Wall Street Breakfast: Jobs Report Takes Center Stage

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Includes: EMR, GM, GOOG, GOOGL, GPS, JAKK, JUNO, KITE, MCD, NTDOF, NTDOY, QQQ, SPY, TM, VLKAY, VZ
by: Wall Street Breakfast
Wall Street Breakfast
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Investors will have a key talking point in hand after the highly anticipated report on U.S. jobs growth for June is released this morning. The consensus estimate is for a nonfarm payrolls bounce of 175K after the weak tally of 38K in May. The market will be looking for confirmation that the May number was a one-time outlier, influenced in part by the Verizon (NYSE:VZ) strike. Some optimistic economists think the NFP mark could come in ahead of 175K on their view that retailers and construction companies dialed up hiring after a soft weather-impacted spring. Today's report takes on added significance in a post-Brexit environment with Federal Reserve rate hike implications.

Economy

Retailers in the U.K. recorded their worst month of June sales in a decade, according to BDO. The accounting firm estimates same-store sales fell 3.6% as demand crumbled after the Brexit vote. Fashion and home products were two of the hardest hit categories. The FTSE 350 General Retailers Index is down 16% since the shock Brexit result.

Germany's trade surplus fell to an adjusted level of €22.2B ($24.6B) after reaching a record of €24.1B ($26.7B) in April. Economists expected a mark of €23.0B ($25.5B). Exports were down 1.8% during the month, while imports rose 0.1%.

The current account surplus in Japan contracted 2.4% to ¥1.809T ($18B) in May. A stronger yuan contributed to the first narrowing of the current account in almost two years. Economists expected the current account surplus to have slimmed even further during the month, with the average forecast of ¥1.747T.

High-ranking Communist Party officials in China are exerting more influence on the daily operations of state-owned companies. The tighter grip comes at the direction of President Xi Jinping, who calls state-owned enterprises a major force to protect the common interests of the people. In a sign of the increased intervention, several Chinese state-owned companies that partner with major automakers such as Volkswagen (OTCPK:VLKAY), Toyota (NYSE:TM), and General Motors (NYSE:GM) have changed their articles of incorporation to protect the goals of the Communist Party.

The Fed Reserve will extend until July 2017 the deadline for lenders to rid themselves of some legacy investments and to end relationships with funds prohibited under the Volcker Rule. Part of the Dodd-Frank reform passed in 2010, the rule was finalized in 2013 and delayed for the first time in 2014 after banks complained they would suffer heavy losses if they had to unload stakes in a rush. The extension is expected to be the final one the Fed may grant.

Stocks

Sources indicate three bidders are in the hunt for Emerson Electric's (NYSE:EMR) Motors and Drives unit. Private equity firm Clayton Dubilier & Rice and two Chinese companies are reported to be prepping bids for the business that include alternator specialist Leroy-Somer. Emerson is expected to finalize a deal before the end of August.

Shares of Nintendo rallied in Tokyo trading after a new Pokemon GO smartphone game soared to the top of Apple's iTunes store chart in the U.S. to energize hopes for monetization potential. Demand for Pokemon GO was also strong this week in Australia and New Zealand. There are also reports of an impressive number of downloads by users of Android devices. The game's launch in Japan is expected shortly. Nintendo (OTCPK:NTDOY, OTCPK:NTDOF) gained more than 8% to reach a two-month high and was the most heavily traded stock today on the Tokyo Stock Exchange.

Volkswagen has to pay $86M in civil penalties as part of an agreement with the state of California. The arrangement is part of the broad $14.7B settlement the German automaker made in the U.S. in the emissions cheating case. California plans to use part of the funds for R&D into emissions testing capabilities.

McDonald's disclosed it expects to take a $235M pretax charge in Q2 related to strategic changes announced over the last year. The company estimated the charge will equate to roughly $0.20 per share. The major changes at McDonald's (NYSE:MCD) include a relocation of the corporate HQ, significant refranchising efforts, and G&A initiatives. Shares of McDonald's are up 0.5% premarket.

A judge ruled in the favor of JAKKS Pacific (NASDAQ:JAKK) in a case focused on the company's right to cut prices on Cabbage Patch dolls and flood the market with product shortly before it lost the key license. While the judge conceded that the moves by JAKKS were harmful to rival Wicked Cool Toys, he determined they didn't rise to the level of illegal conduct. The Cabbage Patch Kids line still produces revenue of about $50M per year.

Anvato, a supplier firm to over-the-top video providers, was acquired by Google (GOOG, GOOGL) for an undisclosed amount. The tech giant will integrate Anvato's team and technology into its Google Cloud Platform group. Anvato, founded in 2007, delivers services around Internet video for customers that include a number of major TV content/station owners, and it helped deliver the live stream of Super Bowl XLVIII in 2014.

The FDA put a clinical hold on a mid-stage leukemia trial by Juno Therapeutics (NASDAQ:JUNO) after the deaths of two patients. The trial was assessing lead CAR-T candidate JCAR015 in adult patients with relapsed/refractory B cell acute lymphoblastic leukemia. Shares of Juno are down 27% after coming off an after-hours trading halt, while peer Kite Pharma (NASDAQ:KITE) is off 7%.

Gap reported sales in June rose 2% year over year to $1.57B. Comparable store sales were up during the month by the same rate. The company cited improved traffic trends during the month, led by the Old Navy chain which recorded a +5% comp. The strong month from Gap (NYSE:GPS) stood out after several other mall retailers posted weak sales reports. Gap is up 5% in premarket trading.

Today's Markets

In Asia, Japan -1.11% to 15107. Hong Kong -0.7% to 20564. China -0.8% to 9400. India -0.3% to 27134 .
In Europe, at midday, London -0.1%. Paris +0.7%. Frankfurt +0.9%.
Futures at 6:20, Dow +0.1%. S&P +0.1%. Nasdaq flat. Crude +0.4% to $45.33. Gold -0.3% to $1357.80.
Ten-year Treasury Yield flat at 1.39%

Today's Economic Calendar

8:30 Non-farm payrolls
1:00 PM Baker-Hughes Rig Count
3:00 PM Consumer Credit

Companies reporting earnings today »