Thursday Morning Reads

Thursday Morning Reads





A policy decision at the ECB today is set to be dominated by the central bank's first strategic review since 2003 under new President Christine Lagarde. The framework is likely to last for most of the year and span topics from the inflation target to digital money and the fight against climate change. The ECB has fallen short of its inflation target of "just under 2%" for years despite increasingly aggressive stimulus under predecessor Mario Draghi, while yesterday marked the five-year anniversary of quantitative easing. In terms of actual decisions, economists expect the deposit rate to stay at -0.5% and QE to remain at €20B/month.
Go deeper: The euro could be set for a rebound, writes Discount Fountain.

China shares tumble on Wuhan lockdown

Chinese authorities have halted travel from two cities, including Wuhan, in the latest bid to stop the spread of a coronavirus that has already claimed 17 lives and infected nearly 600 people. The travel ban comes before the country's Lunar New Year holidays and ahead of a decision from the World Health Organization on whether to declare the outbreak a global health emergency. Asian stocks plunged on the news, with Shanghai off 2.8% and Hang Seng down 1.5%, though U.S. futures are hugging the flatline.
Go deeper: The biggest coronavirus effect will be the fear rather than the reality, says David Lerner.

Crossing the Brexit finish line

Prime Minister Boris Johnson's Brexit deal has cleared its final hurdles in Parliament after four years of paralyzed British politics. The bill now goes to Queen Elizabeth II for signing, putting the U.K. on track to leave the EU by the end of the month. On the European side, the EU council and commission presidents are due to sign off on the agreement Friday, with the European Parliament voting it through next Wednesday, though that step is considered a formality.
Go deeper: 'Pound Not Out Of The Woods Even After Brexit Deal' by WingCapital Investments.

Earnings today - What to watch

Earnings season continues in earnest as several heavyweights report before and after the bell. Investors will be watching for how Intel (NASDAQ:INTC) is working to combat market share loss, especially to AMD (NASDAQ:AMD), while Procter & Gamble's (NYSE:PG) strong organic sales momentum is expected to have continued. Both American Airlines (NASDAQ:AAL) and Southwest (NYSE:LUV) are also set to report quarterly results after their stocks were hit this week due to concerns that the coronavirus outbreak would dent international travel.
Go deeper: INTC investors should closely monitor ASP and shipment growth, according to Business Quant.

Attempt to pause work on JEDI

Calling it "common practice," Amazon (NASDAQ:AMZN) has filed a motion in court to pause Microsoft (NASDAQ:MSFT) from carrying out an up to $10B cloud computing deal until a court rules on its protest of the contract award. Most recently, Amazon has attributed the contract loss to President Trump's "bias" against the company and for improperly pressuring the Pentagon. The JEDI project is designed to consolidate the Defense Department's cloud computing infrastructure and modernize its technology systems.
Go deeper: 'Microsoft Vs. Amazon: Valuing The Cloud' by Louis Stevens.

McDermott unveils bankruptcy plan

The Chapter 11 proposal would pay bondholders a minimal recovery and wipe out existing shareholders. $4.6B in debt would also be exchanged for equity, giving existing lenders approximately 94% of the reorganized company and bondholders 6% of the post-bankruptcy company. HPS Investment Partners, Baupost Group and Octagon Credit Investors are among the largest lenders in McDermott's (NYSE:MDR) $3.3B of secured debt, and are said to be poised to control the engineering firm following the restructuring.

Pension plans weigh on Ford

Ford (NYSE:F) expects to record a pre-tax re-measurement loss of about $2.2B related to its pension and other post-retirement employee benefits plans, according to an SEC filing. The re-measurement loss will reduce Q4 net income by around $1.7B, though the loss will not impact the adjusted earnings per share as it is a special item. Reason for the charge? It's largely related to a drop in discount rates as that leads to an increase in the amount of money to be contributed for future pension benefits.

Note on Tesla scratches heads

UBS just more than doubled its price target on Tesla (NASDAQ:TSLA), lifting the figure to $410 from $160, but still kept its Sell rating on shares. While Tesla has the potential to become the most profitable original equipment manufacturer (OEM), the positives are "taken for granted" at the current price, according to the team led by Patrick Hummel, who sees the company's volumes doubling by 2022. "This is a stretch because it requires perfect execution, strong EV demand growth and at the same time failure of the incumbent OEMs to launch competitive EVs." TSLA -1% premarket.

Conference call with Dave Calhoun

The new Boeing (NYSE:BA) CEO said the planemaker will not cut its dividend despite the extended grounding of the 737 MAX and expects to resume MAX production "months" before the mid-year return to service. The latest delay was triggered by the company's recommendation that pilots should undergo simulator training. He'll also "start with a clean sheet of paper" on a decision whether to launch a new midsize airplane seating 220-270 passengers, effectively halting current plans worth $15B-20B.

Tense relations overshadow digital tax talks

While both the U.S. and France stepped back from the brink of a trade war this week, the delicate truce over digital taxation is on a knife-edge. Another round of crunch talks between U.S. Treasury Secretary Steven Mnuchin and French Finance Minister Bruno Le Maire will take place today as the latter's position faces criticism at home for capitulating under U.S. pressure. France has argued its digital tax would ensure that the world's tech giants pay appropriate duties, while the U.S. maintains the tax unfairly discriminates against U.S. technology companies.

What else is happening...

Largest environmental penalty in Canadian history.

STMicro (NYSE:STMtops estimates on next-gen chip demand.

Payroll software provider Paycom (NYSE:PAYCjoins S&P 500.

CA governor balks at PG&E (NYSE:PCG) bankruptcy deal.

Southwest Airlines (LUV) part of whistleblower complaint.

Wednesday's Key Earnings
Abbott Laboratories (NYSE:ABT+2.4% posting a quarterly revenue beat.
Johnson & Johnson (NYSE:JNJ-0.7% as blockbuster drugs disappointed.
Kinder Morgan (NYSE:KMI+0.3% AH on Gulf Coast Express strength.
Texas Instruments (NASDAQ:TXN-0.7% giving an in-line outlook.

Today's Markets
In Asia, Japan -1%. Hong Kong -1.5%. China -2.8%. India +0.7%.
In Europe, at midday, London -0.3%. Paris flat. Frankfurt -0.4%.
Futures at 6:20, Dow -0.1%. S&P flat. Nasdaq flat. Crude -1.5% to $55.88. Gold -0.2% to $1553.20. Bitcoin -2.6% to $8407.
Ten-year Treasury Yield -3 bps to 1.74%

Today's Economic Calendar
8:30 Initial Jobless Claims
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
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)