Wall Street Breakfast

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


Wall Street Breakfast: Tesla Is Done With California

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The electric vehicle maker sued local authorities in California on Saturday as it pushed to reopen its Fremont factory, but things appeared to get heated very quickly. Elon Musk announced he would move Tesla's (NASDAQ:TSLA) "HQ and future programs to Texas/Nevada immediately" and said retaining manufacturing in California would be "dependent on how Tesla is treated in the future." Tesla built nearly half a million vehicles at its Fremont plant in 2019, while Wedbush analyst Dan Ives estimates it could take the company 12 to 18 months to relocate production. TSLA -3.3% premarket.

Coming off last week's rally

Traders are kicking off the week with some mixed feelings as U.S. stock index futures wavered between gains and losses overnight. As of the last reading, S&P 500 futures were off 0.7%, signaling weakness in the wake of last week's economy-defying rally, while oil fell 3% to under $24/bbl. "Much of the eventual improved growth and virus news is already priced into markets," said Bob Baur, chief global economist at Principal Global Investors. "Because so much future growth and uptrend potential is priced in, we expect a period of relapse and consolidation through June."

Worse before better

The jobs numbers on Friday, which displayed an unemployment rate of 14.7% in April, are "probably going to get worse before they get better," Treasury Secretary Steven Mnuchin told Fox News. "What I said is you're going to have a very, very bad second quarter," he added, saying that "next year is going to be a great year" and the U.S. could see "permanent economic damage" if the country does not reopen. The White House is also talking about more fiscal measures to ease the economic pain, but doesn't want to bail out states that were "poorly managed."

EU threatens Germany

It's a little complicated, but the latest legal drama taking place in Europe highlights a power struggle that could undermine the euro. The European Commission is threatening to sue Germany after the country's top court last Tuesday questioned the legality of the ECB's bond buying program and gave the ECB three months to justify the scheme or else the Bundesbank might have to quit it. The announcement is not likely to trigger an infringement procedure, but is more of a deterrent to show who has final say in these scenarios. "The last word on EU law is always spoken" by the European court, European Commission President Ursula von der Leyen declared. "Nowhere else."

U.K. tries to get economy moving again

Starting today, British citizens who cannot work from home are being "actively encouraged" to go back to work, but avoid using public transport if possible. "If there are outbreaks, if there are problems, we will not hesitate to put on the brakes," added Prime Minister Boris Johnson. The country has suffered the highest numbers of deaths in Europe, with nearly 32K people dying from COVID-19, while BOE Governor Andrew Bailey said the economy could shrink by as much as 35% in Q2 if lockdown measures - imposed on March 23 - continued.

Semi self-sufficiency

As concerns grow about reliance on Asia as a source of critical technology, the Trump administration and semiconductor companies are looking to develop chip factories in the U.S., WSJ reports. Officials are discussing new foundries with Intel (NASDAQ:INTC) and Taiwan Semiconductor (NYSE:TSM), and are interested in helping Samsung Electronics (OTC:SSNLF) expand operations. "This is more important than ever, given the uncertainty created by the current geopolitical environment," Intel CEO Bob Swan wrote in a letter to the U.S. Department of Defense.

Effects of COVID-19 on shopping malls?

Initial results will be seen today as Simon Property Group (NYSE:SPG), the biggest U.S. mall operator, reports first quarter figures, followed by the earnings of rival Macerich (NYSE:MAC) tomorrow. Their outlooks for the next few months will be more closely watched than ever before, with malls slowly beginning to reopen and tenants that have either gone out of business or are nearing the edge. Mall operators collected only 15% of April rent and trends are looking worse for May, according to CenterSquare Investment Management.

Latest retail bankruptcy

Stage Stores, which operates brands including Gordmans and Beall, is the latest retailer to file for bankruptcy since the pandemic began, following J.Crew and Neiman Marcus. It will start selling off inventory when 557 of its stores reopen on May 15, while the rest of its stores are scheduled to reopen in phases on May 28 and June 4 as it searches for prospective buyers. "Given the conditions, we have been unable to obtain necessary financing and have no choice but to take these actions," declared CEO Michael Glazer.

Temp checks the new normal at airports?

Airlines for America, which represents the largest U.S. airlines including American (NASDAQ:AAL), United (NASDAQ:UAL), Delta (NYSE:DAL) and Southwest (NYSE:LUV), is backing the TSA checking temperatures during the coronavirus pandemic. The measure will "add an extra layer of protection for passengers as well as airline and airport employees... and provide additional public confidence that is critical to relaunching air travel and our nation's economy." No decision has been made on whether to mandate the checks, but they would follow the industry requiring facial coverings for all flying passengers.

Today's Markets

In Asia, Japan -1.1%. Hong Kong -1.5%. China flat. India -0.3%.
In Europe, at midday, London -0.3%. Paris -1.4%. Frankfurt -0.7%.
Futures at 6:20, Dow -0.7%. S&P -0.7%. Nasdaq -0.4%. Crude -3% to $23.99. Gold -0.9% to $1698.30. Bitcoin -0.5% to $8810.
Ten-year Treasury Yield flat at 0.69%

Today's Economic Calendar

12:30 PM Fed's Evans Speech
1:00 PM Results of $42B, 3-Year Note Auction


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