Monday Morning Reads
Reads:
- Global Race to Contain China’s Killer Bug
- A $100 Million Bet
- Banning Cashless Stores
- Buy a Dolphin or a Titan Missile
- How Under Armour Lost Its Edge
- Scandals Are Nearly Resolved
- Positioning for 2020
- Determine Your Outcomes
- The Second Chance
News:
- Stocks dive as virus fears deepen
- Virus jitters send oil down, gold and bonds higher
- Passenger plane crashes in Afghanistan
- Coronavirus-related stocks up again as contagion spreads
- Tanger Factory FFO beats by $0.03, beats on revenue
- AbbVie and Allergan to divest Brazikumab and Zenpep
- FDA OKs expanded use for Merck's Dificid
- Rivian looks to crash EV party
- Rocket hits U.S. embassy in Baghdad
- Poland announces $4.6B deal for F-35s
- Arconic EPS misses by $0.01, misses on revenue
- Tenneco +8% after moving forward on strategic review, updating guidance
Premium:
Charts:
Some implied moves for #earnings next week(2of2):$PFE 3.6%⁰$UTX 3.1%⁰$KO 3.0%⁰$S 11.6%⁰$UPS 4.9%⁰$XLNX 7.0%⁰$XOM 2.7%⁰$PII 9.9%⁰$ANTM 4.3% https://t.co/QEYceNdvXy
— Option Millionaires (@OMillionaires) January 25, 2020
Traders across the globe are starting the week in risk-off mode amid growing concerns over the potential economic damage from the fast-spreading coronavirus. In the U.S., Dow futures plunged 477 points, while futures on the S&P 500 and Nasdaq are down 1.7% and 2.1%, respectively. Crude futures traded 3.5% lower at $52.28/bbl and gold rose 0.8% to $1584/oz. Nearly 2,800 people in China have been infected and 80 killed by the disease, and over the last week, both numbers have been rising at close to 50% a day. "We don't know how infectious it is, we don't know how severe it is, and we don't know how it's spreading," said Tom Frieden, former director of the CDC.
Go deeper: Cash is King right now, writes David Lerner.
Preliminary data has also shown the scale at which the outbreak is affecting China's economy. On the first day of the Lunar New Year, there was a 41.6% decline Y/Y in civil air travel, 41.5% reduction in rail travel and 25% drop in road transport. Shanghai Disneyland also locked their doors, Starbucks (NASDAQ:SBUX) said it would shut all its outlets in Hubei province, while Marriott (NASDAQ:MAR), Hilton Worldwide (NYSE:HLT) and Hyatt Hotels (NYSE:H) are waiving cancellation fees. Separately, Honeywell (NYSE:HON) and 3M (NYSE:MMM) are boosting production of protective face and respirator masks, while DuPont (NYSE:DD) is working to increase supply of medical body suits and other protective gear.
Go deeper: China has allotted $9B to contain the spread of the virus.
Further weighing on market sentiment
Five Katyusha rockets were fired at the fortified Green Zone in Baghdad last night, one directly hitting the U.S. Embassy building. The rare direct targeting of the compound wounded three people, adding to the bearish market turn being seen around the world. News reports also suggested that Iraqi security forces in Baghdad killed an anti-government protester, adding to the months-long civil unrest that has seen the death of 500 people since Oct. 1.
Busiest week of earnings season
Providing key outlooks for many sectors of the market, nearly half of the 30 Dow components are scheduled to report Q4 results this week, as well as 141 of the S&P 500 companies. What's on watch? Tech - Apple's (NASDAQ:AAPL) shift to services and wearables, Amazon's (NASDAQ:AMZN) holiday quarter, Facebook's (NASDAQ:FB) ad opportunities. Industrials - Boeing (NYSE:BA) growing debt and GE's (NYSE:GE) turnaround. Energy - Headwinds for Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX)? Consumer - UPS's (NYSE:UPS) state-of-the-economy and forecasts from McDonald's (NYSE:MCD) and Starbucks (SBUX). Financials - PayPal (NASDAQ:PYPL) and Visa (NYSE:V). Healthcare - Pfizer (NYSE:PFE), Eli Lilly (NYSE:LLY) and Amgen (NASDAQ:AMGN).
State attorneys general will meet next week with U.S. Department of Justice attorneys to share information on their investigations into Google (GOOG, GOOGL), a step that could eventually lead to the groups joining forces. The two sides have not previously shared data about their concurrent investigations, WSJ reports, adding that at least seven state AGs who are part of the probe, led by Texas AG Ken Paxton, were invited to the meeting. At issue? Google's dominant position in online search and advertising, and possible anti-competitive behavior in its Android mobile operating system.
Go deeper: Kwan-Chen Ma gives near-term fundamental outlook for Alphabet.
Following several delays due to strong winds, Boeing (BA) successfully staged the first flight of the world's largest twin-engined jetliner on Saturday. The demonstration provides Boeing with a boost ahead of its quarterly results on Jan. 29, with some analysts forecasting a multibillion-dollar annual loss because of charges tied to the 737 MAX. Dubai-based Emirates is due to receive the first 777X, which can seat more than 400 passengers and carries a list price of $420M, though delivery has been pushed back until next year amid technical problems and an upcoming "rigorous" review by the FAA.
Rivian looks to crash EV party
Electric vehicle startup Rivian, backed by Amazon (AMZN) and Ford (NYSE:F), showed off its pickup truck and SUV at a weekend event in San Francisco. Scheduled to be delivered at the end of this year, the R1T pickup with 300 miles of range is expected to list at $69K and the R1S SUV with similar range at $72K. Tesla's (NASDAQ:TSLA) legal victories in key states like Michigan should help clear a path for Rivian to sell directly to customers.
There might be a new irritant to transatlantic relations. The Trump administration said it will respond to the EU's plans for a carbon tax - a top priority under the new commission led by president Ursula von der Leyen - with possible punitive measures. "Depending on what form the carbon tax takes, we will react to it - but if it is in its essence protectionist, like the digital taxes, we will react," U.S. Commerce Secretary Wilbur Ross told the FT.
The U.K. is set to finally leave the EU on Friday, opening the way for it to negotiate fresh trade deals, and the U.S. is hoping to complete a new pact within the year. "There are certain issues that perhaps they (first) need to resolve with the EU, but there are a lot of issues that can be resolved simultaneously," Treasury Secretary Steven Mnuchin declared. Annual trade in goods and services between the U.K. and U.S. is more than $230B. Roughly 20% of British exports each year go to the U.S., making it the U.K.'s largest market outside the EU.
What else is happening...
Passenger plane crashes in Afghanistan.
Italian yield sinks after M5S election failure.
Probed: Deutsche Bank (NYSE:DB) payments to Saudi royal.
'Bad Boys 3' (NYSE:SNE) stays at top of the box office.
Nestle (OTCPK:NSRGY) expands in medical nutrition with Allergan (NYSE:AGN) purchase.
Fiat (NYSE:FCAU) asks court to dismiss GM racketeering suit.
Poland announces $4.6B deal for Lockheed Martin (NYSE:LMT) F-35s.
In Asia, Japan -2%. Hong Kong closed. China closed. India -1.1%.
In Europe, at midday, London -2.4%. Paris -2.3%. Frankfurt -2.2%.
Futures at 6:20, Dow -1.7%. S&P -1.7%. Nasdaq -2.1%. Crude -3.5% to $52.28. Gold +0.8% to $1583.80. Bitcoin +2.5% to $8626.
Ten-year Treasury Yield -7 bps to 1.61%
Today's Economic Calendar
10:00 New Home Sales
10:30 Dallas Fed Manufacturing Survey
11:30 Results of $40B, 2-Year Note Auction
1:00 PM Results of $41B, 5-Year Note Auction