Highlights

Wall Street Breakfast

Author: bmotrader   |   Latest post: Tue, 2 Jun 2020, 9:57 AM

 

Wall Street Breakfast: Is The Magic Still At Disney?

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Investors will size up the level of damage suffered by the world's most powerful entertainment company today, with Disney's (NYSE:DIS) stock down 30% from the all-time highs notched at the start of the year. The numbers will be the first outing for Bob Chapek, the former parks chief, who took the reins in February as COVID-19 spread around the world. Analysts are expecting per-share profit of $0.90, down 44% from a year ago, with cash cows like its theme parks and cruises closed or docked, and production delays as movie theaters remain off-limits. The true scale of the pandemic's impact might still not be known until late summer, when results are released for the current quarter in which 100K Disney employees were furloughed and another $5B line of credit was taken out to bolster liquidity.

Backing for ECB's bond buying program

Germany's top court has ruled that some actions taken by the country's Bundesbank to participate in the ECB's €2.7T bond-buying program were unconstitutional, and not backed by the EU treaty. However, it sees no breach of the prohibition of monetary financing of governments, and therefore backs the program - effectively sanctioning the powers the ECB has deployed to keep its economy growing. The ruling opens the door to a large potential increase in ECB bond purchases in its efforts to counterbalance the economic downside of the coronavirus pandemic.
Go deeper: Fed to start buying ETFs in early May.

Record borrowing

A clearer picture is emerging as to what the U.S. debt load will look like for 2020 after the Treasury announced it would borrow a record $3T this quarter to subsidize economic rescue efforts due to COVID-19. That's on top of first-quarter borrowing of $477B and an anticipated $677B for the third quarter. All the red ink (national debt is near $25T) has some worried about a potential debt crisis and sparked talk about deflation/inflation, while many see the spending as a temporary lifeline, and see the return to growth despite easy money and massive deficits.
Go deeper: Federal assistance for California unemployment.

Turnaround Tuesday

While bickering between Washington and Beijing triggered early selling on Monday, oil's longest run of gains in nine months and reopenings of the economy are helping boost sentiment. U.S. stock index futures are ahead by 1%, while crude is up almost 10% to $22.38/bbl, before a slew of U.S. economic reports including the trade deficit and PMIs. "May, June will be the turning point in terms of restarting global economic activity, and that's really what the market is looking at," said Stefan Hofer, chief investment strategist at LGT Bank Asia.

Big Oil

While first quarter net profit at Total (NYSE:TOT) fell 35% Y/Y to $1.8B, the French energy major kept its dividend stable at €0.66 despite "exceptional circumstances." The results follow those of Royal Dutch Shell (NYSE:RDS.A) last week, which slashed its dividend for the first time since WWII, though rivals BP (NYSE:BP), Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) all maintained their payout to shareholders. Total CEO Patrick Pouyanne said he will also take a 25% fixed salary pay cut for the remainder of the year and laid out plans to have net zero emissions from all its European businesses by 2050.
Go deeper: Texas regulator drops plan to mandate oil output cuts.

Ferrari tops Detroit Three, Tesla tops all

Following bumper earnings that sent shares of the sports carmaker up 7% on Monday, Ferrari's (NYSE:RACE) market cap ($29.8B) is now worth more than each of the Detroit Three - GM ($29.3B), F ($19.2B) and FCAU ($13B). Investors are betting on Ferrari's storied brand name and profit margins despite producing a fraction of the other major carmakers (about 10,000 vehicles a year vs. GM's 7.7M), while shares have tripled in value since its IPO in late 2015. Speaking of market cap figures, Tesla (NASDAQ:TSLA) is worth more than all of the above-mentioned automakers combined at $130B, putting Elon Musk on track for a $700M payout just days after saying the EV maker's stock was too high.

Standards set for coronavirus antibody tests

At least 160 antibody tests manufactured for COVID-19 entered the U.S. market without previous FDA scrutiny on March 16 because the agency felt emergency authorization was warranted. Now, the FDA will require them to meet standards for accuracy. Tests will need to be found 90% "sensitive," or able to detect coronavirus antibodies, and 95% "specific," or able to avoid false positive results. Disclaimer: The tests may be of limited usefulness because researchers are still working to determine the precise level of antibodies sufficient to result in immunity.

IBM Think Digital

The coronavirus pandemic will "dramatically accelerate" adoption of AI and cloud computing, according to new IBM (NYSE:IBM) CEO Arvind Krishna, who is set to launch a slew of new products today at the company's annual Think Digital conference. Among them: IBM Watson AIOps, which uses AI to automate the way companies detect and respond to IT anomalies in real-time, and IBM Edge Application Manager, which uses AI to manage up to 10,000 internet-connected devices. Another set of products is focused on 5G mobile networks, while a suite of solutions will be unveiled to help chief information officers automate business planning, operations and call centers.

Staying alive

Hertz (NYSE:HTZ) shares are off 25% premarket after the rental-car company hired a restructuring advisor ahead of a possible bankruptcy filing. It's been talking to some of its creditors about how to ease its burden without going through the process, but negotiations have been a struggle. Meanwhile, Gold's Gym filed for bankruptcy protection on Monday amid fitness closures, while Carnival (NYSE:CCL) expects to resume some cruise sailings in August after a monthslong pause.

Monday's Key Earnings

AIG (NYSE:AIG) -0.8% AH stung by equity market declines.
Omega Healthcare (NYSE:OHI) +2.2% AH beating estimates.
Realty Income (NYSE:O) +3% AH collecting 82.9% of April rent.
Skyworks Solutions (NASDAQ:SWKS) +0.7% AH reporting FQ2 upside, wider Q3 outlook.
Williams Cos. (NYSE:WMB) -1.4% on GAAP loss of $517M.

Today's Markets

In Asia, Japan closed. Hong Kong +1.1%. China closed. India -0.9%.
In Europe, at midday, London +1.2%. Paris +1.5%. Frankfurt +1.5%.
Futures at 6:20, Dow +1%. S&P +1%. Nasdaq +1.1%. Crude +9.7% to $22.38. Gold -0.5% to $1704.80. Bitcoin +2.4% to $8835.
Ten-year Treasury Yield +3 bps to 0.67%

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
2:00 PM Fed's Bullard: “Perspectives on the Pandemic”
2:00 PM Fed's Bostic Speech

 

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