TradeTheNews.com Weekly Market Update: Risk Assets Continue Rebound
On Hopes for Trade Deal Stocks markets continued to ride a wave of positive momentum throughout much of the first full week of the New Year. US and Chinese officials met in Beijing on Monday and Tuesday and, though details were limited, sentiment improved as future meetings were put on the calendar for later this month. Treasury yields and oil prices also continued to rebound providing a sense of relief for those worried that the recent declines portended an oncoming recession. Reports circulated that the Saudis were going to significantly curtail exports to prop up crude prices, while a deluge of Fed speak, along with the FOMC minutes, affirmed Powell’s recent shift and suggested the Fed consensus is now centered on a ‘wait and see’ approach on rates. The greenback was generally weaker as the US government shutdown dragged on with no endgame in sight as both parties dug further in. The Euro briefly topped a key 1.15 technical level and the Yuan firmed to the best levels since last summer helped by growing expectations for more stimulus from the Chinese government. The British Pound lifted late in the week despite heightened uncertainty heading into next week’s Brexit vote in Parliament. On Friday, investors pulled back from some of those risk assets heading into the weekend and stocks finished lower for the first time in six sessions. For the week, the S&P rose 2.5%, the DJIA gained 2.4%, and the Nasdaq added 3.5%.
In corporate news this week, Eli Lilly announced it would acquire Loxo Oncology for $8B in order to boost its cancer drug portfolio. Ratings agencies delivered humbling news for PG&E, downgrading the electric utility several notches amid reports of extraordinary wildfire liabilities and a potential bankruptcy. Constellation Brands shares tumbled on disappointing guidance related to their wine and spirits division. Retail names saw some volatility this week as Macy's cut its outlook and Kohl’s noted some disappointing holiday SSS, though Target saw a year-end sales surge and Bed Bath & Beyond announced its tracking ahead of long-term financial goals. GM surged on Friday after raising profit guidance as the automaker sharpens its focus on light truck production. Midstream energy firm Targa Resources offered the first high-yield bond deal to hit the markets since November. Reports indicated Amazon may be gearing up to enter the game streaming service space, potentially competing with similar future offerings from Google and Microsoft.
MONDAY 1/7 (EU) EURO ZONE JAN SENTIX INVESTOR CONFIDENCE: -1.5 V -2.0E (lowest reading since Dec 2014) LOXO To be acquired by Lilly for $235.00/shr in all cash deal valued at $8.0B Wall Street firms reportedly plan new exchange to challenge NYSE, Nasdaq - press PGC Reportedly liabilities from 2017-18 fires could reach at least $30B - CNBC *(US) DEC ISM NON-MANUFACTURING INDEX: 57.6 V 58.5E (SA) Saudi Arabia reportedly to cut crude exports to 7.1M bpd - press 005930.KR Reports Prelim Q4 (KRW) Op 10.8T v 13.8Te, Rev 59.0T v 63.6Te (IT) Italian govt to freeze 90% of motorway tariffs; will review in June - Italian Press
TUESDAY 1/8 066570.KR Reports prelim Q4 (KRW) Op 75.3B v 387Be, Rev 15.8T v 16.3Te *(EU) EURO ZONE DEC BUSINESS CLIMATE INDICATOR: 0.82 V 1.00E; CONSUMER CONFIDENCE: -6.2 V -6.2E *(US) NOV JOLTS JOB OPENINGS: 6.888M V 7.050ME (lowest since June) (US) Atlanta Fed raises Q4 GDP forecast to 2.8% from 2.6% prior *(US) NOV CONSUMER CREDIT: $22.1B V $17.5BE (US) Reportedly Pres Trump wants a China trade deal soon to boost markets - press
WEDNESDAY 1/9 STZ Reports Q3 $2.37 v $2.04e, Rev $1.97B v $1.91Be EUR/USD Tests above 1.15 for the first time since Nov; US Dollar index drops below 95.50 *(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 1.75%; AS EXPECTED (US) Conference Board Experimental Help Wanted OnLine Index (HWOL) at 101.7 v 99.3 m/m (reverses Oct and Nov declines) *(US) DOE CRUDE: -1.7M V -2ME; GASOLINE: +8.1M V +2ME; DISTILLATE: +10.6M V +1ME (US) Association of American Railroads weekly rail traffic report for week ending Jan 5th: 436.1K, +4.8% y/y *(US) FOMC MINUTES FROM DEC 19TH MEETING: OFFICIALS EXPRESSED LESS CERTAINTY ABOUT 'TIMING AND SIZE' OF FUTURE RATE INCREASES BBBY Reports Q3 $0.18 v $0.16e, Rev $3.03B v $3.04Be
THURSDAY 1/10 F Reportedly to cut thousands of European jobs; mulls exiting several unprofitable European markets - FT TGT Reports No/Dec SSS +5.7% v 3.4% y/y; CFO Cathy Smith to retire M Reports Nov/Dec SSS +1.1% (owned plus licensed), Cuts FY18 $3.95-4.00 v $4.21e, Rev ~ flat y/y (prior +0.3-0.7%) AAL Cuts FY18 $4.40-4.60 v $4.62e (prior FY18 $4.50-5.00); Cuts Q4 TRASM +1.5% (prior +1.5-3.5%) MGM Starboard said to have built stake and intends to take activist role - press (US) Atlanta Fed maintains Q4 GDP forecast at 2.8% (US) Fed Chair Powell: We have ability to be patient, flexible, and watch patiently at this time; Fed balance sheet will end up "substantially smaller" - comments in Washington AMZN Reportedly developing a game streaming service, could launch in 2020 or later - The Information TRGP Prices $1.5B in senior notes due 2027 and 2029 (upsized from $750M); notes were priced at par (US) US Treasury Sec Mnuchin: China Vice Premier Liu He will most likely visit Washington later in Jan for trade talks
FRIDAY 1/11 (UK) Cabinet Ministers say that Brexit to be delayed beyond March 29th as likely - financial press GM Raises FY18 EPS to 'high end with potential upside' $5.80-6.20 v $6.27e, auto FCF ~$4B - capital markets event GM Guides initial FY19 $6.50-7.00 v $5.86e, adj FCF $4.5-6.0B, capex $8.0-9.0B CZR CNBC's Faber: Icahn has built stake in Caesars; Tilman Fertitta remains interested in pursuing deal, as well