Before the Open (Jan 6-10)

Good morning. Happy Friday. Happy Employment Numbers Day.
The Asian/Pacific markets leaned to the upside. Japan, Hong Kong, South Korea, Taiwan and Australia led. Europe, Africa and the Middle East currently lean up too. Poland, Turkey, Finland and the Czech Republic are doing the best. Futures in the States point towards a positive open for the cash market.
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The dollar is up. Oil and copper are down. Gold and silver are down. Bonds are up.
Here are the employment figures.
unemployment rate: 3.5% (unchanged)
nonfarm payrolls: +145K
private payrolls:
average workweek: flat at 34.3
hourly wages: up 3 cents to $28.32
labor participation rate: unchanged at 63.2%
October jobs revised down from 156K to 152K.
November jobs revised down from 266K to 256K
Stories/News from Seeking Alpha…
The Labor Department’s closely watched monthly employment report this morning could buttress the Fed’s assessment that both the economy and monetary policy are in a “good place.” U.S. stock futures are pointing to more records (Dow 29K?) ahead of the data, which is expected to show nonfarm payrolls increasing by 164,000 in December, a near 50-year low unemployment rate of 3.5%, along with modest wage gains. The pace of hiring remains more than enough to keep the longest economic expansion in U.S. history on track despite a deepening downturn in manufacturing and unsettled trade disputes.
Six figures at Taco Bell
Speaking of a crowded labor market, Yum Brands (NYSE:YUM) is reportedly offering a $100K per year salary for manager-level positions at select Taco Bell locations in the Midwest and Northeast. The development is just one of many examples of the wage inflation pressure being felt in parts of the restaurant sector. That wildcard is part of the 2020 earnings matrix across the fast food industry, which for decades had been seen as offering the quintessential low-wage job.
Internal messages deepen MAX crisis
A new trove of internal messages released by Boeing (NYSE:BA) will add to the hurdles of David Calhoun, a longtime board member who will take over as CEO next week. “This airplane (737 MAX) is designed by clowns, who in turn are supervised by monkeys,” said one company pilot in 2016, while another employee asks: “Would you put your family on a MAX simulator trained aircraft? I wouldn’t.” Perhaps most notable among the communications are efforts to avoid simulator training – an expensive and time consuming process – which helped make the 737 MAX Boeing’s best-selling jetliner.
Iran denies missile downed Boeing 737
Canada’s Justin Trudeau, along with several other Western leaders, has accused Iran of unintentionally downing Flight PS752 with a surface-to-air missile, though the head of the country’s national aviation department has denied those allegations. Iran has now invited the U.S. National Transportation Safety Board to take part in the investigation after initially stating it would not allow Boeing (BA) to take part in the probe or inspect the black boxes from the crash. U.S. officials have expressed concern about sending employees to Iran because of the heightened tensions, while their role could be limited by sanctions.
First state to sell own prescription drugs?
A new budget proposed by California Governor Gavin Newsom includes a plan to allow the state to contract with generic drug makers to provide medicines to all Californians. He believes that the government’s purchasing power may be sufficient to cut drug prices to the state’s 40M residents, almost 33% Medicaid enrollees. Newsom is also in favor of authorizing the California Department of Health Care Services to negotiate drug prices for international buyers, a situation that could potentially enable the state to achieve discounts on par with Canada.
AR breakout in the 2020s
Instead of setting a yearly challenge for himself as he has done annually for the past ten years, Facebook (NASDAQ:FB) CEO Mark Zuckerberg is predicting major developments over the next decade. “While I expect phones to still be our primary devices through most of this decade, at some point in the 2020s, we will get breakthrough augmented reality glasses that will redefine our relationship with technology,” he wrote in a post. Other important themes Zuckerberg is forecasting are a private social platform, decentralizing opportunities and new forms of digital governance.
Amazon explores streaming TV ad expansion
Amazon (NASDAQ:AMZN) has been building a business selling ads on its Fire streaming television platform, and now it wants to sell some ads for the first time on other streaming TV systems such as Apple TV and Xbox, WSJ reports. Publishers were told the company could fill ads at higher prices – as much as $40 per thousand impressions – than other third-party ad-selling platforms. Connected TV ad spending is expected to rise to nearly $8.9B this year, up from $6.9B in 2019, according to eMarketer.
California ‘gig worker’ law
Many are looking to carve out exemptions from California’s new “gig worker” rule – which obligates companies to pay overtime, healthcare and workers’ compensation – and one industry just scored a victory. Los Angeles Superior Court judge William Highberger has issued a temporary restraining order, saying AB5 does not apply to independent truck drivers because they are subject to federal statute. California is home to 450,000 contract workers, and roughly 70,000 of them are independent big-rig owner-operators.
Mercedes keeps luxury car sales crown
Mercedes-Benz (OTCPK:DDAIF) successfully defended its title as the world’s best-selling luxury-car brand in 2019, topping archrivals BMW (OTCPK:BAMXF) and Audi (OTCPK:AUDVF) for the fourth year in a row. The automaker’s sales increased 1.3% to 2.34M vehicles, making it the highest annual sales volume in its history. “The record year underscores once more the strong demand for Mercedes-Benz vehicles, even amidst far-reaching changes in the mobility landscape,” said Mercedes Chairman Ola Kaellenius.
Changing dynamics for U.S. refineries
Even with U.S. energy production at an all-time record, seven different U.S. refineries are on the block now, accounting for about 5% of U.S. crude oil processing capacity, according to data compiled by Reuters. The properties are having trouble finding bidders because of unfavorable locales, worries about falling margins, and the coming restart of nearby facilities in the Caribbean. There’s also pressure from new international shipping fuel regulations, known as IMO 2020, and U.S. renewable fuels standards that require refineries to blend in biofuels.
What else is happening…
Grubhub (NYSE:GRUB) denies reports of sale; shares plunge.
Aurora Cannabis (NYSE:ACB) lands a $1 price target.
iPhone (NASDAQ:AAPL) sales in China up 18% in December.
Tough holiday season for J.C. Penney (NYSE:JCP).
Lockheed Martin (NYSE:LMT) names former DARPA director as CTO.
Boeing (BA) may have to lower 787 production rate – Air Lease.
Thursday’s Key Earnings
Kohl’s (NYSE:KSS) -6.5% on disappointing holiday sales.
Today’s Economic Calendar
8:30 Non-farm payrolls
10:00 Wholesale Trade
1:00 PM Baker-Hughes Rig Count
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Good morning. Happy Thursday.
The Asian/Pacific markets closed with solid gains. Japan, China, Hong Kong, South Korea, India, Taiwan, Indonesia and Thailand all gained 1% or more. Europe, Africa and the Middle East are currently mostly up. Poland, Turkey, Germany, Greece, the UAE and Saudi Arabia are each up at least 1%. Futures in the States point towards a moderate gap up open for the cash market.
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The dollar is up. Oil is flat; copper is down. Gold and silver are down. Bonds are flat.
Stories/News from Seeking Alpha…
U.S. equities are once again positive for the year as a de-escalation between the U.S. and Iran led shares back to the black on Wednesday. Stepping away from military retaliation, President Trump said he would instead tighten sanctions on the Islamic Republic, prompting oil prices to drop below $60 a barrel. Focus returns to trade? Futures now suggest the DJIA will tack on another 100 points at the open as China confirmed Vice Premier Liu He will sign a “Phase 1” deal next week in Washington.
Post-Brexit relationship
In his first face-to-face meeting with Ursula von der Leyen, the new president of the EU Commission, Boris Johnson laid out some red lines for his visions of a post-Brexit deal. He stressed that the U.K. won’t extend its transition period beyond 2020, and that he wants a Canada-style trade accord (under which 98% of goods traded are free of tariffs). “Any future partnership must also not involve any kind of alignment” with EU rules and standards or be subject to the jurisdiction of the European Court of Justice.
Corona joins hard seltzer party
Shares of Constellation Brands (NYSE:STZ) rose 3.6% on Wednesday despite a drag from its stake in Canopy Growth (NYSE:CGC), as results topped estimates and guidance received a lift. The company is now looking to diversify past cannabis, with plans to spend more than $40M in marketing alone on a line of Corona hard seltzers (the alcoholic category is a millennial favorite). “We’re prepared to have one of the biggest introduction spends that we’ve ever had against a single brand, but recognize we’re spending it against a franchise and that’s Corona,” CEO Bill Newlands told CNBC.
Grubhub considers strategic options
The food-delivery provider has tapped financial advisers for help with a review of potential moves that could include a sale of the company or an acquisition, WSJ reports. Also on the menu is what to do in case an activist shows up. Going public nearly six years ago, Grubhub’s (NYSE:GRUB) market cap is now valued at roughly $5B, down from a peak of more than $13B just over a year ago – before competition from other delivery startups heated up. GRUB shares are up 1% premarket, building on yesterday’s 13% advance.
AI welcomed into Hollywood
A new deal signed with Cinelytic will see Warner Bros. (NYSE:T) employ an artificial intelligence system to analyze potential movies and choose which ones to put into development. While the platform doesn’t guarantee a hit, it can assess the value of a star in any territory and how much a film is expected to make in theaters and on other ancillary streams. The system can also complete the menial tasks executives normally have to do, like calculating the parameters for packaging, marketing and distribution, including release dates.
Loosening control over stock data
A proposal advanced by the SEC takes aim at a two-tier system that allows trading platforms like the New York Stock Exchange (NYSE:ICE) and Nasdaq (NASDAQ:NDAQ) to charge their largest customers higher fees for faster proprietary feeds, leaving smaller players to rely on a slower public stream. If the regulator decides to issue an order after receiving public input, the exchanges and FINRA would have to create a new governance plan, which would also be published for public comment before the SEC takes it into consideration.
Milestone for space tourism
“We now have two spaceships which are structurally complete, with our third making good progress,” according to Virgin Galactic (NYSE:SPCE) CEO George Whitesides. “These spaceships are destined to provide thousands of private astronauts with a truly transformative experience by performing regular trips to space.” The company has not set a date for the start of commercial operations, but has said it anticipates doing so in 2020.
Ghosn comes out swinging
During a two-hour-plus news conference on Wednesday, Carlos Ghosn, the world’s most famous white-collar fugitive, defended himself against charges of financial crimes and called out former Nissan CEO Hiroto Saikawa and board member Masakazu Toyoda for orchestrating his downfall. Ghosn also criticized the recent performance of Nissan (OTCPK:NSANY) and Renault (OTCPK:RNLSY), declaring, “there is no more alliance.” Nissan’s stock is still trading near recent lows as the automaker faces huge investment requirements and challenges of slowing sales.
Sidestepping California’s gig worker law
Uber (NYSE:UBER) drivers will now be able to see a trip’s time, distance, destination and estimated price ahead of time, and can reject requests without penalty, essentially giving them more freedom to refuse less-profitable trips. The latest changes are meant to give drivers more choice about which rides they accept, making them appear more independent in the eyes of the law. California’s Assembly Bill 5 went into effect on Jan. 1, establishing a test that employers must pass to classify their workers as contractors.
What else is happening…
Walsh to resign as boss of British Airways owner (OTCPK:ICAGY).
Crisis returns as Takata (OTCPK:TKTDQ) recalls 10M replacement inflators.
Kroger (NYSE:KR) is the latest to join the meatless party.
No deal… HP (NYSE:HPQ) again calls Xerox (NYSE:XRX) bid undervalued.
Deere (NYSE:DE) sees higher margins from cost cuts.
Occidental Petroleum (NYSE:OXY) launches widespread layoffs.
Wednesday’s Key Earnings
Bed Bath & Beyond (NASDAQ:BBBY) -9.9% AH withdrawing its annual forecast.
Constellation Brands (STZ) +3.6% as marijuana losses eased.
Lennar (NYSE:LEN) +0.8% forecasting cash flow growth.
Walgreens (NASDAQ:WBA) -5.8% on soft pharmacy volumes.
Today’s Economic Calendar
8:00 Fed’s Clarida: Economic Outlook and Monetary Policy
8:30 Initial Jobless Claims
9:30 Fed’s Kashkari Speech
10:30 EIA Natural Gas Inventory
11:30 Fed’s Williams: “The Future of Inflation Targeting”
12:45 PM Fed’s Barkin Speech
1:00 PM Results of $16B, 30-Year Note Auction
1:20 PM Fed’s Evans Speech
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
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Good morning. Happy Wednesday.
The Asian/Pacific markets closed mostly down. Japan, China, Hong Kong, South Korea, Malaysia, Thailand and the Philippines all dropped more than 1%. Europe, Africa and the Middle East are currently split. Turkey, Germany, Russia, Hungary and Italy are up; Poland, the UAE, Greece and Saudi Arabia are down. Futures in the States, which were down huge overnight, are up.
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VIDEO: State of the Market
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The dollar is up. Oil is down; copper is up. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
Markets have recovered following initial panic after Iran launched more than a dozen ballistic missiles at bases housing U.S. troops in Iraq. Down by nearly 400 points overnight, DJIA futures have recouped all of their losses, while oil has given back gains and gold is off its highs. The direction of today’s session will likely depend on the U.S. response. President Trump will make a statement this morning, but tweeted last night that “all is well” and seemed to suggest there were no American casualties in the attacks.
737 crashes in Iran, no survivors
A Boeing (NYSE:BA) 737 passenger plane operated by Ukraine International Airlines crashed minutes after takeoff from Tehran overnight killing all 176 people on board. Ukraine’s embassy in Iran pointed to an engine failure – the turbines are made by CFM International (GE, OTCPK:SAFRY) – though Iran said it wouldn’t give the recovered black box to Boeing. The 737-800 (only three years old) is a predecessor of the 737 MAX, the type that regulators grounded worldwide in March after two fatal crashes in a span of five months.
Most valuable American carmaker
Continuing its surge into 2020, Tesla (NASDAQ:TSLA) rose as much as 4.7% on Tuesday to carve out yet another all-time high at over $470/share. The extended rally has pushed the company’s market cap to the highest ever recorded by a U.S. automaker, topping the $80.81B cap of Ford (NYSE:F) in 1999 and easily outdistancing the record cap for pre-bankruptcy General Motors (NYSE:GM) or post-bankruptcy GM. Global records? Tesla’s market cap still trails Toyota (NYSE:TM) and Volkswagen (OTCPK:VWAGY), which were valued at $231.76B and $98.05B, respectively.
Ghosn breaks silence
Lawyers for fugitive ex-Nissan (OTCPK:NSANY) chief Carlos Ghosn blasted the carmaker hours before he was scheduled to hold a highly anticipated news conference, accusing the company of using a “flawed, biased” internal probe to engineer his arrest. Keep your eyes on the presser, which begins at 8 a.m. ET. Ghosn is likely to name people behind what he says was a plot to halt his plans to integrate Nissan more closely with France’s Renault (OTCPK:RNLSY), though the Japanese group is expected to go on the offensive to head off the attacks.
Earnings
Results today from Walgreens Boots Alliance (NASDAQ:WBA), Constellation Brands (NYSE:STZ) and Bed Bath & Beyond (NASDAQ:BBBY) will be among the last ahead of the fourth-quarter earnings season, which kicks into full gear over the coming weeks. While profits are expected to fall slightly – capping 2019 as a lackluster year – Wall Street is hopeful that earnings will rebound in 2020, possibly rising 9.6%. That would be the third-best growth rate in the last seven years, helping justify high stock prices and boosting further economic growth.
Chip prices bottom out
Shares of Samsung Electronics (OTC:SSNLF) rose 2% in Korea overnight after the company said operating profit likely slumped 34% in the fourth quarter. The figure was much milder than analysts had forecast, indicating that memory chip prices have bottomed out and strengthening hope of recovery from an industry downturn. Samsung, the world’s biggest maker of memory chips, has seen earnings drop since late 2018 on rising inventories and trade gloom.
IBM quantum computing service tops 100 clients
That’s up from 40 a year ago, with customers including Delta (NYSE:DAL), Daimler (OTCPK:DDAIF), JPMorgan (NYSE:JPM) and Anthem (NYSE:ANTM), as well as industries ranging from energy to electronics. IBM’s (NYSE:IBM) announcement suggests that quantum computing is no longer a lab or university experiment, said Matthew Brisse, an analyst at research and advisory firm Gartner. By 2023, a fifth of organizations, including businesses and governments, are expected to budget for quantum-computing projects, up from less than 1% in 2018.
Latest punch in meatless wars
McDonald’s (NYSE:MCD) is expanding its pilot of Beyond Meat (NASDAQ:BYND) burgers to 52 restaurants across Canada after rolling out the plant-based meat burgers in 28 local outlets in October. The news comes after BYND shares soared 12.4% on Tuesday and follows an announcement from rival Impossible Foods, which said it won’t be able to partner with the Golden Arches until the company is able to scale up production. “I wish we had vastly more capacity than we do right now because the demand is high,” said CEO Pat Brown.
Troubles in Puerto Rico
Following a week of tremors, a magnitude-6.4 earthquake rocked Puerto Rico on Tuesday, triggering a blackout on the island that is still recovering two years after Hurricane Maria. The territory’s federal board, which last year struck a $35B debt restructuring deal with creditors, authorized $260M in emergency reserve funds for expenses related to the quakes. More than 133K Puerto Ricans moved to the U.S. mainland in 2018, accelerating an exodus that has further dampened the local economy.
What else is happening…
Finland shoots down rumor of four-day working week.
Lackluster demand sees weak factory data out of Germany.
Aramco (ARMCO) not benefiting from oil price gains.
Sonos (NASDAQ:SONO) sues Google (GOOG, GOOGL) over speaker patent infringement.
T-Mobile (NASDAQ:TMUS) adds 1.9M net customers in Q4.
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
10:00 Fed’s Brainard Speech
10:30 EIA Petroleum Inventories
1:00 PM Results of $24B, 10-Year Note Auction
3:00 PM Consumer Credit
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Good morning. Happy Tuesday.
The Asian/Pacific markets posted solid gains. Japan, China, South Korea, Australia and Thailand all did very well; Taiwan was weak. Europe, Africa and the Middle East currently lean up. Turkey, Germany, the UAE, Greece, South Africa, Italy and Sweden are leading. Futures in the States point towards a flat open for the cash market.
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VIDEO: State of the Market
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The dollar is up. Oil is down; copper is up. Gold and silver are down slightly. Bonds are flat.
Stories/News from Seeking Alpha…
What happens in Vegas stays in Vegas, except at CES… hopefully. Exhibitors are optimistic the technology displayed at the world’s biggest trade show will spread into the broader market, and with 175,000 attendees searching for innovations of the future, there’s a good chance it will. This year’s edition of the Consumer Electronics Show runs from today until Jan. 10, featuring the latest advances in areas like artificial intelligence, automation, transportation, surveillance, connected devices and smart cities.
CES thus far
Uber (NYSE:UBER) and Hyundai Motor (OTCPK:HYMLF) are partnering to develop electric air vehicles, joining the global race to make small self-flying cars to ease urban congestion. Samsung Electronics (OTC:SSNLF) demonstrated what it called the world’s first artificial human, Qualcomm (NASDAQ:QCOM) launched an autonomous driving computer and Toyota (NYSE:TM) said it’s building the prototype city of the future in Japan. Amazon (NASDAQ:AMZN) is also teaming up with Lamborghini and Rivian to offer its Alexa voice assistant in vehicles.
Deepfake crackdown
Facebook (NASDAQ:FB) is banning videos that have been manipulated using advanced tools, though the policy “does not extend to content that is parody or satire, or video that has been edited solely to omit or change the order of words.” That could expose the company to new controversy and put it on a slippery slope of deciding which videos are satirical. Late last year, Google (GOOG, GOOGL) updated its ad policy to prohibit the use of deepfakes, while in November, Twitter (NYSE:TWTR) said it was considering identifying manipulated photos, videos and audio shared on its platform.
Risk reassessment
Black gold and gold surrendered some hefty gains overnight as some speculated Iran would be unlikely to strike against the U.S. in a way that would disrupt crude supplies, and its own exports. “Oil traders have been unwinding their hedges, thinking that Iran’s economic hardships would deter an attack that puts the economy into an even deeper hole,” said Stephen Innes, chief Asia market strategist at AxiTrader. U.S. stock index futures meanwhile continued to show a broad advance, though gains were pared to around 0.2% on reports suggesting Iran was weighing 13 “revenge scenarios” to avenge the death of Qassem Suleimani.
Impossible Pork
The meatless wars are heating up as plant-based food makers target new product lines after biting into the U.S. burger business. Impossible Foods will introduce imitation ground pork and sausage later this month, including a patty for a new sandwich at dozens of Burger King (NYSE:QSR) restaurants, as the company turns its focus to international expansion in 2020. Rival Beyond Meat (NASDAQ:BYND) already began supplying plant-based sausage to Dunkin’ Brands (NASDAQ:DNKN) and Tim Hortons restaurants last year, mainly for breakfast sandwiches.
Finland targets four-day workweek
Calling it the “next step for us in working life,” Finland’s newly installed prime minister, Sanna Marin, has proposed putting the entire country on a four-day workweek that consists of six-hour workdays. Neighboring Sweden tested out six-hour work days a couple of years ago, and in France, the standard work week was reduced to 35 hours (from 39 hours) in 2000. The corporate world is also experimenting with the idea. In November 2019, Microsoft Japan (NASDAQ:MSFT) revealed that a trial four-day workweek had boosted productivity by 40%.
Australia bushfires to hit the economy
Killing 25 people and leaving thousands homeless, Australia’s huge bushfires have already burned through more than 25.5M acres of land and the economic costs are adding up. Shane Oliver, AMP’s Sydney-based head of investment strategy, estimates a minimum 0.4% hit on GDP in the March quarter, which could mean growth stalled completely in the period and prompt another interest rate cut as early as February. Prime Minister Scott Morrison has also pledged at least $2B in investment over the next two years for a “bushfire recovery fund” to help rebuild devastated regions.
Model Y program launches in Shanghai
Elon Musk was on site as Tesla (NASDAQ:TSLA) delivered its first China-made Model 3 sedans to the public at an event in Shanghai, where the automaker began building its foreign car plant just over a year ago. The EV maker also announced the kick-off of its Model Y program in the country (the all-electric crossover offers optional third-row seats and has a 300 mile range). “Ultimately Model Y will have more demand than probably all of the other Tesla cars combined… and will have advanced manufacturing technologies that we will reveal in the future,” Musk told the crowd.
Biggest commercial satellite operator
SpaceX (SPACE) launched another 60 satellites in its Starlink network last night, becoming the largest commercial satellite operator. The launch aboard a Falcon 9 rocket brings to 182 the number of spacecraft the firm has now put in the sky as part of its plan to beam broadband internet service to Earth. SpaceX has regulatory approval to launch up to 12,000 platforms but has talked of an eventual 40K, depending on how the project develops.
737 MAX crisis
Boeing (NYSE:BA) is reassigning 3,000 workers to other jobs, but does not expect to furlough any staff, as it halts production of its grounded 737 MAX in mid-January. Major supplier Spirit AeroSystems (NYSE:SPR) meanwhile said it would offer voluntary layoffs to some employees due to a lack of “clarity on the timing for resuming MAX production.” The announcements come after American Airlines (NASDAQ:AAL) and Mexico’s Aeromexico disclosed they were the latest carriers to reach settlements with Boeing over losses resulting from the 737 MAX crisis.
What else is happening…
General Motors (NYSE:GM) is suffering a prolonged sales slump in China.
Nissan (OTCPK:NSANY) will pursue legal action against Ghosn.
Go green… JetBlue (NASDAQ:JBLU) to become carbon neutral in 2020.
Fitbit (NYSE:FIT) holders have approved Google’s (GOOG, GOOGL) buyout.
Juul (JUUL) picks CFO to lead transformation.
Losses prompt Pier 1 (NYSE:PIR) to close nearly half its stores.
Food delivery software startup Olo (ORDR) plans 2020 IPO.
Today’s Economic Calendar
8:30 International Trade
8:55 Redbook Chain Store Sales
10:00 Factory Orders
10:00 ISM Non-Manufacturing Index
1:00 PM Results of $38B, 3-Year Note Auction
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Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets posted mostly big losses. Japan, Hong Kong, South Korea, India, Taiwan, Malaysia, Indonesia and Thailand dropped more than 1%. Europe, Africa and the Middle East are currently mostly down. The UK, Poland, France, Germany, Greece, Turkey, South Africa, Hungary, Italy, the Netherlands and Sweden are down 1% or more. Futures in the States point towards a relatively big gap down open for the cash market.
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FREE Online Course: Jason Leavitt’s Mini Masterclass in Trading
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The dollar is down. Oil is up; copper is down. Gold and silver are up. Bonds are up.
Stories/News from Seeking Alpha…
Stocks are set to kick off the week with more losses, as the DJIA suggests another 200-point drop to erase New Year gains amid an escalation in geopolitical risk in the Middle East. Besides targeting 52 Iranian sites, President Trump threatened to slap sanctions on Iraq ‘like they’ve never seen before’ after a vote to expel U.S. troops, while Iran said it will no longer abide by uranium enrichment limits. WTI oil prices jumped as much as 2% overnight as Brent crude topped $70 a barrel for the first time since September, while gold soared to nearly $1,600 an ounce, its highest in more than seven years.
Defense spending referenced as warnings escalate
“The United States just spent Two Trillion Dollars on Military Equipment. We are the biggest and by far the BEST in the World! If Iran attacks an American Base, or any American, we will be sending some of that brand new beautiful equipment their way…and without hesitation!” President Trump tweeted over the weekend. Increased military spending could make defense stocks a winning trade once again in 2020. The iShares U.S. Aerospace & Defense ETF (BATS:ITA) has rallied more than 70% since Trump was elected on Nov. 8, 2016, while the S&P 500 is up around 50% in that time.
Inflation and repo stabilization
Low global interest rates are here to stay “for the next five to 10 years,” which should lead Fed officials to hold themselves accountable to their 2% inflation target, according to New York Fed President John Williams. He also said the Fed’s response to inject liquidity into repo markets following a cash crunch in September had “worked exactly as we wanted.” “As the level of reserves have been brought back to the appropriate level, we’ve seen money markets operate very smoothly.”
Night of upsets at Golden Globes
Once Upon a Time in Hollywood from Sony Pictures (NYSE:SNE) and 1917 from Universal (NASDAQ:CMCSA) took home the top prizes for best picture in their respective categories on a night packed with upsets at the 2020 Golden Globes. Other big award winners included AT&T (NYSE:T) (+6), ViacomCBS (NASDAQ:VIAC) (+3) and Disney (NYSE:DIS) (+3). Despite 17 nominations, the most of any single studio, Netflix (NASDAQ:NFLX) only garnered two trophies during Sunday’s ceremony, though its nominations still underscore the changing Hollywood landscape.
Beyond real estate
Bed Bath & Beyond (NASDAQ:BBBY) has reportedly signed a deal to sell roughly half of its real estate to private-equity firm Oak Street, including its headquarters, a distribution facility and an undisclosed number of its 1,500 stores. The embattled retailer will then lease back the space in a transaction that will generate more than $250M in proceeds, which will be used to repay debt, buy back shares and fund a turnaround effort under new CEO Mark Tritton. The company is also expected to evaluate the rest of its real estate and retail concepts like Buy Buy Baby and Harmon drugstores.
Xerox scores financing for HP bid
Citigroup, Mizuho Financial and Bank of America have agreed to provide Xerox (NYSE:XRX) with up to $24B in financing for its takeover offer for HP Inc. (NYSE:HPQ), sources told the WSJ. It’s a sign the company is pushing forward with an unsolicited $33B deal that its larger rival had rejected as too low and not in the best interests of its shareholders. Xerox on Nov. 5 made the cash-and-stock offer for HP, whose market value has since risen to almost $30B, making it nearly four times Xerox’s size.
France warns on digital tax retaliation
Any retaliation to France’s new digital services tax could “deeply and durably affect the transatlantic relationship,” French Economy Minister Bruno Le Maire warned the U.S. on Monday. “If the Americans decide to go ahead and impose sanctions… in this case we would retaliate,” he told France Inter radio. Washington has threatened to impose duties of up to 100% on imports of champagne, handbags and other French products worth $2.4B after a government investigation found the tax would harm U.S. tech companies.
First cannabis ETF to launch in Europe
Despite a poor year for the sector, marijuana funds have proved popular in North America, prompting plans by Canadian fund group Purpose Investments to launch Europe’s first cannabis ETF on Jan. 13. The Medical Cannabis and Wellness ETF will be listed in Germany and made available to investors in the U.K., Italy and Ireland. The world’s largest cannabis ETF, the U.S.-listed ETFMG Alternative Harvest (NYSEARCA:MJ), has $673M of assets and lost 28.5% last year, while the second largest fund, Canada’s $327M Horizons Marijuana Life Sciences Index ETF (HMLSF), lost 33.8%.
Cutting heavy-duty truck emissions
The EPA will begin seeking public input today on new rules (to be proposed early this year) that will significantly decrease emissions of smog-forming nitrogen oxide and other pollutants from heavy-duty trucks. The Truck and Engine Manufacturers Association, which represents the four largest truck makers in North America – Daimler Trucks (OTCPK:DDAIF), Paccar (NASDAQ:PCAR), Volvo Trucks (OTCPK:VOLVY) and Navistar (NYSE:NAV) – is backing the initiative and said it wants a national program with “sufficient regulatory lead time, stability and certainty.” The EPA last toughened NOx standards for highway heavy-duty trucks and engines in 2000.
Extra simulator training for 737 MAX pilots?
Boeing (NYSE:BA) has long maintained 737 MAX pilots don’t need supplemental simulator training beyond what they receive to fly other 737 models, but many FAA officials are now regarding that stance with increasing skepticism, WSJ reports. Under consideration is mandatory flight-simulator training as regulators propose rewriting emergency checklists for pilots and creating some new ones. While the FAA’s formal decision isn’t expected until February or later, the idea would entail extra costs and delays for airlines.
What else is happening…
‘Iran fears are overdone’ – Wall Street’s biggest bull.
Saudi Aramco (ARMCO) falls to lowest level since IPO.
Mega recall for faulty Daimler (OTCPK:DDAIF) sunroofs.
Amazon (NASDAQ:AMZN) weighs brick-and-mortar play in Germany.
Apple’s (NASDAQ:AAPL) Tim Cook took home $125M in 2019.
Today’s Economic Calendar
9:45 PMI Services Index
12:30 PM TD Ameritrade IMX