Friday, March 2, 2018

Hawkish Fed Chair and Trade War Scare Overshadow Solid Earnings and Data

TradeTheNews.com Weekly Market Update: Hawkish Fed Chair and Trade War Scare Overshadow Solid Earnings and Data
Fri, 02 Mar 2018 16:04 PM EST

The week opened up with the spotlight clearly focused on Fed Chairman Powell’s first crack at testimony on Capitol Hill, but ended with markets fixated on President Trump’s trade policy. Equity markets came under pressure on Tuesday after Chairman Powell outlined his view that the economy has improved since December, increasing his confidence that inflation is moving back towards the 2% target level. A blowout February Richmond Fed reading and another extremely robust February ISM manufacturing report only bolstered that case. The US dollar firmed to better than a 1-month high though US Treasury yields never moved back to the recent highs and actually edged lower.

Indices continued to swing quite aggressively on an intraday basis and volatility picked up late in the week. President Trump’s Thursday announcement that he will introduce significant tariffs on all global imports of steel and aluminum next week set off a bout of risk off trading into Friday’s trading session. Condemnation was swift and loud from leaders around the world and many at home who feared the move could ignite a global trade war and cause the NAFTA renegotiation talks to collapse. Gold prices rose and bond yields lifted into the final bell on concerns that the trade policy will exacerbate inflation. The VIX briefly topped 25 on Friday before equity buyers stepped in through the European close. For the week the S&P dropped 2%, the DJIA lost 3%, and the Nasdaq slipped 1%.

In corporate news, this week’s Q4 earning reports were highlighted by improvement among bricks and mortar retailers. Macy’s shareholders were pleasantly surprised by an earnings beat and strong guidance including a return to same store sales growth. Electronics showroom Best Buy and denim specialist Gap also reported better than expected results for the holiday quarter. On the M&A front, Amazon expanded into another consumer sector, spending a $1B to acquire home security video company Ring.com, and putting immediate pressure on established home security names like ADT. Another household technology firm, Tivo, saw its shares rise sharply after management announced it would explore strategic alternatives.


SUNDAY 2/25
(CN) Communist Party has moved to repeal language from the constitution that says the head of state “shall serve no more than two consecutive terms”, which would allow China President Xi to stay in power indefinitely - Chinese press (as speculated)

MONDAY 2/26
SPB Spectrum Brands Holdings to combine with HRG Group in deal valued at $10B
*(US) JAN NEW HOME SALES: 593K V 647KE
(US) FEB DALLAS FED MANUFACTURING ACTIVITY: 37.2 V 30.0E
(ZA) South Africa Pres Ramaphosa: confirms naming Nhlanhla Nene as South Africa Fin Min
FIT Reports Q4 -$0.02 v -$0.00e, Rev $571M v $587Me
STAN.UK Reports FY17 adj Pretax $3.0B v $3.1Be; Op $14.3B v $13.8B y/y; Resumes dividend of $0.11

TUESDAY 2/27
BAS.DE Reports final Q4 Adj €1.29 v €1.43e, EBIT €1.86B v €1.75Be, Rev €16.1B v €16.0Be
AAPL Said to be launching primary care clinics called AC Wellness for employees this spring - CNBC
(DE) GERMANY FEB CPI SAXONY M/M: +0.4% V -0.8% PRIOR; Y/Y: 1.3% V 1.4% PRIOR
(EU) EURO ZONE FEB FINAL BUSINESS CLIMATE INDICATOR: 1.48 V 1.47E; CONSUMER CONFIDENCE (FINAL): 0.1 V 0.1E
(DE) German federal administrative court judge: German cities ordered to develop diesel ban further; refuses to overturn diesel car bans
JPM Guides FY18 core loan growth 6-7%; Medium-term pretax $44-47B, ROTCE ~17% - ahead of analyst day
M Reports Q4 $2.82 v $2.69e, Rev $8.67B v $8.71Be
(DE) GERMANY FEB CPI M/M: 0.5% V 0.5%E; Y/Y: 1.4% V 1.5%E
(US) Fed Chair Powell text of testimony released: Must strike balance to avoid overheating, lift inflation
*(US) JAN PRELIMINARY DURABLE GOODS ORDERS: -3.7% V -2.0%E; DURABLES EX TRANSPORTATION: -0.3% V +0.4%E
(US) FEB RICHMOND FED MANUFACTURING INDEX: 28 V 15E (second highest value on record)
(US) FEB CONSUMER CONFIDENCE: 130.8 V 126.5E
(US) Atlanta Fed cuts Q1 GDP estimate to 2.6% from 3.2% on 2/16
(US) Fed Chair Powell: IOER's place in long run operating framework has not been decided but it has served us well since crisis and will continue to use it - testimony to House Financial Services Committee
(US) Aluminum Association applauds Commerce Dept final ruling on aluminum foil import duties of up to 106.1% from China
AMZN To acquire home security video company Ring.com, valued at over $1B - press
TIVO Reports Q4 $0.15 v $0.39e, Rev $214.2M v $212Me; plans to explore all alternatives to maximize shareholder value

WEDS 2/28
BAYN.DE Reports Q4 Net €148M (adj) v €745Me, EBITDA adj €1.78B v €1.80Be, Rev €8.60B v €8.88Be; aims to close Monsanto transaction in Q2
(DE) GERMANY MAR GFK CONSUMER CONFIDENCE: 10.8 V 10.9E
(FR) FRANCE Q4 PRELIMINARY GDP Q/Q: 0.6% V 0.6%E; Y/Y: 2.5% V 2.4%E
(FR) FRANCE FEB PRELIMINARY CPI M/M: -0.1% V 0.3%E; Y/Y: 1.2% V 1.4%E
(DE) GERMANY FEB UNEMPLOYMENT CHANGE: -22K V -15KE; UNEMPLOYMENT CLAIMS RATE: 5.4% V 5.4%E
(DE) GERMANY SELLS €2.413B VS. €3.0B INDICATED IN 0.5% FEB 2028 BUNDS; AVG YIELD: 0.67% V 0.69%% PRIOR; BID-TO-COVER: 1.2X (technically uncovered) V 1.5X PRIOR
(EU) EU published first draft of Brexit treaty: Northern Ireland could stay within customs union; Transitions period to end on Dec 31st 2020
VRX Reports Q4 GAAP $1.45 v $0.99e, Rev $2.16B v $2.18Be
(IN) INDIA Q4 GDP Y/Y: 7.2% V 7.0%E
DKS Immediately ending sales of all assault-style rifles in its stores- NYT
(US) Q4 PRELIMINARY GDP ANNUALIZED Q/Q: 2.5% V 2.5%E; PERSONAL CONSUMPTION: 3.8% V 3.6%E
(US) Q4 PRELIMINARY GDP PRICE INDEX: 2.3% V 2.4%E; CORE PCE Q/Q: 1.9% V 1.9%E
(US) Nevada reports Jan casino gaming Rev $1.02B, -2.1% y/y; Las Vegas strip rev $554.8M, -8.9% y/y
(US) JAN PENDING HOME SALES M/M: -4.7% V +0.5%E; Y/Y: -1.7% V -1.8% PRIOR (lowest M/M in more than three years)
CA.FR Reports FY17 Adj Net €773M v €1.03B y/y, EBITDA €3.64B v €3.59Be, Gross Rev €88.2B v €85.7B y/y; Cuts dividend 34% to €0.46/shr
(US) Association of American Railroads weekly rail traffic report for week ending Feb 24th: 528.4K carloads and intermodal units, +2.8% y/y
(US) Special Counsel Mueller reportedly investigating whether Pres Trump was aware of DNC hack and whether he was involved in its release - NBC News
CRM Reports Q4 $0.35 v $0.33e, Rev $2.85B v $2.81Be

THURS 3/1
ABI.BE Reports Q4 $1.04 v $0.98e, EBITDA $6.19B v $6.03Be, Rev $14.6B v $14.5Be
(UK) FEB MANUFACTURING PMI: 55.2 V 55.0E (19th month of expansion but lowest since Jun)
BBY Reports Q4 $2.42 v $2.04e, Rev $15.4B v $14.5Be; Raises Quarterly dividend 32.4% to $0.45 from $0.34 (indicated yield 2.48%)
(BR) BRAZIL Q4 GDP Q/Q: 0.1% V 0.3%E; Y/Y: 2.1% V 2.5%E (4th straight quarter of growth)
*(US) JAN PERSONAL INCOME: 0.4% V 0.3%E; PERSONAL SPENDING: 0.2% V 0.2%E
*(US) INITIAL JOBLESS CLAIMS: 210K (lowest since 1969) V 225KE; CONTINUING CLAIMS: 1.93M V 1.92ME
KR To stop selling guns to people younger than 21 via its Fred Meyer locations (3rd major retailer to tighten policies) - press
(US) Fed Chair Powell: there's no strong evidence of a decisive move higher in wages - Senate testimony
(US) Fed's Dudley (dove, FOMC voter): trade protectionism is not the answer
(US) Atlanta Fed raises Q1 GDP estimate to 3.5% from 2.6% on 2/27
(US) Pres Trump: US will institute tariffs next week; will impose 25% tariffs on steel and 10% on aluminum imports - comments at White House
(EU) EU's Juncker: EU will "react firmly" to Trump administration tariffs; will bring forward countermeasures
GPS Reports Q4 $0.61 v $0.59e, Rev $4.78B v $4.68Be

FRI 3/2
(US) White House Economic Advisor Cohn said to be again rumored to be on the brink of leaving the White House - financial press
(US) President Trump tweets "trade wars are good, and easy to win"
(CA) CANADA DEC GDP M/M: 0.1% V 0.1%E; Y/Y: 3.3% V 3.3%E
(UK) PM May: Agreement with EU must respect referendum; listening carefully to the many voices on future - Brexit speech
EU said to target duties on up to $3.5B on imports for trade retaliation following Trump announcement on tariffs - press