Tuesday Morning Reads
- Trump Proposes a Record $4.75 Trillion Budget
- Maddening Unsolved Mystery
- Worried About Next Downturn?
- Domain Battle Rages
- Who’s Next?
- Just Save More Money
- Let’s Do It This TIme
- Futures extend gains after tech rally
- Sterling sinks 1.1% after AG sees Brexit legal risk unchanged
- Core CPI rises 0.2% as expected
- Oil tops $57/bbl as PDVSA output tanks
- Morgan Stanley reels in expectations on Tesla
- Microsoft declares $0.46 dividend
- BA -2.3% as Edward Jones sees near-term earnings pressure
- U.S. gives Germany ultimatum on Huawei
- Roku files for mixed shelf offering
- Blackstone, partners close deal for controlling interest in Tallgrass Energy
- HSBC cools on Coca-Cola
- FDA OKs Pfizer's Herceptin biosimilar
"We have secured legal changes," Theresa May said in a late-night news conference beside the EU's Jean-Claude Juncker, ahead of today's vote in the U.K. parliament on the divorce agreement. The pound climbed 0.5% on the news, buying $1.3215 and taking its gains over two days to more than 1.5%. It's not clear if the assurances over the Irish backstop will be enough to win over the 116 additional lawmakers she needs to approve her Brexit accord, but the alternatives are leaving the EU without a deal on March 29 or delaying Brexit.
A rally in tech shares is driving sentiment across the globe, with Wall Street set to extend the strong gains seen in the previous session, driven by an Apple (NASDAQ:AAPL) upgrade at BofA and Nvidia's (NASDAQ:NVDA) $6.9B deal for Mellanox (NASDAQ:MLNX). Dow futures are up 33 points, the Nasdaq is pointing 0.4% higher, while the S&P 500 is poised to pierce the 2,800 level. A lower likelihood of crashing out of the EU without a Brexit deal is also helping inject some bullish sentiment into equity markets, as well as China and the U.S. setting the next steps of their trade talks.
The White House proposed a $4.7T fiscal 2020 budget on Monday that called for cutting regular non-defense discretionary spending by 9%, while increasing defense spending and including $8.6B for a border wall. Under the blueprint, the budget doesn't balance in 10 years and shows a $202B deficit in 2029, assuming economic growth at an average of 3% for the decade. The proposal is likely to be dismissed by Congress and increases the threat of another government shutdown in the fall.
It's only March, but retailers - including Dollar Tree (NASDAQ:DLTR), Abercrombie & Fitch (NYSE:ANF), Kohl's (NYSE:KSS), Gap (NYSE:GPS), J.C. Penney (NYSE:JCP) and Tesla (NASDAQ:TSLA) - have already announced 4,810 store closures in 2019. According to Coresight Research, the closings far outweigh the openings, leaving real estate owners hunting for new businesses or unique concepts to fill empty storefronts. Last year, Coresight tracked 5,524 store shutterings, down more than 30% from a record 8,139 closures announced in 2017.
Oil production in Venezuela has collapsed due to power blackouts throughout the country with state-owned PDVSA and its joint venture partners struggling to operate wells and other facilities. A source at PDVSA also said the government had decided to ration electricity, in part to supply power to the Jose oil export terminal, which is Venezuela's primary source of revenue. Crude futures +1.1% to $57.42/bbl.
Boeing will deploy a software upgrade to the 737 MAX 8 "within weeks" after the FAA announced it would mandate "design changes" in the aircraft by April but said the plane was airworthy and did not need to be grounded. More airlines are nevertheless taking precautions. Singapore and Australia have now suspended 737 MAX flights, as well as Mexico's Aeromexico, Brazil's Gol Transportes Aéreos and Argentina's Aerolineas Argentinas. BA -1.9%premarket.
Putting themselves as equals, Nissan (OTCPK:NSANY) and Renault (OTCPK:RNLSY) have retooled the board structure of the world’s largest car-making alliance following the ouster of Carlos Ghosn. They said the chairman of Renault - Jean-Dominique Senard - would serve as chairman of the alliance but not as chairman of Nissan. However, there will be no change to their cross-shareholding agreements, including the stake of junior partner Mitsubishi Motors (OTC:MMTOY).
EV revolution... Volkswagen (OTCPK:VWAGY) will launch 70 new electric models by 2028, and plans to ramp up its production of electric vehicles to 22M over the next decade. The company previously said it would aim for 15M, an ambitious target considering it made fewer than 50K battery-only vehicles last year. It also disclosed that operating profit at its core VW brand fell to €3.2B from €3.3B in 2018 as it faced bottlenecks certifying cars under new emissions tests.
Tesla CEO Elon Musk has accused the SEC of "unprecedented overreach" as he asked a federal judge to dismiss the regulator's attempt to hold him in contempt of court. In a recent tweet on Feb. 19 that inspired the proceedings, Musk said, "Tesla made 0 cars in 2011, but will make around 500k in 2019." The SEC said that tweet was not approved by a lawyer according to the terms of an earlier settlement, and was inaccurate. TSLA -1.7% premarket.
Alphabet's self-driving car unit Waymo is seeking outside investments from the likes of Volkswagen (OTCPK:VWAGY), The Information reports. Automakers that now make cars for Waymo - Fiat Chrysler (NYSE:FCAU) and Jaguar (NYSE:TTM) - could also be involved. Sources estimate that the division is costing at least $1B a year and investments could ease the burden for Alphabet (GOOG, GOOGL).
Doubling down on its threats, the Trump administration has told the German government it would limit intelligence sharing with Berlin if Huawei is allowed to build its next-generation mobile internet infrastructure. Among other things, European security agencies have relied heavily on U.S. intelligence in the fight against terrorism. Bad news for Huawei has generally been seen by investors as an opportunity for Nokia (NYSE:NOK) and Ericsson (NASDAQ:ERIC).
Apple has officially announced its March 25 event with the tagline: "It's show time." The tech giant is expected to unveil a a bundled news service and video streaming service, which is expected to launch globally. Apple (AAPL) has long hinted at a planned video platform, spending $2B in Hollywood to produce its own content and signing major TV and movie stars.
Race to the bottom? JPMorgan's (NYSE:JPM) investment arm has cut management fees a notch closer to zero for its new BetaBuilders ETF as it tries to gain a stronger hold in the booming market for low-cost investment products. The fund house, which has a total of $1.7T under management, will charge only $0.20 for every $1,000 invested in the ETF. JPMorgan was relatively late to the market, launching its first ETF product in 2014.
The CEO of scandal-plagued Wells Fargo (NYSE:WFC), Tim Sloan, will testify before the House Financial Services Committee today in a hearing that will set the tone for Wall Street under the new Democrat-controlled House. According to prepared remarks, he'll tout the bank's progress in repaying wrongly charged customers and highlight changes to its risk management structure. Sloan took over as CEO in October 2016.
The chief executives of T-Mobile (NASDAQ:TMUS) and Sprint (NYSE:S) are also heading back to Capitol Hill today to defend their planned $26B merger. The agreement to combine the No. 3 and No. 4 U.S. wireless carriers was approved by both companies' shareholders in October and has received national security clearance, but still needs approval from the DOJ and FCC. An informal 180-day "shot clock" on the merger review was halted last week to give the public more time to comment.
In Asia, Japan +1.8%. Hong Kong +1.5%. China +1.1%. India +1.3%.
In Europe, at midday, London +0.1%. Paris +0.1%. Frankfurt +0.1%.
Futures at 6:20, Dow +0.1%. S&P +0.2%. Nasdaq +0.4%. Crude +1.1% to $57.42. Gold +0.4% to $1296.70. Bitcoin +0.6% to $3868.
Ten-year Treasury Yield +2 bps to 2.66%
Today's Economic Calendar
6:00 NFIB Small Business Optimism Index
8:30 Consumer Price Index
8:45 Fed's Reserve Gov. Lael Brainard: "Community Reinvestment Act Modernization"
8:55 Redbook Chain Store Sales
1:00 PM Results of $24B, 10-Year Note Auction