Wednesday Morning Reads
- Yield Curves Invert
- When Will It Stop
- Pressure on Merkel for Stimulus
- China’s Economy Worsens in July
- Lower Fees, Snazzy Branches
- Break Up Big Tech Companies
- The Rise of the Virtual Restaurant
- The USDA Dropped a Corn Bombshell
- The Seduction of Above Average
- Futures lower; yield curve inverts
- German economy halfway to recession
- China industrial output growth weakest in 17 years
- Costco declares $0.65 dividend
- AstraZeneca and Merck's Lynparza shows positive effect in late-stage ovarian cancer study
- Canopy Growth Q1 2020 Earnings Preview
- Argentina's peso continues to drop
- Deere PT lowered at Deutsche Bank
- Banks fall as yield curve inverts; RBC upgrades large-cap REITs
- UnitedHealth declares $1.08 dividend
- Tencent tops earnings on gaming strength
- Regeneron's evinacumab successful in late-stage study in inherited type of high cholesterol
Open Interest Changes
Tariff relief led to big gains for Wall Street on Tuesday, though U.S. stock index futures are now pointing to losses of 0.6% as weaker-than-expected data from China and Germany dimmed the global outlook. Yesterday, the U.S. Trade Representative announced that fresh 10% tariffs, originally scheduled to go into effect Sept. 1, would be delayed until Dec. 15 for some consumer items, while other products were removed from the new tariff list altogether due to "health and security factors." President Trump later told reporters that his decision to delay the duties was to avoid impacts on Christmas shopping.
Nothing is stopping the U.S. from getting sucked into the global trend of negative yielding debt, former Fed Chairman Alan Greenspan told Bloomberg, adding that "zero has no meaning, beside being a certain level." With global central banks engaging in unprecedented monetary easing, a record $15T of government bonds worldwide now trade at negative yields. The U.S.-China trade war is further putting pressure on the 10-year Treasury note, which inverted overnight with the 2-year Treasury rate, a historic recession indicator.
Go deeper: 'The Stock And Bond Divide' by Real Vision.
90% of S&P 500 companies have already reported Q2 results, but there is still plenty to watch this week, particularly retail and e-commerce players. After surprisingly strong earnings from JD.com (NASDAQ:JD) on Tuesday, Macy's (NYSE:M) will release quarterly figures today, while Walmart (NYSE:WMT), J.C. Penney (NYSE:JCP) and Alibaba (NYSE:BABA) will report tomorrow. Analysts expect consumer discretionary and consumer staple profits to fall this quarter, with categories like multi-line retailers and food products likely among the biggest decliners.
Go deeper: Dividend scorecard of Macy's.
A seasonal slowdown and trade tensions saw China post its weakest industrial output growth since 2002, which rose 4.8% in July from a year earlier, adding to the case to roll out more stimulus. Retail sales also slumped, while fixed-asset investment slowed further. Push for trade talks? Following the data - and a delay to the next tranche of U.S. tariffs - Chinese officials stuck to plans to visit Washington in September for face-to-face meetings.
Trading in the iShares MSCI Hong Kong ETF (NYSEARCA:EWH), the largest fund tracking Hong Kong stocks, jumped to a five-year high on Tuesday, with 25M shares trading hands in New York. As riot police clashed with pro-democracy protesters and the Hong Kong airport returned to calm, EWH ended the session in the green, though the $1.4B fund has lost about 40% of its assets since June. Tensions are still running high, with President Trump stoking fears yesterday about a possible intervention from Chinese troops massing at the border.
Go deeper: Explore other iShares country ETFs.
Europe's largest economy contracted by 0.1% in the second quarter as global tensions put pressure on its export-driven manufacturing sector. Speaking before the widely-anticipated fall was published, Chancellor Angela Merkel said the economy was entering a "difficult phase," adding, "we will react depending on the situation." A closely-watched survey of investors yesterday found German economic sentiment had plummeted to its lowest level since the eurozone crisis in 2011.
The newly combined ViacomCBS will invest in more movies and TV shows as it seeks to challenge Disney (NYSE:DIS) and Netflix (NASDAQ:NFLX) to become a bigger player in the growing streaming business. Viacom (NASDAQ:VIA) owns Paramount Pictures and pay TV channels such as Comedy Central, MTV and BET, while CBS (NYSE:CBS) has a broadcast network, television stations, Showtime and a stake in The CW over-the-air network. The two companies have also been major content spenders, having spent more than $13B combined in the past year (or close to the estimated $15B Netflix intends to spend in 2019). VIA -1.5%; CBS -2% premarket.
Facebook (NASDAQ:FB) confirmed that it has been transcribing audio clips of its users in Messenger, but stopped using human review "more than a week ago." Only those who opted in to the feature had their audio clips reviewed by third-party contractors, according to the company, but its support page states that even if one person in a chat consented to Facebook transcribing the conversation, any audio in the thread would have been transcribed, regardless of who sent it.
Go deeper: Quant, SA, Sell Side ratings of Facebook.
Dissolving tech giants will be challenging, but it might be the best action to restore market competition, according to FTC Chairman Joe Simons, who is leading the agency's broad review of the tech sector for potential antitrust violations. Amazon (NASDAQ:AMZN) and Alphabet (GOOG,GOOGL) are common targets of antitrust investigations both domestically and overseas. The FTC is also investigating Facebook (FB) for violations.
Go deeper: Latest tech news.
What else is happening...
Argentina's peso continues slide amid market turmoil.
In Asia, Japan +1%. Hong Kong +0.1%. China +0.4%. India +1%.
In Europe, at midday, London -0.6%. Paris -1%. Frankfurt -1.2%.
Futures at 6:20, Dow -0.6%. S&P -0.6%. Nasdaq -0.6%. Crude -1.3% to $56.38. Gold -0.2% to $1511.70. Bitcoin -7.4% to $10465.
Ten-year Treasury Yield -4 bps to 1.64%