TradeTheNews.com Weekly
Market Update: Congress splits, AG Sessions exits and the Fed stays on track
Fri, 09 Nov 2018 16:10 PM EST
Investors entered the week largely in a holding pattern ahead of the US midterm
elections and FOMC meeting. Treasury yields remained elevated as bond markets
were forced to absorb another slew of bill and coupon supply and indices
drifted up into Tuesday’s vote. Equity markets surged after the House went blue
as widely expected, but the Republicans added seats in the Senate. Talk of a
potential infrastructure deal next year and a continued deregulation push aided
risk sentiment along with the notion that gridlock has been historically good
for stock market returns. The prospects for another round of tax stimulus
receded in most people's minds as well, which spurred a narrative that this
could ultimately give the Fed latitude to back away from some of the rate hikes
penciled in for 2019, if needed.
Thursday’s Fed statement saw only marginal revisions to acknowledge business
spending growth decelerated from its rapid pace earlier this year. Bond yields
ticked up though as most viewed the statement as solidifying expectations that
the Fed will move rates in December and then again in March. Emerging markets
declined after reports circulated that the incoming Mexican President would
urge his Congress to go after banking industry profits when he takes power in December.
Thursday also saw US Attorney General Jeff Sessions step down at the request of
the President, just a day after a fiery press conference at the White House
suggested Trump is unlikely to change his contentious demeanor heading into the
next Congress. US stock markets rolled over on Friday as derisking hit higher
beta indices like the NASDAQ and Russel 2000, in particular, while pushing
Treasury yields lower. US October producer prices handily topped expectations,
but inflation worries had a hard time garnering momentum in light of the
continued precipitous decline in oil prices. WTI fell for the 10th straight day
after officially finishing in a bear market on Thursday. Prices dipped below
$60/bbl for the first time since March heading into an OPEC monitoring
committee meeting this weekend. Equities rode the post-election relief rally to
moderate gains on the week: the S&P500 was up 2.1%, the DJIA gained 2.8%,
and the Nasdaq added 0.7%.
In corporate news this week, Disney results topped estimates on strength from
its film division while weakness in ESPN abated, and the company announced its
new streaming service launching in 2019 will be named Disney+. Zillow dropped
20% on business model uneasiness and a cut to its outlook. Twilio surged on a
significant beat and guidance raise as the cloud communications specialist saw
strong expansions in its client base and revenue stream. Yelp dropped 30% after
a miss and guidance cut, pointing to a shift to non-term advertising that has
left the company more sensitive to short-term operational issues. Roku also
fell after earnings and on reports that Comcast intends to offer its own
over-the-top box. Shares of German steel producer ThyssenKrupp dropped after it
issued a profit warning attributed to new risk provisions established to
address ongoing investigations by the Federal Cartel Office. On the M&A
front, Thoma Bravo reportedly approached Symantec about a potential
acquisition. Arris confirmed it would be acquired by CommScope for $31.75/share
in an all-cash deal valued at $7.4B. And Finisar accepted a $3B cash offer from
II-VI Incorporated.
MON 11/5
*(UK) OCT PMI SERVICES: 52.2 V 53.3E (27th month of expansion)
*(EU) EURO ZONE NOV SENTIX INVESTOR CONFIDENCE: 8.8 V 9.8E
7203.JP Reports H1 Net ¥1.24T v ¥1.07T y/y, Op ¥1.26T v ¥1.1T y/y; Rev ¥14.67T
v ¥14.2T y/y; To buyback 42M shares (1.44% of shares) for ¥250B, Raises
guidance
TUES 11/6
DPW.DE Reports Q3 Net €146M v €641M y/y, EBIT €376M v €393Me, Rev €14.8B v
€14.9Be
(IT) EU's Moscovici: Next step on Italian budget depends on the Italian
response - comments ahead of the ECOFIN meeting in Brussels
(IE) Northern Ireland DUP's Donaldson: Appears we are heading for a 'no-deal'
Brexit
*(US) SEPT JOLTS JOB OPENINGS: 7.009M V 7.085ME
SYMC Thoma Bravo reportedly approached Symantec about potential acquisition -
press
(US) US Midterm election results: Fox and NBC predict the Democrats to gain
control of the House for the first time since 2010; NBC projects Republicans to
retain control of the Senate
WEDS 11/7
ACA.FR Reports Q3 Net €1.1B v €1.06Be, Rev €4.80B v €4.58B y/y
Reportedly Opec+ countries to discuss Oil output cuts for 2019 - press
(EU) Planned update of Brexit for EU envoys said to be moved from Wednesday to
Friday as EU awaits British decisions that are currently on the table -
financial press
(US) DOE CRUDE: +5.8M V +2ME; GASOLINE: +1.9M V -1.5ME; DISTILLATE: -3.5M V
-2.5ME
(US) Association of American Railroads weekly rail traffic report for week
ending Nov 7th: 560K, +5.4% y/y
(US) Pres Trump: hopes to work with Democrats on drug prices and
infrastructure; dealmaking may be easier with a Democratic House
*(US) JEFF SESSIONS RESIGNS AS ATTORNEY GENERAL AT THE REQUEST OF PRES TRUMP;
ACTING AG WHITAKER TO TAKE OVER MUELLER INVESTIGATION - PRESS
(US) SEPT CONSUMER CREDIT: $10.9B V $15.0BE
THURS 11/8
GLE.FR Reports Q3 adj Net €1.23B v €932M y/y, Op €1.93B v €1.45B y/y, Rev
€6.53B v €5.95B y/y
SIE.DE Reports Q4 Net €681M v €1.25B y/y, Industrial Business profit €2.15B v
€2.14B y/y, Rev €22.6B v €22.2B y/y; to buy back up to €3B in shares by 2021
DTE.DE Reports Q3 adj Net €1.32B v €1.35Be, adj EBITDA €6.21B v €6.02Be, Rev
€19.1B v €18.9Be
AZN.UK Reports Q3 Core EPS $0.71 v $0.65e, Rev $5.34B v $5.12Be
ARRS Confirms to be acquired by CommScope for $31.75/shr valued at ~$7.4B inc
debt
(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 2.00-2.25%; AS EXPECTED:
UNEMPLOYMENT RATE HAS DECLINED, JOB GAINS HAVE BEEN STRONG ON AVERAGE
(CA) Canada govt reportedly disagrees with some US changes to USMCA trade deal
text - press
DIS Reports Q4 $1.48 v $1.31e, Rev $14.31B v $13.8Be
YELP Reports Q3 $0.17 v $0.35e, Rev $241.1M v $246Me
FRI 11/9
(MX) President Elect Obrador proposes to scrap bank commissions - press
(UK) Q3 PRELIMINARY GDP Q/Q: 0.6% V 0.6%E; Y/Y: 1.5% V 1.5%E
(UK) SEPT INDUSTRIAL PRODUCTION M/M: 0.0% V -0.1%E; Y/Y: 0.0% V 0.4%E
FNSR To be acquired by II-VI Incorporated for $26.00/shr in cash and stock
valued at $3.2B
VOW3.DE Reports Oct Brand Sales 516.9K -6.2% y/y
(US) OCT PPI FINAL DEMAND M/M: 0.6% V 0.2%E; Y/Y: 2.9% V 2.5%E (largest monthly
rise since Sept 2012)
(EU) Eurogroup chief Centeno: Sanctions on Italy are not agenda at this time
(US) NOV PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 98.3 V 98.0E
(US) Federal prosecutors reportedly have gathered evidence that Pres Trump
participated in hush money payoffs to Stormy Daniels and Karen McDougal; raise
possibility that Trump violated campaign laws – WSJ
(MX) Pres-elect Lopez Obrador: will not change banking laws (reversing prior
comment); doesn't intend to make change to legal framework in financial sector
during first period of administration
