Thursday Morning Reads

Thursday Morning Reads


Morning Charts:


Markets spent all of August fishing for an upward catalyst and it looks like they finally caught a big one. Stocks are continuing a rally that builds on yesterday's gains as the U.S. and China announced they would hold talks in October in Washington. Deputy-level officials will work together in mid-September to lay the groundwork for the meeting. The Shanghai Composite closed up 1% on the news, Europe is green (except for the Brexit-plagued U.K.), and DJIA futures are ahead by 254 points.
Go deeper: 'Readying An Assault To Old Highs' by David Lerner.

Brexit mess

Boris Johnson failed in his bid to call a snap general election on Wednesday, boxing in the U.K. prime minister over his Brexit strategy. Next steps? The government could try to bypass legislation requiring a two-thirds majority to approve a snap election, and while it's unlikely, Johnson could call a vote of no confidence in his own government and then call on his MPs to abstain. Whatever the case may be, the uncertainty weighed on U.K. stocks today, with the FTSE 100 falling 0.7%.

Dorian fallout

Hurricane Dorian churned Wednesday evening toward the Carolinas, regaining strength as a Category 3 storm and threatening large-scale flooding and powerful winds. Retailers in the southeast can expect Dorian to threaten the typical boosts they see from shoppers on the tails of Labor Day weekend and the back-to-school season. Consumer spending is expected to decline as much as $1.5B, according to Planalytics, as foot traffic at apparel stores, outlet centers and restaurants falls between 14%-32%.

Who's paying for tariffs?

Shortly before fresh U.S. duties on $112B of Chinese goods went into effect last weekend, Target (NYSE:TGT) sent a memo to hundreds of its suppliers, warning them that it would refuse to "accept any cost increases related to tariffs." "Our expectation is that you will develop the appropriate contingency plans so that we don't have to pass price increases along" to customers, wrote Mark Tritton, chief merchandising officer. Target shares are trading just shy of an all-time high, giving the S&P 500 company a $54.9B market capitalization.
Go deeper: Margins at Target.

Barra at the White House

After criticizing General Motors (NYSE:GM) on Twitter over the last few weeks, President Trump will sit down today with CEO Mary Barra to discuss trade, ongoing contract talks and revising vehicle fuel efficiency standards. Trump has previously said the automaker "which was once the Giant of Detroit, is now one of the smallest auto manufacturers there," and suggested GM should start moving operations back to the U.S. from China. More talks? Discussions between the United Auto Workers union and Detroit Three automakers are intensifying ahead of a Sept. 14 contract expiration.

Problems not over at Nissan

Another scandal over executive pay is brewing at Nissan (OTCPK:NSANY) after CEO Hiroto Saikawa admitted to being overpaid in violation of internal procedures under a scheme designed by ousted Chairman Carlos Ghosn. Saikawa apologized and vowed to return any improperly paid funds, including tens of millions of yen received through a stock appreciation rights program. Nissan has been trying to strengthen governance, slash costs and boost flagging profitability amid persistent allegations of financial misconduct stemming from Ghosn's 20-year reign at Japan's second-biggest automaker.

Galaxy Fold

Samsung Electronics' (OTC:SSNLF) foldable smartphones will go on sale in South Korea tomorrow. The $2,000 device comes in 5G versions, and will become available in other countries including the U.S., the U.K., France, and Germany after its South Korea launch. Samsung initially planned to release the Galaxy Fold in late April, but reviewers encountered issues with early testing units, and the company delayed the launch to fix the glitches.

Apple returns to bond market

Taking advantage of the steep decline in benchmark interest rates, Apple (NASDAQ:AAPL) is joining U.S. companies including Deere (NYSE:DE) and Disney (NYSE:DIS) by launching its first bond deal since 2017 and selling $7B of debt. All three companies issued 30-year bonds with yields below 3%, a first for the corporate debt market. Bonds issued by big-name corporations give investors a relatively safe alternative that still pays more than government bonds.

Favorable court ruling

The drawn-out saga over CVS Health's (NYSE:CVS) merger with health insurer Aetna has come to a close after Federal Judge Richard Leon said the tie-up was in fact legal under antitrust law. It's a strange case. Leon had been examining a government plan announced last October to allow the merger on condition that Aetna offload its Medicare prescription drug plan business to WellCare Health Plan (NYSE:WCG), but both deals had already closed. CVS +1.8% premarket.

Shrinking Goldman partnership

At least a dozen Goldman Sachs (NYSE:GS) partners are negotiating their exits from the firm that are likely to be announced in coming weeks, WSJ reports. Elisha Wiesel, Goldman's chief technology executive, and Steven Strongin, who runs the firm's research operation, are among those who are discussing stepping down. In all, up to 15% of Goldman’s partners may leave this year, far higher than typical turnover. Fewer are also rising to take their place: Goldman last year named 69 new partners, its smallest partner class in two decades.
Go deeper: Goldman's dividend scorecard.

What else is happening...

EU looking into Facebook's (NASDAQ:FBLibra cryptocurrency.

Risk of a recession rises in Germany.

Czech Republic next to propose a digital tax.

Mastercard (NYSE:MA) begins halting card service in Venezuela.

Bank of America (NYSE:BAC) sees pretax impairment charge of $2.1B.

NYC sues T-Mobile (NASDAQ:TMUS) over 'rampant' sales abuses.

Restructuring reports hammer Mallinckrodt (NYSE:MNK) shares.

Wednesday's Key Earnings
American Eagle (NYSE:AEO-11.6% posting a sluggish growth rate.
Palo Alto Networks (NYSE:PANW+6.2% AH on FQ4 beat, $75M acquisition.
Slack Technologies (NYSE:WORK-13.7% amid first earnings since going public.
Today's Markets
In Asia, Japan +2.3%. Hong Kong flat. China +1%. India -0.2%.
In Europe, at midday, London -0.7%. Paris +0.9%. Frankfurt +0.8%.
Futures at 6:20, Dow +1%. S&P +0.9%. Nasdaq +1.2%. Crude -0.3% to $56.08. Gold -0.7% to $1548.80. Bitcoin +0.4% to $10623.
Ten-year Treasury Yield -5 bps to 1.51%Today's Economic Calendar
Auto Sales
7:30 Challenger Job-Cut Report
8:15 ADP Jobs Report
8:30 Initial Jobless Claims
8:30 Productivity and Costs
9:45 PMI Services Index
10:00 ISM Non-Manufacturing Index
10:00 Factory Orders
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

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.

More Posts by UPB: View All | Private Twitter Feed: Access Now! (For Diamond Members)