Tuesday Morning Reads
- Apple Sells out
- Budget Rebuke
- Big Rout
- California Judge reduced Bayer (BAYRY) Roundup lawsuit by $200 mln. WSJ Report
- Federal Judge has reaffirmed Bayer (BAYRY) weed killer settlement. Reuters Report
- Prepared for the Drop?
- U.S. Cyber Command is targeting Russians to prevent interference with elections (RSX, HACK). NY Times Report
- E.U. will decide today if Italy needs to revise its budget (EWI). Bloomberg Report
- S&P 500 futures drop 1.5%
- Saudi Davos deserted 'in the Desert
- FICO plans big change to credit scores
- Saudis to sign $50B in energy, infrastructure deals
- J&J makes $2.1B offer to buy out Ci
- United Technologies beats by $0.11, beats on revenue
- Biogen beats by $0.62, beats on revenue
- Philip Morris unveils new smokeless products
Some implied moves for earnings next week:$CAT 5.7%$MCD 4.0%$VZ 3.4%$BIIB 6.7%$IRBT 14.9%$COF 4.3%$ILMN 7.2%$EW 7.7%$T 3.9%$BA 4.9%$UPS 5.2%$V 4.3%$F 5.6%$ALGN 8.8%$NOW 7.6%$INTC 5.9%$MSFT 5.6%$TWTR 13.1%$SHOP 9.7%$GRUB 12.5%$AMZN 7.6%$GOOGL 6.2%$CMG 7.9% https://t.co/HFgkT7i6BU
— Option Millionaires (@OMillionaires) October 20, 2018
Todays Open Interest Changes:
Negative sentiment is being seen in the stock markets again as the Dow looked set for steep triple-digit losses and S&P 500 futures slumped 1.5% to a new low of 2715. The tech sector is under additional pressure after chipmaker AMS (OTCPK:AMSSY) plunged 27% as its outlook triggered alarm bells on a big day for corporate earnings. Broader forces may also be at play, amid Saudi Arabia's diplomatic isolation, worries about Italy's finances and a stalemate over Brexit.
Saudi Arabia's Tadawul stock market opened 1.3% lower overnight, ahead of a planned statement by Turkey's Recep Tayyip Erdogan that will reveal the "naked truth" about the killing of Saudi journalist Jamal Khashoggi. The account comes on the opening day of Saudi Arabia's Future Investment Initiative, dubbed "Davos in the Desert," which has seen many notable attendees and organizations pull out due to Khashoggi's disappearance.
SoftBank CEO Masayoshi Son is among the latest to cancel a speaking engagement at the conference, which may flare tensions, as the Saudis are the largest backer of SoftBank's (OTCPK:SFTBY) Vision Fund with a $45B stake. Canada is also willing to freeze exports of armored vehicles to Saudi Arabia, following Germany's lead in suspending military shipments to the kingdom.
Despite the tensions, Riyadh plans to ink deals worth more than $50B in the oil, gas industries and infrastructure sectors at its annual investment conference. The agreements will be signed with companies including Trafigura, Total (NYSE:TOT), Hyundai (OTCPK:HYMLF), Norinco, Schlumberger (NYSE:SLB), Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHGE). Threats of U.S. sanctions may still accelerate a Saudi shift eastward, increasing business engagement with Russia and China.
European Parliament Brexit chief Guy Verhofstadt has rejected Theresa May's proposals to get a Brexit deal over the line after she set out a four point plan in parliament to stave off a Tory rebellion. "[Now] our British counterparts have said that there has to be time limited. But we all know that a time limited backstop [arrangement] is not a backstop. The definition of a backstop is that it’s not time limited."
The executive exodus at Facebook (NASDAQ:FB) continues with Oculus co-founder Brendan Iribe leaving the tech giant following last week’s cancelation of the next-gen Rift 2 tethered VR headset. Sources at TechCrunch said he and Facebook management had "fundamentally different views on the future of Oculus that grew deeper over time" and Iribe wasn’t interested in a "race to the bottom" of performance.
Netflix is tapping debt markets for a second time this year, aiming to raise another $2B for original production, content acquisition and potential M&A moves. Netflix (NASDAQ:NFLX) has said it plans to spend $8B on content this year, but already blew $6.9B on TV shows and movies by the end of the third quarter, suggesting that 2018 spending is likely to be closer to $9B.
YouTube CEO Susan Wojcicki is warning video makers about the threat of the EU's new Directive on Copyright, urging them to "take action immediately" and protest the ruling with videos and social media posts. The directive, which passed in early September and makes tech platforms liable for copyright-protected content, would make it "too risky" for YouTube (GOOG, GOOGL) to "host content from smaller original content creators."
Qualcomm is teaming up with Amazon (NASDAQ:AMZN) to spread the use of its voice assistant, releasing a set of chips that any maker of Bluetooth headphones can use to embed Alexa directly into the device. The functionality would be similar to Apple's (NASDAQ:AAPL) AirPods, which let users tap the devices to talk to Siri. "This radically reduces [engineering] cost... and makes it simple for the industry to adopt this," said Qualcomm's (NASDAQ:QCOM) Anthony Murray.
Ahead of the busy holiday shopping season, Walmart (NYSE:WMT) is expanding two-day shipping and in-store returns to "millions of additional items," as well as making returning products sold by third-party sellers even easier. The move comes as Amazon (AMZN) and Target (NYSE:TGT), two top retail rivals, have been improving their own shipping perks to convince shoppers to pick them over the competition.
Philip Morris has unveiled two new versions of its smokeless tobacco device, iQOS 3 and iQOS 3 Multi, in the more than 40 markets around the world where iQOS products are already available. Philip Morris (NYSE:PM) is further introducing a less expensive line of "heat not burn" inserts, called HEETS, in Japan - where regular e-cigarettes are banned - as it tries to fend off competition and boost sales in key markets.
Constellation Brands is reportedly looking to divest some of its U.S.-based wine brands for approximately $3B. The labels include Clos du Bois, Mark West, Arbor Mist and Cooks, which collectively generate about $260M in EBITDA. Wine portfolio review is a part of Constellation's (NYSE:STZ) gradual shift towards beer and cannabis products, targeting the younger demographic.
The gold-standard in consumer lending decisions is about to get a major overhaul that could increase approvals for credit cards and personal loans, WSJ reports. The creator of the FICO credit score, Fair Isaac (NYSE:FICO), plans to unveil a new scoring system next year called the UltraFICO Score, which is designed to give people with dings on their credit histories a process to have their banking activity factored in as well.
HSBC is launching a digital lending platform for U.S. customers in 2019, almost 10 years since it wrote off $10.6B for its last venture into that market. Online lender Avant will power the platform, according to the FT. "The U.S. unsecured personal loan market is growing at 20% annually and has surpassed $125B in balances," said Pablo Sanchez, regional head of banking and wealth management for HSBC.
Another fine for Wells Fargo... The lender will pay $65M to settle claims that it misled investors about its "cross-selling" business strategy, after the bank failed to inform them that it was built on sales practice misconduct. Wells (NYSE:WFC), which has paid hundreds of millions of dollars in regulatory fines and settlements related to the scandal, said it had previously accrued the penalty costs.
Mitsubishi Heavy Industries is reportedly set to inject ¥220B ($2B) into its aircraft unit, which has struggled to deliver its first passenger plane. First customer ANA Holdings now expects to receive the 90-seater plane in 2020, rather than in 2013 as originally planned. The news comes on the heels of Bombardier's (OTCQX:BDRAF, OTCQX:BDRBF) decision to sue Mitsubishi's (OTCPK:MHVYF) aircraft unit, saying former employees passed on trade secrets to help its jet project.
After receiving a buyout offer from Apollo Global Management (NYSE:APO) last Friday, the board of directors of Arconic (NYSE:ARNC) is now mulling an $11B acquisition. The offer is a small premium to where Arconic shares are trading, adding pressure on the U.S. company to decide if it will remain independent following President Trump's imposition of aluminum tariffs.
Johnson & Johnson has made a tender offer for the outstanding shares of Japanese skincare firm Ci:z Holdings that it doesn't already own for ¥230B ($2.05B) in cash. It's already the second largest shareholder of the Japanese firm, with a 19.9% stake through its affiliate. J&J (NYSE:JNJ) is betting the deal, which will give it ownership of Ci:z's popular brands, will help it strengthen its international innovation pipeline. JNJ -1% premarket.
It's been more than four months since Kellogg's (NYSE:K) Honey Smacks were taken off store shelves, but the cereal is making a comeback next month with a redesigned recipe that omits high fructose corn syrup and artificial flavors. Over 11M boxes were recalled after a salmonella outbreak linked to a factory that manufactured the cereal sickened 135 people in 36 states.
In Asia, Japan -2.7%. Hong Kong -3.1%. China -2.3%. India -0.8%.
In Europe, at midday, London -0.6%. Paris -1.1%. Frankfurt -1.6%.
Futures at 6:20, Dow -1.1%. S&P -1.2%. Nasdaq -1.6%. Crude -1.5% to $68.34. Gold +1% to $1237. Bitcoin -0.7% to $6403.
Ten-year Treasury Yield -4 bps to 3.15%Today's Economic Calendar
8:55 Redbook Chain Store Sales
9:30 Fed's Kashkari Speech
10:00 Richmond Fed Mfg.
1:00 PM Results of $38B, 2-Year Note Auction
1:30 PM Fed's Bostic: Economic Outlook and Monetary Policy
2:15 PM Fed's Kaplan Speech
6:15 PM Fed's Evans Speech
8:00 PM Fed's George “Disruption in the Payments Landscape”