Wall Street Breakfast

Author: bmotrader   |   Latest post: Fri, 10 Jul 2020, 7:55 AM


Wall Street Breakfast: Markets In Full Swing

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Thursday was an ugly day on Wall Street, as stocks posted their worst day since March, though some of the massive losses might be recouped as S&P 500 futures rebounded 2% overnight. "The U.S. economy will not be shut down again," declared U.S. Treasury Secretary Steven Mnuchin, saying testing and tracing are improving and officials understand more about how to contain outbreaks. "There's just too much cash sitting around for this to be a deep correction," added Ken Peng, head of Asia investment strategy at Citi Private Bank. "The Fed and other major central banks have already made it very clear they're there to buy the bottom basically."

Betting or investing?

Another factor to consider in the current environment is the advance of retail traders into the market as the coronavirus pandemic sidelines many professional investors. "Day trading has replaced sports betting as a form of entertainment," reads a headline from Axios, "and this phenomenon could partly explain the current disconnect between the economy (down) and the stock market (up)." Big price action seen in the stocks of bankrupt companies like Hertz (NYSE:HTZ), J.C. Penney (OTCPK:JCPNQ) and Whiting Petroleum (NYSE:WLL) have also underlined this trend as investors rush to buy anything that moves.

737 MAX production start and stop

Boeing's (NYSE:BA) 16% drop yesterday contributed more than 230 points of the Dow Jones' 1,700-pont plunge as the planemaker cut production plans for the 737 MAX just two weeks after restarting work in its Seattle-area factory. Key supplier Spirit AeroSystems (NYSE:SPR), which was asked by Boeing to cut production on the MAX, and other suppliers also traded deep in the red. Less production in 2020 could mean the MAX timeline is slipping again or Boeing will deliver MAX jets at a slower rate than previously expected.

Quarantine policy

British Airways (OTCPK:ICAGY), easyJet (OTCPK:EJTTF) and Ryanair (NASDAQ:RYAAY) have initiated legal action against the U.K. government's quarantine policy, asking for a judicial review to be heard as soon as possible. The airlines describe the rule as "flawed," saying it will have a "devastating effect on British tourism and the wider economy." Instead, they want the government to reintroduce a policy from March 10, which saw passengers from countries deemed at high risk for COVID-19 being ordered to self-isolate upon arrival in the U.K.

Record contraction

Besides logging the highest COVID-19 death toll in Europe, Britain has also paid a heavy economic price. GDP contracted a record 20.4% in April, the largest monthly fall on record, as businesses and workers reeled under a lockdown designed to control the coronavirus pandemic. The OECD has already warned that the U.K. could see one of the developed world's deepest recessions in 2020, with output plunging more than 11%.

What is free speech on social media?

Presumptive Democratic nominee Joe Biden penned a letter to Facebook (NASDAQ:FB) that called, among other things, for the promotion of trustworthy sources of election-related information and to quickly remove fast-spreading misinformation and false paid advertisements. "Just as they have done with broadcast networks - where the U.S. government prohibits rejecting politicians' campaign ads the people's elected representatives should set the rules, and we will follow them," Facebook responded in a statement. Snap (NYSE:SNAP) is also facing some backlash after it stopped promoting President Trump's Snapchat account on its Discover feature, a move CEO Evan Spiegel said "is within its First Amendment rights."

Zoom does some explaining

The company's recent ban against U.S.-based Chinese activists "fell short," Zoom (NASDAQ:ZM) wrote in a blog post, offering more details about what happened. In May and early June, the Chinese government reached out to the platform about meetings commemorating the 1989 Tiananmen Square massacre. The activity is illegal in China, so Zoom terminated some of the meetings that had a significant number of mainland China participants - as well as their host accounts - despite a few being based in Hong Kong and the U.S. (those have since been reinstated). "We will have a new process for handling similar situations," Zoom added, saying it is "developing technology over the next several days that will enable us to remove or block at the participant level based on geography."

Facial recognition - again

Microsoft (NASDAQ:MSFT) is latest big firm to back away from the business following similar moves by IBM (NYSE:IBM) and Amazon (NASDAQ:AMZN). The company said it won't sell facial recognition software to police departments in the U.S. until there's a national law "grounded in human rights" to govern the technology. The news comes amid nationwide protests against law enforcement brutality following the death of George Floyd in Minneapolis on May 25.

Bankrupt Hertz wants to sell shares

One of the more curious bankruptcies in recent memory just got a little odder with word that Hertz Global (HTZ) wants to sell up to $1B in shares following a sizable rally (a court ruling could come today). "The recent market prices of and the trading volumes in Hertz’s common stock potentially present a unique opportunity for the company to raise capital on more favorable terms than the strings-attached loans that many other bankrupt companies get," stated Hertz attorneys on the strategy. Related? Hertz has been extremely popular on Robinhood over the last few weeks, with twice as many users snapping up shares than in Amazon (AMZN) or Microsoft (MSFT).

Thursday's Key Earnings

Adobe (NASDAQ:ADBE) +4.1% AH despite soft forecast.
Lululemon (NASDAQ:LULU) -5.1% AH amid losses from shut stores.
The Children's Place (NASDAQ:PLCE) -3.9% AH on mixed results.

Today's Markets

In Asia, Japan -0.7%. Hong Kong -0.7%. China flat. India +0.7%.
In Europe, at midday, London +0.9%. Paris +1.7%. Frankfurt +0.7%.
Futures at 6:20, Dow +2.3%. S&P +2%. Nasdaq +1.7%. Crude -0.4% to $36.18. Gold +0.2% to $1743.10. Bitcoin -3.3% to $9468.
Ten-year Treasury Yield +5 bps to 0.71%

Today's Economic Calendar

8:30 Import/Export Prices
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count

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