Wall Street Breakfast: All Eyes On The Jobs Report

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by: Wall Street Breakfast
Wall Street Breakfast
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With roller coaster monthly U.S. payroll gains ranging from 11,000 to 287,000 in the previous two months, traders will be looking to the July jobs numbers to provide some context for what appears to be a hiring slowdown in 2016. The Labor Department is set to release the closely watched figure at 8:30 ET. Besides non-farm payrolls, investors will be eyeing the unemployment rate, wage growth and another report that will display the U.S. trade deficit for June.

Economy

Any chance the Federal Reserve had of raising rates this year may have been quashed by the Bank of England, which not only cut interest rates on Thursday, but restarted its money-printing program. The decision makes the corner in which the Fed has found itself even more claustrophobic, and will likely make it harder to tighten monetary policy as one of its closest peers loosens its purse strings.

House Speaker Paul Ryan sees no point in bringing up the Trans-Pacific Partnership for a vote in any "lame duck" session of Congress after the November elections because "we don't have the votes." Despite both U.S. presidential candidates bashing the trade deal on the campaign trail, Obama administration officials have pledged to make a major push in coming months to persuade Congress to pass TPP.

The U.S. Chamber of Commerce and a Texas business group have sued the federal government, alleging the Treasury Department's rules limiting tax-motivated inversion transactions violate the law. "This is not the way it's supposed to work in America," said Thomas Donohue, the chamber's chief executive officer. The suit claims the government rewrote the Internal Revenue Code itself after Congress wouldn't go along with President Obama's proposed legislative changes to limit inversions.

Indonesia's economy grew a faster-than-expected 5.18% in the second quarter from a year earlier, thanks to higher commodity prices and stronger consumption. Household spending, which accounts for more than half of GDP, rose 5.04% on the year. The growth was partly fueled by the earlier start in June of Ramadan, when prices of food and other goods tend to rise.

German factories slammed on the brakes in June, hit hard by business from within the eurozone. Factory orders contracted by 3.1% on the year, an even sharper decline than the 1.5% contraction that economists had penciled in, and much worse than the revised flat reading in May. On the month, orders dropped by 0.4%, from 0.1% growth.

A surge of Zika cases in Puerto Rico is credit negative and may harm the territory's already declining economy and tourism industry, according to Moody's Investors Service. The number of island residents who acquired the infection locally has increased since April, with 4,666 reported cases as of July 27. Puerto Rico's economy is forecast to decline by 2% in fiscal 2017.

The start of the Olympics in Rio today has been shadowed by a storm of bad news - not including a Zika outbreak that prompted many health officials to recommend moving the games out of the city as a public safety measure. Political uncertainty, protests, violent crime, infrastructure failures and poverty are set to greet spectators this weekend in an event that some economists say could mean upward of $15B in losses for Brazil.

Stocks

Amazon will reveal its first branded cargo plane, Amazon One, at Seattle's SeaFair Air Show today, emblazoned with "Amazon" on its belly, "Prime Air" on its sides and the Amazon (NASDAQ:AMZN) smile logo on its tail. The freighter jet is among a fleet of 40 leased from Atlas (NASDAQ:AAWW) and Air Transport Services Group (NASDAQ:ATSG) to improve a supply chain straining to keep pace with the retailer's growing sales and swelling ranks of Prime members.

U.S. District Judge Kevin Castel has dismissed part of a lawsuit filed last year by Gucci, Yves Saint Laurent and other luxury brands accusing Alibaba (NYSE:BABA) of promoting sales of counterfeit items. The racketeering charges were rejected on grounds that the petitioners were unable to back up the claim with facts. The ruling doesn't affect other trademark-related claims against Alibaba, which has been dogged by numerous allegations about fake goods.

Yahoo is shutting down its "legacy" Messenger platform, the main tool used by oil traders to communicate since the late 1990s. The follow-up version of Yahoo's (NASDAQ:YHOO) messaging service cannot be used by the industry, as it doesn't meet compliance standards like saving conversations. While a raft of alternatives exist, users have expressed concerns about a fragmented communication market.

In a new regulatory filing, Goldman Sachs (NYSE:GS) warned that Brexit could force it to "restructure" some of its U.K. operations, in one of the clearest signs that Wall Street institutions are preparing specific measures following the landmark vote. New York state's financial regulator also sent Goldman a second request for information about its fundraising for Malaysian state fund 1MDB and requested a meeting with the bank by the end of the month.

After suffering a crippling hack earlier this week, Hong Kong-based Bitcoin (COIN, OTCQB:BTCS) exchange Bitfinex said it may spread the $68M loss among its users, including ones not directly impacted by the hack. "We are leaning towards a socialized loss scenario," the exchange wrote in a blog post. Bitfinex is still "settling positions and balances" and will provide more details soon

European financials: Royal Bank of Scotland (NYSE:RBS) -4.6% premarket after racking up a more than a £2B loss in the first half following substantial charges for litigation and conduct. Allianz's (OTCQX:AZSEY) net profit fell by half in Q2, hit by higher damage claims, the sale its South Korean business and weaker investment performance. "Net outflows at Pimco have slowed, but we have not yet reached our goals," CEO Oliver Baete said in a statement.

It's not just Takata (OTCPK:TKTDY) anymore. The NHTSA has upgraded a probe of more than 8M air bag inflators made by ARC Automotive to a so-called engineering analysis after a driver was killed in Canada last month by one of the ruptured devices. The probe covers inflators used by General Motors (NYSE:GM), Fiat Chrysler (NYSE:FCAU), Hyundai (OTC:HYMTF) and Kia (OTC:KIMTF). Canadian regulators are also investigating.

Mercedes-Benz is planning its own distinct line of electric vehicles, challenging BMW (OTCPK:BAMXF) and Tesla (NASDAQ:TSLA) in a bet that alternative fuel cars have the potential to become profitable. According to Bloomberg, Mercedes (OTCPK:DDAIF) will add two electric SUVs and two sedans and create a new sub-brand for the cars, though a name hasn't been chosen yet.

Xiaomi has joined the virtual reality landgrab with a cheap smartphone-based headset which will be compatible with devices from 4.7-inch to 5.7-inch in size. More than 1M consumers have already signed up to trial the Mi VR Play, available as a beta version in China practically free of cost at RMB1 ($0.15). It will be tested by "tens of thousands" of users, according to a Xiaomi (Private:XI) spokesperson, before a full launch in coming months.

Look out, Pokemon GO! Walt Disney (NYSE:DIS) is considering using a similar augmented reality approach for a new range of Star Wars toys, sources told WSJ. The development comes after a disappointing year for Playmation, the connected wearables (including Hulk and Iron Man gloves) that Disney launched in connection to its Marvel franchises. Those products are now seeing substantial discounts.

Rackspace +20% premarket following reports that the firm is nearing a sale to a private equity firm. The news comes two years after the cloud computing company said it would explore a deal amid heightened competition in the fast-growing market. Rackspace (NYSE:RAX) has shifted its business model in recent years, amid stiff competition from larger technology companies such as Amazon (AMZN) and Microsoft (NASDAQ:MSFT), and is now more of a services provider offering bundled computing and support.

The latest figures from the FBI show that July 2016 was the 15th consecutive month of record background checks for gun sales. The previous July record was set in 2015, when there were 1,600,832 checks, but last month there were 2,197,169. Each person may buy multiple firearms after passing a background check, so the number of guns sold at retail may be even higher than the number of background checks performed. Related tickers: SWHC, RGR, CAB, VSTO

Thursday's Key Earnings

Activision (NASDAQ:ATVI) +1.2% AH following a surge in revenues.
Chesapeake Energy (NYSE:CHK) -3% after missing estimates.
Devon Energy (NYSE:DVN) +1.6% increasing its production guidance.
EOG Resources (NYSE:EOG) +3.2% AH boosting its fracking plans.
FireEye (NASDAQ:FEYE) -17.6% AH cutting forecasts, announcing layoffs.
Kellogg (NYSE:K) +1.7% AH raising its profit outlook.
Kraft Heinz (NASDAQ:KHC) +4.1% AH increasing its dividend.
LinkedIn (NYSE:LNKD) +0.1% AH after topping expectations.
Priceline (NASDAQ:PCLN) +5.4% AH lifted by strong travel demand.
SeaWorld (NYSE:SEAS) -13.2% on declining attendance.
Teva Pharmaceutical (NASDAQ:TEVA) +3.5% on specialty drug sales.
Zynga (NASDAQ:ZNGA) -4.4% AH on a shrinking user base.

Today's Markets

In Asia, Japan flat at 16254. Hong Kong +1.4% to 22146. China -0.2% to 2977. India +1.3% to 28078.
In Europe, at midday, London +0.4%. Paris +0.6%. Frankfurt +0.3%.
Futures at 6:20, Dow +0.2%. S&P +0.3%. Nasdaq +0.2%. Crude -0.9% to $41.56. Gold flat at $1367.90.
Ten-year Treasury Yield flat at 1.5%

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 »