Highlights

Wall Street Breakfast

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

 

Wall Street Breakfast: Deficit And Give Me Twenty

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Last issued in 1986, the Treasury is bringing back the 20-year bond, which will debut in a $20B auction later this afternoon. "That gives us the ability to extend the duration to raise a significant amount of funds... and lock in a significant amount of very low interest rates," Treasury Secretary Steven Mnuchin said during Congressional testimony on Tuesday. The government's borrowing needs have jumped dramatically in recent weeks due to pandemic spending, and the national debt now stands at more than $25T, up 15% since a year ago. While there was thought to issue 50-year and 100-year bonds, Mnuchin determined there wasn't enough demand for those types of securities.

Volatility warning

"With most institutional investors believing this is a bear rally, but at risk of being forced to chase the trend if it continues, the risk is of bigger bubbles leading to larger shocks," according to Bank of America. On that note, U.S. stock index futures are up nearly 1% ahead of the open, after a market drop yesterday that followed a big rally on Monday. Hopes for a coronavirus vaccine have also been seen as attributing to sentiment, with doubts cast on early results from a Moderna (NASDAQ:MRNA) trial. Keep an eye out today for minutes from the FOMC's last meeting, when it kept rates near zero, as well as retail earnings from Target (NYSE:TGT), Lowe's (NYSE:LOW) and L Brands (NYSE:LB).

Retail roundup

Walmart (NYSE:WMT) logged strong sales for the first quarter, but had higher costs for paying and protecting employees. In fact, Walmart's e-commerce sales in the U.S. shot up by 74%, and same-store sales grew by 10%, though the company is discontinuing Jet.com and phasing out the brand. Despite a strong outlook, traders bid down Home Depot (NYSE:HD) on what could have be some profit-taking action, while Kohl's (NYSE:KSS) warned of a "low point" of 2020 as margins took a hit from the coronavirus pandemic.

Reopening America

As of today, every state will be somewhere along the road toward a full reopening of the economy. Connecticut will allow residents to dine at a restaurant outdoors or go into a retail shop, becoming the final one to lift shelter-in-place orders and business closures. Also being allowed to reopen are offices, museums, zoos and outdoor recreation - all with social distancing requirements and capacity limits.

Spotify inks deal with Joe Rogan

The Joe Rogan Experience is heading to Spotify (NYSE:SPOT) in an exclusive licensing deal worth more than $100M, sending SPOT shares up 8% on Tuesday. His full podcast library, dating back 11 years, will debut on the service Sept. 1, and will be exclusive to Spotify via a multi-year deal later this year. "We're going to be working with the same crew doing the exact same show," Rogan declared. "The only difference will be it will now be available on the largest audio platform in the world."

Rolls-Royce sheds nearly a fifth of workforce

Highlighting COVID-19's toll on the aerospace industry, Britain's Rolls-Royce (OTCPK:RYCEY) is cutting at least 9,000 jobs from its global staff of 52,000. One of Britain's best-known industrial names, the company supplies engines for large aircraft like the Boeing 787 (NYSE:BA) and Airbus A350 (OTCPK:EADSY). "This is about adjusting our capacity to meet future demand," CEO Warren East told BBC Radio, forecasting air travel will not recover for three to five years.

Nasdaq plans to give Luckin the boot

Although Luckin Coffee (NASDAQ:LK) has received a delisting notice from Nasdaq, the stock will begin trading again at 7:00 a.m. ET until that process is complete. Shares were suspended on April 7 due to "fabricated transactions" disclosed by the company and the "past failure to publicly disclose material information." Recent reports out of China indicate that Luckin is pivoting with its business model, which could be a positive for Starbucks (NASDAQ:SBUX) if there is no consumer backlash against U.S. companies amid some heightened tension.

Baby powder liabilities

Besieged by lawsuits, Johnson & Johnson (NYSE:JNJ) is stopping to sell one of its most famous products - baby powder made with talc - across the U.S. and Canada. The claims generally allege that talc can cause inflammation that leads to cancer, with some even pointing to trace amounts of asbestos in the product. The move is part of a broad reassessment of J&J's consumer product portfolio - prompted by the COVID-19 pandemic - as it faces billions of dollars in compensation from the suits.

Tuesday's Key Earnings

Home Depot (HD) -3% despite strong outlook.
Kohl's (KSS) -7.7% reworking its brand strategy.
Urban Outfitters (NASDAQ:URBN) -4.4% AH on plunging margins.
Walmart (WMT) -2.1% warning about pace of recovery.

Today's Markets

In Asia, Japan +0.8%. Hong Kong +0.1%. China -0.5%. India +2.1%.
In Europe, at midday, London -0.2%. Paris -0.6%. Frankfurt flat.
Futures at 6:20, Dow +0.9%. S&P +0.9%. Nasdaq +0.9%. Crude +0.4% to $32.09. Gold +0.4% to $1753.10. Bitcoin -0.2% to $9767.
Ten-year Treasury Yield -1 bps to 0.7%

Today's Economic Calendar

7:00 MBA Mortgage Applications
10:00 Quarterly Services Report (Advance)
10:30 EIA Petroleum Inventories
1:00 PM Results of $20B, 20-Year Bond Auction
2:00 PM FOMC minutes

 

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