Friday Morning Reads
- ‘Downturn Without Modern Precedent’
- Rudderless After A Rally
- Many Jobs May Vanish Forever
- Disease Is Ravaging the $25 Billion Banana Industry
- What Could Amazon Want From JCPenney?
- Graveyard for Fools
- The Best Source of Investment Income?
- Twitter War!
- Hong Kong tumbles 5% as U.S. warns of 'destabilization'
- Futures suggest more losses at the open
- Alibaba EPS beats by $0.44, beats on revenue
- IBM cuts jobs across U.S., likely in the thousands
- TJX suspends dividend
- U.S. Oil Fund told by broker to stop buying oil futures
- Deere EPS beats by $0.53, beats on net sales
- Foot Locker EPS misses by $0.44, misses on revenue
- Fish oil to the rescue?
- Foot Locker down on earnings miss
- Tetraphase on board with Melinta offer; gives notice to AcelRx
- China drops GDP target, commits to trade deal
Following the pro-democracy protests that rocked Hong Kong in 2019, China detailed new national security legislation on the city that would clamp down on dissent, with opposition lawmakers warning the territory's status as an international financial center would be in jeopardy. "Any effort to impose national security legislation that does not reflect the will of the people of Hong Kong would be highly destabilizing," the U.S. State Department declared, as stocks in Hong Kong slid 5.6% overnight. The law is expected to pass China's National People's Congress before the end of its annual session on May 28.
In a sign of the uncertainty facing its economy, China scrapped its annual growth target for the first time since it began the practice in 1994, due to the "global epidemic situation and economic and trade situation." The country's economy shrank 6.8% in Q1, the first contraction in decades, setting a somber tone to this year's annual parliamentary meeting. Remarks from Premier Li Keqiang also addressed dealings abroad, saying, "we will work with the United States to implement the phase one China-U.S. economic and trade agreement."
S&P 500 futures are down another 0.5% ahead of Memorial Day weekend with the latest tensions between the U.S. and China on display. Beijing detailed new national security legislation for Hong Kong (see above), prompting American lawmakers to propose a bill that would essentially sanction any Chinese officials that enforce such a law. Stocks closed lower on Thursday, but initially posted broad gains as President Trump announced the economy would not shut again if a second wave of coronavirus hits, while Treasury Secretary Steven Mnuchin said there was a "strong likelihood" of another stimulus package.
Emergency rules from the FDA in March had loosely approved many coronavirus antibody tests as the COVID-19 pandemic spread in the U.S., but the agency is now following up on those regulations. 27 serological tests have been removed from the FDA's list, and while more than half were from China, a test by Becton Dickinson (NYSE:BDX) - distributed with partner BioMedomics - also got the boot. "BioMedomics has completed development of a second generation of the test... [and] intends to submit a new EUA application to FDA once the second-generation test has successfully completed all validation testing," Becton Dickinson said in a statement.
Big Blue is not disclosing the scale of the layoffs, but WSJ sources said they could affect several thousand people including its Global Technology Services (GTS) division, which offers IT outsourcing. It's the first major staff reduction under new CEO Arvind Krishna, who is trying to revive growth at the company. Last month, IBM took a $900M charge against earnings, largely to cover restructuring costs linked to GTS.
Facebook (NASDAQ:FB) is shifting permanently toward more remote work as it looks to recover from the COVID-19 pandemic, CEO Mark Zuckerberg told employees on Thursday. That marks an expansion of a previous stance that all employees could choose work from home at least for the rest of 2020 - a move topped by Twitter (NYSE:TWTR), which granted the option indefinitely. Facebook plans on building three new "hubs" in Atlanta, Dallas and Denver, where remote workers in those areas could occasionally convene to "foster community."
Marking its biggest investment in Asia to date, KKR (NYSE:KKR) is putting $1.5B in Reliance Industries' Jio Platforms, bringing the amount of new funds raised by the latter over the past month to $10B. A combined stake of just over 17% was raised in five fundraising deals led by Facebook (FB) (other recent investors were General Atlantic, Silver Lake and Vista Equity Partners). The deals highlight Jio's potential to become the dominant player in India's digital economy via movies, music apps and telecoms venture Jio Infocomm.
Hertz (NYSE:HTZ) is at loggerheads with a key group of creditors before a deadline today to cut a deal over missed debt payments, Bloomberg reports. The car rental company is running out of time to either extend a forbearance agreement or make around $400M of lease payments, and if no deal is reached, Hertz may need to seek bankruptcy protection. There's also a chance top shareholder Carl Icahn could swoop in at the last-minute to protect a $1.6B investment, now worth about $170M.
Argentina is set for its ninth sovereign debt default today as talks with creditors to restructure $65B in foreign debt took "a positive course." That's according to Economy Minister Martin Guzman, who declined to comment on whether the government would make around $500M in bond payments. "There is still an important distance to cover," he added, "but all sides are at the table trying to find a solution."
What else is happening...
Federal Reserve's balance sheet grows to $7.04T.
Pretty much no one is going to Macau.
Best Buy (NYSE:BBY) -4.4% on lower sales levels.
Hewlett Packard Enterprise (NYSE:HPE) -5.4% implementing major cost cuts.
Medtronic (NYSE:MDT) -2.7% missing expectations.
Nvidia (NASDAQ:NVDA) -0.4% AH following a week of record closes.
TJX Companies (NYSE:TJX) +6.8% suggesting strong sales as store reopened.
In Asia, Japan -0.8%. Hong Kong -5.6%. China -1.9%. India -0.8%.
In Europe, at midday, London -0.9%. Paris -0.1%. Frankfurt -0.4%.
Futures at 6:20, Dow -0.5%. S&P -0.5%. Nasdaq -0.7%. Crude -5.6% to $32.02. Gold +0.9% to $1737.10. Bitcoin -1.7% to $9175.
Ten-year Treasury Yield -3 bps to 0.64%Today's Economic Calendar
1:00 PM Baker-Hughes Rig Count