Highlights

Wall Street Breakfast

Author: bmotrader   |   Latest post: Fri, 7 Aug 2020, 11:21 AM

 

Wall Street Breakfast: Houston, We Have A Problem

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The U.S. State Department has ordered the closure of China's consulate in Houston to protect property and "private information" of Americans as reports came in last night of documents being burned in the compound's courtyard. "We urge the U.S. to immediately withdraw its erroneous decision. Otherwise China will make legitimate and necessary reactions," China's Foreign Ministry declared, as the U.S. dollar surged against the Chinese yuan, breaking the key 7 level. On Tuesday, the DOJ also accused two Chinese hackers of working for the government to steal terabytes of data, including coronavirus research, from Western companies across 11 nations.

Tensions hit sentiment

S&P 500 futures pulled back 0.4% overnight following the diplomatic flare-up, which adds to concerns over the deteriorating relationship between the economic superpowers. President Trump already dimmed hopes of a Phase 2 trade deal earlier this month, saying the relationship with China had been too badly damaged by COVID-19. Investors are also questioning whether Congress will reach an agreement on the next coronavirus stimulus bill before lawmakers start their summer recess, while Trump warned the pandemic will probably "get worse before it gets better."

Earnings

Two big names are on the radar today as earnings season kicks into high gear. Following a record number of car deliveries earlier in July, Tesla (NASDAQ:TSLA) may report a fourth straight quarterly profit, which could qualify the high-flying stock for inclusion in the S&P 500. Shares have jumped more than 50% this month alone (adding to the stock's more than 3x increase this year), as investors bet on a sudden jump in demand from passive funds that track the benchmark. Don't forget about Microsoft (NASDAQ:MSFT)! Much of the focus will continue to center around its cloud business amid recent trends towards remote work.

Twitter cracks down on 'QAnon' activity

"We've been clear that we will take strong enforcement action on behavior that has the potential to lead to offline harm," the company said via its Twitter Safety account. "In line with this approach, this week we are taking further action on so-called 'QAnon' activity across the service." A Twitter (NYSE:TWTR) spokesperson said more than 7,000 QAnon-related accounts were banned in recent weeks, while the platform limited the distribution of 150,000 others. According to Wikipedia, QAnon is a "far-right conspiracy theory detailing a supposed secret plot by an alleged 'deep state' against U.S. President Donald Trump and his supporters." Last year, the FBI designated QAnon as a potential domestic terror threat.

Abandoning hopes

While U.K. and EU negotiators began the latest round of Brexit negotiations on Monday, the two sides remain deadlocked over fishing rights, level playing field guarantees, governance of the deal and the role of the European Court of Justice. With just days to go until Boris Johnson's deadline for an outline agreement, senior sources told The Telegraph that there is now an assumption that "there won't be a deal." What would happen in that case? The U.K. would leave the bloc on December 31 by following default WTO rules and specific agreements for certain goods. The British government has also abandoned hopes of clinching a U.S. free trade deal ahead of the presidential election in November, with the novel coronavirus outbreak blamed for slow progress.

Record retail trading volumes

Earnings yesterday from some of the biggest publicly traded brokers have highlighted the major jump into retail trading. TD Ameritrade (NASDAQ:AMTD), which is set to be acquired by Charles Schwab (NYSE:SCHW), added a record 661K new funded retail accounts in Q2, surpassing the 608K new accounts during the first quarter. A record 3.4M daily average revenue trades were also noted, more than four times last year's levels and 62% more than the prior quarter. Interactive Brokers (NASDAQ:IBKR), which additionally beat on the top and bottom lines, said its daily average revenue trades increased 111% since the same quarter last year, while customer accounts grew to 867K.

737 MAX may not return until next year

The latest timeline anticipates the FAA won't finish work to lift its March 2019 grounding order until late October or early November because the agency has decided to ask for public comments before finalizing software and hardware changes, WSJ reports. Completing pilot training and maintenance checks is expected to stretch well into December, and only then will the MAX be ready to return to commercial service. That means the jets are expected to be grounded at least as long under current Boeing (NYSE:BA) CEO David Calhoun as under his predecessor, Dennis Muilenburg, who was ousted at the end of 2019 after repeated delays in getting the plane back in the air. BA -1.3% premarket.

Self-driving partnerships

Ending work on autonomous commercial vehicles it began with startup Aurora in 2019, Fiat Chrysler (NYSE:FCAU) has selected Waymo as its exclusive, strategic technology partner for "Level 4" fully self-driving technology across its full product portfolio. The collaboration will start with the Ram ProMaster full-size van, though it's likely to expand given Fiat's expected merger with PSA Group into a company called Stellantis. It's been quite a run for the Alphabet (GOOG, GOOGL) unit. Waymo, considered the leader in autonomous vehicle development, inked another partnership in June with Volvo Cars (OTCPK:GELYY) to develop self-driving electric vehicles designed for ride-hailing.

Tuesday's Key Earnings

Coca-Cola (NYSE:KO) +2.3% saying the worst is over.
Lockheed Martin (NYSE:LMT) +2.6% topping estimates, raising guidance.
Philip Morris (NYSE:PM) +4.2% posting better-than-feared results.
Snap (NYSE:SNAP) -6.2% AH on lagging Q2 growth.
Texas Instruments (NASDAQ:TXN) +1.3% AH following Q2 beats, upside outlook.
United Airlines (NASDAQ:UAL) +1.2% AH expecting to lower cash burn.

Today's Markets

In Asia, Japan -0.6%. Hong Kong -2.3%. China +0.4%. India -0.2%.
In Europe, at midday, London -0.9%. Paris -1.2%. Frankfurt -0.6%.
Futures at 6:20, Dow -0.4%. S&P -0.4%. Nasdaq flat. Crude -1.3% to $41.36. Gold +0.7% to $1856.50. Bitcoin -0.7% to $9351.
Ten-year Treasury Yield -2 bps to 0.59%

Today's Economic Calendar

7:00 MBA Mortgage Applications
9:00 FHFA House Price Index
10:00 Existing Home Sales
10:30 EIA Petroleum Inventories
1:00 PM Results of $17B, 20-Year Bond Auction

 

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