Wall Street Breakfast: Prepare For The Powell Fed?
President Trump is set to pick Fed Governor Jerome Powell to be the next Fed chair, succeeding Janet Yellen, whose four-year term expires in early February, WSJ reports. He is seen as the "safe choice" because he's not expected to veer drastically from current Fed policy. That would mean gradually raising short-term interest rates in quarter-percentage-point steps through 2020, while slowly shrinking the Fed's $4.2T balance sheet.
House GOP leaders are still rushing to release a tax plan today despite the hesitation of some Republicans from high-tax states who could be crucial to the bill's passage. More details are leaking out... The corporate tax rate cut will be permanent, not set to expire, and there won't be major changes to 401(k) plans. The bill also won't include changes to the individual mandate to purchase health insurance.
The Fed may have left interest rates unchanged, but the Bank of England is widely expected to raise rates for the first time in a decade, in one of the most closely watched policy meetings since the financial crisis. Investors will also focus on the degree of unity among policymakers as they gauge the likelihood of further increases. Sterling is inching up against the dollar ahead of the decision, which will be announced at midday London time.
Currency strategists and traders say China is leaving nothing to chance during next week's visit by President Trump, and will likely prop up the value of the yuan, a regular target during last year's campaign for the White House. Beijing has allowed the currency to rise more than 5% against the U.S. dollar this year, after it plunged by around 6.5% in 2016, thanks to tighter management of capital outflows and weakness in the greenback.
In the first of a series of pro-market reforms, Argentina has unveiled sweeping proposals to cut taxes, including lowering corporate rates to 25% from 35% and slashing employer social security taxes. The plans, which officials hope congress will approve by the end of the year, aim to increase economic growth by 0.5% per year for at least five years as President Macri strives to make the nation's economy more competitive.
In the nick of time? Venezuela appeared to have made a crucial bond repayment on Wednesday, but the chaos surrounding the installment has stirred up worries about the crisis-ridden country. Given the lack of a grace period, investors can ask the International Swaps and Derivatives Association today to determine whether there has been a formal default that would trigger credit default swaps.
The Houston Astros beat the Los Angeles Dodgers 5-1 last night in Game 7 of the World Series, bringing home the championship title for the first time since they started out in 1962 as the Colt .45s. When the final viewership numbers come up, the game - streamed on Fox (FOX, FOXA) - should draw between 23M-25M viewers, far less than the 40.04M viewers who watched the Cubs defeat the Indians in Game 7 of last year's World Series.
Facebook reported strong Q3 results that topped Wall Street expectations, beating revenue estimates by nearly $500M and posting earnings per share more than 24% above the consensus. While FB shares traded as high as 2% initially, they fell back after Mark Zuckerberg said that 2018 expenses would rise 45%-60%. He wants to clamp down on fake news and hate speech, but that will drive costs higher.
Tesla tumbled 5% in AH trading after the EV automaker reported its biggest quarterly loss ever. The company also pushed back production targets for the Model 3 by about three months, saying it was difficult to predict how long it will take to fix bottlenecks. The car, whose price starts at $35,000, is widely seen as key to Tesla's (TSLA) future.
Overnight earnings roundup: Credit Suisse (CS) +3.1% premarket on strength in wealth management as its CEO said he's not feeling pressure from activists. Royal Dutch Shell (RDS.B) +0.5% premarket with strong refining leading to a profit jump, while cash flow slowed. Also inching up premarket is Sanofi (SNY), which confirmed its full-year outlook despite diabetes woes.
Following similar approval by the EMA last month, GlaxoSmithKline (GSK) has received clearance from the FDA to fast-track the development of a potentially "transformational" blood cancer treatment, currently named GSK2857916. The company sold its marketed cancer drugs to Novartis (NVS) in 2015, but it continues to invest in early-stage research and has said oncology could become another pillar of its pharma business.
Pershing Square's Bill Ackman has finally thrown in the towel on his firm's short position in Herbalife (HLF), covering shares after extended losses. Instead, he has opened a separate bet exclusively in put options that will limit the risk to 3% of the firm's capital. Ackman initially reported his short position in Herbalife in late 2012, claiming the company was running an illegal pyramid scheme.
The current state of talks to update NAFTA is creating uncertainty among businesses and could hurt investments and growth, according to Rio Tinto (RIO) CEO Alf Barrios. The company exports 75% of the aluminum produced at its Canadian plants to the U.S. and supplies 30% of that market's needs, he told a conference organized by the Canadian American Business Council.
With the Trump administration deciding to scrap the DACA program, Google (GOOG, GOOGL) and Facebook (FB) have joined a legal challenge by more than 100 tech firms against a decision to end protection for "Dreamers." They argue that such immigrants are vital to the U.S. economy, and that ending the program will hit growth. Airbnb (AIRB), Microsoft (MSFT), Salesforce (CRM), LYFT, UBER and Twitter (TWTR) also signed on to the amicus brief.
SoftBank is "definitely" talking to Charter Communications (CHTR) about a merger, a source told the New York Post, in a week where talks to merge Sprint (S) and T-Mobile (TMUS) are reportedly on life support at best. Reports also suggest that SoftBank (OTCPK:SFTBY) may pull its planned $10B investment in UBER as ex-CEO Travis Kalanick continues to battle other board members.
Another day, another milestone. Bitcoin climbed past $7,000 overnight for the first time ever, giving investors serious thought if it will hit $10,000 by year's end. The cryptocurrency had a staggering $3.5B trade volume in the past 24 hours and got new impetus this week after CME said it planned to introduce bitcoin futures.
Amazon has registered three new domain names related to cryptocurrency, sparking speculation that the e-commerce giant may accept it as payments or even move into the space. They include: amazonethereum.com, amazoncryptocurrency.com and amazoncryptocurrencies.com. The company already signed up for the domain "amazonbitcoin.com" three years ago, and the address takes you straight to Amazon.com (AMZN).
Allergan (AGN) +4.2% raising its earnings outlook.
Facebook (FB) -1.9% AH dinged by its 2018 expense forecast.
Fitbit (FIT) -3% AH after a quarterly net loss.
GoPro (GPRO) -11.1% AH giving soft guidance.
Groupon (GRPN) +7.3% swinging to a profit.
Kraft Heinz (KHC) -1.5% AH on light organic sales.
Shake Shack (SHAK) +5% AH with better menu pricing.
SodaStream (SODA) +4.8% surpassing estimates.
Southern Co. (SO) -0.2% losing ground in Q3.
Tesla (TSLA) -5% AH updating on Model 3 production.
Transocean (RIG) +2.5% AH improving fleet utilization.
Qualcomm (QCOM) +1% AH beating expectations.
In Asia, Japan +0.5%. Hong Kong -0.3%. China -0.4%. India -0.1%.
In Europe, at midday, London +0.3%. Paris -0.1%. Frankfurt -0.2%.
Futures at 6:20, Dow -0.1%. S&P -0.1%. Nasdaq -0.1%. Crude +0.1% to $54.34. Gold -0.1% to $1276.70.
Ten-year Treasury Yield flat at 2.37%
Chain Store Sales
7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
9:45 Bloomberg Consumer Comfort Index
10:30 EIA Natural Gas Inventory
4:30 Money Supply
4:30 Fed Balance Sheet
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