Wall Street Breakfast: Alphabet Becomes World's Most Valuable Company

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Includes: AAPL, AET, AIG, APC, BCS, BP, CS, E, FB, FDX, GOOG, GOOGL, LL, MAT, QQQ, RDS.A, RDS.B, REPYY, SPY, STO, SYY, TNTEY, TOT, TSLA, TWTR, UBS, VLKAY, YHOO
by: Wall Street Breakfast
Wall Street Breakfast
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Alphabet overtook Apple as the most valuable public company in the world in after-hours trading on Monday, as better-than-expected earnings sent the company's stock up 8% to $813. At that price, Alphabet's (GOOG, GOOGL) market cap totaled $559B, topping that of Apple (NASDAQ:AAPL), which closed the day worth $534.7B. Despite heavy losses at its 'Other Bets' projects (self-driving cars, smart contact lenses, Internet balloons etc.), Google's core business saw strong sales of mobile advertising and YouTube, boosting revenue for the quarter 18% to $21B.

Economy

Chinese shares climbed higher today after the country's central bank injected more liquidity into the financial system and guided the renminbi to its highest fix in almost a month. The PBOC added 100B yuan ($15.2B) in short-term loans to money markets, in a move to stave off potential liquidity squeezes ahead of the week-long Lunar New Year holiday that starts Feb. 7. Shanghai Composite +2.3%.

An outbreak of the Zika virus and its potential association with birth defects in South and Central America has been declared an international health emergency by the World Health Organization. The designation marks the fourth time the WHO has proclaimed a global health threat since such procedures were put in place in 2007, with the others arising from influenza, Ebola and polio. Possible stock gainers: Healthcare shares, travel insurers, mosquito-control products?

Targeting more ways to help Puerto Rico pay off nearly $72B in debt, a House Natural Resources subcommittee will hold a hearing in Washington later today to consider whether a federal authority should be created to oversee the island's budget and spending. Yesterday, the U.S. territory released details of a proposed restructuring deal that would cut its debt from $49.2B to $26.5B - a 46% haircut on creditors' holdings.

Ted Cruz has defeated Donald Trump in the first-in-the-nation Iowa caucus, cementing his status as a leading alternative to the Republican front-runner, while Marco Rubio placed a strong third. On the Democratic side, the race between Hillary Clinton and Bernie Sanders was too close to call. How critical are the caucus results for stocks? "It's a leading indicator for what we are going to see this year," said Thomas Murphy, managing partner at Family Office Research. "We're going to see a lot of ups and downs just related to politics."

Stocks

Grappling with a collapse in crude prices, BP has reported its worst annual loss in 20 years (even weaker than its 2010 results that included the costs of the Gulf of Mexico oil spill). For 2015 as a whole, the company announced a loss of $6.5B. On an underlying basis, Q4 replacement cost profit came in at $196M, down from $2.2B a year earlier, and well below analyst estimates. BP is also aiming to reduce its global oil production, or upstream, headcount by 4K-20K as it undergoes a $3.5B restructuring program. BP -8.5% premarket.

Standard & Poor's has lowered its credit rating on Royal Dutch Shell (RDS.A, RDS.B) and placed the oil major, BP, Eni (NYSE:E), Repsol (OTCQX:REPYY), Statoil (NYSE:STO) and Total (NYSE:TOT) on ratings watch with potential negative implications. S&P's moves, which include downgrading Shell's ratings to A+/A-1 from AA-/A-1+, come three weeks after the agency lowered its 2016 price assumption for Brent crude to $40/bbl.

UBS's net income rose 11% to 949M Swiss francs in the fourth quarter boosted by a tax gain that offset a decline in wealth-management and investment-banking profit. "Despite a very challenging environment, we had an excellent year, both in terms of shareholder returns and strengthened client relationships," CEO Sergio Ermotti declared. UBS also proposed raising its 2015 dividend to 0.85 Swiss francs per share including a special payout of 0.25 francs.

Yesterday's settlements by Barclays (NYSE:BCS) and Credit Suisse (NYSE:CS) for misrepresenting their private stock trading sites are unlikely to be the last as regulators continue to pursue abuses in electronic trading. According to the research firm Tabb Group, about 42% of the average daily trade volume is handled in the "dark," meaning information about trades isn't publicly known before they are executed. While the pools have existed for decades, they have become more popular in recent years due to the increase in high-frequency trading.

AIG is sticking with a strategic plan that aims to streamline the company but falls far short of calls from activist Carl Icahn to break into three separate units focusing on life, property-casualty and mortgage coverage. On Monday, Icahn told Bloomberg that the alternative plan presented last week by AIG's chief executive was inadequate and that he's assembling a slate of directors to shake up the company. Icahn reportedly owns 42M AIG shares, making him the insurer's largest activist shareholder.

Tesla has applied to the Michigan Secretary of State's office for a Class A dealership license to sell directly to the public. In its bid to enter Michigan, the company could try to fly around state law by establishing a relationship with a licensed repair facility or resort to legal action if Michigan snubs the request. There's also a grass roots movement to put the Tesla (NASDAQ:TSLA) question to voters in the state on the ballot in November.

The clock is ticking for Volkswagen to submit a repair plan covering 80K U.S. diesel SUVs and larger cars with emission levels over allowable levels. The California Air Resources Board set a deadline of February 2 for the German automaker to come up with a remedy. Last month, California rejected VW's (OTCPK:VLKAY) proposal to fix 482K 2.0 liter cars, calling it "substantially deficient."

Lumber Liquidators has been ordered by the DOJ to pay $13.15M for violations of the Lacey Act - a law for the protection of plants, fish and wildlife. The company allegedly sourced timber illegally from the last remaining habitat of Siberian tigers and Ampur leopards. Lumber Liquidators (NYSE:LL) is also under a separate investigation into charges that its laminate products from China contain excessive levels of formaldehyde.

Scoring another big regulatory approval, Brazil's antitrust authority has cleared FedEx's (NYSE:FDX) €4.4B proposed takeover of TNT Express (OTCPK:TNTEY). "Once the acquisition is closed, we look forward to the opportunities it will bring to our employees, customers and shareholders in Latin America and across the globe," FedEx Express CEO David Bronczek said. The companies also recently announced unconditional approvals from the United States and the European Union.

"Silver Lake has no interest in acquiring even a slice of Twitter (NYSE:TWTR)," Fortune reported yesterday, shattering a rumor started by The Information. TWTR shares saw an 11% advance at one point following the initial news, but pared gains following Fortune's report. Twitter remains just $2 below a Jan. 20 post-IPO low of $15.48, and the company's Q4 results will be released in eight days.

After buying WhatsApp two years ago in a deal worth about $22B, Facebook (NASDAQ:FB) founder Mark Zuckerberg said he expects the messaging app to contribute to the company's bottom line after it hits roughly a billion users. That metric has now been reached. Facebook also stated recently it was exploring new WhatsApp business models geared toward profitability and scrapped the service's $0.99 annual renewal fee. About 42B messages, 1.6B photos and 250M videos are shared daily over the seven-year-old application.

Yahoo will unveil a cost-cutting plan that includes shuttering several business units and laying off up to 15% of its workforce in tandem with its Q4 results this afternoon, WSJ reports. Plans to turn around Yahoo's (NASDAQ:YHOO) struggling core business are set to dominate the earnings report, with investors keen to see if CEO Marissa Mayer will push ahead with a proposed spin-off or entertain calls for a complete sale.

Monday's Key Earnings

Aetna (NYSE:AET) +1.4% on health plan growth.
Anadarko (NYSE:APC) +2.8% AH after cutting 2016 spending in half.
Google (NASDAQ:GOOG) +8% AH to become world's most valuable company.
Mattel (NASDAQ:MAT) +5.8% after topping expectations.
Sysco (NYSE:SYY) +8.3% following big volume gains.

Today's Markets

In Asia, Japan -0.6% to 17751. Hong Kong -0.8% to 19447. China +2.3% to 2750. India -1.2% to 24539.
In Europe, at midday, London -1.5%. Paris -1.6%. Frankfurt -0.8%.
Futures at 6:20, Dow -0.7%. S&P -0.7%. Nasdaq -0.8%. Crude -2.8% to $30.74. Gold -0.3% to $1124.40.
Ten-year Treasury Yield -2 bps to 1.93%

Today's Economic Calendar

Auto sales
8:30 Gallup US ECI
8:55 Redbook Chain Store Sales
1:00 PM Fed's George: Monetary policy and Economic Policy

Companies reporting earnings today