Wednesday Morning Reads
- Same Old Bear
- Tying American Stocks to the Rest of the World
- It May Not Be Enough.
- President Trump wants China trade deal to increase stock prices (FXI). Bloomberg Report
- China trade talks have concluded with two sides making progress on energy and agriculture (DBA, XLE). Bloomberg Report
- Fear of an earnings slowdown
- Plenty of Opportunities in 2019
- Small-Cap Stocks Shine
- Globe goes green as trade talks extended
- Vietnam accuses Facebook of breaking cyber laws
- Fitch issues U.S. triple-A rating warning
- Hard road ahead for May's Brexit deal
- U.S. government shutdown drags on
- Tim Cook discusses Apple's focus and future
- Can Hulu catch up to Netflix?
- Energy Transfer Operating LP prices $4B of senior notes in 3 tranches
- Aphria completes acquisition of CC Pharma; shares up 2% premarket
- Tesla sued over passenger death
- Report: AT&T prepping significant layoffs
- Reports of iPhone production cut
President Trump gave a national address last night pointing to a "humanitarian and security crisis" on the southern border and demanded billions of dollars in Congressional funding for a wall, which would be "indirectly paid for" via a trade deal with Mexico. An extended shutdown can affect the economy in a number of ways - from delaying business permits and visas to reducing service hours at innumerable agencies. Withheld or forgone pay from millions of federal employees can also hit consumer spending, which makes up about 70% of U.S. economic activity.
The shutdown also has the sovereign credit rating of the U.S. on watch. "If this continues to March 1 and the debt ceiling becomes a problem several months later, we may need to start thinking about the policy framework, the inability to pass a budget... and whether all of that is consistent with triple-A," said James McCormack, Fitch's global head of sovereign ratings.
Stocks across the globe are marching higher after U.S.-China trade talks were extended for an unscheduled third day, fueling optimism that the world's largest economies can avoid an all-out confrontation. Progress was seen on issues including purchases of U.S. farm and energy commodities, as well as increased access to China's markets, but the two sides are still ways apart on Chinese structural reforms that would stop alleged theft and forced U.S. technology transfer.
Following three years of declines, U.S. carbon emissions rose 3.4% in 2018, as the effects of a strong economy, like diesel and jet-fuel use in transportation, outstripped a sharp decline in the number of power plants burning coal to generate electricity. According to the Rhodium Group, the increase was the biggest jump since 2010, when the economy was rebounding from the Great Recession, and the second largest increase in two decades.
Theresa May takes her Brexit deal back to the House of Commons today, with just five working days to overcome political opposition before a vote on the accord is held on Jan. 15. However, her position may now be weaker than ever, after lawmakers on Tuesday restricted the prime minister's tax-varying powers if Britain crashes out of the EU without an agreement.
Italian Deputy Prime Minister Matteo Salvini and the leader of Poland’s ruling party, Jaroslaw Kaczynski, will today discuss the possibility of forming a Eurosceptic alliance to contest the European Parliament elections in May. "Someone has betrayed the European dream," Salvini told a League rally in Rome last month. "We will provide the blood for a new European community based on respect, work, growth and equality."
Apple +1.5% premarket as CEO Tim Cook shared why he is optimistic about the tech giant's future. "I think Apple (NASDAQ:AAPL) is not well understood in some of Wall Street. For example, I think there are several people that believe the most important metric is how many iPhones are sold in a given 90-day period or what the revenues is... I want the customer to be happy. Because if they're happy, they will eventually replace that product with another. And the services and the ecosystem around that will thrive."
The upward movement comes despite the latest report from the Nikkeisuggesting Apple (AAPL), which slashed its quarterly sales forecast last week, has reduced planned production for its three new iPhone models by about 10% for the January-March quarter. Qualcomm (NASDAQ:QCOM) also said comments from CEO Tim Cook - stating there were no recent settlement discussions between the iPhone maker and the chipmaker - were "misleading."
Netflix may have double the number of U.S. subscribers as Hulu (DIS, CMCSA, T), but CEO Randy Freer thinks it's "absolutely possible" to catch up to the streaming giant. Hulu added more subscribers in the U.S. than Netflix (NASDAQ:NFLX) in 2018, with 8M new users bringing the service's total sub count to 25M. "We expect to grow more this year than we did last year," added Freer.
Vietnam has accused Facebook (NASDAQ:FB) of failing to take down anti-government comments on its platform, days after controversial cybersecurity legislation took effect. The nation is also considering withholding money for some advertising paid to the social media giant. Despite economic reforms and increasing openness to social change, Vietnam's Communist Party retains tight media censorship and does not tolerate dissent.
In his annual New Year's resolution post, Facebook (FB) CEO Mark Zuckerberg said this year he plans to hold regular public discussions about the future of technology in society. "Do we want technology to keep giving more people a voice, or will traditional gatekeepers control what ideas can be expressed." Last year, he pledged to fix Facebook, but the stock plunged by nearly 30% in 2018 as the company became mired in a nonstop data privacy scandal and platform manipulation.
Chicago law firm Corboy & Demetrio has filed a lawsuit against Tesla (NASDAQ:TSLA) alleging that its 2014 Model S had a "defective" battery pack that was not protected against "thermal runaway," and caused the death of an 18-year old passenger in an accident last year. According to the law firm, there have been at least a dozen worldwide reported cases of Tesla S batteries catching fire in collisions as well as while being stationary in the last five years.
Fiat Chrysler is nearing a settlement with the DOJ to resolve allegations that it used illegal software to allow 104,000 U.S. diesel vehicles to pollute beyond legal limits, Reuters reports. Unlike similar settlements with VW (OTCPK:VLKAF) and Daimler (OTCPK:DDAIF), Fiat (NYSE:FCAU) still sells diesel-powered passenger vehicles in the U.S. and plans to offer diesel versions in two additional Jeep SUVs by 2020.
Following the resignation of Richard Goudis, Herbalife (NYSE:HLF) executive chairman and former CEO Michael Johnson has reassumed the role of chief executive on an interim basis. The nutritional-supplement provider said Goudis's resignation is related to comments he made before serving as CEO "that are contrary to Herbalife's expense-related policies and business practices... and do not reflect the company's culture."
One more chance? The latest twist in the Sears (OTCPK:SHLDQ) bankruptcy is that Chairman Eddie Lampert's hedge fund has until 4:00 p.m. today to pay a $120M deposit in order to participate in a scheduled auction by liquidators for the company. It's unclear if Lampert can secure the funding for a deposit and a bid, but the winning bidder at the auction will also need approval from a bankruptcy judge.
More retail trends... J.C. Penney (NYSE:JCP) said it will initiate three preliminary store closings this spring, as part of an ongoing evaluation of its performance, while shares climbed 3% AH after the chain issued a holiday sales update. Beginning next month, Walmart (NYSE:WMT) plans to partner with startup Udelv in testing the use of autonomous vans to deliver online grocery orders to customers in Arizona.
After closing its mega deal for Shire, Takeda (NYSE:TAK) will consider selling businesses from its Nycomed acquisition in 2011, as Japan's largest pharmaceutical group seeks to divest $10B of assets. To simplify the business further, Takeda said it will focus on five core areas: oncology, gastrointestinal conditions, neuroscience, rare diseases and plasma-derived therapies.
In Asia, Japan +1.1%. Hong Kong +2.3%. China +0.7%. India +0.6%.
In Europe, at midday, London +1%. Paris +1.1%. Frankfurt +1%.
Futures at 6:20, Dow +0.3%. S&P +0.3%. Nasdaq +0.4%. Crude +2.2% to $50.85. Gold -0.3% to $1281.80. Bitcoin -0.4% to $4018.
Ten-year Treasury Yield +2 bps to 2.74%
Today's Economic Calendar
7:00 MBA Mortgage Applications
8:20 Fed's Bostic Speech
9:00 Fed's Evans Speech
10:30 EIA Petroleum Inventories
11:30 Fed's Rosengren Speech
1:00 PM Results of $24B, 10-Year Note Auction
2:00 PM FOMC minutes