Wall Street Breakfast: Q2 Earnings Season Kicks Off

by: Wall Street Breakfast
Wall Street Breakfast
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Equity markets are looking to shift their focus back to corporate results, with Alcoa (NYSE:AA) kicking off the second-quarter earnings season after today's closing bell. Yet even with the S&P 500 scraping up against a record high, triggered by Friday's strong jobs report, some investors remain cautious in light of uncertainty about the Fed's plan for rates, upcoming U.S. elections and ripple effects from the Brexit.


Prime Minister Shinzo Abe's Liberal Democratic Party and its Komeito allies won a stronger majority in Japan's Upper House election on Sunday, in a development that will make it far easier to push through his economic agenda. "It is likely that a large-scale economic stimulus program, in the magnitude of at least ¥10T (2% of GDP), will be implemented," Societe Generale said in a research note. Abe later confirmed a new round of stimulus, sending the Nikkei up 4%.

China's consumer inflation last month grew at its slowest pace since January, suggesting the country is still experiencing weak demand. According to the National Bureau of Statistics, the consumer price index rose 1.9% in June from a year earlier. While the rate was slightly above analyst expectations, it remained far below the 3% target set by Chinese officials for 2016.

Australia's Malcolm Turnbull declared victory on Sunday in a marathon national election, with his coalition government retaining power and the opposition Labor Party conceding defeat. It's still unclear whether the prime minister will lead a majority government or one that needs the support of smaller parties and independents. The coalition has so far won 74 of 150 House of Representative seats and is projected to take 76, or the slimmest majority possible.

The U.K. will have to accept the good with the bad in its future relationship with the European Union, warned Germany's Angela Merkel, reiterating that there would be no "cherry picking" which aspects of EU life it wanted to keep. "The decision (Brexit) has been taken... and the next step is - and Britain will do this only when they have a new prime minister - to invoke Article 50," she told public broadcaster ZDF.

Britain's finance chief will meet some of Wall Street's biggest investors in New York today and urge them to stick with the U.K. despite the Brexit. "Pursuing a stronger relationship with our biggest trading partners is now a top priority," George Osborne said in a statement. His visit will be the first of a series of trade missions to key global financial and political centers, including Singapore and China later this month.


The Bank of England is weighing a raft of emergency measures to stem the flood of money out of Britain's biggest property funds that caused fresh market panic last week, the Sunday Telegraph reports. These could include "enforced notice periods before redemptions, slashing the price for investors who rush to the door, or additional liquidity requirements for funds."

Deutsche Boerse is considering cutting the acceptance threshold for its merger with London Stock Exchange (OTCPK:LDNXF) in an effort to ensure the deal goes through. The German exchanges operator's shareholders have until tomorrow to decide whether or not to tender their shares. Deutsche Boerse (OTCPK:DBOEF) had originally set itself a target of securing more than 75% of its stock, but may now cut that level to 60% to allow index funds to participate.

The Farnborough Airshow takes off today with executives from the aviation industry flying in to complete deals and unveil their latest technology. Brexit uncertainty could cloud demand for big jets, as Airbus (OTCPK:EADSY) and Boeing (NYSE:BA) look to snap up some scarce orders from the big carriers. Among the exhibitors: AJRD, AME, CAE, ERJ, FLIR, GD, HRS, LLL, LMT, RTN, SNA, SPR, TXT, UTX

A decade after unveiling a "master plan" to turn Tesla (NASDAQ:TSLA) into an automotive powerhouse, founder Elon Musk has dropped a big hint that he's going back to the drawing board. The carmaker has come under withering scrutiny over its ability to deliver on its promises, and a recent death involving one of its Model S cars. The mogul announced on Twitter yesterday that he is working on a "secret master plan, part 2," with details to come later this week.

Micah X. Johnson, the man who killed five policemen in Dallas, was planning an even deadlier attack, according to the city's police chief. Gun and law enforcement stocks like SWHC, RGR, TASR and DGLY rallied on Friday in response to the news. President Obama will meet with relatives of the police officers tomorrow and speak at a memorial service for the victims, cutting short his trip to Europe in light of the shootings.

The hacking outfit OurMine has already been responsible for a few high-profile Twitter (NYSE:TWTR) account takeovers, but the latest may be particularly embarrassing for the company. Twitter CEO Jack Dorsey had his account briefly hacked Saturday morning, as OurMine tweeted out a link to its website and a message that it was "testing your security," along with a Vine clip that has since been deleted. TWTR -2.1% premarket.

Japanese messaging service Line Corp., set for a dual New York and Tokyo listing this week, has priced its initial public offering at the top of its marketed range at ¥3,300 per share. That would put it on track to raise as much as $1.3B and value the company at ¥693B ($6.9B). Not only will Line's (Private:LIN) offering end a tech IPO drought, it will mark the first Japanese company to list new shares in the U.S. since 2000.

Following Friday's surge, Nintendo (OTCPK:NTDOY) soared almost 25% overnight - adding $7.5B to its market value in just two days - on hopes that the popularity of its new Pokemon smartphone game will boost earnings. Pokemon GO was launched in the U.S. last week and shot to the No. 1 free app in the iTunes store. It was also launched in Australia and New Zealand, and is expected to be rolled out in Japan soon.

Healthcare talk... Centene (NYSE:CNC) and WellCare Health Plans (NYSE:WCG) have made competing offers for the Medicare Advantage insurance policies - covering about 350K people - that Aetna (NYSE:AET) plans to shed in order to acquire Humana (NYSE:HUM). Aetna presented the divestiture plan on Friday, when meeting with DOJ officials in a bid to address their antitrust concerns.

An elderly woman infected with Zika has died in Utah, and while the exact cause is unclear, authorities said it marks the first death related to the virus in the U.S. The unidentified Salt Lake County resident, who had an underlying health condition, contracted the disease while traveling abroad to a region with a Zika outbreak. Related tickers: SNY, INO, AEMD, XON, CEMI, BCRX, TMO, OTCQB:GOVX

Black Friday is coming four months early for some retailers. Stores including Target (NYSE:TGT), Sears (NASDAQ:SHLD), Banana Republic, Express (NYSE:EXPR), the Gap (NYSE:GPS) and Old Navy are offering deals around the same time as Amazon's (NASDAQ:AMZN) big Prime Day sale, which starts tomorrow. Wal-Mart (NYSE:WMT) has even eliminated the $50 minimum spending requirement for shoppers to receive free shipping on their online orders.

Despite denying rumors about a sale several weeks ago, the UFC has agreed to sell itself to WME-IMG for about $4B, NYT reports. Backing the transaction are private equity firms Silver Lake, Kohlberg Kravis Roberts (NYSE:KKR) and Michael S. Dell. The deal highlights the power and reach of the 23-year-old UFC, whose fights are now shown in more than 156 countries and claim millennials as some 45% of its audience.

Finding Dory has finally gotten knocked out of the top spot at the box office after three blockbuster weeks, but the success of new champion The Secret Life of Pets wasn't enough to keep the popular fish story from breaking more records. With another $20.3M over the weekend, Finding Dory is now the highest-grossing film of 2016 in U.S. theaters with $422.5M, and the highest-grossing animated movie of all time (domestically) for Walt Disney (NYSE:DIS).

Today's Markets

In Asia, Japan +4% to 15708. Hong Kong +1.5% to 20881. China +0.2% to 2994. India +1.8% to 27627.
In Europe, at midday, London +0.5%. Paris +0.7%. Frankfurt +1.1%.
Futures at 6:20, Dow +0.3%. S&P +0.3%. Nasdaq +0.5%. Crude -1.6% to $44.70. Gold +0.2% to $1360.40.
Ten-year Treasury Yield +1 bps to 1.37%

Today's Economic Calendar

10:00 Labor market condition index
10:00 Fed's George: U.S. Economy
1:00 PM Results of $24B, 3-Year Note Auction
9:30 PM Fed's Mester speech

Companies reporting earnings today »