Tuesday Morning Reads

Tuesday Morning Reads




Open Interest



Big changes are coming to the Dow Jones Industrial Average due to Apple's (NASDAQ:AAPL) 4-for-1 stock split, which will significantly reduce the benchmark's exposure to the information technology sector. Exxon Mobil (NYSE:XOM), Pfizer (NYSE:PFE) and Raytheon (NYSE:RTX) will be swapped out for Salesforce.com (NYSE:CRM), Amgen (NASDAQ:AMGN) and Honeywell (NYSE:HON), marking the biggest reshuffle in seven years. The moves are effective before the open next Monday, while the divisor used to calculate the blue-chip index from the constituents will be changed before then, preventing any distortions. Soaring about 55% from its March 23 low, the Dow now sits 4% below its all-time high of 29,568.57 notched on February 12.

Commitment to trade

S&P 500 futures climbed 0.5% overnight after another record-setting session on Wall Street that saw the benchmark close above 3,400 for the first time. The latest advance follows a discussion between U.S. and Chinese trade negotiators, with both sides seeing progress on a Phase One trade deal and committing to its success in their first formal dialogue since early May. Data compiled by Johns Hopkins University also showed new daily COVID-19 cases dropping to under 37K (they have been below 50K since mid-August), while we'll get earnings today from Salesforce (CRM), Best Buy (NYSE:BBY) and Intuit (NASDAQ:INTU).

Changing how the Fed views inflation

Chairman Jerome Powell is set to signal a significant policy shift this week during a "virtual Jackson Hole conference," including perhaps the Fed's biggest steps ever to goose inflation back up to a healthy level. "Average inflation" targeting means the central bank will allow inflation to run higher than the usual 2% healthy target for a period of time (if it's spent a considerable time below that level). The goal could brand Powell's tenure at the Fed as the opposite of Paul Volcker's - whose sharp rate hikes in the '80s built a recession but tamped down price pressures.

Can you get coronavirus a second time?

Researchers at the University of Hong Kong say they have proved the "first case" of reinfection of COVID-19, marking the first such documented case in the world. The virus strains contracted by a 33-year-old man in April (while living in Hong Kong) and August (after he returned from Spain) were "clearly different," meaning he was not a "persistent carrier" of the virus from his prior infection. "The finding does not mean taking vaccines will be useless," said Dr. Kai-Wang To, one of the leading authors of the paper. "Immunity induced by vaccination can be different from those induced by natural infection. [We] will need to wait for the results of the vaccine trials to see how effective vaccines are."
Go Deeper: Dosing underway in AstraZeneca's COVID-19 antibody trial.

Epic ruling

Judge Yvonne Gonzalez Rogers has decided that Apple (AAPL) will not be required to bring Fortnite - which it had banned after Epic Games added an in-app payment system in violation of Apple's rules - back to the App Store. However, she ordered Apple not to block the development and distribution of Unreal Engine (the tech behind Fortnite and many other industry games). The ruling is just an early skirmish in a more significant battle that Epic - backed by Tencent (OTCPK:TCEHY) - and Apple are fighting.

One-third of Americans use TikTok

As TikTok and its Chinese parent company ByteDance (BDNCE) sued the Trump administration yesterday over an upcoming ban, the fast-growing video app revealed specific U.S. and global growth milestones for the first time. TikTok has about 100M monthly active users in the U.S. (up nearly 800% from Jan. 2018), notching a figure that would exceed the MAUs of long-established social networks like Twitter (NYSE:TWTR), Pinterest (NYSE:PINS) and Snapchat (NYSE:SNAP), according to research firm Statista. Given the growth rate, TikTok also would not be far behind Facebook-owned (NASDAQ:FB) Instagram, which had 121M MAUs as of last year.
Go Deeper: General Atlantic and Sequoia Capital are driving Oracle's TikTok bid.

Huawei's latest problem is India

India is phasing out Chinese equipment from its telecoms networks over an escalating border dispute in the Himalayan Galwan Valley. It's not a formal ban and Prime Minister Narendra Modi hasn't made any public announcements - to avoid a tough response from Beijing - but key industry officials have made it clear that local companies should not use suppliers like Huawei or ZTE (OTCPK:ZTCOF). "Let's do tough rather than talk tough," the FT report quoted a senior government official as saying. The move comes after many Western companies have banned Huawei from supplying 5G equipment over security and privacy concerns.

Ant Group is going public

The crown jewel of the sprawling Alibaba (NYSE:BABA) empire, Ant Group - formerly known as Ant Financial - has filed for an IPO on the Shanghai stock exchange's STAR market and the Hong Kong stock exchange. The firm is reportedly targeting a valuation of about $225B, based on an IPO of about $30B if markets are favorable, making it larger than some of America's biggest banks. Ant Group, which is still controlled by Alibaba founder Jack Ma, runs the popular Alipay mobile payments app in China which has over 900M users. It also offers other financial products and could use proceeds from the IPO to expand cross-border payments and enhance its research and development capabilities.

What else is happening...

Work management platform Asana (ASANA) files for a direct listing.

Facebook (FB) gets Street-high target from UBS on shopping potential.

Germany's recession was not quite as deep as previously thought.

Tiffany (NYSE:TIF) buyout deadline pushed out to late November.

Delta (NYSE:DAL) warns of nearly 2,000 pilot furloughs in October.

World Trade Organization sides with Canada in U.S. lumber dispute.

Monday's Key Earnings

Palo Alto Networks (NYSE:PANW) -2.4% AH as soft billings view weighed on FQ4 beats.

Today's Markets

In Asia, Japan +1.4%. Hong Kong -0.3%. China -0.4%. India -0.1%.
In Europe, at midday, London +0.2%. Paris +0.8%. Frankfurt +0.7%.
Futures at 6:20, Dow +0.6%. S&P +0.5%. Nasdaq +0.3%. Crude +0.1% to $42.68. Gold -0.3% to $1932.70. Bitcoin -1.6% to $11607.
Ten-year Treasury Yield +4 bps to 0.69%

Today's Economic Calendar

8:55 Redbook Chain Store Sales
9:00 S&P Corelogic Case-Shiller Home Price Index
9:00 FHFA House Price Index
10:00 Consumer Confidence
10:00 New Home Sales
10:00 Richmond Fed Mfg.
1:00 PM Results of $50B, 2-Year Note Auction
3:25 PM Fed's Daly Speech

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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