Monday Morning Reads
- Trump Tightens Scrutiny
- Worst Yet to Come
- Apple’s Biggest Problem?
- Futuristic Grocery Store
- Sony’s Chief Plans to Make Entertainment Assets a Priority
- Skipping SUVs for Station Wagons
- Recession Portfolio
- 10 Things in 2019
- Stocks set for modestly lower open
- Eli Lilly to acquire Loxo Oncology for $8B
- Barron's calls out value and income plays
- Nvidia introduces new gaming chip
- Tesla breaks ground on Chinese Gigafactory
- Sears preps for possible liquidation
- European beer stocks stumble after Goldman cut
- Disney hikes prices at California parks
- Morgan Stanley lowers Macau GGR forecast
- OPKO Health appoints Jon R. Cohen as Executive Chairman of Bioreference Laboratories
- Samsung adds iTunes to smart TVs
- BAML calls Ferrari a top auto pick
Asian markets registered gains today on optimism that trade talks between the U.S. and China will move in the right direction. Japan's Nikkei increased 2.4% and returned to over 20K. South Korea's Kospi rose 1.3%, and Australia's ASX 200 was 1.1% higher. Hong Kong's Hang Seng Index tracked 0.6% higher on the day, and the Shanghai Composite Index gained 0.7%. Meanwhile, the European stocks started the day off in positive territory, but have backtracked amid Brexit and yellow vest anxiety. The Stoxx 600 Index is down 0.3% at last check. U.S. stock futures have edged lower in the buildup to a huge week of corporate events, highlighted by CES and the JPMorgan healthcare conference in San Francisco.
President Donald Trump and Chinese President Xi Jinping are considering meeting in the first half of 2019 if progress is made with the trade talks that began today in Beijing. Trump is also reportedly considering meeting with Chinese Vice President Wang Qishan at the annual World Economic Forum in Davos at the end of the month. The current U.S. delegation in China includes Deputy U.S. Trade Representative Jeffrey Gerrish and Treasury Department official David Malpass. Trump sent the team off with a confident reminder, saying the weakness in the Chinese economy gives the U.S. some leverage in the talks.
Debate starts this week in the British Parliament over Prime Minister Theresa May's Brexit plan ahead of a key vote scheduled for January 15. May is looking for approval in Parliament after delaying a previous vote due to lack of support. "If the deal is not voted on at this vote that's coming up then actually we are going to be in uncharted territory," she told the BBC yesterday. Fears of a U.K. exit from the European Union without a negotiated deal continue to rock many industries in the U.K. with the March 29 deadline looming.
The Nikkei Japan Services Purchasing Managers' Index fell to a three-month low of 51.0 in December on a mix of soft sales demand from key companies and rough weather. The reading in November was 52.3. "Positive survey data from the manufacturing sector were not mirrored by Japan's dominant service-providing industry in December, where business activity increased at the weakest pace since May if the natural-disaster-hit September is discounted," noted IHS Markit economist Joe Hayes. The composite index fell to 52.0 vs. 52.4 in the prior month, a level that is still considered showing a relatively solid pace of expansion.
The Institute for Supply Management is due to release its Non-Manufacturing Index reading for December. Economists expect a mark of 58.4, down from 60.7 in November but still comfortably in the +50 range considered indicative of an expanding economy. The ISM update takes on added significance with releases on factory orders and durable goods data both postponed due to the government shutdown.
CES kicks off this week as startups and the biggest names in the industry descend on Las Vegas. Major companies at the event will showcase the latest advances in artificial intelligence, robotics, self-driving and flying cars, smarthome devices, new TVs, 5G and advances in wireless connectivity. Highly-anticipated keynote talks are being delivered by AT&T's (NYSE:T) John Donovan, Twitter's (NYSE:TWTR) Jack Dorsey, IBM (NYSE:IBM) CEO Ginni Rometty, AMD (NASDAQ:AMD) CEO Dr. Lisa Su, NBA Commissioner Adam Silver, Verizon (NYSE:VZ) CEO Hans Vestberg and former Department of Labor Secretary Elaine Chao. Some of the tech majors expected to attract attention are Samsung (OTC:SSNLF), LG (OTC:LGEAF, OTC:LGEPF), Sony (NYSE:SNE), Qualcomm (NASDAQ:QCOM), Intel (NASDAQ:INTC), Alibaba (NYSE:BABA) - as well as consumer products players such as Procter & Gamble (NYSE:PG) and Whirlpool (NYSE:WHR).
In early news out of CES, Nvidia (NASDAQ:NVDA) launched a new, lower-priced version of its newest graphics card called GeForce RTX 2060. The company says the new lower-cost chip puts revolutionary Turing architecture GPUs within the reach of tens of millions of PC gamers worldwide. The RTX 2060 is 60% faster on current titles than the prior-generation GTX 1060 and beats the gameplay of the GeForce GTX 1070 Ti. The RTX 2060 will be available globally on January 15 from every major OEM, system builder and graphics card partner.
Starboard Value has taken a 1.7% stake in Dollar Tree (NASDAQ:DLTR), sources tell The Wall Street Journal. The activist investor is said to be pushing the retailer to sell its Family Dollar business and change its pricing model. Starboard has also quietly named seven candidates for the Dollar Tree board as part of its push. Shares of Dollar Tree are down 16% over the last 52 weeks.
In what would have been once been considered a shocking move, Samsung (OTC:SSNLF) struck a deal with Apple to include an iTunes movies/TV app and AirPlay 2 capabilities on 2019 smart TVs. The company also added the app to 2018 smart TVs through a firmware update. Apple's (NASDAQ:AAPL) decision to free up the iTunes ecosystem is indicative of the growing importance of services revenue to the company and the huge investment out of Cupertino in TV content. It also led The Verge to ask the pressing question of why any Samsung smart TV owner would buy an Apple TV box now.
Disney announced a double-digit price increase at its theme parks in California ahead of the opening of Star Wars attractions this summer that includes a Millennium Falcon ride. The cost for a one-day Disneyland ticket during peak times rose 10.4% to $149. Disneyland annual passes now range from $399 to the highest level of access costing $1,949. Higher ticket prices from Disney (NYSE:DIS) have sometimes provided cover for Cedar Fair (NYSE:FUN), Six Flags Entertainment (NYSE:SIX) and SeaWorld Entertainment (NYSE:SEAS) to lift prices at some of their parks.
Earlier today in Shanghai, Tesla (NASDAQ:TSLA) broke ground on its Chinese Gigafactory where it plans to mass-produce Model 3 and Model Y electric vehicles. "We think with the resources here we can build the Shanghai Gigafactory in record time and we’re looking forward to hopefully having some initial production of the Model 3 towards the end of this year and achieving volume production next year," Elon Musk stated at the event. The local Gigafactory is the first wholly-owned car plant in China operated by a foreign company. Shares of Tesla are up 1.26% in premarket action to $321.69.
More on Tesla: The EV automaker has asked the Trump administration to exempt the Chinese-made "car computer brain" of its new Model 3 sedan from the 25% tariffs imposed in August, saying they threaten the company's bottom line. The automaker says choosing another supplier would have delayed the Model 3 launch by 18 months due to clean room setup, line validation and staff training.
Beer stocks are having a rough session in Europe after Goldman Sachs issued a downgrade on Anheuser-Busch InBev (NYSE:BUD) to Neutral from Buy, as well as a two-notch lowering on Heineken (OTCQX:HEINY, OTCQX:HINKF) straight to Sell from Buy. AB InBev is down 2.2% and Heineken is off 1.7%, while Carlsberg (OTCPK:CABGY, OTCPK:CABJF) is also caught up in pessimism, down 2.4% in Copenhagen trading.
On the M&A front, Sony Pictures Entertainment (SNE) and AT&T (T) are waiting to hear on the first round of bidding action on GSN Games after quietly putting the social games maker on the block a few months ago, according to Variety. The companies are hoping to see offers arrive in the neighborhood of $600M to $700M. Sony holds 58% of GSN Games, while AT&T owns the other 42%. Apollo Global Management (NYSE:APO) is also considering a bid for General Electric's (NYSE:GE) jet leasing business that could range as high as $40B. Shares of GE are up 2.2% in premarket trading.
Barron's bits: A number of stocks could see some buying action today following favorable write-ups in the weekly publication. Alerian (NYSEARCA:AMLP) and Salient Midstream & MLP (NYSE:SMM) were both highlighted as best income ideas for 2019 due to the master limited partnerships' investment focus on companies that provide transportation, storage and processing of energy. There are also some tasty morsels for value investors with AT&T (T), DXC Technology (NYSE:DXC), Morgan Stanley (NYSE:MS) and Mylan (NASDAQ:MYL) all singled out as single-digit forward P/E stocks with recent Wall Street upgrades. Navistar (NYSE:NAV) is seen as an M&A target after its round of cost-cutting and with Volkswagen (OTCPK:VWAGY) still lurking as a suitor. Finally, there is Apple (AAPL) to consider with its 12X 2019 EPS multiple and $130B net cash position. "Assuming Apple’s multiple returns to its 13.6 average, the stock is worth $166.46. Add back $27 in net cash per share — a logical step given that Apple has finally promised to bring its cash position to zero - and Apple is worth $194, 31% above its latest close," writes Barron's Tae Kim.
In Asia, Japan +2.4%. Hong Kong +0.8%. China +0.7%. India +0.4%.
In Europe, at midday, London -0.4%. Paris -0.3%. Frankfurt -0.3%.
Futures at 6:20, Dow +0.06%. S&P -0.04%. Nasdaq -0.15%. Crude +2.8%to $49.30. Gold +0.5% to $1,292.30. Bitcoin +5.2% to $4,103.
Ten-year Treasury Yield -1.4 bps to 2.645%
Today's Economic Calendar
10:00 Factory Orders
10:00 ISM Non-Manufacturing Index
12:30 PM TD Ameritrade IMX
12:40 PM Fed's Bostic: Economic Outlook and Monetary Policy