Wall Street Breakfast

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


Wall Street Breakfast: Gobbling Up The Thanksgiving Turkey Rally

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The Santa rally appears to be coming early this year as traders look set to push Wall Street further into record high territory today before taking off for Thanksgiving. The bullish trend has been underpinned by recent trade optimism, leading the DJIA on Tuesday to score its 100th record close under President Trump, while weak figures from China (see below) suggest the world's second-largest economy may seek to hasten a "Phase One" deal. Due to the holiday-shortened week, a U.S. data feast will also be served during the session, including durable goods for October, a second reading of Q3 GDP and the Fed's Beige Book.

Signs of a slowdown in China

Under pressure from slowing demand at home and the fallout from the Sino-U.S. trade war, profits at China’s industrial firms slid 9.9% Y/Y in October to 427.56B yuan ($60.7B). That marks the greatest slump since the January-February period and compares with a 5.3% decline in September. "The big drop suggests the real economy is still facing plenty of difficulties... likely prompting authorities to unveil more growth-boosting measures in a gradual and restrained way," said Nie Wen, economist at Shanghai-based Hwabao Trust.

Thanksgiving retail on watch

Retailers are preparing for one of their biggest weekends of the year, with an estimated 165.3M Americans going shopping Thanksgiving Day through Cyber Monday, according to the National Retail Federation. The majority of consumers are planning to make their purchases on Black Friday, though the day is becoming less and less crucial to retailers as sales stretch beyond Thanksgiving week and more shoppers opt to make their purchases online.

Repo operations escalate

Stepping up its actions to prevent another surge in repo rates, the New York Fed added $92.7B in temporary liquidity to the financial system on Tuesday. The previous day, the bank conducted the first operation of its third, longer-term repo loans, which - at 42 days - go beyond year-end. The Fed has been intervening in markets in the current fashion since mid-September and hopes to cut back on interventions at the start of 2020.

NYC bans all flavored e-cigarettes

As federal officials waver on a flavored e-cigarette ban, state and municipal officials are grappling with how to address the resurgence of youth nicotine addiction. The latest to take action is NYC, which becomes the largest city in the U.S. to outlaw all vaping flavors except tobacco. A nationwide public health matter is also spreading, with a mysterious vaping lung disease that has so far sickened more than 2,100 and killed 42 people.

Criminal opioid probe

Federal prosecutors have opened a criminal investigation into whether opioid companies violated the Controlled Substances Act in connection with shipping large quantities of the painkillers that contributed to a healthcare crisis. Companies that received subpoenas include Teva (NYSE:TEVA), Mallinckrodt (NYSE:MNK), Johnson & Johnson (NYSE:JNJ), Amneal Pharmaceuticals (NYSE:AMRX), AmerisourceBergen (NYSE:ABC) and McKesson (NYSE:MCK). The probe is in the early stages, and additional firms could receive subpoenas in the coming months.

Chicago ride-hail congestion tax

Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT) shares rose slightly on Tuesday despite the Chicago city council's approval of a congestion surcharge on ride-hail trips. Mayor Lori Lightfoot's plan, which increases charges on single-passenger trips and lowers the tax on shared rides, seeks to raise $40M for the fiscal year that begins Jan. 1. It's another blow to the industry after California passed its "gig-worker rule" and Tfl stripped Uber of its license to operate in London.

Another hurdle for the 737 MAX

The FAA now intends to be sole issuer of airworthiness certificates for all new 737 MAXs (a role it previously shared with Boeing), meaning it will inspect and sign off on every jet individually before delivery to airlines. It's another public pushback by the agency against company pressure to accelerate the plane's reinstatement. While Boeing (NYSE:BA) has been angling to start some MAX deliveries by late December, FAA leaders have stressed they don't have a timeline and won't sacrifice safety to speed up the process.

Tuesday's Key Earnings

Best Buy (NYSE:BBY) +9.9% giving strong guidance.
Box (NYSE:BOX) +2.2% AH following a beat-and-raise.
Dell (NYSE:DELL) -3.9% trimming its full-year sales forecast.
HP Inc. (HPQ) +1.8% AH on Commercial systems strength.
VMware (NYSE:VMW) +0.7% AH amid licensing strength.

Today's Markets

In Asia, Japan +0.3%. Hong Kong +0.2%. China -0.1%. India +0.5%.
In Europe, at midday, London +0.5%. Paris +0.2%. Frankfurt +0.5%.
Futures at 6:20, Dow +0.1%. S&P +0.2%. Nasdaq +0.3%. Crude +0.2% to $58.54. Gold +0.4% to $1466.30. Bitcoin -3.5% to $6897.
Ten-year Treasury Yield flat at 1.74%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Durable Goods
8:30 Initial Jobless Claims
8:30 GDP Q3
8:30 Corporate profits
10:00 Personal Income and Outlays
10:00 Pending Home Sales
10:00 State Street Investor Confidence Index
10:30 EIA Petroleum Inventories
11:00 Survey of Business Uncertainty
11:30 Results of $32B, 7-Year Note Auction
12:00 PM EIA Natural Gas Inventory
1:00 PM Baker-Hughes Rig Count
2:00 PM Fed's Beige Book
3:00 PM Farm Prices


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