Thursday Morning Reads

Thursday Morning Reads




Open Interest Changes:



The world's largest oil companies have been known for their dividend safety for years, but that may be changing amid a historic rout in crude prices. "In this extraordinary situation, we have decided to reduce the cash dividend for the first quarter 2020 by 67% [to $0.09]," Norway's Equinor (NYSE:EQNR) said in a statement. While most oil majors have already slashed investments and buybacks, the latest could be a signal of what's to come from others in the industry, including Royal Dutch Shell (RDS.ARDS.B), BP (NYSE:BP), Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), Total (NYSE:TOT) and ConocoPhillips (NYSE:COP).

Suspicious wagers?

An inquiry by the CFTC, helped by the FBI and State Department, is investigating whether Russia's stance with OPEC+ leaked before shots were fired in an oil price war that began on March 8. The illegal wagers involving WTI futures contracts expired before Monday's price swoon, but prior swings may have netted hundreds of millions of dollars. The CFTC has recently made an effort to prioritize insider trading, forming a specialized task force in 2018 to pursue such misconduct.
Go deeper: 'USO Now Detaching From Reality' by Paulo Santos.

Wiping out a decade of employment gains

U.S. stock index futures were little changed overnight ahead of weekly unemployment claims that's expected to show another 4.3M workers out of a job (PMIs and new home sales are also expected to be ugly). The jobless figure would bring the total filings since late March to more than 26.3M, though economists say this week's data should confirm that the claims have peaked. Europe is now back in the green after eurozone business activity crashed to "shocking" lows, while the prospect of fresh U.S.-Iran tensions saw oil prices regain some ground, up 15% to $15.85/bbl.

Corporate outlooks on the pandemic

Earnings reports are starting to paint a mixed picture on how long the coronavirus will impact business. Las Vegas Sands (NYSE:LVS) CEO Sheldon Adelson anticipates tourism spending to recover, even as the company reported a 51% drop in revenue, while Delta (NYSE:DAL) expects it could be three years before demand for flying recovers. Underlying sales at consumer giant Unilever (NYSE:UL) were flat during Q1, while Daimler's (OTCPK:DDAIF) profits plunged and Hermes reopened all of its stores in mainland China.

Court to decide fate of Victoria's Secret

Private-equity firm Sycamore Partners wants to scrap its plans to take control of Victoria's Secret, a deal reached back in February. The high-profile legal test will decide whether the coronavirus allows a buyer to walk away from an agreement reached before the disease was declared a pandemic. L Brands (NYSE:LB), parent of the lingerie brand, closed its U.S. stores in March, furloughed the majority of its workers and skipped April rent payments, moves Sycamore says were in violation of the proposed transaction.

Nursing homes

A survey from the WSJ has found at least 10,700 COVID-related deaths at long-term care facilities among more than 35 states that either report data online or responded to requests for information. That's almost a quarter of all U.S. deaths, with the virus hitting at least 4,800 facilities nationwide. Currently, the federal Centers for Medicare and Medicaid Services requires nursing homes to tightly restrict who can enter, though limited testing and asymptomatic cases means staffers could have brought infections inside.

Threat to U.S. food supply

Tyson (NYSE:TSN) is closing a factory for one of its subsidiaries in Logansport, Indiana on April 25 while its more than 2.2K employees undergo COVID-19 testing. The pork processing facility, which produces 3M pounds of pork daily and helps support more than 250 independent family farmers from across nine states, suspended production for one day on April 20 for additional deep cleaning and sanitizing. Last week, Smithfield Foods shut down a pork processing plant that accounts for up to 5% of production after more than 500 of its workers were infected and one died.

Down to Georgia

In the latest coronavirus briefing, President Trump said he disagreed with Georgia's decision to restart its economy, telling Governor Brian Kemp that it was too early to ease stay-at-home orders and let some businesses reopen. The state was the first in the country to significantly loosen restrictions, though many are still in place and some cities such as Atlanta remain on lockdown. Asked about Georgia, Dr. Anthony Fauci said he would caution the state to move more slowly and reminded that the virus left to itself would take off and add fatalities.

Spend or hit the pause button?

"We need to spend what it takes to win the war," Treasury Secretary Steven Mnuchin declared in an apparent rebuke to Senate Majority Leader Mitch McConnell, who feels the federal government should "push the pause button." While he's sensitive to concerns about the rising federal debt, Mnuchin believes low interest rates and the urgency of preventing as much long-term damage as possible cuts in the other direction. Many expect the national debt to exceed $3.8T for 2020, meaning for the first time since WWII the nation will owe more than its economy can produce in a given year.

Junk-rated debt as collateral

Already hoovering up pretty much anything in sight on The Continent for the past few years, the ECB has - in a back-doorish sort of way - added high-yield bonds to the list of allowable assets it will buy. Specifically, the central banks will accept bonds which had the lowest investment-grade rating on April 7 (many of which by now have fallen below BBB-). Presumably, this might include the paper of Italy, which is under threat of an imminent downgrade to a junk credit.
Go deeper: European Union floats €2T recovery plan.

What else is happening...

Biggest 5G expansion so far for AT&T (NYSE:T).

Apple (NASDAQ:AAPL) will add $75B-$100B in buybacks - analysts.

Boeing (NYSE:BA) details lean manufacturing drive.

Marathon Petroleum (NYSE:MPC) expects to defer some planned 2020 capex.

Wednesday's Key Earnings
Alcoa (NYSE:AA+3.8% AH topping revenue estimates.
AT&T (T-1.3% pulling guidance, keeping dividend.
Biogen (NASDAQ:BIIB-9.4% extending timeline for Alzheimer's drug.
CSX (NASDAQ:CSX+2.1% AH as operating ratio hit a new record.
Delta Air Lines (DAL-2.7% raising $3B in debt.
Discover Financial (NYSE:DFS-6.1% AH swinging to a Q1 loss.
Kimberly-Clark (NYSE:KMB+2.4% posting 11% organic sales growth.
Kinder Morgan (NYSE:KMI-0.3% hurt by refined products volumes.
Las Vegas Sands (LVS+7.2% AH after better-than-feared Q1.

Today's Markets
In Asia, Japan +1.5%. Hong Kong +0.4%. China -0.2%. India +1.5%.
In Europe, at midday, London +0.1%. Paris +0.5%. Frankfurt flat.
Futures at 6:20, Dow flat. S&P +0.1%. Nasdaq flat. Crude +15% to $15.85. Gold +0.7% to $1750.90. Bitcoin +2% to $7092.
Ten-year Treasury Yield flat at 0.63%

Today's Economic Calendar
8:30 Initial Jobless Claims
9:45 PMI Composite Flash
10:00 New Home Sales
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
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.

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