Markets opened the week amid a cloud of headlines related to rising Iranian tensions. Stock indices briefly moved lower while gold and oil prices shot higher after Iran sent a salvo of missiles into two bases housing US troops in Iraq, retaliation for last week’s assassination of Quds commander Soleimani. Just hours after that attack, news broke that a Ukrainian Air Boeing 737-800 crashed shortly after takeoff in Tehran. The timing and circumstances invited a wave of speculation surrounding the cause of the downing and only added to the overall unease. By midweek though, tensions began to subside as it became clear that the US would not respond militarily after no casualties resulted from Iran’s missile attack. Gold futures reversed some $35 off of 7-year highs above $1600 and WTI crude briefly pushed above $65 before failing and quickly falling back below $60. Ultimately the significant technical reversal in those widely followed risk barometers came alongside renewed vigor for stocks as investors become comfortable that the Iran situation was deescalating. By Friday, the early 2020 momentum carried the Dow past 29K for the first time. Another solid US employment report, albeit short of consensus expectations for job gains, reinforced the belief the Fed will likely remain on hold in 2020. Treasury yields declined and the Greenback softened in the wake of the jobs data as well as news that House Speaker Pelosi would be sending the articles of impeachment over to the Senate next week, allowing the trial to move forward. For the week, the S&P was up 0.9%, the DJIA added 0.7%, and the Nasdaq rose for the fifth week in a row, gaining 1.8%.
In corporate news this week, Boeing's woes continued as new internal memos showed employees raised safety concerns during the development of the troubled 737MAX, and Boeing supplier Spirit Aerosystems announced it will lay off thousands of employees in response to the production halt for the aircraft. Macy’s posted a small decline in holiday same store sales, though less than anticipated, but announced the closure of 29 stores over the coming months. Kohl’s shares slid after reporting poor holiday sales and cutting its outlook, citing specific weakness in its women’s apparel business. Bed Bath and Beyond missed estimates again, withdrew its outlook, and issued a warning that sales and profit will remain pressured during next quarter, as well. Costco notched a healthy +7.8% Dec same store sales increase amid strong holiday demand. Homebuilder Lennar topped earnings estimates and saw its cash flow acceleration continuing into 2020, promising further debt repurchases and return of capital. Yum! Brands announced the $375M acquisition of Habit Burger Grill for $14/share in cash in a move to compete with Shake Shack.
MONDAY 1/6 JGB (JP) Japan MoF sells ¥2.1T v ¥2.1T indicated in 0.1% 10-year JGBs: avg yield: -0.0050% v -0.042% prior, bid to cover 3.70x v 3.28x prior
TUESDAY 1/7 (IR) Iran reportedly assessing 13 retaliation scenarios against US - Iranian press (ES) Spain Parliament approves Sanchez bid to form a new govt (as expected) Boeing 737-800 passenger plane operated by Ukraine company, crashes after takeoff in Iran
WEDNESDAY 1/8 066570.KR Reports prelim Q4 (KRW) Op 98.6B v 75.3B y/y, Rev 16.1T v 15.8T y/y (16.5Te) *(EU) EURO ZONE NOV BUSINESS CLIMATE INDICATOR: -0.25 V -0.18E LEN Reports Q4 $2.13 v $1.90e, Rev $6.97B v $6.70Be WBA Reports Q1 $1.37 v $1.40e, Rev $34.3B v $34.6Be *(US) DEC ADP EMPLOYMENT CHANGE: +202K V +160KE (US) Pres Trump: Iran appears to be standing down; no Americans were harmed in last night's attack; to place new sanctions on Iran (US) Association of American Railroads weekly rail traffic report for week ending Jan 4th: 414K, -5.1% y/y *(US) NOV CONSUMER CREDIT: $12.5B V $16.0BE BBBY Reports Q3 -$0.38 adj v $0.03e, Rev $2.76B v $2.86Be; withdraws FY19 guidance COST Reports Dec SSS (ex-gasoline) +7.8%
THURSDAY 1/9 3382.JP Reports 9M Net ¥169.97B v ¥156.27B y/y; Op ¥319.1B v ¥304.3B y/y; Rev ¥4.98T v ¥5.07T y/y (IR) CBS Transportation Correspondent: "US officials are confident Ukrainian Flt 752 was shot down by Iran. US intelligence picked up signals of the radar being turned on & satellite detected infrared blips of 2 missile launches, probably SA-15s, followed shortly by another infrared blip of an explosion." *(US) TREASURY $16B 30-YEAR BOND REOPENING DRAWS 2.341%; BID TO COVER 2.54 V 2.46 PRIOR AND 2.26 OF THE LAST 8 REOPENINGS BA Releases new internal communications on 737 MAX that shows employees raised safety concerns during the development process
FRIDAY 1/10 *(US) DEC AVERAGE HOURLY EARNINGS M/M: 0.1% V 0.3%E; Y/Y: 2.9% V 3.1%E; AVERAGE WEEKLY HOURS: 34.3 V 34.4E Dow hits 29,000 mark for first time SPR CEO: To lay off 2.8K employees at Kansas facility; not yet received notice from Boeing when MAX production will restart or what production rates will be when it does (US) House Speaker Pelosi: House will send Trump impeachment articles to the Senate next week (IE) Sinn Fein party accepts the Northern Ireland power sharing agreement; will re-enter devolved govt in Northern Ireland - press (US) On day Iran Gen Soleimani was killed, a second secret US mission to kill a senior Iranian military official in Yemen was not successful - Washington Post