Wall Street Breakfast: Brexit Campaigning Enters Final Hours

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Includes: ADBE, AFRAF, BBRY, FB, FDX, GOOG, GOOGL, KMX, LEN, MCD, MMTOY, NSANY, OIBR, QQQ, RGR, SBUX, SCTY, SFTBY, SPY, SSNLF, SWHC, TSLA, VLKAY, VSTO
by: Wall Street Breakfast
Wall Street Breakfast
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Enough with the surveys and polls, traders appear to be in "wait and see" mode as equities hold steady ahead of a closely watched Brexit vote. "Anyone that wants to call this referendum with confidence is extremely foolish," said John Curtice, professor of politics at Strathclyde University. "The contest is very close to 50-50." Politicians on both sides of the debate will be making their last arguments today ahead of polling stations opening tomorrow at 7:00 a.m. London time.

Economy

Just in case there was still anybody holding out for a July rate hike, Janet Yellen quashed that idea yesterday in her Humphrey-Hawkins testimony. Mostly repeating the memes from the recent FOMC policy meeting and her press conference, Yellen cited "considerable uncertainty" about the economic outlook, and the potential for a Brexit vote to shake up the markets. She testifies again today, this time before the House Financial Services Committee.

Puerto Rico is being sued in New York by a group of hedge funds claiming it's illegally using an emergency fiscal-crisis law to dodge payments that are supposed to be guaranteed by the island's constitution. While Governor Alejandro Garcia Padilla has not yet implemented a temporary debt moratorium, many speculate he will soon because the territory is expected to default on a payment of nearly $2B on July 1.

Acting Brazilian President Michel Temer has authorized the transfer of 2.9B reais ($849M) from the federal government to the state of Rio de Janeiro, which is struggling with a fiscal crisis less than two months before the Olympic Games. Rio declared a "public calamity" last week as a result of its deteriorating finances, which have forced deep cuts to crucial services such as education, healthcare and policing.

North Korea fired two ballistic missiles off its east coast overnight in what appears to be the most successful test of its mid-range Musudan rocket to date. "We strongly condemn these recent missile tests," the U.S. State Department declared. "Our commitment to the defense of our allies, including the Republic of Korea and Japan, remains ironclad."

U.S. crude has once again joined Brent above $50 a barrel after data from the American Petroleum Institute showed a larger-than-expected draw on stocks. Inventories fell by 5.2M barrels for the week ended June 17. The Energy Information Administration will separately issue official stockpile data this morning at 10:30 a.m. ET. Crude futures +1.1% to $50.38/bbl.

Stocks

Elon Musk considers Tesla's potential deal for SolarCity (NASDAQ:SCTY) a "no-brainer" that would transform the former into "the world's only vertically integrated energy company offering end-to-end clean energy products." The all-stock deal, worth as much as $2.8B, sent Tesla (NASDAQ:TSLA) down 11% in extended trading on Tuesday, while SolarCity shares soared over 16%.

The Department of Transportation and the FAA have issued final rules covering the use of drones in the U.S. Key points: Drones must weigh less than 55 pounds, obey a 100 mph speed limit, remain within a pilot's line of sight and not fly under a covered structure. All operators must be at least 16 years old and have a remote pilot certificate with a small UAS rating.

Facebook is paying a variety of media companies and celebrities to create videos for its live-streaming services, and has inked nearly 140 deals for more than $50M so far, WSJ reports. Partners include old-school media like CNN, digital players like Vox and Mashable, and celebrities like Kevin Hart and Russell Wilson. The arrangements are a way to encourage publishers to produce a steady stream of high-quality videos until Facebook (NASDAQ:FB) figures out a more concrete plan to compensate creators.

Replacing Nikesh Arora, SoftBank (OTCPK:SFTBY) has picked Ken Miyauchi, head of the group's telecoms operations, to become company president and chief operating officer. Arora, the former Google (GOOG, GOOGL) executive handpicked by Masayoshi Son as his successor, abruptly quit the company on Tuesday after it became clear that Son wanted to remain at the helm longer than planned.

The bankruptcy petition of mobile phone carrier Oi (NYSE:OIBR), the biggest ever in Brazil, poses no threat to the country's state banks or the wider financial system, Finance Minister Henrique Meirelles told Globo News. The company's request to seek protection from creditors on 65B reais ($19B) in liabilities had sounded alarm bells about the exposure of local lenders.

Air France pilots have called off a strike planned for the weekend, averting what would have been the second such stoppage during the Euro 2016 soccer tournament. The development came after the incoming CEO of Air France-KLM (OTC:AFRAF), Jean-Marc Janaillac, proposed freezing new pay rules opposed by the pilots in exchange for a four-month truce.

Volkswagen's top management and supervisory board are expected to get an earful from shareholders today as the automaker hosts its first annual shareholders' meeting since its emissions scandal erupted in September. The event isn't likely to result in any real consequences, however, as almost all of VW's (OTCPK:VLKAY) voting shares are owned by members of the Porsche and Piech families, the state of Lower Saxony and Qatar's sovereign wealth fund.

BlackBerry is also holding its annual general meeting this morning, with executives likely to face questions about the future of the company's hardware business. The one-time smartphone leader has been struggling in recent years and its first Android-powered phone, the Priv, has so far failed to boost sales. BlackBerry's (NASDAQ:BBRY) software and services operations, on the other hand, have performed better, with revenue in the category last quarter jumping 106% Y/Y.

Samsung Electronics plans to invest $1.2B in the U.S. over the next four years on "Internet of Things" technologies. Samsung's (OTC:SSNLF) investment will be aimed at a variety of IoT applications, including digital health, drones, robots, self-driving cars and firms making software to process the massive amount of data produced by these devices.

Facing hefty compensation costs and falling sales, Mitsubishi Motors (OTC:MMTOY) is predicting a net loss of ¥145B ($1.4B) for 2016 in the wake of its mileage-cheating scandal. The forecast would mark the firm's first loss in eight years after admitting in April to overstating the fuel economy on four of its mini-vehicles, including two models it produced for Nissan (OTCPK:NSANY).

McDonald's has received more than half a dozen bids for thousands of its China and Hong Kong stores in a deal that could be worth about $3B. According to Reuters, McDonald's (NYSE:MCD) is offering a 20-year master franchise agreement to buyers as part of the deal, but has placed restrictions which have discouraged some private equity firms from participating in the process.

A federal judge in California has allowed a lawsuit accusing Starbucks (NASDAQ:SBUX) of deliberately underfilling lattes about 25% less than their advertised sizes. It's not the first time the company has been sued over its drinks. A separate class-action in April accused the coffee giant of putting too much ice in cold beverages, leaving consumers with just over half the amount they paid for. Starbucks called both lawsuits "without merit."

U.S. senators are pushing for a compromise gun control bill, a day after they failed to advance four gun measures following last week's mass shooting in Orlando. Senate Majority Leader Mitch McConnell said he would schedule a vote on a bill by fellow GOP Senator Susan Collins that would prevent about 109K people on the "no-fly" list, as well as another narrow list of possible terrorist suspects, from purchasing weapons. Related tickers: SWHC, RGR, VSTO

Tuesday's Key Earnings

Adobe (NASDAQ:ADBE) -5.2% AH as guidance fell short.
CarMax (NYSE:KMX) -4.9% following sluggish sales, earnings.
FedEx (NYSE:FDX) -1.2% AH on pension adjustments and expenses.
Lennar (NYSE:LEN) -1.2% despite topping estimates.

Today's Markets

In Asia, Japan -0.6% to 16066. Hong Kong +0.6% to 20795. China +1% to 2906. India -0.2% to 26766.
In Europe, at midday, London +0.3%. Paris +0.2%. Frankfurt +0.1%.
Futures at 6:20, Dow flat. S&P flat. Nasdaq flat. Crude +1.1% to $50.38. Gold -0.4% to $1267.50.
Ten-year Treasury Yield flat at 1.69%

Today's Economic Calendar

7:00 MBA Mortgage Applications
9:00 FHFA House Price Index
10:00 Existing Home Sales
10:00 Yellen delivers semi-annual monetary policy testimony
10:30 EIA Petroleum Inventories
11:30 Results of $13B, 2-Year FRN Auction
1:00 PM Results of $34B, 7-Year Note Auction

Companies reporting earnings today »