Wednesdays Market Prepper
- First Time in 14 Months
- Taking this sector down
- Market Outlook
- What the ECB Will and Won’t Do This Week
- Bond’s Rollercoaster Ride
- $1.26 Billion Antitrust Fine
- Don’t Call It Pink Chocolate
- Markets Took It In Stride
- Global investors on edge
- Newell Brands lowers profit guidance
- Boeing raises forecast for China demand
- Intel appeal backed by EU
- U.S. gas prices at two-year high
- Bumpy road for United Tech-Rockwell deal
- Apple preps $5B bond sale
Yesterdays Unusual Option Volume:
Global markets trade lower in the early going, tracking Wall Street's slide amid continuing tensions over North Korea and a new hurricane threatening to menace the U.S. coastline. European stocks followed Asia lower, and most commodities also are lower. In Europe, investors are also looking ahead to the European Central Bank's monetary policy meeting on Thursday, although little news is expected. Elsewhere, new data shows Australia's economy grew less than expected in the second quarter, and gold rises toward one-year highs.
Traders are bracing for another hurricane to hit the U.S., as Hurricane Irma has strengthened into one of the most powerful storms ever recorded over the Atlantic Ocean. Shares of insurers already coping with damage from Hurricane Harvey and reinsurers providing insurance companies with backup protection against major disasters ended yesterday's trading with sharp losses. Reinsurer Everest Re (NYSE:RE) fell nearly 7%, making it the biggest loser on the S&P 500, and XL Group (NYSE:XL) slumped 5.8%. November orange juice futures soared 6.2% to $1.45 per pound, the highest for a most actively traded contract since May 2016. Cruise ship companies that operate in the Caribbean, including Royal Caribbean (NYSE:RCL) and Carnival (NYSE:CCL), also fell sharply. Airlines including American (NASDAQ:AAL), Delta (NYSE:DAL), Southwest (NYSE:LUV) and JetBlue (NASDAQ:JBLU) are canceling flights and offering waivers to passengers.
President Trump yesterday revoked the so-called "Dreamer" program that shields young unauthorized immigrants from deportation, giving Congress six months to draft a legal path for amnesty. As early as March 2018, some of the 800,000 young adults brought to the U.S. illegally as children who qualify for the DACA program - Deferred Action for Childhood Arrivals - would become eligible for deportation without a congressional fix. In reaction, a wide range of business leaders - including JPMorgan Chase's (NYSE:JPM) Jamie Dimon, Facebook's (NASDAQ:FB) Mark Zuckerberg, Apple's (NASDAQ:AAPL) Tim Cook, Google's (NASDAQ:GOOG) Sundar Pichai and Cummins's (NYSE:CMI) Tom Linebarger - urged Congress to act, and said Trump's decision to end the program moves the labor force in the wrong direction for achieving growth.
U.S. gasoline pump price rose to new two-year highs on Tuesday, but the futures market signaled a coming end to the fuel supply crunch created by Hurricane Harvey as oil refineries return to service. While gasoline futures (NYSEARCA:UGA) fell yesterday 2.8% to $1.6991 per gallon, the average price for a gallon of gasoline at the pump rose 1.1 cents to $2.65 a gallon, extending the 27 cent surge for the week ended Monday. Consumers could continue to see elevated pump prices for a number of weeks as refiners and pipelines gradually ramp up and depleted inventories are slowly replenished. Few refineries have reported the kind of major damage that hobbled plants for months following hurricanes Katrina and Rita in 2005, but some are likely to be offline for several weeks; Morgan Stanley says it took 3-5 weeks for refining capacity to return to normal levels after the storms in 2005 and 2008.
Rate hikes could be hurting the U.S. economy, says Minneapolis Fed President Neel Kashkari, suggesting the Fed is potentially overestimating the tightness of the labor market and may have allowed inflation expectations to turn lower. "It’s very possible that our rate hikes over the past 18 months are leading to slower job growth, leaving more people on the sidelines, leading to lower wage growth, and leading to lower inflation and inflation expectations," Kashkari said, not disappointing his dovish fans. "These premature rate hikes that we are embarking on, they’re not free, and I think we need to remind ourselves of that.” Kashkari's comments added to investor concerns about banks, whose margins have been under pressure for much of the past decade in the low-rate environment; the financial sector was Tuesday's worst performer, -2.2%.
The proposed $30 billion tie-up of United Technologies (NYSE:UTX) and Rockwell Collins (NYSE:COL), already criticized by customers and slammed by investors, could face a bumpy regulatory road to approval, especially in the European Union. The two companies, which both supply airplane makers, say the overlap in their product lines is relatively small, but opponents of the deal could argue the combination would result in unfair market power since the companies are able to exercise leverage based on their sale of a wide range of specialized products to certain customers. Boeing's (NYSE:BA) initial reaction was "skeptical" that the deal would benefit customers, and threatened to cancel some contracts with the two suppliers if the combination undermines competition in the aerospace supply chain. Boeing and Airbus (OTCPK:EADSF, OTCPK:EADSY) will have a say in the merger's fate because they both have “disproportionate influence” on deals throughout their supply chains, says William Blair analyst Nicholas Heymann.
Facebook inflates the number of people who can see the ads on its platform, alleges Pivotal Research analyst Brian Wieser, who maintains a Sell rating on the stock with a year-end $140 price target. Facebook's (FB) Ads Manager claims a potential reach of 41 million 18-24-year olds and 60 million 25-34-year olds in the U.S., but 2016 U.S. census data shows just 31 million people aged 18-24 and 45 million in the 25-34 age group, Wieser says. "While Facebook's measurement issues won't necessarily deter advertisers from spending money with Facebook, they will help traditional TV sellers justify existing budget shares and could restrain Facebook's growth in video ad sales on the margins," according to Wieser. In response, Facebook says its reach estimates "are designed to estimate how many people in a given area are eligible to see an ad a business might run. They are not designed to match population or census estimates."
Nissan unveiled its new Leaf electric car with improved range, autonomous driving technology and a $29,000 sticker price that undercuts rivals in an attempt to jump-start slowing sales. The 2018 Leaf will travel 150 miles on a single charge, Nissan (OTCPK:NSANY) says, up from 107 miles in the previous version, but Tesla's (NASDAQ:TSLA) base Model 3 can go 220 miles on a single charge and the Chevy Bolt (NYSE:GM) has a range of 238 miles - although those cars carry a considerably higher price tag. Nissan is aiming to more than double annual deliveries after selling 49,000 Leafs in 2016, roughly 2,000 units fewer than Tesla's Model S. The new Leaf, whose Japanese sales start October 2, followed by sales in Europe and the U.S. in January, has a window to build momentum before Tesla ramps up Model 3 production and other EV models hit the roads over the next few years.
The European Union's highest court ruled that Intel's (NASDAQ:INTC) decade-long challenge of a €1.06 billion ($1.3 billion) European Union antitrust fine must be referred back to a lower court, which must re-examine the case. In a potentially encouraging sign for the company, the lower court has been told to focus on Intel’s arguments that its rebates to customers were not anti-competitive. The ruling by the Court of Justice of the EU may force the European Commission to re-examine its tough line and economic approach in other antitrust cases such as those against Qualcomm (NASDAQ:QCOM) and Google (GOOG, GOOGL). The ruling also could embolden companies challenging the commission in court over antitrust decisions.
Hollywood finished off its weakest summer at the box office in 25 years, after marking a modern-worst year-over-year decline - and that's before accounting for inflation. Revenues overall fell 14.6% to $3.83 billion, the first time since 2006 the total failed to hit $4 billion, and the visitor count of 430 million is by far the worst showing in a quarter-century. Labor Day weekend grosses were the holiday's worst in 17 years, with no major releases stepping up to the plate. The Hitman's Bodyguard (LGF.A, LGF.B) held the No. 1 spot for the third week in a row, with $13.3M over the four days, while Annabelle: Creation (NYSE:TWX) held on to No. 2 with $9.2M in that span. Grim executives now look ahead to the weekend's 4,000-theater-plus wide release of Stephen King's It to jump-start the remainder of the year.
Hewlett Packard Enterprise (NYSE:HPE) +4.3% AH on Q3 beat.
HealthEquity (NASDAQ:HQY) +6% AH on Q2 beat.
Coupa Software (NASDAQ:COUP) +4.8% AH on Q2 revenue growth.
Dave & Buster's (NASDAQ:PLAY) -7% AH on weak same-store sales growth.
Duluth Holdings (NASDAQ:DLTH) +8.9% AH on strong Q2 earnings.
At Home Group (NASDAQ:HOME) +4.5% AH on Q2 revenue growth.
In Asia, Japan -0.14%. Hong Kong -0.46%. China +0.03%. India -0.46%.
In Europe, at midday, London -0.67%. Paris -0.26%. Frankfurt -0.10%.
Futures at 6:30, Dow +0.04%. S&P flat. Nasdaq +0.15%. Crude +0.50% to $48.90. Gold +0.06% to $1,345.30.
Ten-year Treasury Yield +5 bps to 2.075%Today's Economic Calendar
7:00 MBA Mortgage Applications
8:30 International Trade
8:55 Redbook Chain Store Sales
9:45 PMI Services Index
10:00 ISM Non-Manufacturing Index
2:00 PM Fed's Beige Book