Wall Street Breakfast: Global Markets Steady As Fed Meeting Looms
Global markets are slightly higher in a week largely dominated by the upcoming Federal Reserve meeting in Jackson Hole, Wyoming. A speech on Friday by Fed Chair Janet Yellen could settle the matter on if a September rate hike should be priced in. South Korea, Australia and the main China index showed gains, while the Nikkei 225 fell slightly after Japanese flash PMI for August came in weak at 49.6. European markets are in positive territory after August PMI readings didn’t show significant Brexit blowback, with the Euro Stoxx 50 up 0.84% in midday trading.
Economy
Oil prices are lower again as the market digests reports indicating that Iraq is preparing to ramp up its export levels. Iraq oil production rose sharply in July to hit 3.71M barrels a day. Strong oil output out of China and a new ceasefire with militants in Nigeria are also being eyed by traders. WTI crude oil futures -0.80% to $47.03/bbl. Brent crude -1.14% to $48.60/bbl.
IHS Markit’s composite Purchasing Managers’ Index dropped in Germany to a 54.4 reading from 55.3 in July. The gauge for the services sector fell to 53.3. Markit said the report signaled a weaker pace of expansion for the nation. France flash August composite PMI rose to a 10-month high of 51.6. Overall Eurozone flash composite PMI came in at 53.3 for August to top the consensus estimate of 53.1.
The Federal Reserve is feeling more heat on its lack of diversity ahead of the central bank’s annual gathering in Jackson Hole later this week. Four Fed presidents plan to meet with activist group Fed Up to discuss the issues of income inequality and reform requests. Fed Up is also pushing a proposal to make the regional Fed banks government entities, an issue the Fed policymakers are likely to push back hard on. Also on the radar for the Fed meeting at the Tetons is a new paper questioning how much firepower the central bank has under current conditions to combat a recession in the U.S.
The National Association of Realtors is due to release its report on existing home sales for July later today. The report is highly anticipated after the level of existing home sales in June soared to an annual rate of 5.57M, the best monthly rate in more than seven years. Economists expect a mark of 580K for July. “Sustained job growth as well as this year’s descent in mortgage rates is undoubtedly driving the appetite for home purchases,” noted NAR Chief Economist Lawrence Yun.
Retail e-commerce sales are forecast by eMarketer to increase 24% Y/Y to $1.95T this year to account for 8.7% of all of retail spending. Retail e-commerce sales in North America are seen rising 15.6% to $423.34B. eMarketer expects retail e-commerce sales to balloon to $4.058B in 2020, to represent just short of 15% of all retail spending.
Stocks
A key autonomous driving partnership between Delphi Automotive (NYSE:DLPH) and Mobileye (NYSE:MBLY) is expected to be announced later today. The two auto suppliers want to pool investment and execution risk amid the rapidly developing self-driving car push in the industry. Shares of both companies are down roughly 10% over the last 52 weeks.
There’s some good news for tech companies such as Facebook (NASDAQ:FB), Instagram, Twitter (NYSE:TWTR) and Snapchat (Private:CHAT), with new data showing that Pokémon Go usage has peaked. Measurements from three different data tracking firms on Pokémon Go show a decline in worldwide daily active users and engagement rates from their peaks. Though the financial impact of the Nintendo (OTCPK:NTDOY) phenomenon has been difficult to gauge, most analysts agree that Pokémon Go has gobbled up mindshare over the last ten weeks.
NBCUniversal closed on its $3.8B acquisition of DreamWorks Animation (NASDAQ:DWA). As planned, the studio will be folded into Universal’s Filmed Entertainment Group, where it joins other Comcast (NASDAQ:CMCSA) properties Universal Pictures, Fandango and NBCUniversal Brand Development. DreamWorks Animation shareholders were cashed out at $41 per share.
Volkswagen is close to striking a deal with two parts suppliers after negotiating through the night. The dispute with seat maker CarTrim and cast iron parts supplier ES Automobilguss has affected output at more than half of the Volkswagen (OTCPK:VLKAY) facilities in Germany. The disruption has also had a cascading impact across the auto parts sector in the nation.
Wells Fargo agreed to pay a $3.6M fine to the U.S. Consumer Financial Protection Bureau as part of a civil penalty for illegal student loan servicing, plus $410K in restitution to borrowers. The regulator says thousands of student loan borrowers encountered problems with their loans or received misinformation about their payment options because of breakdowns in Wells Fargo’s (NYSE:WFC) servicing process.
Textron said it would be interested in buying Bombardier’s (OTCQX:BDRAF, OTCQX:BDRBF) struggling Learjet business at the right price. A deal with Textron (NYSE:TXT) would provide Bombardier with a potential exit from the light business jet market, which CEO Alain Bellemare described as “oversupplied” and “remarkably competitive” on the company’s quarterly earnings call earlier this month. Bombardier delivered only six Learjet vehicles in H1 of this year, down from 14 in 2015, and it recently cancelled plans to develop a new Learjet 85.
Following reports earlier this month tipping off that Adam Selipsky had left Amazon’s (NASDAQ:AMZN) AWS division, Tableau Software (NYSE:DATA) confirms he will take over the CEO role previously held by co-founder Christian Chabot. Chabot will remain chairman of the company’s board of directors. Shares are up 0.84% in premarket action.
General Electric’s seven-year, $1.6B dredging campaign to remove industrial pollutants from the Hudson River was called inadequate by the New York Department of Environmental Conservation. A letter sent by the agency urged the EPA to closely scrutinize the effectiveness of GE’s dredging in its project review due to be released by April 2017. At least 136 acres of river bottom and 35% of the PCBs (Polychlorinated Biphenyls) discharged from a pair of GE factories along the Hudson near Albany have not been removed, the state agency says.
Canaccord Genuity dove into the restaurant sector after the market closed yesterday to pick out some favorites. Sonic (NASDAQ:SONC), Dave & Buster’s (NASDAQ:PLAY), Panera Bread (NASDAQ:PNRA) and Darden Restaurants (NYSE:DRI) were lined up with Buy ratings, with trends seen working in the favor of the chains. Fogo De Chao (NASDAQ:FOGO), McDonald’s (NYSE:MCD), Brinker International (NYSE:EAT), Del Frisco’s Restaurants (NASDAQ:DFRG) and Buffalo Wild Wings (NASDAQ:BWLD) were assigned Neutral ratings. Traffic pressure in the U.S. is an ongoing concern for the restaurant industry.
The CFA Society of Minnesota hosts an under-the-radar conference today and tomorrow with a powerful roster of presenting companies. The event was moved to later in the month this year in a development which pushes many of the companies past the quiet period imposed around their earnings releases. Notable names in attendance will include Target (NYSE:TGT), Delta Air Lines (NYSE:DAL), Stamps.com (NASDAQ:STMP), General Mills (NYSE:GIS), Piper Jaffray (NYSE:PJC), Spectrum Brands (NYSE:SPB), 3M (NYSE:MMM) and AstraZeneca (NYSE:AZN).
In Asia, Japan -0.61% to 16497. Hong Kong +0.2% to 22998. China +0.2% to 3090. India -0.01% to 27972 .
In Europe, at midday, London +0.61%. Paris +0.70%. Frankfurt +0.90%.
Futures at 6:20, Dow +0.3%. S&P +0.2%. Nasdaq +0.3%. Crude -0.80% to $47.03. Gold -0.01% to $1343.30.
Ten-year Treasury Yield flat at 1.56%
Today’s Economic Calendar
8:55 Redbook Chain Store Sales
10:00 New Home Sales
10:00 Richmond Fed Mfg.
1:00 PM Results of $26B, 2-Year Note Auction
Companies reporting earnings today »
