Highlights

Wall Street Breakfast

Author: bmotrader   |   Latest post: Mon, 6 Apr 2020, 8:53 AM

 

Wall Street Breakfast: Spotlight On FOMC

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The Fed releases minutes of its Jan. 28-29 policy meeting today, which could help explain what the central bank is thinking about potential economic risks, including those stemming from the coronavirus. It may additionally provide insight into the central bank's balance sheet policy, with Powell having indicated that both Treasury bill purchases and role of repo operations in the open markets would decline during Q2. Four regional Fed presidents are also set to give speeches around the country, including 2020 FOMC members Robert Kaplan, Loretta Mester and Neel Kashkari.

Futures rebound

Markets across Asia and Europe were mostly higher overnight, though shares in Shanghai dipped 0.3%, as the coronavirus death toll in China hit 2,000. Sentiment received a boost on reports that China was considering measures such as direct cash infusions and mergers to bail out its heavily hit airline industry. While the outbreak has triggered Apple (NASDAQ:AAPL) to issue a revenue warning, the Nasdaq Composite posted another record close on Tuesday (though the Dow and S&P drifted lower), while stock index futures are now pointing to opening gains of 0.2%.
Go deeper: Coronavirus crisis - Unilever, 3M eligible for China loans.

Brussels proposes new digital strategy

Margrethe Vestager, the EU's digital and competition chief, is set to publish the first draft of an EU digital strategy likely to have major effects on tech giants like Apple (AAPL), Facebook (NASDAQ:FB), Google (GOOG, GOOGL) and Amazon (NASDAQ:AMZN). The new rules will focus on a so-called digital single market that will support growth and innovation in the European tech industry, as well as a framework for companies' use of artificial intelligence. Vestager is also examining Big Tech's data practices, including how companies compete by using third party data.
Go deeper: Facebook: Mark Zuckerberg's 'Atlas Shrugged' Moment by Louis Stevens.

Rare profit miss at Walmart

Despite missing the Q4 consensus EPS mark ($1.38 vs. $1.44) and comparable sales estimates (1.9% vs. 2.4%), Walmart (NYSE:WMT) shares rebounded during yesterday's session, rising 1.5% to $119.63. CFRA analyst Garrett Nelson notes that while the EPS miss was only the second in 18 quarters, investors may have been prepared for the weak mark after Target's (NYSE:TGT) disappointing holiday sales update a few weeks ago. Walmart's sluggish holiday sales come despite continued online gains, as traditional retailers adjust to changing shopping habits.
Go deeper: D.M. Martins Research says WMT is a long-term buy despite modest growth.

Bed Bath remodels

New CEO Mark Tritton has laid out his vision for remaking the troubled retailer, planning to invest $350M to $400M on store upgrades, tech initiatives and supply chain improvements. He also wants a more streamlined look at Bed Bath (NASDAQ:BBBY) stores, including wider aisles and no more piles of merchandise up to the ceiling. Besides the decluttering efforts and more private brands, Tritton aims to have online pickup service available in all stores by the end of the year.
Go deeper: Check out Quant ratings on Bed Bath & Beyond.

First fintech takeover of a U.S. bank

Giving it access to a stable and cheaper source of funding, LendingClub (NYSE:LC) is paying $185M in cash and stock for Radius Bancorp, a Boston-based online bank with about $1.4B in assets. The move marks the first time an American fintech company has acquired a regulated U.S. bank. Fintechs like Robinhood and Square (NYSE:SQ) have already applied for ways to become banks (and issue new products like checking accounts), while mobile bank Varo Money received FDIC approval last week for a national bank charter.
Go deeper: LC is riding the high tide, writes Robbert Manders, but fails to create value.

Buffett jumps on the ETF train

It's pocket change given the $128B in cash at Berkshire Hathaway (BRK.A, BRK.B), but The Oracle (or, more likely, managers Todd Combs and Ted Weschler) dipped toes into a couple of passive ETFs in Q4. Berkshire now owns a combined $25M of the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) and the Vanguard S&P 500 ETF (NYSEARCA:VOO), with the investments going toward a company pension plan. Bloomberg's Eric Balchunas suggests it's not a bad place to park some money and gain a bit more yield than short-dated Treasury paper (VOO yields 1.80%, SPY 1.66%), while having plenty of liquidity should the need arise.

Space tourism

NASA has given SpaceX (SPACE) the thumbs-up to become the first company in its Commercial Crew program to send humans into space. Four privately-paying space tourists will orbit the planet aboard SpaceX's Crew Dragon capsule, in missions set for late 2021 or 2022. The space frenzy is also being seen in the stock market. A seven-day surge in Virgin Galactic (NYSE:SPCE) has lifted shares to $32, four times above its level in December (Tesla moment?).

Alphabet scales back moonshot projects

Espousing increased financial discipline, Alphabet (GOOG, GOOGL) is calling it quits on efforts to build and monetize its Makani wind energy kites. It's the first project from X, Alphabet's moonshot factory, to be terminated since Google co-founders Larry Page and Sergey Brin stepped aside as leaders in December. The news follows Alphabet's disappointing earnings report, where the losses from its "Other Bets" category swelled to $4.8B in 2019, up from $3.4B the year before.

Drive to profitability

Uber (NYSE:UBER) has closed a customer support office in downtown Los Angeles, laying off about 80 employees, according to the Los Angeles Times. "We will be moving the outreach and innovation work to Manila," said Uber manager Ruffin Chevaleau. "I know that this is a shock." In the months since going public, Uber has made a series of cuts to its corporate workforce totaling more than 1,000 workers, including in its marketing, self-driving and engineering departments.

Tuesday's Key Earnings

Devon Energy (NYSE:DVN) +2.2% AH boosting production guidance.
Groupon (NASDAQ:GRPN) -24.3% AH exiting the Goods category.
Herbalife (NYSE:HLF) +4.1% AH beating expectations.
LendingClub (LC) -0.2% AH giving a soft outlook.
Medtronic (NYSE:MDT) -4% missing on revenues.
Nutrien (NYSE:NTR) -0.7% AH on weak potash demand.
Walmart (WMT) +1.5% rallying past a rare profit miss.

Today's Markets

In Asia, Japan +0.9%. Hong Kong +0.5%. China -0.3%. India +1.1%.
In Europe, at midday, London +0.8%. Paris +0.6%. Frankfurt +0.4%.
Futures at 6:20, Dow +0.2%. S&P +0.2%. Nasdaq +0.3%. Crude +1.4% to $53.01. Gold +0.7% to $1614. Bitcoin +4.3% to $10136.
Ten-year Treasury Yield flat at 1.55%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:10 Fed's Bostic: Economic Outlook
8:30 Housing Starts
8:30 Producer Price Index
8:30 Fed's Mester Speech
8:55 Redbook Chain Store Sales
10:00 E-Commerce Retail Sales
10:00 Quarterly Services Report (Advance)
11:45 Fed's Kashkari Speech
1:30 PM Fed's Kaplan Speech
2:00 PM FOMC minutes
4:30 PM Fed's Barkin: “New Monetary Policy Frameworks: Why Now?”

 

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