Cover story: Of the three people likely to be chosen by Donald Trump to lead the Fed—Stanford economist John Taylor, Fed governor Jerome Powell, and incumbent Janet Yellen—Powell is the most likely choice, especially given Treasury secretary Steven Mnuchin’s support for him; A Taylor Fed would likely mean a “more aggressive” normalization of policy in terms of rate increases and reducing the balance sheet.
Features: 1) Positive on EPD: Leader among U.S. energy master limited partnerships isn’t getting the respect it deserves from the market, and shares remain attractive at a time when there is a dearth of income; 2) Positive on TGT: Chief Brian Cornell has sold assets, cut costs, and is refurbishing stores, efforts that could increase traffic and boost the share price despite growing competition from AMZN; 3) Positive on BABA, LFC: Consumer-related stocks in China stand to benefit from president Xi Jinping’s growing power and the economy’s shift from export-driven manufacturing to domestic services; 4) The S&P telecom sector, once home to 14 companies, now has only four, prompting calls for the creation of a new “communications services” category.
Tech Trader: Strong earnings reports from AMZN, MSFT, and GOOGL are a sign tech giants continue to exploit their dominance to attract a growing amount of revenue from loyal customer bases.
Trader: Ben Bowler of BAC/Merrill Lynch foresees two factors that might change the outlook in the U.S.: higher inflation and a new Fed chief’s outlook on the moral hazard created by central bank puts; A recent selloff in biotechs such as AMGN, BIIB, CELG, and GILD is the result of high expectations, but the companies still have room to run; Scott Davis of Melius Research is optimistic that GE chief John Flannery will be able to create value by spinning off nonessential businesses.
Interview: Jeff Vinik, owner of the Tampa Bay Lightening hockey team and a former fund manager at Fidelity, says the market may see strong growth and low inflation for many more years.
Follow-Up: Cautious on CVS: Company’s acquisition of AET brings some long-term benefits, but the deal requires it to trade cheap stock for more expensive stock, and some Aetna competitors that work with CVS could walk away.
European Trader: Cautious on Shire: Irish pharmaceutical is in a slump, and though a bullish case can be made, it must take into account growing competition from Roche and generic rivals as well as limits on pricing power.
Asian Trader: Positive on SNE: Once a rival to AAPL, the Japanese electronics giant has become a key supplier, while a turnaround and growing strength in a range of divisions are producing results. Emerging Markets: The benefits of bitcoin continue to be debated on Wall Street, but for people in countries such as Venezuela and Zimbwabwe the cryptocurrency is a lifeline.
Commodities: “Heating-fuel supplies are tight as the weather starts to cool in the U.S., and that could lead to a spike in prices for both natural gas and heating oil, particularly if temperatures are chillier than usual.”
Streetwise: A group of activists is asking Vanguard to no longer invest in companies that contribute to genocide or crimes against humanity, but the firm feels such an effort creates an impossible burden.