There’s new confusion on the trade war front, big tobacco is reuniting, and the yield curve is worsening.
Stocks rose on the open Tuesday. The Dow gained 94 points, or 0.4%, while the S&P added 0.4% and the Nasdaq advanced 0.6%.
While stocks were initially higher on the open after China announced new measures to help boost consumption—including the possible removal of restrictions on auto purchases—as growth in the country and world’s second largest economy slows amid pressures from the U.S., the market slid backward quickly as investors digested the lates developments in the trade war. Mark Newton, managing member at Newton Advisors, said that investors should remain cautious despite Monday’s gains. “Given the low volume and breadth on yesterday’s bounce, along with China’s non-confirmation of any Call, it makes sense to sell into yesterday’s move until we see a break of this range,” Newton wrote in a note. “Given a lack of developments on the ongoing China trade dispute, Monday’s gains aren’t something to be taken too seriously.”
After 24 hours, China still seems unaware of calls between it and the U.S. to talk trade, casting doubt on Trump’s proclamation that calls did indeed take place over the weekend and that the prospects on a deal to end the conflict had improved. “I have not heard of this situation regarding the two calls that the U.S. mentioned in the weekend,” Chinese Foreign Ministry spokesman Geng Shuang said in a press conference. “Regretfully, the U.S. has further increased the tax rate on China’s exports to the U.S. This extreme pressure is purely harmful to both sides and not constructive at all.”
Long-term Treasury rates added to their monthlong slide Tuesday, worsening the yield curve inversion and adding fuel to the recession concerns fire. The yield on the 2-year Treasury note held steady at 1.549%, roughly 4 basis points above the 10-year note’s rate of 1.513%. The 30-year bond was down to 1.984%, after falling below 2% for the first time ever on August 14. The Treasury Department will sell $40 billion in 2-year Treasury notes, $41 billion in 5-year notes, and $32 billion in 7-year notes later today.
Papa John’s was up 7% at the time of writing after announcing early this morning that Rob Lynch, former president of Arby’s, had been named its new CEO. Lynch replaces Steve Ritchie, who was handpicked by founder John Schnatter to succeed him in 2018 when the company was embroiled in controversy. Lynch helped lead Arby’s to 16 consecutive quarters of same-store sales growth, as well as record sales and profits in 2018. Prior to that, Lynch had served as Arby’s chief market officer and had overseen the chain’s move from local marketing to national marketing, and is responsible for Arby’s famous “We have the meats” tagline. Lynch has also held marketing positions at Taco Bell, H.J. Heinz, and Procter & Gamble. “I am thrilled to welcome Rob to Papa John’s at this pivotal moment in the company’s history,” Starboard CEO, and Papa John’s chairman, Jeff Smith said. “His proven record transforming organizations and realizing the growth potential of differentiated brands is ideally suited for Papa John’s as the company sets forth on its next chapter.”
Philip Morris International is in talks to merge with Altria Group, in a deal that would reunite the tobacco giants more than 10 years after the two companies split. Altria spun off from PM in 2008 and has remained a largely U.S.-focused company, selling Marlboro cigarettes domestically while PMI has focused on selling cigarettes in overseas markets. Analysts have long speculated the two companies may reunite in a rapidly changing market for tobacco products. Combining the two would create a global tobacco powerhouse with investments in the growing e-cigarette and cannabis markets.
Stocks We’re Watching
Medicines Co (NASDAQ: MDCO): Shares of Medicines Co jumped by as much as 15% Monday after the biopharmaceutical company reported positive Phase 3 trial results for its cholesterol-lowering therapy, inclisiran sodium. The treatment was tested in patients with high LDL cholesterol and proved effective across two key goals, with safety in line with prior tests. “This is a momentous occasion that further reinforces our confidence in the tremendous potential of inclisiran to fundamentally change the treatment of cardiovascular disease,” Medicines Co Chief Executive Mark Timney said in a statement. Detailed data on the trial will be presented September 2 at the ESC Congress 2019 conference.
Sempra Energy (NYSE: SRE-A): This stock got a slight boost this morning after ValuEngine upgraded shares from a hold to a Buy in a note to clients. The company released its earnings earlier this month, reporting $1.10 EPS for the quarter, missing analysts estimates of $1.19. The business had revenue of $2.23 billion during the quarter, net margin of 18.61% and a return on equity of 10.18%.