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Wall Street Breakfast: Markets Stumble On Trade Gloom

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Wall Street Breakfast

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It's a down day for stocks across the globe amid fears of an escalating trade dispute between the U.S. and China. "The increase in the possible tariff rate (to 25% on $200B of Chinese goods) is intended to provide the administration with additional options to encourage China to change its harmful policies and behavior and adopt policies that will lead to fairer markets and prosperity for all of our citizens," U.S. Trade Representative Robert Lighthizer said in a statement.


Markets suggest a 91% chance of the Bank of England returning interest rates today to levels unseen since the aftermath of the financial crisis. The Monetary Policy Committee is expected to raise the figure from 0.50% to 0.75%, despite a weakening outlook for the U.K. economy and growing risks from Brexit. The BOE's remarks will also be critical to sterling's next shift.

Stepping up pressure on Ankara to resolve a dispute that has created fissures between the two nations, the U.S. Treasury Department has imposed sanctions against two top Turkish officials. Any property of the ministers of justice and interior within U.S. jurisdiction will be frozen due to "serious human rights abuses" for their roles in detaining Pastor Andrew Brunson.

Fresh off announcing a $113M infrastructure fund as part of the White House's Indo-Pacific blueprint, Secretary of State Mike Pompeo is beginning a five-day visit across Malaysia, Singapore and Indonesia. U.S. engagement with Southeast Asia is typically framed as a counter to Chinese dominance in the region, and some are worried that the current trade war could force nations to choose openly between Beijing and Washington.

Calling the wildfire situation in California "the new normal," Governor Jerry Brown said the state has sufficient funds to pay for firefighting costs from the more than dozen large blazes. However, he also cautioned on fiscal stress, stating a downturn in the Californian economy is inevitable at some point and could require borrowing for such emergencies.

Canada's government is scaling back elements of its planned carbon tax regime to address worries from the business community about global competition, WSJ reports. Under the changes, industrial companies would now have fewer of their emissions - 20% versus the original 30% - subject to the levy. The carbon tax takes effect next year, and starts at 10 Canadian dollars (US$7.68) a metric ton and rises gradually to C$50 by 2022.


Wall Street was expecting worse... Tesla (TSLA) soared more than 9% in AH trading on Wednesday despite reporting the biggest loss in its history at $717.5M. The company reassured investors it would achieve a profit later this year, as a rush of Model 3 sales in Q2 helped it burn much less cash than expected. CEO Elon Musk also apologized multiple times on a post-earnings call for his past behavior and reaffirmed production targets.

Reports that Google may return to the Chinese market are not true, according to state-owned China Securities Daily, which cited information from "relevant departments." The Intercept reported yesterday that Google (GOOG, GOOGL) was planning a local censored version of its search engine that would block some websites and certain search terms, sending shares of Baidu (BIDU) plunging 8%.

Starbucks has officially confirmed its partnership with Alibaba (BABA). The deal "opens up 500M or more active users of those apps (Alipay or Taobao or Tmall or Hema) that will have access to Starbucks (SBUX)," CEO Kevin Johnson declared, adding that the company will partner with Ele.me on food delivery from more than 2,000 Chinese stores by the end of 2018.

The Canadian unit of Molson Coors (TAP) has entered a deal that will allow it to develop cannabis-infused beverages in the Great White North. It's teaming up with Canadian cannabis producer Hydropothecary (HYYDF) to "participate in this exciting and rapidly expanding consumer segment." Marijuana use in Canada will become legal later this year.

Suggesting IPO sentiment is still weak in the tech sector, Sonos has cut the price of its listing to $15 a share, below the expected range of $17 to $19. In selling 13.9M shares, the maker of smart speakers for the home would raise $208.5M and be valued at just under $1.5B. Sonos is scheduled to start trading this morning on the Nasdaq under ticker symbol "SONO."

DraftKings has become the first company to roll out mobile sports betting in New Jersey as legal sports wagers slowly spread through the U.S. The new regulations, passed in June, require mobile providers to operate through casinos and racetracks in the state that already have land-based sports book operations. For DraftKings (DRAFT), their partner is Atlantic City's Resorts Casino Hotel.

Bank news roundup: Barclays (BCS) -0.8% premarket despite tripling profits in its best quarter in more than three years, boosted by a pickup in trading revenue and lower bad-loan losses. JPMorgan (JPM) is being investigated by the SEC for its handling of so-called "pre-released" ADRs between 2011 and 2015, while Wells Fargo (WFC) has agreed to pay a $2B penalty over decade-old mortgage loans.

Already moving several hundred million dollars of assets to support the new hub, Credit Suisse (CS) has chosen Frankfurt as a key post-Brexit center for its investment banking and capital markets business. The Swiss group is also moving 50 traders to Madrid and recently confirmed it had been granted a new brokerage license in Paris.

Spanish taxi drivers have ended a six-day strike that blocked the country's major roadways after the government said it will limit licenses for online ride-hailing companies such as UBER. Separately, Southeast Asian rival GRAB has secured new investment of $1B from a clutch of financial firms, including OppenheimerFunds and China's Ping An Capital.

Investigators have retrieved the black boxes from the Aeromexico E190 passenger jet that crashed in northern Mexico shortly after takeoff on Tuesday. While the 103 passengers and crew survived by evacuating the plane before it caught fire, nearly everyone on the flight suffered minor injuries. Representatives of Embraer (ERJ) and the maker of the plane's engines, General Electric (GE), are assisting in the probe.

Four people have tested positive for Ebola in eastern Democratic Republic of Congo just a week after another outbreak that killed 33 people in the northwest was declared over. Twenty people have already died from hemorrhagic fevers in and around Mangina. The area also has strong trade with neighboring Rwanda and Uganda, raising the risk of the virus moving internationally. Related tickers: MRK, JNJ

Silicon Valley's Zest Labs has accused Walmart (WMT) of stealing its "Eden" technology to prolong the shelf life of produce and reduce spoilage. In its $2B complaint, Zest said it was "stunned" in March when Walmart claimed to have developed Eden internally over six months through a "hackathon" among its own engineers. The two had worked together for years before the retailer lost interest last November.

While steering clear of potential quarrels, Amazon (AMZN) and other retail companies have formed a new group called the Package Coalition. It will lobby to keep the U.S. Postal Service's services "reliable and affordable" and take the company’s case to the public as the government weighs changes affecting USPS. A task force set up by President Trump is due to recommend postal reforms to the White House in the coming days.

Wednesday's Key Earnings

Chesapeake Energy (CHK) -5.7% on lower natural gas prices.
Enterprise Products (EPD) +1.4% expanding pipeline capacity.
Ferrari (RACE) -11% reeling back Marchionne targets.
Square (SQ) -1.1% AH amid a weak earnings outlook.
T-Mobile (TMUS) +1.1% AH beating wireless sub estimates.
Tesla (TSLA) +9.4% AH reaffirming profit, output targets.
Wynn Resorts (WYNN) -3% AH missing both lines of its Q2 report.

Today's Markets

In Asia, Japan -1%. Hong Kong -2.2%. China -2%. India -1%.
In Europe, at midday, London -1.3%. Paris -0.8%. Frankfurt -1.8%.
Futures at 6:20, Dow -0.7%. S&P -0.6%. Nasdaq -0.7%. Crude -0.8% to $67.09. Gold -0.2% to $1224.90. Bitcoin -0.2% to $7586.
Ten-year Treasury Yield -2 bps to 2.98%

Today's Economic Calendar

7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
10:00 Factory Orders
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

Companies reporting earnings today »

This article was written by

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Comments (185)

techy46 profile picture
Oh my, so the two parties no longer herd all the sheep?

"At the event, Nielsen said the cyberthreat that now exceeds the danger of a physical attack against the U.S. by a hostile foreign group."

GoodWRITEArm profile picture
Tesla has interesting maths.
Shaggieman profile picture
"Apple market cap is now equal to one year's Federal deficit!"

Sold my last 100 AAPL shares a week too early. Tempted to short here!
techy46 profile picture
Never ever short a religion!
techy46 profile picture
Actually compare AAPL and MSFT for the last 5 years.

APPL's up 19%, MSFT is up 26%!
didn't AAPL have a 7:1 or 6:1 split in that time (need to account for that)
AAPL wins the race to $1T market value. Congrats!
techy46 profile picture
Apple market cap is now equal to one year's Federal deficit!
techy46 profile picture
US wastes $2 billion a day in defense spending!

Still can't afford a $25 billion Wall!
scotch64 profile picture
I am quite amused about all this "wall" stuff and who's gonna build it and who's gonna flip the bill for it .
Do any of you know that the wall is already +75 % built? No its not a physical wall in most part , its a virtual wall built by the US gov't and Boeing started back in 2008(Billions of $$$) if me mind serves correct .
I know b/c I stacked the Comm. towers infrastructure containing comms and high tech monitoring equip. in Nogales and Sasabe AZ required for 24/7 virtual patrolling and signaling . As far as I know that segment of the project is actually complete between Yuma and El Paso.
What is very perplexing to me is many urban border specific areas are already equipped with steel barrier walls in conjunction with rural area virtual fence walls. What is severely lacking is , why has this "wall" zone NOT been declared an active USA militarized zone(shoot to kill) ?! If its so damned important to date?! Hell , even if you build it its still gonna have to be patrolled .So why are we not militarizing the zone and using the purpose built virtual fence and and adding automated firepower in the red zone?! Ultimalty making it effective as it was originally designed for .....reducing need for physical wall and patrolling?yeah quite confusing ....!
Buyandhold 2012 profile picture
The markets may have stumbled on trade gloom.

But Apple just became the first stock with a market cap of at least one trillion.

And Tesla is up by about 10% in the past 24 hours

Go Apple! That stock really inspires me. Anyone who has held on to their shares of Apple for 10 years or longer must be smiling.

And go Tesla. That stock really inspires me. It is losing so much money, but the price of the stock seems to defy gravity.

That is because many investors believe that Elon Musk is a true visionary. And true visionaries are not just a dime a dozen.

Musk has even spoken about sending 100,000 Americans to Mars.

I wish I could pick a few of the Americans to send on that flight to Mars.

I just read a news report that McDonald's served a pregnant woman cleaning fluid instead of a latte.

That seems hard to believe. But truth is stranger than fiction.

Next time I go to McDonald's I think I'll just skip the senior citizen coffee special.

"DraftKings has become the first company to roll out mobile sports betting in New Jersey...."

I have had relatives in New Jersey since the day that I was born back in 1955. And one of them was a big time gambler. He did not need DraftKings to place bets on sports. All he had to do was get on the phone and call Uncle Vinnie. And Uncle Vinnie always made sure that he collected if you lost the bet. He collected money the old-fashioned way.

"Calling the wildfire situation in California "the new normal," Governor Jerry Brown said...…"

Tragic what is happening in California regarding the wildfire situation. The wildfire situation is so bad that some of the fires have even been called "fire tornadoes."

And it amazes me how long Jerry Brown has been in politics. He has real staying power. Just like Mick Jagger who keeps on rocking and rolling at age 74.

Of course, Ronald Reagan was 69 when he was elected president and 77 when he left office. So some old timers seem to hang in there, Look at Strom Thurmond. Wasn't he around 100 when he got out of politics?

Turkey should release pastor Andrew Brunson. The more that I look at the situation in Turkey, the more that it seems that the country is a dictatorship rather than a democracy.
Strom Thurmond. If there was ever a poster boy for term limits, it was that guy. Spent the last ten years of his career nodding off at meetings and pinching intern's asses.
Wait until China just hints at taxing Aapl
techy46 profile picture
That's why AAPL will move assembly back to US for iPhones sold here.
scotch64 profile picture
Oh no they won't (despite the foxconn ruse in MN) that was a well intentioned until orange man opened pandora's box on tariffs. There is no way apple can retain profit margins on USA based manufacturing wages no matter the tax incentive or repatriation money. Outsourcing is tooo much apart of the business model to change on a dime for this Admin. Whatch apple to clamshell-up and wait for better days till this blows over. Thats what they do anyway, why change. "Apple is patience"
deercreekvols profile picture
$TSLA clearly doesn't follow the "rules" that other stocks follow. This past Quarter saw Tesla suffer its biggest loss in their history, $717.5M, the stock is up almost 10% pre-market. Next to the definition of the word "irrational" there should be a picture of Tesla's logo. Makes zero sense how the stock is priced and how the stock continues higher.

Let's start with a little history, shall we?

On this day in 1934, with the death of German President Paul von Hindenburg, Chancellor Adolf Hitler becomes absolute dictator of Germany under the title of Fuhrer, or “Leader.” The German army took an oath of allegiance to its new commander-in-chief, and the last remnants of Germany’s democratic government were dismantled to make way for Hitler’s Third Reich. The Fuhrer assured his people that the Third Reich would last for a thousand years, but Nazi Germany collapsed just 11 years later.
On this day in 1939, from his home on Long Island, New York, German-born physicist Albert Einstein writes to President Franklin D. Roosevelt, urging “watchfulness and, if necessary, quick action” on the part of the United States in atomic research. Einstein, a lifelong pacifist, feared that Nazi Germany had begun work on an atomic bomb. In the summer of 1939, fellow expatriate physicists Leo Szilard, Eugene Wigner, and Edward Teller, profoundly disturbed by the lack of American atomic action, enlisted the aid of Einstein, hoping that a letter from such a renowned scientist would help attract Roosevelt’s attention. Einstein agreed to the venture because of his fear of sole Nazi possession of the deadly weapon, a possibility that became especially troubling after Germany ceased the sale of uranium ore from occupied Czechoslovakia. After reading Einstein’s letter, Roosevelt created the Uranium Committee, and in 1942 the highly secret U.S. and British atomic program became known as the Manhattan Project. Einstein had no role in the Allied atomic bomb program.
On this day in 1923, in a hotel in San Francisco, President Warren G. Harding dies of a stroke at the age of 58. Harding was returning from a presidential tour of Alaska and the West Coast, a journey some believed he had embarked on to escape the rumors circulating in Washington of corruption in his administration. In the summer of 1923, as Washington began discussing rumors of corruption in the departments of the Interior and Justice and in the Veterans Bureau, Harding departed on a speaking tour of Alaska and the West. On August 2, he died of an embolism, perhaps brought on by worry over the political scandals about to explode on the national stage. Early the next morning, Vice President Calvin Coolidge was sworn in as president by his father, a notary public, in his family home in Plymouth, Vermont.

Will Baidu, which dropped 8% yesterday on news that Google was returning to the Chinese market, rise 8% today? Seems that the news of Google returning to China was not true. Those damn rumors. Good thing Seeking Alpha didn't buy into the rumor...whoops.

Barclays triples profits for the Quarter and is down almost 1%. Strange days indeed.

Walmart may have stolen technology? Say it ain't so.

This is the day The Lord has made. Let us rejoice and be glad in it.

JPMorgan says it's among banks and securities dealers that are being investigated by the U.S. Securities and Exchange Commission for handling of "pre-released" American Depositary Receipts from 2011 to 2015. Easy fix. Jamie Dimon writes a check to pay the fine and it's back to business as usual.

Tough way to start a letter to your investors: Dear Partner, We had another difficult Quarter and lost an additional 5.4%, bring the Greenlight Capital funds year-to-date loss to 18.3%...

Time to stop saying what a brilliant investor David Einhorn is. Down 18.3% in a bull market?

And there it is! Six minutes after the opening bell rings, Telsa gets it's first Trending News update. Tesla opens up 8.45% after posting a better quarter than expected by many analysts and investors. The company's cash burn wasn't as bad as some of the most dire forecasts, while Elon Musk's apology tour to analysts is being well-received... No word on Elon Musk apologizing to folks he has offended on Twitter, but hey, it's a start.

Where is Jon Corzine and will he really leave MF Global to take over Greenlight Capital?

Where is Marissa Mayer and why didn't Yahoo! make limited-edition surfboards?

Have a great day everyone. Stay safe, sage, and sane out there.

18214212 profile picture
DCV, I have a theory to explain the irrational behavior of TSLA ( and other momentum "cult" stocks ). Many investors who apply logic tend to short such stocks, so the short interest tends to be higher than normal in these stocks. Then, the bulls find clever ways to drum up enough enthusiasm to scare shorts into covering higher. I often wonder how much of the buys in the stock are someone going long ( at ridiculous valuations ) versus scared shorts covering higher. My desire not to go long a cult stock is only surpassed by my desire not to short such a stock.
deercreekvols profile picture
I agree. I have no interest in either side of $TSLA but I do enjoy watching the stock and CEO.

A true case-study for a stock that doesn't seem to follow the "rules."
re: Einhorn. I'm not calling him a genius but his returns lately remind me of what happened to Julian Robertson in 1999. Value investing returns were so terrible that he closed his fund. Shortly after this the tech bubble burst and value stocks once again became attractive.
The post office and car talk. Slow news day. Maybe a good thing. Need one of those now and again.
mc2406 profile picture
RE: Slow news day-- Can't believe no one commented on Coors and their cannibis infused alcoholic beverages in Hoser land.

Coors used to be smuggled across the Mississippi River when not marketed in the East. Smuggling from Canada will now be the new reality, eh?
blueline profile picture
Coors was legal at 18 in Colorado back in the day. Nebraska was 21.

So yes there was a lot of Coors beer transported across state line.
techy46 profile picture
SSDW, dog days of summer......
The Black Baron profile picture
The Chinese Ministry of Commerce gave me a good laugh this morning with the following statement:
"China is fully prepared and will have to retaliate to defend the nation's dignity and the interests of the people, defend free trade and the multilateral system, and defend the common interests of all countries,"

They are "defending" free trade and the "common interests" of all countries, LMAO. The hypocrisy is deafening.
"This time it will be different" ..
EmotionlessInvest profile picture
Amazon's Jeff Bezos would need to spend $28 million a day to avoid getting richer
MARKETWATCH 7:36 AM ET 8/2/2018
This is really gonna bring on a tweet storm from he who is so obviously envious of Bezos
blueline profile picture
Dengue, Ebola, Lassa, Marburg, Yellow fever are all types of hemorrhagic fevers.

The most dangerous are spread by infected animals. Bats, rats, and infected animals that are eaten by humans.

This isn't rocket science. They are controllable with common sense eradication of potential carriers and quarantine of animals, including humans, that have been exposed.
Buckoux profile picture

"Dengue, Ebola, Lassa, Marburg, Yellow fever are all types of hemorrhagic fevers....The most dangerous are spread by infected animals. Bats, rats, and infected animals that are eaten by humans."

And by well-intentioned, but publicity-seeking, oh-so-liberal, public health professionals at the CDC, wanting to make a name for themselves. So they bring Ebola victims to the USA.
"Top five non-Tesla cars people are trading in to get into a Model 3, they are Toyota Prius, BMW 3 Series, Honda Accord, Honda Civic and Nissan Leaf."

Game over for shorts. $400 on the horizon.
techy46 profile picture
I wonder what the coming recession will do to Tesla?
belz profile picture

Re Tesla and opportunities

Tesla is just scratching the surface of a multi Trillion $ transportation market.

They're breaking new ground in mass production of batteries and EVs. A steep learning curve that GM and the German manufacturers are now facing noting that they are targeting production rates equal to what Tesla had in its early years ... 2012.

BTW Audi, Jaguar and Mercedes EVs are all delayed, once more, to 2019 after much hype for 2018 launches.

Can't imaging why an investor would question Tesla's future pathway when the model 3 already has, in the US, a 52% market share in its segment, a positive gross margin and, orders for its EVs are stronger than ever including for the S and x models.

Not to mentionned, Tesla autopilot neural chip development is a world first The chip has 2000 frames per second crushing the next best chip ( Nvidia) at 200 frames. And it's neural based design avoids the current handicaps of GPU/CPU hybrid chips.

Finally, the financials are on a fast track to generate positive cash flow and profits without chopping R&D and capex needed to sustain rapid growth.

Don’t short the sock. Staying on the side lines is an unsound investment decision.
blueline profile picture
I've said this before...

When someone offers for sale an EV that is competitive to an ICE in price, resale, performance, and driving range I will buy one.

I am still waiting.
Buckoux profile picture

"They're breaking new ground in mass production of batteries and EVs."

Its that cloud of dust, on the far horizon, Tesla breaking "new ground" on a battery factory, or merely the smoke of another Tesla on fire?

(or, Elon Musk playing with his flame thrower?) Cool......
Yea.. no sh!t...
Chris Lau profile picture
How about that $TSLA?
Tech this week: Misses earnings, drops 20%.
Car companies: Miss earnings, drop 10-15%. See $F, $GM.
Tesla: Miss earnings, 13% up
Tony Pow profile picture
There are many reasons to be up.

1. Better than expected.

2. Believe in the future of Model 3 making good profits.

3. Believe the bottom has arrived.

4. Believe in fair tale told by the greatest salesman.

5. Living in denial esp. the car owners who never read WSB.
TBill profile picture
"Musk also apologized multiple times on a post-earnings call for his past behavior"

"I was drunk"
"I was on Ambien"
"Roseanne hacked my account"
Rabbit1960 profile picture
Watched lots of news reports, and noted that none of them made mention of the problems with build quality and unmanageable backlogs at Tesla Service Centers. It doesn't matter that a properly built Tesla is a great car if you can't get that car, or have the car you've got repaired quickly.

Disregard everything else as noise - if word of mouth from Tesla owners turns negative then the valuation bubble bursts.
blueline profile picture
"a downturn in the Californian economy is inevitable at some point and could require borrowing for such emergencies."

A typical response from Moon Beam! Borrow is socialist talk for tax!

Instead of proactively preventing future fires with proper forest maintenance he wants to take more money from private citizens and increase the size and budget of the State's fire fighting department.
TBill profile picture
Yup, typical response from big government leftist who think any problem can be solved if you throw enough $$ at it.
The reality is the problem was caused by government in the first place.
EmotionlessInvest profile picture
Kinda like eventually going trillions into debt to give unneeded corporate tax cuts under the false premise it was needed to make US corps competitive?
The same US corps that have had record historical high profits for about the last ten years.
But of course the peanut cuts for regular folks are set to expire while the corporate handouts are permanent.
Yup, this administration is really looking out for the working man. lol
It's a TOP profile picture
" Borrow is socialist talk for tax!"

"This is a time to borrow and borrow long term" - Trump

blueline profile picture
"encourage China to change its harmful policies and behavior"

Walmart has a Chinese toaster for sale for $8.88.

There is NO possible way that a company in China can manufacture, package, ship and then sell them to Walmart for a profit when the final retail price is $8.88.

Either Walmart is selling them at a loss, which I doubt, or China is. My bet is that China is dumping them in the USA at below cost to provide fake jobs for it's people and to prevent America from making their own toasters.

China is the problem.
Strike profile picture
blueline, your criticism is correct, but the solution lies in emulating Germany which faces the same dumping problems as the U.S. but which enjoys a trade surplus with China.

The solution is obvious: Divert funds from the military-industrial complex to education and infrastructure.
iF you can't sell a toaster for under 10 bucks, you simply haven't thought outside the box and reduced your costs!
Blueline, do you think we are toast?
Tony Pow profile picture
Is Tesla's rise a rebirth or an opportunity to exit? There are better opportunities at less risk elsewhere.
TBill profile picture
Bottom line, no way is TSLA worth what F or GM is.... which is where it is priced now.

[Disclosure, TSLA is my consistently profitable hedge stock for years now]
Tony Pow profile picture
Starbucks needs Alipay more than BABY. Very few use cash in China these days.

Google should be allowed for researchers at least. Facebook is banned too in China. It is 'national security' and protectionism.
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