Friday Morning Reads

Friday Morning Reads




Open Interest Changes:




The tech-heavy Nasdaq on Thursday closed at a new all-time high led by gains from Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN), while the Dow and S&P 500 closed lower on disappointing earnings from Walgreens (NASDAQ:WBA). While U.S. stock index futures are all inching lower premarket, the same pattern is being seen as the Dow and S&P 500 lead losses at 0.5% and the Nasdaq behind at 0.2%. "The cyclical story is on hold for now," Allianz Global Investors' Mona Mahajan declared, as money flows back into stay-at-home plays. "It's not dead forever," she added. "There are a few things that could reignite it," like evidence virus cases have peaked, a vaccine or a resolution to the November presidential election.

Improved oil demand, clouded outlook

"While the oil market has undoubtedly made progress... the large, and in some countries, an accelerating number of COVID-19 cases is a disturbing reminder that the pandemic is not under control and is casting a shadow over the outlook," the IEA wrote in its closely watched monthly report. While global oil demand in the first half of 2020 plunged by 10.75M barrels a day, down roughly 11% Y/Y, the agency forecast oil demand would be down by 5.1M bpd in the second half. This means global oil demand this year will average 92.1M barrels per day, down by 7.9M bpd versus 2019, a slightly smaller decline than forecast in the last report.

Pandemic era earnings

Investors are also set to get a glimpse of the coming earnings season as Carnival (NYSE:CCL) reports Q2 results this morning against the backdrop of the COVID-19 pandemic. Like many of its peers, the company has already borrowed heavily and raised money to stay afloat as most of its voyages were canceled due to coronavirus restrictions. The world's largest cruise operator will also likely discuss the future and its plans to sail again as COVID-19 cases spike. Yesterday, AIDA Cruises, Germany's leading cruise line and a part of Carnival, announced that three of its ships will restart sailing in August.

Mask policies

Following an increase in COVID-19 cases and hospitalizations in various parts of the country, Starbucks (NASDAQ:SBUX) is requiring customers to wear facial coverings at all company-owned locations from July 15. The coffee chain joins a long list of companies that require masks, including Costco (NASDAQ:COST) and major airlines. Earlier this week, the Retail Industry Leaders Association asked governors to require consumers not affected by a medical condition to wear masks when shopping or in public spaces.

Thinking about automation

Tyson Foods (NYSE:TSN), the biggest U.S. meat company by sales, currently relies on about 122K workers to churn out about 20% of chicken, beef and pork produced in the U.S. That's changing after the coronavirus pandemic showed supply chain vulnerabilities. The company is now pushing further into robotics, developing an automated deboning system destined to handle some of the roughly 39M chickens it processes each week. At Pilgrim's Pride (NASDAQ:PPC), the second largest U.S. chicken processor, deboning machines now trail humans by only 1% to 1.5% in terms of meat yield per chicken.

Latest trade actions

The U.S. is expected to announce actions today against France over its digital services tax, but will suspend them while France defers the collections from U.S. technology firms. The steps are tied to a U.S. Section 301 probe into the foreign tax, which Washington says discriminates against U.S. tech giants like Google (GOOGGOOGL), Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB). The Trump administration also plans to finalize regulations this week that will bar the U.S. government from buying goods or services from any company that uses products from five Chinese firms, including Huawei, Hikvision, Dahua (OTCPK:DHUA), Hytera and ZTE Corp. (OTCPK:ZTCOY).

Competitive self-driving world

On June 26, Amazon (AMZN) announced a $1.3B deal to acquire startup Zoox, which is set on designing a fully autonomous vehicle from scratch rather than retrofitting existing cars. The problem? Amazon needs to keep talent on board to make the deal worth it. It's planning at least $100M in stock awards to retain Zoox's 900+ employees, and can walk away from the deal if large numbers of them turn down the offers. The Information already reported last week that two senior Zoox engineers, James Philbin and Marc Wimmershoff, joined rival Alphabet's (GOOGGOOGL) self-driving unit Waymo, and Reuters revealed that GM's (NYSE:GM) Cruise stepped in to offer $1.05B for Zoox after the latter signed an exclusive agreement to negotiate with Amazon.
Go deeper: Flash back to the infamous case of Anthony Levandowski.

Local currency coronavirus relief

Tenino, a town of fewer than 2,000 people in Washington state, has begun printing its own wooden currency to help residents and businesses through the coronavirus crisis. There's some history here: In 1931, civic leaders printed local wooden banknotes to restore consumer confidence after the town's bank failed during the Great Depression. Current Tenino residents, who have documented loss of income due to the pandemic, are eligible for up to $300 a month, while nearly all businesses in the town are accepting the local $25 bills (which can be redeemed at city hall). "A federal program dumps money from the top and these blue-chip companies steal it all," said Mayor Wayne Fournier. "If we do it from the ground up, there's no stealing. It's a direct ballast to Main Street."

What else is happening...

TikTok (BDNCE) is no longer available in Hong Kong.

Sony (NYSE:SNEinvests $250M in 'Fortnite' maker Epic Games.

United Airlines (NASDAQ:UAL), pilots union reach tentative agreements.

Reports suggest Coinbase (COIN) is headed for stock market listing.

Tesla (NASDAQ:TSLA) poised to electrify S&P 500 - Reuters.

Thursday's Key Earnings
Walgreens (WBA-7.8% AH on $1.7B loss from the coronavirus outbreak.

Today's Markets
In Asia, Japan -1.1%. Hong Kong -1.8%. China -2%. India -0.4%.
In Europe, at midday, London +0.3%. Paris +0.1%. Frankfurt +0.1%.
Futures at 6:20, Dow -0.5%. S&P -0.5%. Nasdaq -0.2%. Crude -2.4% to $38.69. Gold +0.5% to $1812.90. Bitcoin -0.5% to $9177.
Ten-year Treasury Yield -2 bps to 0.57%

Today's Economic Calendar
8:30 Producer Price Index
1:00 PM Baker-Hughes Rig Count
2:00 PM Treasury Budget

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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