Highlights

Wall Street Breakfast

Author: bmotrader   |   Latest post: Mon, 27 Jan 2020, 9:03 AM

 

Wall Street Breakfast: Brent Tops $70 As Iran Tensions Rise

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Stocks are set to kick off the week with more losses, as the DJIA suggests another 200-point drop to erase New Year gains amid an escalation in geopolitical risk in the Middle East. Besides targeting 52 Iranian sites, President Trump threatened to slap sanctions on Iraq 'like they've never seen before' after a vote to expel U.S. troops, while Iran said it will no longer abide by uranium enrichment limits. WTI oil prices jumped as much as 2% overnight as Brent crude topped $70 a barrel for the first time since September, while gold soared to nearly $1,600 an ounce, its highest in more than seven years.

Defense spending referenced as warnings escalate

"The United States just spent Two Trillion Dollars on Military Equipment. We are the biggest and by far the BEST in the World! If Iran attacks an American Base, or any American, we will be sending some of that brand new beautiful equipment their way...and without hesitation!" President Trump tweeted over the weekend. Increased military spending could make defense stocks a winning trade once again in 2020. The iShares U.S. Aerospace & Defense ETF (BATS:ITA) has rallied more than 70% since Trump was elected on Nov. 8, 2016, while the S&P 500 is up around 50% in that time.
Go deeper: Not all Aerospace & Defense ETFs are equal, writes Atlas Grinned.

Inflation and repo stabilization

Low global interest rates are here to stay "for the next five to 10 years," which should lead Fed officials to hold themselves accountable to their 2% inflation target, according to New York Fed President John Williams. He also said the Fed's response to inject liquidity into repo markets following a cash crunch in September had "worked exactly as we wanted." "As the level of reserves have been brought back to the appropriate level, we've seen money markets operate very smoothly."
Go deeper: 'The Coming Reflation - Michael Gayed Talks With Alpha Trader.'

Night of upsets at Golden Globes

Once Upon a Time in Hollywood from Sony Pictures (NYSE:SNE) and 1917 from Universal (NASDAQ:CMCSA) took home the top prizes for best picture in their respective categories on a night packed with upsets at the 2020 Golden Globes. Other big award winners included AT&T (NYSE:T) (+6), ViacomCBS (NASDAQ:VIAC) (+3) and Disney (NYSE:DIS) (+3). Despite 17 nominations, the most of any single studio, Netflix (NASDAQ:NFLX) only garnered two trophies during Sunday's ceremony, though its nominations still underscore the changing Hollywood landscape.
Go deeper: 'Frozen II' becomes highest grossing animated movie ever.

Beyond real estate

Bed Bath & Beyond (NASDAQ:BBBY) has reportedly signed a deal to sell roughly half of its real estate to private-equity firm Oak Street, including its headquarters, a distribution facility and an undisclosed number of its 1,500 stores. The embattled retailer will then lease back the space in a transaction that will generate more than $250M in proceeds, which will be used to repay debt, buy back shares and fund a turnaround effort under new CEO Mark Tritton. The company is also expected to evaluate the rest of its real estate and retail concepts like Buy Buy Baby and Harmon drugstores.
Go deeper: Shock Exchange says to sell BBBY heading into earnings.

Xerox scores financing for HP bid

Citigroup, Mizuho Financial and Bank of America have agreed to provide Xerox (NYSE:XRX) with up to $24B in financing for its takeover offer for HP Inc. (NYSE:HPQ), sources told the WSJ. It's a sign the company is pushing forward with an unsolicited $33B deal that its larger rival had rejected as too low and not in the best interests of its shareholders. Xerox on Nov. 5 made the cash-and-stock offer for HP, whose market value has since risen to almost $30B, making it nearly four times Xerox’s size.

France warns on digital tax retaliation

Any retaliation to France's new digital services tax could "deeply and durably affect the transatlantic relationship," French Economy Minister Bruno Le Maire warned the U.S. on Monday. "If the Americans decide to go ahead and impose sanctions... in this case we would retaliate," he told France Inter radio. Washington has threatened to impose duties of up to 100% on imports of champagne, handbags and other French products worth $2.4B after a government investigation found the tax would harm U.S. tech companies.

First cannabis ETF to launch in Europe

Despite a poor year for the sector, marijuana funds have proved popular in North America, prompting plans by Canadian fund group Purpose Investments to launch Europe's first cannabis ETF on Jan. 13. The Medical Cannabis and Wellness ETF will be listed in Germany and made available to investors in the U.K., Italy and Ireland. The world's largest cannabis ETF, the U.S.-listed ETFMG Alternative Harvest (NYSEARCA:MJ), has $673M of assets and lost 28.5% last year, while the second largest fund, Canada's $327M Horizons Marijuana Life Sciences Index ETF (OTC:HMLSF), lost 33.8%.

Cutting heavy-duty truck emissions

The EPA will begin seeking public input today on new rules (to be proposed early this year) that will significantly decrease emissions of smog-forming nitrogen oxide and other pollutants from heavy-duty trucks. The Truck and Engine Manufacturers Association, which represents the four largest truck makers in North America - Daimler Trucks (OTCPK:DDAIF), Paccar (NASDAQ:PCAR), Volvo Trucks (OTCPK:VOLVY) and Navistar (NYSE:NAV) - is backing the initiative and said it wants a national program with "sufficient regulatory lead time, stability and certainty." The EPA last toughened NOx standards for highway heavy-duty trucks and engines in 2000.

Extra simulator training for 737 MAX pilots?

Boeing (NYSE:BA) has long maintained 737 MAX pilots don't need supplemental simulator training beyond what they receive to fly other 737 models, but many FAA officials are now regarding that stance with increasing skepticism, WSJ reports. Under consideration is mandatory flight-simulator training as regulators propose rewriting emergency checklists for pilots and creating some new ones. While the FAA's formal decision isn't expected until February or later, the idea would entail extra costs and delays for airlines.
Go deeper: Shares of Southwest Airlines (NYSE:LUV), the largest U.S. MAX operator, are off 3% premarket.

Today's Markets

In Asia, Japan -1.9%. Hong Kong -0.8%. China flat. India +1.9%.
In Europe, at midday, London -1%. Paris -1.2%. Frankfurt -1.7%.
Futures at 6:20, Dow -0.7%. S&P -0.7%. Nasdaq -0.8%. Crude +1.1% to $63.72. Gold +1.8% to $1579.80. Bitcoin +1.7% to $7557.
Ten-year Treasury Yield flat at 1.78%

Today's Economic Calendar
9:45 PMI Services Index
12:30 PM TD Ameritrade IMX

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