedies available, including American courts, it also faces a Sept. 15 deadline before its services are banned in the U.S.

What's the scope?

It's still unknown how far President Trump's executive action will go, but U.S. Commerce Secretary Wilbur Ross is set to identify transactions covered by the order. Tencent has many prominent investments, including in Snap (NYSE:SNAP), Activision Blizzard (NASDAQ:ATVI) and Spotify (NYSE:SPOT) - via Tencent Music Entertainment (NYSE:TME). Tencent also bought a 5% stake in Tesla (NASDAQ:TSLA) back in 2017, and CEO Elon Musk has called the company an "investor and adviser." In premarket trade, Tencent ADRs are unchanged (shares tumbled 5% in Hong Kong), while Tencent Music is down 4.1%.

Stimulus impasse

A three-hour meeting Thursday evening between White House officials and Democratic leaders yielded little progress on a virus relief package, bringing the talks to the brink of collapse. It's unclear whether the two sides will resume negotiations today, meaning President Trump would likely rely on executive actions. "The one thing the President can do is extend the moratorium and that would be a good thing if there's money to go with it and that's what we keep telling them," House Speaker Nancy Pelosi declared, adding that he "can't move that much money" without congressional approval.

Jobs report ahead

While the stock market is coming off of five consecutive days of gains, U.S. futures fell 0.5% overnight. Prior to the dip, this week's gains in the S&P 500 pushed the benchmark just 1.3% below its Feb. 19 record, while the Nasdaq closed above 11,000 for the first time on Thursday. Jobs is another area of focus for investors this morning. Estimates for the non-farm payrolls report are all over the place, with consensus coming in at 1.6M jobs created in July, after a 4.8M increase in June. The U.S. unemployment rate is forecast at 10.5%, from 11.1% last month.

Tariffs

"Canada was taking advantage of us, as usual," President Trump announced after imposing tariffs of 10% of Canadian aluminum. "Very unfair to our jobs and our great aluminum workers." The new tariffs only apply to a certain category of aluminum non-alloyed unwrought aluminum, which refers to unfinished ingots and slabs of aluminum that are then heated and rolled into different products like sheet or shapes of aluminum. The friction comes a little over a month after the implementation of the new USMCA trade agreement and Ottawa said it would retaliate with proportional levies.

More executive orders

"We will bring our pharmaceutical and medical supply chains home - we're going to bring them home where they belong - and we will end reliance on China," President Trump said after unveiling an action on domestic drug production. "We'll be making our product here - safely, beautifully and inexpensively. We're reasserting American economic independence." The executive order will help increase production of essential medicines, medical equipment and protective gear in the U.S., according to trade adviser Peter Navarro. "If we've learned anything from the China virus pandemic... we are dangerously overdependent on foreign nations."

Virtual fans next?

67 NFL players have opted out of the 2020 season due to the coronavirus pandemic, with athletes only allowed to withdraw if "a close family member gets seriously sick with COVID or if they themselves are newly diagnosed with a high-risk condition." Team hit the hardest? The New England Patriots. A grand total of eight players will not be playing in the fall, and that is after Tom Brady took his talent to Tampa. At the NCAA level, UConn became the first major college football team to abandon its 2020 season outright, and the prospect of more cancellations could ding U.S. broadcasters like ABC/ESPN (NYSE:DIS), CBS (NASDAQ:VIAC), NBC (NASDAQ:CMCSA) and Fox (NASDAQ:FOXA).

Thursday's Key Earnings
Dropbox (NASDAQ:DBX) -5.2% AH announcing departure of CFO Ajay Vashee.
Groupon (NASDAQ:GRPN) +33.1% AH delivering more than $70M in free cash flow.
T-Mobile (NASDAQ:TMUS) +5.6% AH claiming mantle of No. 2 wireless provider.
Uber (NYSE:UBER) -2.5% AH as revenues cratered, deliveries soared.

Today's Markets

In Asia, Japan -0.4%. Hong Kong -1.6%. China -1%. India flat.
In Europe, at midday, London flat. Paris -0.3%. Frankfurt +0.1%.
Futures at 6:20, Dow -0.5%. S&P -0.5%. Nasdaq -0.5%. Crude -1% to $41.53. Gold -0.1% to $2066.80 Bitcoin +0.2% to $11808.
Ten-year Treasury Yield flat at 0.53%

Today's Economic Calendar

8:30 Non-farm payrolls
10:00 Wholesale Trade
1:00 PM Baker-Hughes Rig Count
3:00 PM Consumer Credit

 

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Wall Street Breakfast: New Front In The Tech War

Author: bmotrader   |  Publish date: Thu, 6 Aug 2020, 10:15 AM


Secretary of State Mike Pompeo has detailed a new five-pronged "Clean Network" effort aimed at curbing potential national security risks, expanding the "5G Clean Path" program. The U.S. wants to see "untrusted Chinese apps" removed from Apple's (NASDAQ:AAPL) and Google's (GOOG, GOOGL) app stores, called for companies to limit availability of their apps on phones made by Huawei and urged firms to halt using Chinese cloud providers like Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU) and Tencent (OTCPK:TCEHY) for storing sensitive data. While the guidance isn't binding, it signals an escalation of the Trump administrations efforts to limit the spread of Chinese technology after declaring a potential ban on TikTok earlier this week.

Jobless claims

U.S. stock index futures are hugging the flatline ahead of fresh insights into the health of the labor market, with another 1.423M workers expected to have filed first time claims for weekly unemployment benefits. The data release will follow a positive session on Wednesday as major indexes brushed off a weaker-than-expected ADP private payrolls report, with money shifting into cyclical and value stocks. "Even if the economy goes well, investors will still be asking for the Federal Reserve and the government to have their hands on the market," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

'Trillions of dollars apart'

The White House and Democrats have not agreed to any "top-line numbers," according to White House Chief of Staff Mark Meadows, and remain "trillions of dollars apart" on COVID-19 stimulus negotiations. Specifically, the Trump administration has offered $400 per week in enhanced federal unemployment benefits through Dec. 14 (up from $200), but Democrats aren't backing down from $600 per week. Meadows and Treasury Secretary Steven Mnuchin also put $200B in state and local aid on the table, but that is far less than the $1T Democrats are seeking. Republicans say they are prepared to walk away and rely on executive actions by President Trump if an agreement isn't within reach by the end of the week.

Exploring negative rates

U.K. banks hold enough capital to keep on lending and absorb the losses that are likely to arise due to the COVID-19 pandemic, the Bank of England said Thursday, after keeping its key interest rate at just 0.1%. "The MPC will continue to review the appropriateness of a negative policy rate as a policy tool alongside its broader toolkit," it said. The BOE also maintained its huge bond-buying program, which stands at £745B (after a £100B expansion in June), and said it does not expect the U.K. economy to exceed its pre-coronavirus levels until the end of 2021 (the previous forecast detailed the second half of 2021).

Airline relief

Shares of U.S. airlines are on the rise in premarket trade as bipartisan support builds for an additional $25B in aid to one of the sectors hardest hit by the coronavirus. "We don't want to lose our airlines. If they're looking at that, whether they’re Republican or Democrat, I'd be certainly in favor. We can't lose our transportation system," President Trump said at a White House press briefing. Congress set aside $25B for U.S. carriers in the $2.2T CARES Act in March on the condition that they wouldn't cut jobs through Sept. 30. The new proposal would extend those protections through the end of March 2021.

Quicken Loans IPO

Rocket Companies, the parent company of mortgage lending giant Quicken Loans, has sold 100M shares at $18/share in its initial public offering, raising about $1.8B. The figures were below initial estimates, which forecast 150M shares would be sold at $20-22. Shares will begin trading on the New York Stock Exchange today under ticker symbol "RKT," though the weak demand raises questions as to whether the hot tech IPO market, which features DoorDash (DOORD) later this summer, might be cooling.

'Coronavirus misinformation' takedown

Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) took action against the account of the Trump campaign and @TeamTrump late Wednesday, removing a post for violating policies around "harmful COVID misinformation." YouTube (GOOG, GOOGL) also followed suit. The posts were a video clip from a Fox News interview with President Trump about reopening schools, in which he claims children are "almost immune" to COVID-19. The tech giants have faced heat in recent months, with some saying their censorship reach is going too far, while others say they are not policing enough.

Goldman sounds off on tech again

Rising chances of an approved coronavirus vaccine by the end of November are underpriced by equity markets, wrote Goldman Sachs strategists including Kamakshya Trivedi. The approval could "challenge market assumptions both about cyclicality and about eternally negative real rates," the team added, saying that such a scenario may support steeper yield curves, traditional cyclicals and banks, and challenge the leadership of technology stocks. Remember, Goldman Sachs called Apple's (AAPL) stock price "unsustainable" before earnings on June 30 (the stock has risen 15% since the FQ3 report). AAPL's Quant Rating at Seeking Alpha is Very Bullish.

Wednesday's Key Earnings

CVS Health (NYSE:CVS) -0.9% despite Q2 beat and guidance raise.
Etsy (NASDAQ:ETSY) +3% AH hitting all-time highs on strong growth.
Moderna (NASDAQ:MRNA) -3.4% as rival vaccine makers reported good news.
Roku (NASDAQ:ROKU) -4.4% AH logging a 42% revenue burst.
Teva Pharmaceutical (NYSE:TEVA) +7.3% continuing a years-long turnaround.

Today's Markets

In Asia, Japan -0.4%. Hong Kong -0.7%. China +0.3%. India +1%.
In Europe, at midday, London -2%. Paris -1.2%. Frankfurt -0.9%.
Futures at 6:20, Dow +0.1%. S&P flat. Nasdaq flat. Crude -0.9% to $41.81. Gold +0.6% to $2060.80. Bitcoin +0.7% to $11689.
Ten-year Treasury Yield -2 bps to 0.52%

Today's Economic Calendar

7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
10:00 Fed's Kaplan Speech
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

 

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Wall Street Breakfast: Gold, Stimulus, Trade

Author: bmotrader   |  Publish date: Wed, 5 Aug 2020, 9:35 AM


The precious metals rally gathered pace overnight as spot gold rose as much as 0.6% to a record $2,031.14 per ounce, while spot silver advanced as much as 1.3% to $26.3473/oz. The printers are running... Investors are counting on even more spending in the U.S. to combat the pandemic's fallout as White House negotiators work "around the clock" to reach a stimulus deal by the end of the week, while markets also latched on to comments from San Francisco Fed President Mary Daly that the U.S. economy will need more support than initially thought. Search for a new reserve currency? Goldman Sachs says gold may climb to $2,300/oz. and RBC Capital puts the odds of a rally to $3,000/oz. at 40%.

Rally continues

U.S. stock index futures are looking to extend gains as traders await progress from Washington on a new coronavirus aid package. "I think the expectation for the market is that we are going to get that stimulus," Ally Invest's Lindsay Bell told CNBC. Better-than-expected earnings from Disney (NYSE:DIS) are also helping sentiment (see below), while closely-watched Moderna (NASDAQ:MRNA) will report before the opening bell. On the trade front, reports suggest that U.S. trade representative Robert Lighthizer and Chinese Vice Premier Liu will meet in mid-August to discuss the Phase One trade deal between the U.S. and China.

100 million streaming subscribers

While Disney (DIS) continued to feel the impact of the COVID-19 pandemic on sectors like its parks business, where revenue tanked 85% from a year earlier, CEO Bob Chapek announced a new streaming service that will launch in fiscal 2021 under the Star brand acquired from Fox (NASDAQ:FOX). In total, Disney now has 100M paid subscribers across its streaming services, which include Disney+, Hulu and ESPN+. Disney+ reached 60.5M paid subscribers, hitting a goal of 60M-90M subscriptions by 2024, four years early.
 

Wild ride for Novavax

At one point in after-hours trading on Tuesday, Novavax (NASDAQ:NVAX) was down 32% after STAT News reported that eight participants in a Phase 1 clinical trial evaluating COVID-19 vaccine candidate NVX-CoV2373 had to be hospitalized. That data was later found to be erroneous and shares are now up 17% premarket (the stock has rallied 3,800% YTD). Novavax's two-injection regimen when administered with its immune-boosting technology generated antibody responses that were four times higher than those seen in people who had recovered from the disease.

Beirut blast

Lebanon is eyeing a state of emergency following a massive explosion that rocked Beirut with the force of a 3.5 magnitude earthquake on Tuesday and caused widespread damage across the capital. At least 100 people were killed and more than 4,000 wounded, while local officials linked the blast to some 2,750 tons of confiscated ammonium nitrate that were being stored at a port warehouse for the past six years. It's been a rough ride for the country's economy. Lebanon's GDP fell 6.9% in 2019, while the Lebanese pound has lost over 60% of its value in just the past month, and 80% of its value since October.

Opioid epidemic

The U.S. Department of Justice is demanding OxyContin maker Purdue Pharma pay as much as $18.1B in penalties as part of its bankruptcy reorganization plan, WSJ reports. On the civil side, the DOJ is seeking $2.8B - which could be tripled under the law - for tax dollars spent battling the U.S. opioid epidemic, as well as kickbacks to doctors and pharmacies and transferring cash to hide money from creditors. On the criminal side, federal prosecutors want Purdue to pay a $6.2B fine and the forfeiture of potentially $3.5B more over marketing and distribution that violated criminal statutes including anti-kickback laws, misbranding under the Food, Drug and Cosmetic Act and conspiracy.

Tale of two companies

Sir Richard Branson plans to fly on a Virgin Galactic (NYSE:SPCE) spaceship next year after the company settled on an early 2021 date for its first passenger flight. That assumes both demonstration flights go as planned in the fall and yield the "expected results." Meanwhile, Virgin Atlantic is seeking Chapter 15 bankruptcy protection in the Southern District of New York as it tries to nail down a £1.2B rescue plan. Under the proposal, Virgin Group will retain its 51% controlling stake in the airline, while partner Delta (NYSE:DAL) will continue to hold the remaining 49%.

Meet the teenager allegedly behind the Twitter hack

Graham Ivan Clark, 17, of Tampa, Fla., convinced a Twitter (NYSE:TWTR) employee that he was a co-worker, according to prosecutors, and seized control of a phone number via SIM-swapping. He also set up several fake phishing pages, including one that resembled the company’s Okta login portal, a destination used for securely logging into company systems. Once inside, Clark, who entered a not-guilty plea in court Monday, allegedly gained the ability to bypass Twitter's security protections, setting the stage for an hourslong hack on July 15 that held hostage the main communications tool of some of the most powerful people on the planet.

More misconduct

One of the most prominent trade secret cases in recent years has come to a close as Anthony Levandowski was sentenced to 18 months in prison (his incarceration will be delayed until after the COVID-19 pandemic). Levandowski had been a key engineer at Google's (GOOG, GOOGL) Waymo before starting his own self-driving truck company called Otto. The latter was eventually bought by Uber Technologies (NYSE:UBER), where he became the head of its self-driving unit, but Levandowski eventually pleaded guilty to taking thousands of files from his former employer when he left in 2016.

Tuesday's Key Earnings

Activision Blizzard (NASDAQ:ATVI) -1.4% AH despite strong Q2, upbeat guidance.
Beyond Meat (NASDAQ:BYND) -9.9% AH weighed down by heavy costs.
Nikola (NASDAQ:NKLA) -13.4% AH reporting wider loss, light on details.
Square (NYSE:SQ) +9.6% AH posting a 64% jump in revenue.
Twilio (NYSE:TWLO) -4.1% AH despite beating expectations.
Walt Disney (DIS) +6.1% AH reporting 100M paid streaming subscribers.

Today's Markets

In Asia, Japan -0.3%. Hong Kong +0.6%. China +0.2%. India -0.1%.
In Europe, at midday, London +1%. Paris +0.8%. Frankfurt +0.8%.
Futures at 6:20, Dow +0.7%. S&P +0.5%. Nasdaq +0.4%. Crude +2.5% to $42.72. Gold +1.7% to $2056.20. Bitcoin +1.4% to $11384.
Ten-year Treasury Yield +2 bps to 0.53%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
8:15 International Trade
9:45 PMI Services Index
10:00 ISM Non-Manufacturing Index
10:30 EIA Petroleum Inventories
5:00 PM Fed's Mester: Economic Outlook

 

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Wall Street Breakfast: Back To Earnings

Author: bmotrader   |  Publish date: Tue, 4 Aug 2020, 10:18 AM


Reporting a record $6.7B loss overnight as the oil industry struggles, BP (NYSE:BP) halved its dividend to 5.25 cents per share following in the footsteps of rival Royal Dutch Shell (RDS.A, RDS.B). Analysts are still scratching their heads, with the stock up 8.2% premarket, though some are attributing the big move to business segments that are getting overshadowed. BP said it had "an exceptionally strong contribution" from trading (more than $1B for the quarter) and launched a new green strategy. It pledged to increase low-carbon spending to $5B a year by 2030 and boost renewable power generation to 50 gigawatts while shrinking oil and gas output by 40% compared with 2019.

More earnings

Disney (NYSE:DIS) will lead the earnings charge after the market close today, with results also expected from Activision Blizzard (NASDAQ:ATVI), Beyond Meat (NASDAQ:BYND) and Nikola (NASDAQ:NKLA). While the House of Mouse has reopened theme parks in Asia, France and Florida, and inked a deal with the NBA to resume the season at its facilities, the company is not out of the woods yet. It has had to contend with shuttered cruise lines, disrupted production schedules, slashed advertising budgets and indefinitely delayed major theatrical releases. Disney+ promises to be a rare bright spot, but from a revenue perspective, the streaming service is still only a small piece of the sprawling media empire.

Clock is ticking on TikTok

The drama surrounding TikTok (BDNCE) prompted Chinese state media to lash out overnight, with the China Daily and Global Times labeling the U.S. a "rogue country" and likening the potential sale to Microsoft (NASDAQ:MSFT) as "open robbery." President Trump has also come under fire for saying "key money" would have to be paid to the U.S. Treasury for making the deal possible (he previously said TikTok would be banned from Sept. 15). The crackdown has split many in the industry, with some advocating a "whatever it takes" approach in the "technology war," while others decry the betrayal of values like free speech and capitalism. Remember, services like Google Search (GOOG, GOOGL), YouTube, Facebook (NASDAQ:FB), Instagram, Twitter (NYSE:TWTR) and Snapchat (NYSE:SNAP) are all banned in China, while the U.S. has introduced recent measures to eliminate Chinese IP and trade secret theft.

Futures dip after tech-powered rally

Stocks began August on the front foot as a basket of positive news sent the major stock averages higher with the Nasdaq Composite notching its 29th record close of the year after topping 11,000. Big Tech dealmaking, an Eli Lilly (NYSE:LLY) antibody trial and strong manufacturing data lifted markets, though U.S. futures fell 0.3% overnight, giving back some of the big gains. Democratic leaders and White House officials are still at odds over a new coronavirus aid package. While the two sides have agreed on another round of stimulus checks, they remain deadlocked on whether to cut a $600-a-week federal jobless supplement.

Google roundup

Talk about the tech rally... Google (GOOG, GOOGL) announced a long-term partnership with ADT yesterday that sent shares of the latter up 56%. The deal will see the company invest $450M for a 6.6% stake in ADT, with Google hardware and services set to be integrated in ADT's installation, service and professional monitoring network. In related news, Google parent Alphabet locked in some of the lowest borrowing costs ever for a U.S. company, completing a $10B sale of bonds across six maturities ranging from five to 40 years.

Space news

Virgin Galactic (NYSE:SPCE) inked a non-binding memorandum of understanding with Rolls-Royce (OTCPK:RYCEF) to collaborate in designing and developing engine propulsion technology for supersonic commercial travel. It also unveiled its initial design concept of a high-speed aircraft - that would have capacity for 9 to 19 people at an altitude above 60K feet - before disclosing earnings results and a new 20.5M stock offering that weighed on shares. On Sunday, SpaceX (SPACE) ferried astronauts Doug Hurley and Bob Behnken back from the International Space Station for a landing in the Gulf of Mexico, marking the first splashdown in the last 45 years of NASA travel.

Covid trends: Cloud surge and retail bankruptcies

Companies worldwide spent a record $34.6B on cloud services in Q2, up roughly 11% from the previous quarter and 30% from the same period last year, according to research firm Canalys. Example: Jones Lang LaSalle (NYSE:JLL), one of the world's largest commercial real estate services firms, has shifted roughly 90% of its employees to remote work due to the coronavirus, representing about 90,000 workers. However, as social distancing and lockdowns become part of the daily vocabulary, other sectors of the economy are not faring as well. 2020 is on track to have the highest number of retail bankruptcies in a decade, according to S&P Global Market Intelligence. Le Tote, owner of Lord & Taylor, and Tailored Brands (NYSE:TLRD), parent company of Men's Wearhouse, became the latest to join the retail graveyard this past Sunday.

Monday's Key Earnings

Clorox (NYSE:CLX) -1.9% despite mega sales growth, new CEO.
Realty Income (NYSE:O) +1% AH collecting 91.5% of July rent.
Virgin Galactic (SPCE) -8% on new 20.5M share offering.
Williams Cos. (NYSE:WMB) +0.9% AH as total costs dropped 24%.

Today's Markets

In Asia, Japan +1.7%. Hong Kong +2%. China +0.1%. India +2%.
In Europe, at midday, London +0.2%. Paris +0.1%. Frankfurt -0.5%.
Futures at 6:20, Dow -0.2%. S&P -0.3%. Nasdaq -0.3%. Crude -1.6% to $40.35. Gold +0.3% to $1992.30. Bitcoin -0.2% to $11280.
Ten-year Treasury Yield -2 bpst to 0.54%

Today's Economic Calendar

Auto Sales
8:55 Redbook Chain Store Sales
10:00 Factory Orders

 

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Wall Street Breakfast: Microsoft Back On Track To Acquire TikTok's U.S. Operations

Author: bmotrader   |  Publish date: Mon, 3 Aug 2020, 9:54 AM


Microsoft is committed to trying to buy TikTok's U.S. operations, after CEO Satya Nadella discussed a potential deal during a phone call on Sunday with President Trump. Microsoft (NASDAQ:MSFT) said in a blog post that it will move quickly to pursue discussions with TikTok parent ByteDance (BDNCE), aiming to complete negotiations by Sept. 15. "Microsoft fully appreciates the importance of addressing the President’s concerns," the company said. "It is committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the United States, including the United States Treasury." The company's aim is to build on TikTok's popular user experience with adding privacy and security protections. The proposed transaction has gained the blessing of top Trump administration officials, including Treasury Secretary Mnuchin, as well as several Republican lawmakers, after the president's Friday night comments that he preferred a TikTok ban in the U.S. instead of a sale took all sides by surprise.

All eyes on U.S. payroll data

The U.S. July employment report, to be released this Friday, will have a binary flavor to it. If the jobs situation is consistent with economists' views, it should give investors more confidence in the economy's health while weak data will weigh on investors' near-term enthusiasm. Current consensus is a rise of 1.65M jobs, albeit a bearish drop of ~27% from last Thursday's projection of 2.25M. Congress is trying to cobble together another stimulus package but, unsurprisingly, Republicans and Democrats are at loggerheads over the specifics.

MLB draws strong TV ratings in opening week

Despite concerns over a truncated 60-game season and empty seats in stadiums, Major League Baseball's opening week has been a resounding success. Games aired nationally during opening weekend (July 23-26) drew more than twice as many viewers as a year ago. Walt Disney's (NYSE:DIS) ESPN said that its first 12 broadcasted games averaged ~1.2M viewers, up 34% compared to last year. Fox Sports (NASDAQ:FOX) also enjoyed a double-digit rise in ratings. According to Michael Mulvihill, Fox Sports head of strategy and analytics, the strong start reflects pent-up demand and little competition from other major U.S. sports. The season, though, is facing its first stern test after 18 members of the Miami Marlins tested positive for COVID-19 leading to the cancellations of certain games by several clubs. 17 games have been postponed to date.

Fed to "relax" approach to managing inflation target

The Fed is preparing to abandon its long-held practice of raising interest rates to preempt overheating in the economy, citing persistently low U.S. inflation. Chairman Jerome Powell hinted at the shift in a news conference last week when he disclosed that the central bank would soon complete a comprehensive review of its policy-making strategy. The change is unlikely to alter much since interest rates are barely above zero and are expected to remain low for the foreseeable future. Longer term, central bankers, economists and investors expect rates to return to a more normal 4% or so once the economic recovery/expansion has matured.

Trump readies action against Chinese software firms

During an interview yesterday on Fox News' Sunday Morning Futures, Secretary of State Mike Pompeo said that President Trump will announce new action this week against Chinese software companies that he perceives are threats to national security, including TikTok and WeChat that, he says, are "feeding data directly to the Chinese Communist Party." In a separate interview, Treasury Secretary Steve Mnuchin declared that "we are not keeping TikTok in its current form." The expected actions will be the latest salvo in the deterioration in U.S./Sino relations.

Apple sued in China over voice assistant patent

Shanghai Zhizhen Network Technology Company, known as Xiao-i, has filed a lawsuit in a Shanghai court against Apple (NASDAQ:AAPL) claiming infringement on a patent covering a voice assistant similar to Siri. The company seeks 10B yuan ($1.43B) in damages and, if successful, could prevent the tech giant from selling many of its products in China. In late June, China's Supreme Court ruled that Xiao-i owns the patent which ended a process that involved several trials since 2012. It is the third time in less than a decade that Apple has faced trademark and patent challenges in its #2 market (behind the U.S.). The company has yet to comment on the matter.

U.S. COVID-19 pandemic in new "widespread" phase

According to White House coronavirus task force coordinator Dr. Deborah Birx, the pandemic is in a "new phase" that is different from the March/April period with "extraordinarily widespread" cases in both urban and rural areas. Reemphasizing the essential role of wearing masks and distancing, Dr. Birx said, "To everybody who lives in a rural area, you are not immune or protected from this virus and that is why we keep saying, no matter where you live in America, you need to wear a mask and socially distance, do the personal hygiene pieces." She also says super-spreading events are the main concern, not super-spreading individuals. Per Johns Hopkins case tracker, U.S. infections are now over 4.6M with over 154K deaths.

GOP and Dems tussle over fourth round of U.S. stimulus

Talks between Republican and Democratic leaders over the specifics of the latest round, the fourth, of economic stimulus are proceeding down the familiar contentious path. Both sides agree on sending $1,200 checks to most Americans but the GOP is apparently balking at a boost to unemployment insurance which was set at $600 per week but recently lapsed. Democrats want to preserve the $600 amount while Republicans want to cut it to $200 due to cost concerns. House Speaker Nancy Pelosi is accusing President Trump of standing in the way of a deal. On Face the Nation yesterday, Chief of Staff Mark Meadows said, "I'm not optimistic that there will be a solution in the very near term."

7-Eleven to acquire Speedway for $21B in cash

Seven & i Holdings (OTCPK:SVNDF) indirect subsidiary 7-Eleven has agreed to acquire Speedway from certain subsidiaries of Marathon Petroleum (NYSE:MPC) for $21B in cash. The Enon, Ohio-based chain operates ~3900 convenience stores in 36 U.S. states. The transaction, which includes a 15-year fuel supply agreement for about 7.7B gallons per year, should close in Q1 2021.

China's Caixin manufacturing PMI hits nine-plus year high

The Caixin China manufacturing purchasing managers index hit its highest point since 2011, lending more credence to inklings of a recovery there. China's official PMI rose to its own four-month high last week, and it's got a bigger sample, focused on larger state-owned companies. Caixin focuses on smaller manufacturers, and it hit 52.8, the third straight month it was over 50, signaling expansion.

Rio Tinto sues Australia's Monadelphous over 2019 fire

Rio Tinto (NYSE:RIO) has sued Monadelphous Engineering Associates (OTCPK:MOPHY) over a fire at Rio's Western Australia iron ore processing facility last year. Monadelphous says Rio is claiming MEA breached terms of a contract, and that Rio is seeking A$493M (about $351M) tied to its inability to process iron ore at the plant during repairs.

Today's Markets

In Asia, Japan +2.24%. Hong Kong -0.56%. China +1.75%. India -1.64%.
In Europe, at midday, London +0.56%. Paris +0.97%. Frankfurt +1.86%.
Futures at 6:20, Dow -0.05%. S&P +0.10%. Nasdaq +0.52%. Crude -1.32% to $39.74. Gold +0.02% to $1,986.30. Bitcoin -0.75% to $11,164.
Ten-year Treasury Yield +1.3bps to 0.549%

Today's Economic Calendar
9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending

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Wall Street Breakfast: Negotiations Begin Over Next Coronavirus Relief Package

Author: bmotrader   |  Publish date: Tue, 28 Jul 2020, 7:24 AM


Republicans have unveiled major parts of their coronavirus relief plan with just days to go before expanded federal jobless benefits are set to expire. Highlights: The $600 weekly federal unemployment supplement would be cut to $200 a week through September, when the payment will then combine with state benefits to replace 70% of previous wages. It also includes stimulus checks, $105B to help schools reopen in the fall and more PPP loans, among other provisions. The bill is the first step toward negotiating a compromise plan with Democrats, though Nancy Pelosi called it a "pathetic" piecemeal approach. "Having said that, we are going to see if we can find some common ground," she added. "But we are not there yet."

Big earnings week

"You need to understand that this week is about one thing and one thing only: It's about earnings. First time it's been like that in a while," CNBC's Jim Cramer declared, with Q2 results set to pour in. Today investors will hear how McDonald's (NYSE:MCD), Pfizer (NYSE:PFE), 3M (NYSE:MMM), Raytheon (NYSE:RTX), Starbucks (NASDAQ:SBUX) and AMD (NASDAQ:AMD) fared during the coronavirus pandemic and their expectations for the future. U.S. stock index futures are 0.3% lower ahead of the big earnings announcements, which will include Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL) and Alphabet (GOOG, GOOGL) in the coming days.

Precious metals rally loses some steam

Spot gold fell more than 1% overnight to $1,920/oz, while silver tumbled 4.5% to $23.62/oz, as the FOMC gathers today for a meeting that may provide more direction for traders. While prices waver, most market watchers are still predicting more gains ahead for the precious metals. "The message from the Fed meeting is expected to be dovish, reiterating the need for more fiscal measures, which is likely to be supportive of gold," said Nicholas Frappell, global general manager at Sydney-based ABC Bullion. "With real interest rates deep in negative territory and the coronavirus resurgence hitting the dollar index hard, that’s good for gold."

Chances of a Shelton nomination?

Sen. Susan Collins (R., Maine) is joining Sen. Mitt Romney (R., Utah) in opposing the nomination of controversial pick Judy Shelton to the Federal Reserve's board of governors. "In her past statements, Ms. Shelton has openly called for the Federal Reserve to be less independent of the political branches, and has even questioned the need for a central bank," Collins said in a statement. The nominee has also been a longtime proponent of a return to the gold standard, which would limit the Fed's ability to influence inflation and employment. Republicans have a 53-47 vote advantage in the Senate, meaning Shelton can't afford to lose more than three Republicans if all Democrats oppose her candidacy.

European bank dividends on hold

Billions of euros are at stake for investors as the ECB extended a request that banks hold off on returning capital until January 2021. The central bank first asked lenders in March to not make dividend payments until October in an effort to conserve capital as lockdowns to combat the pandemic brought the economy to a standstill. While the move was painful for shareholders, the ECB indicated it was a trade-off for unprecedented regulatory relief it had granted them to weather the crisis.

Navigating online dating during the pandemic

Match Group (NASDAQ:MTCH) has named Jim Lanzone, previous chief executive of CBS Interactive, as the new CEO of its flagship dating app Tinder. He definitely has his work cut out for him as the coronavirus pandemic redefines the online dating industry. Lanzone will join the company on Aug. 3, succeeding current Tinder CEO Elie Seidman, who is stepping down and returning to work with early-stage, venture-backed companies. Match Group controls much of the Internet dating scene, with other properties like OkCupid, Hinge and Plenty of Fish.

Upcoming Apple product launch dates

It's going to be a busy fall season for Apple (AAPL), according to well-known leakers iHacktu Pro and Komiya, who published the launch dates for every upcoming company product. The late 2020 updates will begin on August 19 with a new iMac, AirPods Studio, HomePod 2 and HomePod Mini, followed by an event on September 8 that will unveil the iPhone 12 line, iPad, Apple Watch Series 6 and AirTags. Another special event on October 27 will show off the Apple Silicon MacBook and MacBook Pro 13", iPad Pro and Apple TV 4K. There are also big expectations for a renewed AirPower charging mat, and smaller wireless charger AirPower Mini, as well as Apple Glass - the reported augmented reality smart glasses.

Court showdown over mask mandates

A Georgia judge hears arguments today in a case brought by Governor Brian Kemp to stop the city of Atlanta from enforcing a mask mandate that is punishable by a fine or up to six months in jail. Shares of mask makers like Alpha Pro Tech (NYSEMKT:APT), Allied Healthcare Products (NASDAQ:AHPI) and Lakeland Industries (NASDAQ:LAKE) are on watch as the emergency motion asks the judge to halt Atlanta's enforcement efforts while a lawsuit works its way through the courts. Kemp, one of the first governors to ease statewide stay-at-home orders and business closures, claims that Atlanta's measure is more restrictive than a state order which "strongly encourages face coverings" but does not require them.

Monday's Key Earnings

Hasbro (NASDAQ:HAS) -7.4% hit by movie theater closures.
NXP Semiconductors (NASDAQ:NXPI) -3.7% AH as weaker auto sales weighed on Q2 beats.

Today's Markets

In Asia, Japan -0.3%. Hong Kong +0.7%. China +0.7%. India +1.5%.
In Europe, at midday, London flat. Paris -0.6%. Frankfurt -0.3%.
Futures at 6:20, Dow -0.3%. S&P -0.3%. Nasdaq -0.3%. Crude -0.5% to $41.40. Gold -0.4% to $1922.90. Bitcoin -4.3% to $10795.
Ten-year Treasury Yield flat at 0.61%

Today's Economic Calendar

FOMC meeting begins
8:55 Redbook Chain Store Sales
9:00 S&P Corelogic Case-Shiller Home Price Index
10:00 Consumer Confidence
10:00 Richmond Fed Mfg.
11:30 Results of $24B, 2-Year FRN Auction
1:00 PM Results of $44B, 5-Year Note Auction

 

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