Friday Morning Reads
- Fight With White House
- Central Banker to the World
- Smart to Fight the Fed
- Don’t Count on a Sequel.
- Bed Bath & Beyond Is Circling the Drain
- Are You Guilty Of Risk Creep?
- The Tariff Man
- Trends That May End
- Futures extend gains as Dow holds 27K
- China's trade surplus with U.S. rises 11%
- Altria +2% after Goldman Sachs lift
- Apple disbands AR/VR headset team - report
- Sell-side can't get enough Snap
- Barr recuses himself from 737 MAX probe
- The president is a no-coiner
- Brookfield Infrastructure drops 3.3% after equity offering announced
- Schwab loses two bulls (updated)
- CannTrust suspends cannabis product sales
- Hillenbrand to acquire Milacron for $2B
- Netflix hires new CMO
Open Interest Changes
Another day, another record. The Dow rallied 200 points on Thursday to close above 27,000 for the first time ever as Fed Chair Jerome Powell cemented his view that rates have room to go lower in the coming months. "We're learning that interest rates - that the neutral interest rate - and the natural rate of unemployment is lower than we thought," he said in the second day of semi-annual testimony on Capitol Hill. "So monetary policy hasn't been as accommodative as we had thought." Futures contracts tied to the DJIA are extending gains, up 89 points ahead of the open, while the S&P 500 and Nasdaq are ahead by 0.3%.
"I am not a fan of Bitcoin (BTC-USD) and other cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air," President Trump tweeted last night. He also took a slap at Facebook (NASDAQ:FB) and its Libra crypto offering, which he said "will have little standing or dependability." If Facebook and others want to become banks, he adds, they can stand in line and get banking charters like all the rest. "We have only one real currency in the USA, and it is stronger than ever, both dependable and reliable."
U.K. Prime Minister Theresa May's government has unveiled plans for a tax on global tech giants, in what could be one of her final pieces of legislation and a last-ditch bid to shape her legacy beyond Brexit. A 2% tax is planned on the revenues of search engines, social media platforms and online marketplaces that "derive value" from British users. The levy would come into force in April 2020 and is expected to raise almost £1.5B in four years.
Chinese trade data surprised investors with an 11% increase in the trade surplus with the U.S. in June, rising to $29.92B (from $26.89B in May), an unexpected result at a time when the trade tensions between the two countries are still rising. Data on Thursday previously showed the Los Angeles and Long Beach port complex in the U.S., the nation’s busiest and the No. 1 for ocean trade with China, handled 5.1% fewer inbound containers of cargo in June as the countries go back to the drawing table for a trade deal.
Crude prices are headed for their biggest weekly gain in three as simmering Middle East tensions, shrinking U.S. crude inventories and Tropical Storm Barry in the Gulf of Mexico threaten the supply outlook. Despite the developments and recent rollover of an OPEC-led output cut, the IEA is forecasting another oil glut in 2020. "This surplus adds to the huge stock builds seen in the second half of 2018," the agency declared, adding that "market tightness is not an issue for the time being" but predicting growth of 1.4M barrels per day next year (from 1.2M bpd in 2019).
Shares of pharmacy benefit managers (PBMs) and other healthcare players soared on Thursday in reaction to the Trump administration's reversal on its proposed overhaul of rebates collected by the drug middlemen. At this juncture, the administration is moving forward with its plan to tie Medicare reimbursement for drugs to the lowest prices paid elsewhere. The news came days after a federal judge dealt a blow to the White House by striking down a rule that would have forced pharmaceutical companies to disclose the list price of their drugs in TV ads.
Daimler (OTCPK:DDAIF) has issued its fourth profit warning in just over a year, this time blaming higher costs to deal with a recall of vehicles fitted with faulty Takata airbags and increasing funds set aside to address diesel emissions tampering allegations. As a result, second-quarter profits will likely swing to a loss of €1.6B, excluding interest and taxes, a near 40% plunge from the same period last year. Full-year earnings are also expected to be "significantly" below the previous year's levels, sending Daimler shares down as much as 4.5% in Frankfurt.
Major automakers have been consolidating efforts as the race heats up to develop driverless and electric cars. The latest partnership, to be announced at a press event in New York today, will see Volkswagen (OTCPK:VWAGY) invest around $2.6B in Ford's (NYSE:F) autonomous vehicle partner, Argo AI, in a deal that values the startup at $7B. Under the deal, Argo will develop autonomous driving technology for VW and eventually supply systems for commercial use, while continuing its development work with Ford.
Nike (NYSE:NKE) is going ahead with its manufacturing facility in Goodyear, Arizona - with a likely investment of at least $184M - despite losing state money last week when it pulled a Betsy Ross flag-themed shoe from the market. The decision was prompted by critics who said the sneaker reflected links to slavery, though Arizona Gov. Doug Ducey called it "a shameful retreat." While Nike will forfeit a $1M grant, the footwear maker will still get more than $2M in tax breaks from the city of Goodyear, where Nike said it will begin work on the facility later this year and begin making soles in 2020.
With his former law firm, Kirkland & Ellis LLP, representing the planemaker, Attorney General William Barr has recused himself from overseeing the DOJ's investigation into Boeing (NYSE:BA) in the wake of the 737 MAX crisis. The criminal probe seeks to determine whether the company and federal regulators gave short shrift to safety concerns while designing and certifying the MAX. Shortly before the news, Boeing 737 program manager Eric Lindblad announced his retirement just 12 months into the job, consumed by the jet's grounding following two fatal crashes.
What else is happening...
'The Fed And The Market: Something's Not Quite Right' writes contributor Elazar Advisors.
Tensions as Turkey receives first Russian S-400 shipment.
In Asia, Japan +0.2%. Hong Kong +0.1%. China +0.4%. India -0.2%.
In Europe, at midday, London +0.2%. Paris +0.5%. Frankfurt +0.1%.
Futures at 6:20, Dow +0.4%. S&P +0.3%. Nasdaq +0.3%. Crude +0.1% to $60.26. Gold +0.1% to $1407.80. Bitcoin +1.8% to $11650.
Ten-year Treasury Yield +1 bps to 2.13%