Thursday Morning Reads

Thursday Morning Reads




Open Interest Changes:


Unusual Option Action:




Major global equity markets are mostly higher, helped by the continuing rally in commodity prices that has propped up the stocks of energy and mining companies. Brent crude oil is up 0.5% at $73.84/bbl, crossing $74 for the first time in four years. Aluminum is extending its recent torrid gains, with prices for alumina touching an all-time high, and iron ore surged 5%. Equity indices in the Asia-Pacific region closed with gains, while European stocks are mostly higher but are trading in a very narrow range. The U.K.'s FTSE is outpacing the region, as the index is heavily weighted with miners and energy stocks. U.S. stock index futures point to a roughly flat open, as investor focus remains on first-quarter earnings.


Financial stocks are failing to keep up with the broader S&P 500, which posted its third straight winning session on Wednesday as first-quarter earnings continued to come in strong. Around 80% have beaten analyst earnings and sales expectations, a higher portion than the five-year average, according to FactSet. Bank earnings are no exception, yet their share prices have lagged. A possible explanation: the Wall Street Journal reports the combined Q1 earnings of Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) rose by more than $2.5 billion, thanks to lower corporate tax rates. Without that boost, Wells Fargo would have seen earnings decline from a year ago, and Citi and BofA would have seen no growth.

Japan Prime Minister Abe and Pres. Trump remain at odds on major trade issues after concluding two days of meetings in Florida but agreed to hold talks on “free, fair and reciprocal” trade, without specifying what that could mean. But Trump made clear he has little interest in rejoining negotiations over the Trans-Pacific Trade Partnership unless there is “a deal I can’t refuse. But I like bilateral [agreements] better.” Notably, Trump did not exempt Japan from the recently imposed steel and aluminum tariffs as he did for other key U.S. allies and trading partners. The two leaders appeared to present a more united front on the threat of North Korean missiles.

The tightening yield spread is raising concerns among investors and Fed officials, as the phenomenon has sometimes indicated a weakening longer-term outlook for U.S. economic growth and inflation. The yield curve from five to 30 years continued to flatten Wednesday to as little as 29 basis points, the narrowest spread since 2007, and the gap between the two-year yield and the 10-year yield touched 41 basis points, also the smallest since before the financial crisis. A truly inverted curve “is a powerful signal of recessions” that historically has occurred “when the Fed is in a tightening cycle, and markets lose confidence in the economic outlook,” John Williams, the next president of the New York Fed, said this week, although he maintained that is not the case now.


Hours before its earnings report, Procter & Gamble (NYSE:PG) said it agreed to pay €3.4 billion ($4.21 billion) for the Consumer Health unit of Merck KGaA (OTCPK:MKKGY), in one of P&G's biggest acquisitions in years. The division of Merck KGaA (not affiliated with drugmaker Merck) makes vitamins and supplements that P&G says complement its over-the-counter medicine business; the deal will replace a joint venture P&G runs with Teva Pharmaceutical (NYSE:TEVA).

CEO Jeff Bezos finally put a subscriber number on's (NASDAQ:AMZN) Prime membership program, and it's north of 100 million. In a shareholder letter, Bezos added that the company shipped more than five billion items via Prime last year, and 2017 was its biggest signup year yet. The company established the program, which offers free shipping and other perks, 13 years ago.

The Federal Aviation Administration says it will order an inspection of some 220 jet engines after investigators determined that a broken fan blade touched off the engine explosion on Tuesday's Southwest Airlines (NYSE:LUV) flight that shattered a window and killed a passenger. The accident will enhance scrutiny of the CFM56-7B engine made by CFM International, a joint venture between General Electric (NYSE:GE) and France's Safran (OTCPK:SAFRF), that is a mainstay of commercial aviation. Southwest suffered a similar failure on another CFM56 engine two years ago, forcing the plane to land but not resulting in injuries.

Chinese regulators are seeking additional concessions from Qualcomm (NASDAQ:QCOM) before approving the company's proposed purchase of NXP Semiconductors (NASDAQ:NXPI). Qualcomm reportedly resubmitted its application earlier this week, effectively resetting a timetable for a decision and giving Chinese regulators another 180 days to review the deal. The statement is China's first on the pending deal since Pres. Trump's tariff proposals; China is the last major government yet to grant approval.

Taking a page from rivals Alphabet (GOOGGOOGL) and Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB) is launching a project to design its own custom chips that could be used in ambitious plans for consumer hardware as well as by its AI software and in data centers, the Wall Street Journal reports. Recent job listings call for engineers with experience building processors from scratch. Building its own chips would give Facebook more control over end hardware products.

The vice president of footwear is the latest in a string of executives to depart Nike (NYSE:NKE) amid a culture shift at the sports apparel maker, according to the Portland Business Journal. Greg Thompson is the fourth executive to leave this week, after spending decades there. Those and other departures are coming in the wake of complaints of a "boys' club" environment.

Kinder Morgan reported mixed Q1 results but pleased investors by raising its dividend 60% to $0.20 per share from $0.125 previously, with Chairman Richard Kinder saying the company "delivered on our commitment made in mid-2017." For the quarter, Kinder Morgan (NYSE:KMI) says it achieved distributable cash flow of $0.56 per share, up 4% from the prior quarter, resulting in more than $800 million of excess DCF above the dividend. For 2018, the company's budget is set to achieve DCF of $4.57 billion ($2.05 per share) and adjusted EBITDA of $7.5 billion.

Unilever unveiled a new stock buyback program for as much as €6 billion ($7.4 billion) and raised its quarterly dividend by 8%. Unilever (NYSE:UL) said it is starting the buyback program to return the expected after-tax proceeds from the sale of its struggling spreads business last year. The company reported first-quarter underlying sales rose 3.4%, matching its expectations and topping the 2.9% growth in the prior-year quarter. Shares are 2% lower in London trading.

Three new board members - all of them women - are named at Wynn Resorts (NASDAQ:WYNN), the casino operator coping with a sexual harassment scandal tied to former CEO Steve Wynn. The move enlarges and diversifies the board at a company that earned the lowest possible score in corporate governance last year from advisory firm ISS. The CEO's ex-wife, Elaine Wynn, now the company’s largest individual shareholder, had said she wanted to see new board appointees.

Wednesday's Key Earnings
Kinder Morgan (KMI+1.6% AH on Q1 earnings, dividend increase.
Alcoa (NYSE:AA+5% AH on Q1 earnings, raising 2018 EBITDA guidance.
American Express (NYSE:AXP+4% AH Q1 earnings beat, guidance.
Crown Castle International (NYSE:CCI+0.4% AH on healthy Q1 metrics, FFO guidance.
United Rentals (NYSE:URI-3.3% AH despite Q1 earnings beat.
Canadian Pacific Railway (NYSE:CP-1.1% AH despite almost meeting estimates, higher freight volume.
Steel Dynamics (NASDAQ:STLD) unchanged AH on Q1 earnings beat.
Pier 1 Imports (NYSE:PIR-16.8% AH on soft Q4 sales, buyback cessation.
PTC Inc. (NASDAQ:PTC-1.9% AH despite Q2 earnings beat, growing subscription revenue.
Sleep Number (NASDAQ:SNBR-9.6% AH on Q1 earnings miss.

Today's Markets 
In Asia, Japan +0.15%. Hong Kong +1.40%. China +0.84%. India +0.37%.
In Europe, at midday, London +0.20%. Paris +0.17%. Frankfurt -0.11%.
Futures at 6:20, Dow -0.02%. S&P -0.11%. Nasdaq -0.05%. Crude +0.72%to $68.96. Gold -0.32% to $1,349.20. Bitcoin +1.6% to $8,225.
Ten-year Treasury Yield +2.8bps to 2.895%

Today's Economic Calendar
8:00 Fed's Reserve Gov. Lael Brainard speech
8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
9:30 Randal Quarles: “Semi-Annual Testimony on the Federal Reserve’s Supervision and Regulation of the Financial System”
9:45 Bloomberg Consumer Comfort Index
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
6:45 PM Fed's Mester: Monetary Policy and Economic Outlook

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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