Monday, December 24, 2018
U.S. equity futures are looking to bounce ahead of today’s abbreviated trading session (US equity markets close at 1:00 PM EST) and week as markets are closed tomorrow in observance of Christmas Day as investors weigh news over the weekend that President Donald Trump had discussed firing Federal Reserve Chairman Jerome Powell as well as the impact of a partial U.S. government shutdown. Stock sentiment got a boost overnight following reports Treasury Secretary Steven Mnuchin called senior executives from six of the largest banks to discuss liquidity and lending, with reports the banks confirmed ample liquidity. The Treasury Secretary also said Donald Trump doesn’t plan to oust Jerome Powell, following a report the president has repeatedly discussed firing the central bank chief. Safe-havens, including gold and the yen, climbed, while Treasuries are little changed. WTI was little changed after sinking 11% last week.
On Friday, the federal government partially shut down for the third time this year early Saturday as lawmakers in Washington failed to compromise over funding for President Donald Trump’s border wall. Senate Majority Leader Mitch McConnell announced his chamber would adjourn for the Christmas holiday, not returning until Dec. 27. With the impasse, funding expired for the Commerce, Interior, Treasury and other departments but won’t affect agencies including the Pentagon and Health and Human Services whose operations have already been funded.
U.S. stocks closed steeply lower Friday, as investors remained fearful of the partial government shutdown, rising interest rates and slowing global growth, and uncertainty surrounding U.S.-China trade relations, helping conclude five days of selling that ranks as the Dow’s worst since the financial crisis in October of 2008. U.S. stocks sank to a 19-month low, with heavy selling in tech shares sending the Nasdaq 100 slide around 3% Friday to bring the declines past 20% (considered bear market territory). Both the S&P and the Dow are edging closer to bear market territory, with the S&P falling 17.5% from its Sept. 20 highs, and the Dow down 16.3% from its recent highs, reached on Oct. 3. For the week, the S&P 500 fell 7.1%, the Dow slid 6.9% and the Nasdaq dropped 8.4%. It was the worst performance for the Dow and Nasdaq since 2008, and the S&P’s worst weekly showing since 2011.
In Asian markets, The Nikkei Index was closed, the Shanghai Index gained 10 points to close at 2,527 and the Hang Seng Index fell -102 points to settle at 25,651. In Europe, the German DAX was closed for holiday, while the FTSE 100 is down around -25 points trading just under 6,700.
Market Closing Prices Yesterday
· The S&P 500 Index dropped -50.80 points, or 2.06%, to 2,416.62
· The Dow Jones Industrial Average fell -414.23 points, or 1.81%, to 22,445.37
· The Nasdaq Composite plunged -195.41 points, or 2.99%, to 6,332.99
· The Russell 2000 Index declined -33.92 points, or 2.56% to 1,292.09
· U.S. equity markets early close at 1:00 PM EST for Christmas Eve
· 8:30 AM EST Chicago Fed Nat Activity Index for November
· China said it will lower or remove import tariffs on more than 700 types of goods and will cut some export levies, starting Jan. 1
· The White House offered $2.5 billion for border security to end the impasse over Trump’s wall. The proposal included new fencing and $400 million for the president’s immigration policy priorities, a Democratic aide said – Bloomberg
· President Trump said he was replacing Defense Secretary Jim Mattis on Jan. 1 with deputy defense secretary Patrick Shanahan in an acting capacity after Mattis resigned over policy differences
Sector News Breakdown
· Kraft Heinz Co (KHC) and Mondelez International Inc (MDLZ) have been short-listed to participate in the second round of Campbell Soup Co’s (CPB)auction of its international business, people familiar with the matter said
· Tesla (TSLA) has slashed prices on its Model 3 electric car in China, according to Reuters, citing the carmaker’s Chinese website. Prices of certain Model 3 cars were cut by up to 7.6%, with the starting price for a Model 3 in China now at $72,000
· U.S. stores have met lofty sales expectations set by analysts and industry groups this holiday season with total U.S. retail sales, excluding automobiles, up 5.2% from November 1 through December 19, the Wall Street Journal Reports, citing MasterCard SpendingPulse. Online sales continued to grow faster than sales overall, rising 18.3% during the period and accounting for 13% of total sales, and delivery has held up so far during the holiday season
· Vintage Capital filed a suit in Delaware Chancery Court to challenge Rent-A-Center’s (RCII) efforts to halt its $1.37B tie-up agreement with Vintage, Bloomberg reports
· South Korea’s transport ministry said it would file a complaint against German luxury carmaker BMW with prosecutors for allegedly delaying recalls and concealing defects that led to several engine fires in the country this year.
· Wendy’s (WEN) files automatic mixed securities shelf
Energy, Industrials and Materials
· OPEC and allied oil producers are ready to hold an extraordinary meeting and will do what is needed if the current cut in oil output by 1.2 million barrels per day does not balance the market next year, the United Arab Emirates’ energy minister said on Sunday. – Reuters
· Guyana’s foreign ministry has condemned what it says was a dangerous incursion into local waters after a Norwegian ship hired by ExxonMobil (XOM) was “intercepted” by a Venezuelan naval vessel.
· Anglo American PLC (AAL.LN) raised its production guidance for 2019 for its Minas-Rio iron-ore operation in Brazil after receiving regulatory approval for the step 3 license area of the project; Anglo now expects the project to produce between 18M-20M tons next year, compared with previous guidance of 16M-19M tons.
· Volkswagen AG VOW is facing potential problems with a software update that was used to retro-fit existing diesel vehicles. VW immediately informed the Federal Motor Transport Authority after registering “abnormalities” with regard to a software update for diesel vehicles fitted with 1.2-litre type EA189 engines
· RPM International (RPM) downgraded to underweight from neutral and cut tgt to $55 from $60
· Morgan Stanley (MS) mentioned positively in Barron’s noting shares have fallen 28% this year, as the bank trades below book and says investors rarely get to the buy the stock at less than eight times expected earnings, but now is one of those opportunities
· Aimmune Therapeutics, Inc. (AIMT) submits Biologics License Application to the FDA for AR101, an immunotherapy for the treatment of peanut allergy in children and adolescents ages 4–17.
· Aeglea BioTherapeutics (AGLE) files $275M mixed securities shelf
· Catalyst Biosciences (CBIO) files $200M mixed securities shelf
· Johnson & Johnson (JNJ) mentioned mixed in Barron’s saying after shares dropped this month over potential legal damages from the alleged health risks of baby powder the sell-off looks overdone, but says there are more deeply discounted health-care stocks for investors to consider
Technology, Media & Telecom
· AT&T’s (T) Warner Bros’ “Aquaman” won the pre-Christmas U.S. box office with $67.4M from 4,125 theaters. Disney’s (DIS) musical “Mary Poppins Returns” placed number two in its debut weekend with $22.2M from 4,090 locations for a five-day opening of $31M. Behind it was Viacom’s (VIAB)Paramount’s “Bumblebee,” earning $21M from 3,550 theaters in its debut weekend