Wall Street Breakfast

Author: bmotrader   |   Latest post: Mon, 3 Aug 2020, 9:54 AM


Wall Street Breakfast: Gold Notches New All-Time High

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Spot gold traded as high as $1,943.93 per ounce overnight, eclipsing the previous record of $1920.30 set in September 2011 (it has increased 27% since the start of 2020). The yellow metal tends to benefit from widespread stimulus measures from central banks because it is widely viewed as a hedge against inflation and currency debasement. The rally is also being driven by U.S.-China tensions, but without cash flow streams to be evaluated like stocks or bonds, the movement in precious metals is notoriously difficult to analyze. Looking to gold funds, the popular SPDR Gold Trust ETF (NYSEARCA:GLD) is up 2% premarket after climbing 5% over the past week.

Back from vacation?

As gold and silver have been making historic moves higher this summer, Bitcoin (BTC-USD) has been notable for not doing anything much at all - mostly residing in a tight trading range around the $9,500 level. Things got interesting over the weekend, with Bitcoin poking its head above $10,000, and it's now trading changing hands at $10,187. The rally in Ether (ETH-USD) has been even more impressive, now up to a two-year high of $312.

Eventful week

Stocks are on the rise alongside safe-haven assets ahead of an upcoming Fed meeting that will yield clues on what comes next for monetary policy. S&P 500 futures advanced 0.6% overnight after Republicans finalized a bill for about $1T in coronavirus relief funds (see more below), while administration officials once again touted a 'V-shaped' economic recovery. The first print of U.S. GDP for Q2 is also due this week, while investors will digest earnings from Big Tech heavyweights. On the coronavirus front, reported cases and fatalities fell in many states hit hard by COVID-19, including Florida, Arizona, California, Texas and New York.

GOP unveils next coronavirus aid bill

Treasury Secretary Steven Mnuchin confirmed there would be $1,200 in direct stimulus payments in August - based on the same formula from the earlier package - but called the $600 in expanded federal unemployment benefits (that expires July 31) "ridiculous" and a disincentive for people to go back to work. The new $1T plan, which will likely ensure no more than 70% of an employee's previous pay, will serve as a starting point for negotiations with Democrats, who have already passed a $3.4T bill in the House. Mnuchin also revealed that a payroll tax cut sought by President Trump won't be in the coming bill, but may be in follow-up virus relief legislation.

Dollar falters

"There's a trade war, there's a technology war, there is a geopolitical war and there could be a capital war," according to billionaire investor Ray Dalio. "If you say by law 'Don’t invest in China,' or even possibly withholding the payment of bonds that the U.S. owes payment on in China - these things have big implications for the dollar," he added. "The things I worry about the most are the soundness of our money. You can't continue to run deficits, sell debt or print money rather than be productive and sustain that over a period of time." The U.S. Dollar Index broke through support at 94.65 on Friday, and extended losses overnight by falling another 0.4% to 94.03.

Tech antitrust hearing

The high-profile hearing in front of the House Judiciary Committee's Antitrust subcommittee has been reset for July 29 after a year-long investigation into online competition. It'll be the first time Amazon's (NASDAQ:AMZN) Jeff Bezos, Facebook's (NASDAQ:FB) Mark Zuckerberg, Apple's (NASDAQ:AAPL) Tim Cook and Google's (GOOG, GOOGL) Sundar Pichai will testify together and the first congressional appearance for Bezos. It also adds up to a big catalyst day for Facebook, which reports its earnings after the closing bell on Wednesday.

Moderna scores more funding for coronavirus vaccine

The U.S. government modified its existing contract with Moderna (NASDAQ:MRNA) over the weekend, adding a commitment of up to $472M for the company's Phase 3 study of the mRNA vaccine candidate (mRNA-1273) against COVID-19. As part of discussions related to Operation Warp Speed, the company opted to conduct a "significantly" larger study, which will accommodate 30,000 participants at the 100 µg dose level in the U.S. Combined with the prior contract, total value is $955M and the Phase 3 study will begin today. MRNA +7.6% premarket.

SAP plans IPO for Qualtrics unit

Alongside an EPS beat, German software giant SAP (NYSE:SAP) announced plans to list shares of its Qualtrics survey-software unit in the U.S., less than two years after buying the company for about $8B. "SAP's acquisition of Qualtrics has been a great success and has outperformed our expectations with 2019 cloud growth in excess of 40%," CEO Christian Klein declared. An IPO could value Qualtrics at as much as €16B, while SAP will retain a majority stake in the company after the public listing. SAP +3.1% premarket.

Boom year for SPACs

Rush Street Interactive has agreed to merge with special purpose acquisition company dMY Technology Group (NYSE:DMYT), in a deal that values the online sports-and-casino betting company at about $1.8B including debt, WSJ reports. Rush Street is similar to competitor DraftKings (NASDAQ:DKNG), which also recently chose to go public via a blank-check company. Why are SPACs becoming popular? At a time of great uncertainty, they can offer liquidity, especially when some IPOs are getting derailed due to volatility. The traditional IPO process can also take anywhere from several months to a year, though some SPAC deals are reported to only take weeks and could provide better price support. DMYT +10.6% premarket.

Today's Markets

In Asia, Japan -0.2%. Hong Kong -0.4%. China +0.3%. India -0.4%.
In Europe, at midday, London -0.2%. Paris -0.1%. Frankfurt +0.2%.
Futures at 6:20, Dow +0.5%. S&P +0.6%. Nasdaq +1.2%. Crude -0.2% to $41.23. Gold +2% to $1936.10. Bitcoin +2.3% to $10187.
Ten-year Treasury Yield -2 bps to 0.57%

Today's Economic Calendar

8:30 Durable Goods
10:30 Dallas Fed Manufacturing Survey
11:30 Results of $48B, 2-Year Note Auction
1:00 PM Results of $49B, 5-Year Note Auction


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