Wall Street Breakfast

Author: bmotrader   |   Latest post: Fri, 24 Jan 2020, 10:02 AM


Wall Street Breakfast: Triple Record High For Wall Street

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More highs are in store for the three major U.S. stock indexes as reports suggest the Trump administration is weighing whether to drop existing tariffs on $112B of Chinese imports (which were introduced at a 15% rate on Sept. 1). The Dow, S&P 500 and Nasdaq are ahead by 0.4% as the concession is seen as pausing the U.S.-China trade war. "Phase One" of the pact would include Chinese purchases of American farm goods, rules to deter currency manipulation and some provisions to protect intellectual property and open up Chinese industries to U.S. firms.

Yuan strengthens past 7 per dollar

With the U.S. considering rolling back tariffs on Chinese imports, the yuan has strengthened beyond seven per dollar for the first time since August. The move, if confirmed, "can be regarded as a turning point" in the U.S.-China trade war," according to Ken Cheung, a Mizuho currency strategist. Many had feared the prior tumble past the psychologically important level of 7 threatened to unleash a whole new front in trade hostilities - a currency war.

Rationale for T-Bill buying

"With roughly $2.4T of Treasury bills outstanding and daily turnover of around $95B, the bill market has substantial capacity to support our activity, and we expect to be able to maintain the current pace of Treasury bill purchases for some time," said Lorie Logan, who is the acting leader of the Markets Desk at the New York Fed. "So far, reserve management purchase operations have proceeded smoothly," she added, noting that the Fed "is prepared to adjust the pace and other parameters of the reserve management purchases as necessary."

Notable tech names that don't make money

Uber (NYSE:UBER) shares tumbled nearly 6% late Monday after reporting another mega $1.2B loss, though CEO Dara Khosrowshahi expects the company will be EBIDTA profitable in 2021 as it "improves global scale and efficiency” through technology and automation. Next up is Peloton (NASDAQ:PTON), which will release its first quarterly report since going public before the opening bell. Path to profitability? While analysts are expecting the exercise-equipment maker to post a loss of $0.40 cents per share, the Street is still bullish on the stock.

SoftBank's new governance standards

The WeWork (WE) debacle is leading SoftBank (OTCPK:SFTBY) to adopt tougher governance standards as the Japanese group aims to reduce the outsized control of startup founders and restore confidence in the companies it backs. Under consideration are restrictions on dual-class share structures, board seats and voting rights. SoftBank is also set to write down at least $5B today due to a slump in the value of WeWork, as well as some other top holdings.

Xerox exits Fujifilm joint venture

Bringing an end to their 57-year-old joint venture, Xerox (NYSE:XRX) has agreed to sell its 25% stake in the business to Fujifilm (OTCPK:FUJIY) as part of a deal that will bring the company total proceeds of $2.3B. It will also dismiss a lawsuit filed by Fujifilm against Xerox and comes more than a year and a half after the two agreed to combine in a complex transaction that was sunk by shareholders Carl Icahn and Darwin Deason. The breakup of the JV (and dismissing the suit) could free both firms to make needed strategic shifts. XRX +3.8% premarket.

India pulls out of RCEP trade pact

Everything seemed to be going well at the 35th ASEAN Summit - after seven years of talks to conclude the Regional Comprehensive Economic Partnership - until India announced its withdrawal from the trade deal. "This reflects both our assessment of the current global situation as well as of the fairness and balance of the agreement," said Vijay Thakur Singh, a diplomat in charge of East Asian relations for India. Moving on... The remaining 15 countries will continue working towards the pact that would cover nearly a third of the world's GDP, while China announced that India is welcome to join the RCEP whenever it's ready.

OPEC cuts oil demand forecasts

"The outlook for global growth, at least in the short- and medium-term, has been revised down repeatedly over the past year... as U.S. tight oil (shale), in particular, has again outperformed expectations," OPEC wrote in its closely-watched annual World Oil Outlook. As a result, the 14-member group lowered its outlook numbers for global oil demand growth, to 104.8M barrels per day by 2024, and 110.6M bpd by 2040. OPEC's production of crude oil and other liquids is also expected to decline to 32.8M bpd by 2024, compared with 35M bpd in 2019.

Cold weather forecasts boost NG

Nymex natural gas futures continue to climb, up 2.6% to $2.895/MMBtu, bringing their rally to 35% from a multi-year low hit three months ago. Prices soared more than 4% yesterday to their highest level since March, as forecasts call for cooler than expected temperatures across the U.S. in the coming days and weeks. Hedge funds and other speculative investors appear to be turning slightly less bearish, and analysts say an unwind of those bets can exacerbate bullish price moves such as the current one.

Iran nuclear deal unraveling

The EU remains committed to the 2015 Iran nuclear deal, though that depends on the Islamic State's "full compliance," as the accord continues to collapse following President Trump's withdrawal from the agreement. Starting tomorrow, Tehran will begin injecting uranium gas into 1,044 centrifuges at its Fordow plant, after already going beyond the deal's enrichment and stockpile limitations. European nations have so far been unable to give Iran a way to help it sell its oil abroad or access its banking system without restrictions as the country faces strict U.S. sanctions.

Monday's Key Earnings
Marriott (NASDAQ:MAR) -1.7% AH giving weak full-year outlook.
Occidental Petroleum (NYSE:OXY) -0.5% AH amid Anadarko costs.
Realty Income (NYSE:O) +0.4% AH nudging up 2019 guidance.
Shake Shack (NYSE:SHAK) -16% on disappointing comparable sales.
Sprint (NYSE:S) -2.4% missing expectations.
Sysco (NYSE:SYY) -0.6% after mixed quarter.
Uber (UBER) -5.9% AH posting $1.2B loss, soft bookings.
Under Armour (NYSE:UAA) -18.9% on accounting probe, slashed outlook.

Today's Markets

In Asia, Japan +1.8%. Hong Kong +0.5%. China +0.5%. India -0.1%.
In Europe, at midday, London +0.3%. Paris +0.2%. Frankfurt flat.
Futures at 6:20, Dow +0.4%. S&P +0.4%. Nasdaq +0.4%. Crude +0.7% to $56.93. Gold -0.3% to $1506.80. Bitcoin +0.4% to $9281.
Ten-year Treasury Yield +3 bps tp 1.82%

Today's Economic Calendar
8:30 International Trade
8:55 Redbook Chain Store Sales
9:45 PMI Services Index
10:00 ISM Non-Manufacturing Index
10:00 Job Openings and Labor Turnover Survey
12:40 PM Fed's Kaplan Speech
1:00 PM Results of $38B, 3-Year Note Auction
6:00 PM Fed's Kashkari Speech

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