Wall Street Breakfast: Market Awaits Jobs Report

by: Wall Street Breakfast
Wall Street Breakfast
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Futures are edging into the green ahead of the January payrolls report due at 8:30 ET. Consensus calls for 190K jobs added, with the unemployment rate holding steady at 5%. Traders in interest rate markets have essentially priced out the chance of a rate hike in 2016 and the 10-year Treasury yield has fallen all the way to 1.85%, so a strong jobs number could make things interesting in fixed-income. Both the Nikkei and Shanghai were lower overnight, and Europe is modestly higher at midday.


The sweeping Pacific trade deal is expected to face a stiff challenge in Congress as more politicians head for the election year safety of pulling support. GOP Senator Rob Portman is the latest to raise concerns over the current form of the trade pact. Representatives from 12 nations formally signed the agreement in New Zealand earlier this week to kick off the road to ratification. A vote in the U.S. Congress isn't expected to occur until after the elections in November.

Olympics organizers in Brazil said they have no plans to cancel the Summer Olympics in Rio de Janeiro due to the Zika outbreak. A statement from the Sports Minister Group says the government is "fully committed" to ensure the games take place. Local media on the continent has been buzzing on the prospect of the first Olympics cancellation after the World Health Organization issued a stark warning on Zika earlier this week.

The Reserve Bank of Australia issued a cautiously optimistic report on the economy in Australia in a new monetary policy statement. Despite the turmoil with key trading partner China, the RBA sees growth of 2.5% to 3.5% this year and headline inflation of between 2% and 3%. The central bank warned that uncertainty with key China is still a significant risk. Analysts think that if the RBA is it be moved off its 2% benchmark rate level, it will be due to offshore headwinds.

Gold is poised for its largest weekly gain in a month with a 3% jump for the week. The strength of the metal is attributed to a weaker U.S. dollar and fading expectations for U.S. rate hikes. The spot price of gold is up 0.2% to $1,159 per ounce in today's early action.

U.K. car production hit a ten-year high, according to the Society of Motor Manufacturers and Traders. A record level of exports boosted production to almost 1.6M units. Strong sales in the U.S. and Europe offset weakness in deliveries to China.


China issued a crackdown on illegal genetically modified seeds through local authorities in reaction to a Greenpeace report on contamination. The dramatic action follows the major takeover offer from ChemChina for Syngenta (NYSE:SYT). Beijing has not commented directly on the Greenpeace findings.

Traffic is solid into Macau ahead of the Chinese New Year holiday period which begins on February 7. The number of visitors to Macau from Mainland China rose 11% compared to an equivalent period last year. The number of total visitors to the gambling destination was up 5%. This year's Chinese New Year season is seen as critical for the local arms of Wynn Resorts (NASDAQ:WYNN), Las Vegas Sands (NYSE:LVS), and MGM Resorts (NYSE:MGM).

Russian coal producer Mechel stuck a debt restructuring agreement with creditors after several years of negotiations. Mechel (NYSE:MTL) shareholders will vote on the plan on March 4. Shares of Mechel rose over 9% in Moscow trading in reaction to the deal.

Toyota is on track to top three trillion yen ($25.7B) in annual operating profit even after suspending production in Japan last week due to an explosion at a plant and fighting through recalls. This year, the automaker is outpacing the profit of the rest of the Japanese automakers combined. Toyota recorded Q3 sales of 7.34T yen ($63B) to top the estimate of analysts. Strong sales in North America helped to take up the slack from dips in Europe and Asia.

Honda has recalled another 443K vehicles in Japan due to faulty air bags made by Takata (OTCPK:TKTDY). The latest Takata headache for the Japanese automaker covers 13 different models, including Honda's (NYSE:HMC) Fit compact car. The global tally of recalled vehicles tied to Takata air bags is now over 50M.

Major oil stocks are on watch after ConocoPhillips' (NYSE:COP) dividend cut was dissected on the company's post-earnings conference call last night. Several analysts asked ConocoPhillips execs what the company has to offer investors with the dividend slashed. Concoco's new yield of 2.4% is well-below the Big Oil players Chevron (NYSE:CVX), Total (NYSE:TOT), Royal Dutch Petroleum (NYSE:RDS.A), BP (NYSE:BP), and Exxon Mobil (NYSE:XOM).

Honeywell agreed to acquire smoke detection and video security company Xtralis for $480M. Ireland-based Xtralis will fall into Honeywell's (NYSE:HON) Automation and Control Solutions division that accounts for about a third of the company's annual sales. The deal is expected to close in the second quarter after regulators give their approval.

Linn Energy says it has started a process to explore strategic alternatives to strengthen its balance sheet and maximize the value of the company. The company hired Lazard as its financial adviser to assist it in the process. Linn (LINE, LNCO) also said it tapped out its credit facility after borrowing $919M. Total borrowings by Linn now stand at $3.6B.

Tech stocks were roughed up in the after-hours session last night after some earnings disappointments. Sierra Wireless (NASDAQ:SWIR) and Outerwall (NASDAQ:OUTR) both cited weak demand for core products in their reports, while LinkedIn (NYSE:LNKD) fell 24% after dialing back revenue and profit expectations quite a bit. During the earnings call, LinkedIn execs said the company's strategy in 2016 will be focusing on a narrower set of core initiatives.

Friday's Key Earnings

Weyerhaeuser (NYSE:WY) +0.5% after solid earnings.
Deckers Outdoor (NASDAQ:DECK) -8% AH after soft guidance.
SkyWest (NASDAQ:SKYW) +1% after topping estimates.
Callaway Golf (NYSE:ELY) +0.5% on strong product demand.
Lions Gate (NYSE:LGF) -5% on a weak film slate performance.

Today's Markets

In Asia, Japan -1.3% to 16819 . Hong Kong +0.6% to 19288. China -0.7% to 2963 . India +1.1% to 24617.
In Europe, at midday, London +0.3%. Paris +0.4%. Frankfurt -0.1%.
Futures at 6:20, Dow +0.2%. S&P +0.2%. Nasdaq +0.2%. Crude +0.4% to $31.84. Gold +0.2% to $1159.40.
Ten-year Treasury Yield -1 bp to 1.85%

Today's Economic Calendar
8:30 Non-farm payrolls
8:30 International Trade
1:00 PM Baker-Hughes Rig Count
3:00 PM Consumer Credit

Companies reporting earnings today