Wall Street Breakfast

Author: bmotrader   |   Latest post: Thu, 2 Jul 2020, 7:42 AM


Wall Street Breakfast: More Coronavirus Stimulus

Author:   |    Publish date:

All eyes today will be on the ECB's latest policy decision at 7:45 a.m. ET, with President Christine Lagarde speaking 45 minutes later. Anything less than a widely anticipated increase to the €750B Pandemic Emergency Purchase Program could trigger a market shock (remember in March when Lagarde inadvertently said the ECB was "not here to close [bond] spreads"?) A shot in the arm would come as eurozone powerhouse Germany, which has maintained a stance of fiscal prudence, took steps to accelerate a recovery from the coronavirus pandemic. Angela Merkel's coalition agreed on a sweeping €130B stimulus package - designed to spur consumer spending and business investment - and exceeded the top end of expectations by 30%.

Business is business?

Two of Hong Kong's biggest banks are backing China's controversial national security law a week after former Hong Kong chief executive Leung Chun-ying blasted HSBC for its silence. HSBC said on social media that it "respects and supports all laws that stabilize Hong Kong's social order," while Standard Chartered (OTCPK:SCBFF) later announced it believed the law can "help maintain the long term economic and social stability of Hong Kong." HSBC -1.1% premarket.


Beijing is relaxing coronavirus restrictions to allow more foreign carriers to fly to the mainland after Washington retaliated against China's curbs on U.S. passenger airlines by barring Chinese airlines from entering the U.S., effective June 16. Qualifying foreign carriers currently prohibited from operating routes to China will now be allowed once-a-week flights into a city of their choosing starting June 8. The move is the latest in a long list of U.S.-China frictions over issues like trade, the coronavirus pandemic and treatment of Hong Kong.

Rally on pause

The S&P 500 rose for a fourth straight day on Wednesday, trimming its YTD loss to just 3.3%, though futures are pointing to a lower open, down 0.6% at the time of writing. Data today will likely show that the number of Americans filing for unemployment benefits last week dropped below 2M for the first time since mid-March, though the figure still remains astonishingly high. Elsewhere, oil retreated as hopes for an early OPEC+ meeting were dashed by a long-running feud over complying with production cutbacks.

Fed expands muni lending facility

The central bank will allow all U.S. states to have at least two cities or counties eligible to directly issue notes to the Municipal Liquidity Facility "regardless of population." Governors will also be able to designate two issuers in their jurisdictions whose revenues are generally derived from government activities, such as public transit, airports, toll facilities, and utilities, to be eligible to directly use the facility. The MLF was formed to offer up to $500B in lending to states and municipalities to help manage cash flow stresses caused by the COVID-19 pandemic.

Warp Speed initiative

Aimed at following through on a pledge to have a COVID-19 vaccine available in the next 2-3 quarters under Operation Warp Speed, the Trump administration has selected five "finalists" for development. Companies include Moderna (NASDAQ:MRNA), AstraZeneca (NYSE:AZN), Johnson & Johnson (NYSE:JNJ), Merck (NYSE:MRK) and Pfizer (NYSE:PFE), but not GlaxoSmithKline (NYSE:GSK) and Sanofi (NASDAQ:SNY). About 30K people will take part in Phase 3 trials, meaning that a total of 150K people could be vaccinated.

Empty display cases

Walmart (NYSE:WMT) has pulled firearms and ammunition from the sales floors of some stores as widespread protests continue across the U.S. and, in some cases, have led to looting. Customers can still purchase these items, which are being stored in secured rooms. How much damage has occurred? "We've had some stores where we've had inventory lost and some physical damage, but it's not very many stores as a percent of total," Walmart CEO Doug McMillon declared.

GM aims to preempt Tesla

Suppliers familiar with such plans at GM (NYSE:GM) and Ford told Reuters the Detroit automakers, which count trucks and commercial vehicles among their most profitable businesses, "don't want to leave the door open for Tesla (NASDAQ:TSLA)" as they did with passenger cars. The electric van - code-named BV1 – is reportedly aimed at business users, due to start production in late 2021 and will share some components with GM's future electric pickups and SUVs. Still under consideration is whether to offer the vehicle through its traditional truck brands, Chevrolet and GMC, or market it under a different brand like Maven.

Wednesday's Key Earnings

American Eagle (NYSE:AEO) +14.7% pulling cash-preserving lever.
Campbell Soup (NYSE:CPB) -6.1% reversing earlier gains.
Canada Goose (NYSE:GOOS) +17.7% as margins improved.
Cloudera (NYSE:CLDR) -11.9% AH giving light revenue guidance.

Today's Markets

In Asia, Japan +0.4%. Hong Kong +0.2%. China -0.2%. India -0.4%.
In Europe, at midday, London -0.4%. Paris -0.7%. Frankfurt -0.8%.
Futures at 6:20, Dow -0.6%. S&P -0.6%. Nasdaq -0.3%. Crude -1.8% to $36.62. Gold +0.5% to $1712.40. Bitcoin -0.5% to $9533.
Ten-year Treasury Yield -2 bps to 0.75%

Today's Economic Calendar

7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
8:30 Productivity and Costs
8:30 International Trade
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet


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