Wednesday Morning Reads

Wednesday Morning Reads




Open Interest



More than half a million people have been ordered to evacuate the U.S. Gulf Coast, with Hurricane Laura set to come ashore tonight in Texas and Louisiana as a Category 3 storm. On its current track, Laura will likely cause $6B-$18B in losses, according to Chuck Watson, a disaster modeler with Enki Research. Oil is meanwhile holding at a five-month high of $43 per barrel amid a threat that some of America's largest oil refineries could be shut for months. The hurricane has already prompted more than 84% of oil output and nearly 61% of natural gas production in the Gulf of Mexico to be taken off-line, according to the Interior Department's Bureau of Safety and Environmental Enforcement.

Another record close

While the S&P 500 and Nasdaq notched fresh highs on Tuesday for the third day running, futures were more muted overnight as investors awaited the next steps for monetary policy (Fed Chair Jerome Powell will speak tomorrow at Jackson Hole). Contracts tied to the Dow are off by 0.2%, the S&P 500 is unchanged and Nasdaq is ahead by 0.3%. Ahead of the opening bell, the latest durable goods report for July will be published, with new orders for manufactured big-ticket items expected to have grown 4.3%, down from a 7.6% jump in June.

Salesforce soars

Cloud and software stocks are getting a boost premarket following a stellar earnings report from Salesforce (NYSE:CRM). The company raised its full-year outlook to $20.7B-$20.8B in revenue and adjusted EPS of $3.72-3.74 (after lowering guidance last quarter). Shares rose 13% AH on the Q2 results, which saw subscription and support sales up 29% and Professional Services increase 23%. "It's humbling to have had one of the best quarters in Salesforce's history against the backdrop of multiple crises seriously affecting our communities around the world," said CEO Marc Benioff.

Vaccine liability protections

The European pharmaceuticals vaccine lobby is pushing the EU for certain liability protections as drugmakers around the world rush to develop a coronavirus vaccine. It would give them a "comprehensive no-fault and non-adversarial compensation system, and an exemption from civil liability" if there are problems with the vaccines, "in order to compensate for such high risks taken by manufacturers." Several of the firms in Vaccines Europe are in advanced talks with the EU over vaccine supplies, while some have already reached deals with either the U.S. or the EU.

Company culture at Mickey D's

McDonald's (NYSE:MCD) handling of workplace problems is in the spotlight as the fast-food giant probes whether former CEO Steve Easterbrook covered up improprieties by other McDonald's employees. Allegations have also surfaced of potential misconduct within the human resources department (former managers have said their complaints were ignored and they feared retaliation for reporting misconduct). Easterbrook was fired in November over a consensual relationship with an employee, but the company received a tip months later that he had been involved in multiple affairs with workers.

Should the U.S. sell the F-35 to the UAE?

With the ink barely dry on the peace agreement between Israel and the UAE, the two countries are sparring over the latter's long-standing request to buy Lockheed Martin's (NYSE:LMT) F-35 from the U.S. Washington is firmly committed to selling advanced weaponry to the UAE, according to Secretary of State Mike Pompeo, adding that Israel would maintain its "qualitative military edge" as stipulated under American law. However, any U.S. decision to push ahead with an arms sale to the UAE will likely face pushback in Congress. It also brings up regional memories of the F-35 sale to Turkey, which backfired after Ankara acquired the S-400 missile defense system from Russia.

Backed by Thiel

Data analytics firm Palantir (PLTR) has filed to go public, confirming prior reports that the company would pursue a direct listing - the same unconventional route taken by Slack (NYSE:WORK) and Spotify (NYSE:SPOT). The secretive tech business co-founded by Peter Thiel is reportedly hoping for a valuation of about $26B, despite losing $588M, or $580M on a pro-forma basis, in 2019. Another Thiel-backed business, called Luminar, went public on Monday via a $3.4B SPAC merger, while workplace app Asana (also backed by Thiel) filed for direct listing on NYSE.

Year of the SPAC

Gary Cohn, the former economic adviser to President Trump, is the latest high-profile name to join the frenzy of Wall Street dealmaking related to special purpose acquisition companies (SPACs). He's teaming up with investor Clifton S. Robbins to seek $600M for a new blank-check acquisition company, following splashy deals for the likes of Virgin Galactic (NYSE:SPCE), DraftKings (NASDAQ:DKNG) and Nikola (NASDAQ:NKLA). Other high-profile financiers like Bill Ackman, Michael Klein and Chamath Palihapitiya, as well as former U.S. House Speaker Paul Ryan, are among the sponsors for SPAC IPOs in 2020.

What else is happening...

U.S. charges Teva (NYSE:TEVA) in generic drugs price-fixing probe.

American Airlines (NASDAQ:AAL) to reduce workforce by 19K in October.

Elon Musk teases big battery breakthrough.

GM (NYSE:GM) and Ford (NYSE:F) near finish of coronavirus ventilator projects.

Carnival (NYSE:CCL) cancels Princess world cruises in early 2021.

Tuesday's Key Earnings

Best Buy (NYSE:BBY) -4% AH warning surge in buying could be temporary.
Hewlett Packard Enterprise (NYSE:HPE) +6.1% AH on sequential top-line gains, strong guidance.
Intuit (NASDAQ:INTU) +5.9% AH after FQ4 beats, TurboTax Online strength.
Nordstrom (NYSE:JWN) -5.7% AH with sales falling 53% during the quarter.
Salesforce (CRM+13.5% AH raising outlook, shaking off pandemic.

Today's Markets

In Asia, Japan flat. Hong Kong flat. China -1.3%. India +0.6%.
In Europe, at midday, London -0.3%. Paris +0.2%. Frankfurt +0.5%.
Futures at 6:20, Dow -0.2%. S&P flat. Nasdaq +0.3%. Crude -0.3% to $43.24. Gold +0.1% to $1925.60. Bitcoin -1.5% to 11428.
Ten-year Treasury Yield +3 bps to 0.71%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Durable Goods
10:00 Fed's Barkin Speech
10:00 State Street Investor Confidence Index
10:30 EIA Petroleum Inventories
11:00 Survey of Business Uncertainty
11:30 Results of $22B, 2-Year FRN Auction
1:00 PM Results of $51B, 5-Year Note Auction

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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