Wall Street Breakfast: Massive Rebound For Battered Stocks

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Includes: AAL, AAPL, ABX, AMZN, APPCQ, AXP, BHP, DAL, FCAU, GOOG, GOOGL, HMC, JBLU, LUV, PHG, QQQ, SAP, SAVE, SBUX, SLB, SPY, TKTDY, UAL, UNP, VALE, VZ, YHOO
by: Wall Street Breakfast
Wall Street Breakfast
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There's a major relief rally going on across the globe, pushing equities up following several gut-wrenching sessions, after a dovish Mario Draghi hinted at more stimulus and crude prices continued to bounce higher. The ECB is not the only one suggesting additional easing. On Thursday, China's Vice President Li Yuanchao signaled that Beijing would keep intervening in its stock market, and speculation is rife that the Bank of Japan could opt for extra stimulus at a policy meeting next week.

Economy

"We have plenty of instruments and especially we have the determination and willingness and capacity of the Governing Council to act and deploy these instruments," ECB President Mario Draghi added at the World Economic Forum in Davos. Asked about the financial market rout since the start of the year, he described it as "market vibrations, gyrations" and said it was premature to say that the global economic outlook had worsened as a consequence. Today is the last day of the annual conference at the Swiss resort.

European business activity had a much poorer start to 2016 than expected as deeper price cutting and a weak euro failed to drive any meaningful demand. Markit's Composite Flash PMI for the eurozone slumped to an 11-month low of 53.5 in January from December's 54.3. "You can put a lot of stimulus into the market but if the rest of the world is slowing then it is difficult to buck that trend," said Rob Dobson, senior economist at Markit.

Christine Lagarde has confirmed plans to run for a second term as managing director of the International Monetary Fund. "I have had the honor since the opening of the procedure to receive support from France, Germany, Great Britain, China, Korea, Mexico," Lagarde announced in an interview on French television. While the U.S. (the IMF's largest shareholder) has yet to formally back her bid for another term, she said VP Joe Biden and other American officials have praised her performance at the head of the institution.

The ruble jumped the most since August overnight, rebounding from its lowest level on record, as a recovery in crude prices encouraged investors to buy assets in the world's biggest energy exporter. The Russian currency rose 3.6% to 79.7450 per dollar after touching a record intraday low of 85.999 on Thursday, paring its weekly slump to 2.7%. "The ruble keeps tracking changes in the oil price," said Oleg Kouzmin, chief economist at Renaissance Capital. "The currency is still largely commodity-based."

Despite the recent crude bounce, the general plunge in oil prices is causing more investors to bet Venezuela will default on its $120B pile of foreign debt, an event that would trigger a messy battle over the country's oil shipments and deepen its economic and political crisis. The price of oil - which accounts for 96% of Venezuela’s export earnings - has recovered above $30 a barrel, but is still down sharply on the year.

A massive winter storm is barreling toward Washington D.C., with the system poised to drop near-record snowfall on the U.S. capital before walloping other cities with blizzard conditions. The National Weather Service described the storm as "potentially crippling" for a swath of the Northeast, with snowfall exceeding two feet in many metro areas. Airlines have canceled thousands of weekend flights, with many of the 2,200 cancellations set for Friday. Related tickers: AAL, DAL, JBLU, LUV, SAVE, UAL

Marking the largest weekly rally in three months, oil futures have skyrocketed above $31, as a cold front sweeping the U.S. and Europe as well as firmer financial markets gave traders reason to cash in on short positions. Although crude is poised for its first weekly gain this year, analysts still warn there has been no shift in the fundamental backdrop of supply that far exceeds demand and swelling inventories. Earnings season could also play a big role in driving prices in the near term. WTI +5.7% to $31.23/bbl; Brent +7% to $31.30/bbl.

Stocks

JPMorgan CEO Jamie Dimon saw his reported compensation rise 35% to $27M in 2015, although the board cut his cash portion and tied three-fourths of his total salary to more performance-sensitive stock awards. According to a securities filing, Dimon received $20.5M in restricted stock and $5M in cash, along with a base salary of $1.5M. Compensation disclosures by Wall Street firms are closely watched, as many banks face pressure from shareholders to overhaul pay practices. JPM +1% premarket.

Amazon is stepping up its investment plans across Europe this year, employing several thousand more staff as it seeks to expand amid stricter scrutiny of its tax, privacy and employment records. The retailer hired a record 10,000 people across Europe in 2015 - taking its workforce above 41,000, FT reports. Amazon (NASDAQ:AMZN), which is also seeking to develop its digital media, grocery delivery and cloud businesses, will publish fuller details of its European operations on Friday.

Apple is no longer the world's largest public company, when defined by enterprise value, which includes debt and subtracts cash to give a more complete picture of a firm's worth. Alphabet (GOOG, GOOGL) overtook Apple (NASDAQ:AAPL) in December and is now valued at $420B compared with the latter's $393B. Measured by market cap, Apple still remains bigger, at $535B versus the search giant's $485B. Meanwhile, Tim Cook made a surprise visit to Brussels yesterday, looking to lobby European Commissioner Margrethe Vestager as EU regulators close in on a final decision about the company's Irish tax deals.

Automakers recalled a record 51.26M vehicles in the United States last year, continuing a historic surge for car companies facing an unprecedented government crackdown on safety lapses. According to the NHTSA, that figure topped the 50.99M vehicles called back in 2014, meaning that the recalls in each of the past two years surpassed any annual total logged by federal regulators in nearly five decades. Notable recalls: HMC, FCAU, OTCPK:TKTDY

Boeing is lowering production of the 747-8, taking an after-tax Q4 charge of $569M or $0.84 per share as a result. "The air cargo market recovery that began in late 2013 has stalled in recent months and slowed demand for the 747-8 Freighter," said CEO of Boeing Commercial Airlines Ray Conner. The move will cut the jumbo jet's output from one airplane per month to half a plane starting in September. BA -1.1% premarket.

Barrick Gold fell 3.1% after the bell yesterday after stating it expects to take a goodwill and asset impairment charge of as much as $3B. The writedown is primarily related to its Pascua-Lama mining project, located on the border of Chile and Argentina, and its Pueblo Viejo project in Dominican Republic. Barrick (NYSE:ABX) also announced preliminary FY 2015 production of 6.12M oz. of gold, in line with its updated guidance of 6M-6.15M oz.

Brazil's government and Samarco Mineração, a joint venture between Vale (NYSE:VALE) and BHP Billiton (NYSE:BHP), are inching closer to a deal to settle a 20B-real ($4.8B) lawsuit related to November's deadly dam burst. The resulting tsunami of mud roared through river valleys in two states, killing at least 17 people and dumping mine waste as far away as the Atlantic Ocean. An outline of the accord between the two sides is likely to be completed by early February.

Philips has terminated a $3.3B deal to sell 80.1% of its Lumileds division to a group of Asian investors, after the deal ran into unspecified objections from the U.S. government. The would-be buyer, Go Scale Capital, comprises GSR Ventures, Oak Investment Partners, Asia Pacific Resource Development, and Nanchang Industrial Group. In 2015, Philips' (NYSE:PHG) Lumileds generated sales of approximately $2B.

The "pharma bro" circus continues. Martin Shkreli intends to assert his right against self-incrimination by taking the 5th during next week's hearing before the U.S. House Committee on Oversight and Government Reform. His lawyer, Baruch Weiss, asked chairman Jason Chaffetz that he be excused from the hearing, but the latter stated Shkreli could be held in contempt if he fails to appear. A compromise is possible. The committee may elect to hear testimony in a non-public session or immunize the testimony in a public session so it can't be used in criminal prosecution.

A U.S. judge will decide on Monday whether retailer American Apparel can exit bankruptcy under the control of hedge funds or give former chief executive Dov Charney a chance to finance a competing plan. American Apparel (OTCPK:APPCQ) filed for bankruptcy in October and last month Charney and two investment funds presented a $300M takeover plan that was recently rejected by the company's board.

SAP has raised its 2017 outlook for revenue and profit to the upper end of expectations, highlighting its progress in turning itself from a packaged software firm into a cloud supplier. Sales are now expected to be in a range of €23B-€23.5B, and operating profit adjusted for some items will be between €6.7B-€7B. Last week, SAP pre-announced better-than-expected 2015 results, fueled by strong year-end renewals of existing software license customers.

Yahoo will decide on its next strategic steps only after releasing quarterly earnings on Feb. 2, Reuters reports, as the company continues to resist investor calls to explore a sale of its core Internet assets. Sources said the company wants to gauge shareholder reaction after presenting its strategic vision during the earnings conference call. Yahoo (NASDAQ:YHOO) said last month it would pursue a tax-free spinoff of the core Internet business, which could take at least a year. YHOO +2.1% premarket.

Thursday's Key Earnings

American Express (NYSE:AXP) -4% AH following a soft earnings outlook.
Schlumberger (NYSE:SLB) +3.1% AH on a new stock buyback, job cuts.
Southwest Airlines (NYSE:LUV) +0.5% after record operating income.
Starbucks (NASDAQ:SBUX) -3% AH on disappointing sales and guidance.
Union Pacific (NYSE:UNP) -3.4% after a weak earnings print.
United Continental (NYSE:UAL) +0.5% despite a stronger U.S. dollar.
Verizon (NYSE:VZ) +3.3% on higher subscriber growth.

Today's Markets

In Asia, Japan +5.9% to 16959. Hong Kong +2.9% to 19081. China +1.3% to 2917. India +2% to 24436.
In Europe, at midday, London +2.4%. Paris +3.2%. Frankfurt +2%.
Futures at 6:20, Dow +1.3%. S&P +1.4%. Nasdaq +1.8%. Crude +5.7% to $31.23. Gold flat at $1098.50.
Ten-year Treasury Yield +5 bps to 2.06%

Today's Economic Calendar

8:30 Chicago Fed National Activity Index
9:45 PMI Manufacturing Index Flash
10:00 Existing Home Sales
10:00 Leading Indicators
1:00 PM Baker-Hughes Rig Count

Companies reporting earnings today