Tuesday Morning Reads

Tuesday Morning Reads





Open Interest Changes

Stocks set the stage to open higher following the S&P 500’s worst day since the financial crisis after President Trump said he’ll discuss a payroll tax cut with Congress and that he’s considering other relief measures. S&P futures are up 4.5%, the Dow futures rose 4.4%, and Nasdaq futures are up 4.6%. Treasurys retraced some of yesterday’s surge as 10-year yield added 22 basis points to 0.715%. Crude oil rose 7.4% to $33.42 per barrel. Volatility, though, hasn't disappeared — the Cboe Volatility Index is up 18% to 49.65. In overseas markets, Asia equities markets closed higher and Europe stock averages gained in morning trading.

U.S. status as net oil exporter at risk

The country’s days as a net petroleum exporter may be numbered as plunging oil prices threaten domestic production, Bloomberg reports. For four of the last six weeks, the U.S. has shipped out more crude and refined products than it brought in, but the margin is relatively thin. After the worst price rout in nearly three decades, domestic drillers are facing a million-barrel drop in production that could curb U.S. exports and set back its progress toward energy independence. If shale output slips by more than 1M barrels per day this year, that could be enough to take the U.S. from net exporter back to net importer, Bloomberg estimates.

Saudi Arabia escalates oil price war

The kingdom plans to supply a record 12.3M barrels of oil per day next month, up 25% from the previous month, as it ratchets up its oil price war with Russia. The production boost pushes Aramco’s (ARMCO) supply over its maximum capacity, indicating it’s tapping Saudi Arabia’s strategic inventories to bring as much crude as quickly as it can onto the market. In February, it produced about 9.7M barrels per day. Russia’s energy minister parried back, saying Russia has the ability to boost production by 500,000 barrels per day, which could bring its output to a record 11.8M barrels per day.

Things look brighter in Hubei Province

Leaders in the province, the source of the global coronavirus outbreak, laid out plans to ease restrictions on Monday following a significant drop in the daily number of new infections and deaths from Covid-19. Officials said the government would lift travel restrictions in areas of low risk, allowing people to return to work after much of Hubei had been on lockdown during January.

Alibaba’s delivery staff back on the job

Alibaba's (NYSE:BABA) package and meal delivery units are fully staffed at pre-coronavirus levels, the latest example of how China’s largest corporations are getting back to work after Beijing’s entreaty to safeguard economic growth, Bloomberg writes. Cainiao, meal delivery unit Eli.me and grocery chain Freshippo are all back at full strength, according to a spokesperson. Cainiao, of which BABA owns 60%, boasts a network of millions of delivery people that can handle more than a billion packages daily during peak demand. Last week, Alibaba rival JD.com (NASDAQ:JD) forecast at least 10% revenue growth this quarter, suggesting surprising resilience in online retail.
Go deeper: Compare Alibaba's key stats with those of its peers.

Toyota cuts Lexus output on weaker China demand - report

Toyota (NYSE:TM) is reportedly cutting back on Lexus production against weaker Chinese demand during the coronavirus crisis. It's scaling back output of sedans and SUVs by 6% at two plants, in Fukuoka and Aichi prefectures. That cutback is expected to last for two weeks, starting March 16.

Coronavirus puts electric Cadillac model debut on hold

General Motors (NYSE:GM) has called off its early April introduction of the Cadillac Lyriq crossover, the first of several battery-powered models that CEO Mary Barra had said would debut in the next several years. The coronavirus is also affecting the automaker’s day-to-day operations, as the company has instructed its employees to hold meetings with suppliers and vendors via video calls instead of in-person meetings. GM considers the Lyriq a key in its efforts to restore the struggling Cadillac brand's prestige and battle Tesla (NASDAQ:TSLA) for luxury buyers.
Go deeper: Review GM's financials.

Tesla plans Shanghai car parts expansion

Tesla (TSLA) plans to boost production capacity for certain car parts at its $2B factory in Shanghai as it seeks to localize its supply chain in the world’s biggest auto market, Reuters reports. Specifically, it plans to add more lines to produce more battery packs, electric motors, and motor controllers. For cooling pipes, a key part of the car’s heat management system, it aims to boost production to 260,000 sets per year, up from 150,000.

More U.S. hotel REITs pull guidance on Covid-19 impact

Sotherly Hotels (NASDAQ:SOHO) and Park Hotels & Resorts (NYSE:PK) have added to the list of lodging REITs withdrawing guidance amid growing concerns about the COVID-19 virus outbreak. Park Hotels & Resorts reported $30M in lost rooms revenue from group customer cancellations, primarily in March and April. Sotherly Hotels expects governmental travel advisories, increased travel restrictions from corporations, and significant airline flight cancellations to adversely impact the REIT’s financial results for Q1 2020 and FY20.
Go deeper: Track Park Hotels’ stock momentum.

Blackstone in talks for $4B deal to take SOHO China private

Blackstone (NYSE:BX) has entered exclusive talks to take office developer SOHO China Ltd. private, Reuters reports, in a deal that shows confidence via one of Blackstone's biggest China bets yet. It's a buyout worth about $4B, as Blackstone reportedly offered HK$6/share, which would be nearly a 100% premium to SOHO China's January price averaging HK$3.03. The deal would also involve Blackstone assuming debt that came to about $4.7B as of last June.

What else is happening...

Ikea tests sales on Alibaba's (BABA) Tmall.

Goldman Sachs (NYSE:GSenergy funds' NAV materially hurt.

Heineken (OTCQX:HEINYto invest in Brazil.

Cypress Semiconductor (NASDAQ:CYacquisition wins CFIUS clearance.

Revlon (NYSE:REV) announces restructuring, debt financing.

Iron ore shows safe haven qualities - S&P Global.

Monday's Key Earnings
Stitch Fix (NASDAQ:SFIX-34.1% PM on disappointing sales growth.
Vail Resorts (NYSE:MTN-11% PM on Q2 miss, coronavirus impact.
Synchronoss Technologies (NASDAQ:SNCR-1.9% PM on mixed Q4 results.

Today's Markets
In Asia, Japan +0.85%. Hong Kong +1.4%. China +1.8%. India closed.
In Europe, at midday, London +3.65%. Paris +4.11%. Frankfurt +3.48%.
Futures at 6:20, Dow +4.4%. S&P +4.5%. Nasdaq +4.6%. Crude +7.4% to $33.42. Gold -0.95% to $1,659.70. Bitcoin -0.1% to $7,928.
Ten-year Treasury Yield +21.7bps to 0.715%.

Today's Economic Calendar
6:00 NFIB Small Business Optimism Index
8:55 Redbook Chain Store Sales
1:00 PM Results of $38B, 3-Year Note Auction

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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