Tuesday Morning Reads
- Losses in store at the open
- Rite Aid soars after Albertsons deal
- Walmart guidance disappoints
- Comparable sales shine at Home Depot
- GM pitches deal for Seoul's support
- Opioids: Kentucky sues Cardinal Health
- Fox News plans new streaming service
- Samsung to slash OLED production
- BHP rebuffs Elliott as profit jumps
- Now bots are trying to help populists win Italy's election.
- Odd Lots: How one of the most profitable trades of the last few years blew up.
- A Deutsche Bank trader is now writing post-apocalyptic fiction.
- U.S. oil is getting more expensive again.
- Greeks are getting back to normal, but it’s painful.
- A Carillion case study.
- Bitcoin’s back?
- Top Morning Charts
- Bottom Scans I
- Bottom Scan II
- Head and Shoulders Bull&Bear
- Bottom Scan III
- Overbought / Oversold
- Bull Flags
- Channel Up Scan
Unusual Option Action:
Albertsons has agreed to purchase the rest of Rite Aid (NYSE:RAD) that is not being sold to Walgreens Boots Alliance (NASDAQ:WBA) for an undisclosed sum, as retailers respond to the recent M&A in the pharmacy sector and rapidly changing consumer landscape. Shareholders of Albertsons will hold roughly 71% of the $24B combined company, while Rite Aid investors will own the rest. The cash-and-stock deal would also allow Albertsons to go public after more than a decade of ownership by private-equity giant Cerberus Capital. RAD +31% premarket.
Several investment firms weighed in on the future for U.S. equities over the holiday weekend. While BlackRock upgraded its outlook for U.S. stocks on earnings momentum, Citi said there was "no equity bear market, but more corrections may be in sight" and Morgan Stanley stated the recent share slide was the "appetizer, not the main course." U.S. markets are now getting ready to reopen today, with stock futures in the red and the DJIA down over 200 points.
"Federal fiscal policy is entering uncharted territory," according to Goldman Sachs. "In the past, as the economy strengthens and the debt burden increases, Congress has responded by raising taxes and cutting spending. This time around, the opposite has occurred." If current fiscal policies are extended, the U.S. net interest expense relative to GDP will exceed the levels seen in the 1980s and early 1990s by 2027, and debt-to-GDP will probably be higher than 100%, "putting the U.S. in a worse fiscal position than the experience of the 1940s or 1990s."
The 19 finance ministers of the eurozone gathered yesterday to discuss who should become the next vice president of the ECB, picking Luis de Guindos, Spain's current minister for the economy. The choice means that the next ECB president - a role that becomes vacant in 2019 - might come from a northern European country and thus a more hawkish member when compared to incumbent Mario Draghi.
Ireland is stepping up plans to avoid market disruption from Brexit as Euroclear announced plans to create a settlement system that doesn't rely on the U.K. Until now, Dublin has depended on Euroclear's London-based operations to settle stock and ETF trading on the Irish stock exchange via passporting rights, but the current system would be "untenable" under a hard Brexit.
The world's largest oil exporter, Saudi Arabia, is exploring the use of nuclear energy for domestic energy consumption as part of its transition away from an oil-based system. "We are looking at a number of countries that have nuclear technology for peaceful purposes... so that we can save the oil and export it in order to generate revenue," Foreign Minister Adel Al-Jubeir said at the Munich Security Conference.
It's the latest trade tension escalation between the world's top two economies. China has threatened retaliation after the Trump administration received a green light to impose steep tariffs on aluminum and steel imports on national security grounds. "If the final decision from the U.S. hurts China's interests, we will definitely take necessary measures to protect our rights," said Wang Hejun, a senior official at China's Commerce Ministry.
Qualcomm and its advisors worked to reassert control and reprice the company's $40B deal to acquire NXP Semiconductors (NASDAQ:NXPI) this past weekend, with many NXP shareholders deciding in recent months that the company would be worth more if it remained independent. The purchase is structured as a tender offer under Dutch law, requiring at least 80% of the shares be purchased by Qualcomm in order for it to take control. Closing the deal could also help Qualcomm (NASDAQ:QCOM) defend a Broadcom (NASDAQ:AVGO) takeover.
Meanwhile, proxy advisory firm ISS is recommending investors vote for four out of the six board director nominees that Broadcom (AVGO) has put forward for election at Qualcomm's (QCOM) shareholder meeting on March 6. While the recommendation falls short of Broadcom's nominees winning a majority on Qualcomm's 11-member board, ISS said such a vote would offer a reasonable path to a negotiated deal that would deliver value.
Earlier reports suggested that Samsung Electronics (OTC:SSNLF) was looking for new OLED panel customers after Apple (NASDAQ:AAPL) slashed production for its iPhone X, but the company is now cutting its own output for Q1, according to the Nikkei. Supply plans for "45M-50M iPhones" have been lowered to "20M or fewer" at its South Chungcheong plant. Samsung Electronics shares fell as much as 2.3% following the news.
Black Panther blew away even the most lofty expectations for its debut weekend, posting the fifth best U.S. opening of all time and besting the likes of Iron Man, Batman and Superman. The Disney (NYSE:DIS) film earned an estimated $192M from Friday through Sunday, and scored $235M including Presidents Day. The movie was also the top-grossing film in history at 80 AMC (NYSE:AMC) theaters, or more than 10% of the entire circuit.
Fox News is expanding its reach in the news world with Fox Nation (NASDAQ:FOXA), a standalone subscription service available without a cable package, NYT reports. The venture will develop hours of new daily programming with a mostly fresh slate of anchors and commentators, joining an increasingly crowded marketplace for web-only streaming television. An official announcement is expected today.
Bitcoin broke through the $11,000 mark over the weekend for the first time since January as Venezuela announced today's pre-sale of its "petro" cryptocurrency - backed by oil, gas, gold and diamond reserves. The country's crypto regulator said it would draw investment from Qatar, Turkey and other Middle Eastern countries, as well as from European nations and the U.S.
"Reminder: cryptocurrencies are still a new and hyper-volatile asset class, and could drop to near-zero at any time... Don't put in more money than you can afford to lose," cautioned Vitalik Buterin, the founder of blockchain network Ethereum. His tweet also included another warning: "If you're trying to figure out where to store your life savings, traditional assets are still your safest bet."
Deutsche Bank has started cutting at least 250 jobs globally at its corporate and investment bank, and the layoffs could widen to more than 500, Bloomberg reports. Trading at the unit slumped 27% last quarter and fees from advising on deals and arranging debt and equity sales dipped 3%. Coupled with bonus payments that Deutsche Bank (NYSE:DB) CEO John Cryan said were on the "generous" side, the declines helped push the business into the red.
Although the "Colonel is working on it," KFC (NYSE:YUM) has apologized to its customers in the U.K. after the chain's branches were forced to close because they've run out of chicken. "We've brought a new delivery partner onboard, but they've had a couple of teething problems - getting fresh chicken out to 900 restaurants across the country is pretty complex!"
A federal judge in Delaware has overturned a jury’s verdict requiring Gilead Sciences (NASDAQ:GILD) to pay a record $2.54B because its hepatitis C drugs Sovaldi and Harvoni infringed a patent held by rival Merck & Co (NYSE:MRK). In a statement, Merck said it planned to appeal and believed the judge’s ruling did not reflect the facts of the case. The verdict had been the largest ever in a U.S. patent case.
Kentucky has filed a lawsuit against Cardinal Health (NYSE:CAH), accusing the drug distributor of contributing to the opioid epidemic. "These companies were following a playbook," Attorney General Andy Beshear declared. "The playbook gave them record profits and left us with devastation." It's the third such lawsuit filed by the state since November 2017, after cases against McKesson (NYSE:MCK) and Endo International (NASDAQ:ENDP).
General Motors has offered to convert debt of around $2.2B owed by its ailing South Korean operation into equity in exchange for financial support and tax benefits from Seoul, Reuters reports. GM also plans to produce two new models in South Korea after announcing last week it would shutter one facility and soon decide the future of the remaining three plants in the country.
U.S. investigators probing Daimler (OTCPK:DDAIF) have found that its cars were equipped with several software functions which may have helped them to pass diesel emissions tests, including one which switched off emissions cleaning after 26 km of driving, Bild am Sonntag reports. In the past, Daimler has said American and German investigations could lead to significant penalties and recalls.
Takata's U.S. unit has received court approval for its bankruptcy exit plan. The ruling comes after the company reached a settlement last week with creditor groups representing current and future victims of the company's lethally defective air bags, whose claims will be handled by a trust. Under the restructuring plan, Takata (OTCPK:TKTDQ) will sell most of its non-air bag assets to Key Safety Systems for $1.6B.
Latest self-driving news: Waymo (GOOG, GOOGL) has obtained a permit from Arizona to operate as a Transportation Network Company, meaning it can start charging fees to ferry customers around the state. Sony (NYSE:SNE) is also looking to get in on the action, with plans to build an AI-based taxi hailing system in Japan, while UBER said it sees the commercialization of its flying taxi service happening within five to 10 years.
An Iranian commercial plane crashed on Sunday in a foggy, mountainous region of Iran, killing all 66 people on board. The Aseman Airlines ATR-72 was made by European airplane manufacturer ATR, a partnership between Airbus (OTCPK:EADSY) and Leonardo (OTCPK:FINMY). Under decades of international sanctions, Iran's commercial passenger aircraft fleet has aged, with accidents occurring somewhat regularly in recent years.
Helped by robust metals prices, BHP Billiton (NYSE:BHP) reported a 25% rise in underlying half-year profit and said its focus remains on cutting debt as it boosted its dividend. The company also brushed off calls by activist investor Elliott Advisors to change its structure, with listings in both Britain and Australia, and said it plans to sell its onshore U.S. shale assets worth about $10B. BHP -3.5% premarket.
The partners in Israel's Tamar and Leviathan natural gas fields - Delek Drilling (OTC:DKDRF) and Noble Energy (NYSE:NBL) - have signed 10-year agreements to sell $15B worth of natural gas to Egyptian company Dolphinus. Various possibilities for transmission of the gas to Egypt are being examined, including use of the East Mediterranean Gas pipeline or a Jordanian-Israeli pipeline that will supply gas to NEPCO.
In Asia, Japan -1%. Hong Kong -0.8%. China closed. India -0.2%.
In Europe, at midday, London -0.3%. Paris +0.1%. Frankfurt -0.1%.
Futures at 6:20, Dow -0.8%. S&P -0.8%. Nasdaq -0.8%. Crude +0.5% to $61.83. Gold -1.1% to $1341. Bitcoin +2.1% to $11396.
Ten-year Treasury Yield +3 bps to 2.91%
Today's Economic Calendar
1:00 PM Results of $28B, 2-Year Note Auction