DAILY MORNING BRIEF

S&P futures vs fair value: -11.10. Nasdaq futures vs fair value: -30.00. The S&P 500 futures trade 11 points, or 0.3%, below fair value. The latest weekly initial jobless claims count totaled 1.186 million (Briefing.com consensus 1.400 million). Today's tally was below the prior week's revised count of 1.435 million (from 1.434 million). As for continuing claims, they decreased to 16.107 million from a revised count of 16.951 million (from 17.018 million). Secretary of State Mike Pompeo has detailed a new five-pronged "Clean Network" effort aimed at curbing potential national security risks, expanding the "5G Clean Path" program. The U.S. wants to see "untrusted Chinese apps" removed from Apple's (NASDAQ:AAPL) and Google's (GOOG, GOOGL) app stores, called for companies to limit availability of their apps on phones made by Huawei and urged firms to halt using Chinese cloud providers like Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU) and Tencent (OTCPK:TCEHY) for storing sensitive data. While the guidance isn't binding, it signals an escalation of the Trump administrations efforts to limit the spread of Chinese technology after declaring a potential ban on TikTok earlier this week. Jobless claims U.S. stock index futures are hugging the flatline ahead of fresh insights into the health of the labor market, with another 1.423M workers expected to have filed first time claims for weekly unemployment benefits. The data release will follow a positive session on Wednesday as major indexes brushed off a weaker-than-expected ADP private payrolls report, with money shifting into cyclical and value stocks. "Even if the economy goes well, investors will still be asking for the Federal Reserve and the government to have their hands on the market," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. 'Trillions of dollars apart' The White House and Democrats have not agreed to any "top-line numbers," according to White House Chief of Staff Mark Meadows, and remain "trillions of dollars apart" on COVID-19 stimulus negotiations. Specifically, the Trump administration has offered $400 per week in enhanced federal unemployment benefits through Dec. 14 (up from $200), but Democrats aren't backing down from $600 per week. Meadows and Treasury Secretary Steven Mnuchin also put $200B in state and local aid on the table, but that is far less than the $1T Democrats are seeking. Republicans say they are prepared to walk away and rely on executive actions by President Trump if an agreement isn't within reach by the end of the week. Exploring negative rates U.K. banks hold enough capital to keep on lending and absorb the losses that are likely to arise due to the COVID-19 pandemic, the Bank of England said Thursday, after keeping its key interest rate at just 0.1%. "The MPC will continue to review the appropriateness of a negative policy rate as a policy tool alongside its broader toolkit," it said. The BOE also maintained its huge bond-buying program, which stands at £745B (after a £100B expansion in June), and said it does not expect the U.K. economy to exceed its pre-coronavirus levels until the end of 2021 (the previous forecast detailed the second half of 2021). Airline relief Shares of U.S. airlines are on the rise in premarket trade as bipartisan support builds for an additional $25B in aid to one of the sectors hardest hit by the coronavirus. "We don't want to lose our airlines. If they're looking at that, whether they’re Republican or Democrat, I'd be certainly in favor. We can't lose our transportation system," President Trump said at a White House press briefing. Congress set aside $25B for U.S. carriers in the $2.2T CARES Act in March on the condition that they wouldn't cut jobs through Sept. 30. The new proposal would extend those protections through the end of March 2021. Quicken Loans IPO Rocket Companies, the parent company of mortgage lending giant Quicken Loans, has sold 100M shares at $18/share in its initial public offering, raising about $1.8B. The figures were below initial estimates, which forecast 150M shares would be sold at $20-22. Shares will begin trading on the New York Stock Exchange today under ticker symbol "RKT," though the weak demand raises questions as to whether the hot tech IPO market, which features DoorDash (DOORD) later this summer, might be cooling. 'Coronavirus misinformation' takedown Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) took action against the account of the Trump campaign and @TeamTrump late Wednesday, removing a post for violating policies around "harmful COVID misinformation." YouTube (GOOG, GOOGL) also followed suit. The posts were a video clip from a Fox News interview with President Trump about reopening schools, in which he claims children are "almost immune" to COVID-19. The tech giants have faced heat in recent months, with some saying their censorship reach is going too far, while others say they are not policing enough. Goldman sounds off on tech again Rising chances of an approved coronavirus vaccine by the end of November are underpriced by equity markets, wrote Goldman Sachs strategists including Kamakshya Trivedi. The approval could "challenge market assumptions both about cyclicality and about eternally negative real rates," the team added, saying that such a scenario may support steeper yield curves, traditional cyclicals and banks, and challenge the leadership of technology stocks. Remember, Goldman Sachs called Apple's (AAPL) stock price "unsustainable" before earnings on June 30 (the stock has risen 15% since the FQ3 report). AAPL's Quant Rating at Seeking Alpha is Very Bullish. What else is happening... Samsung Galaxy (OTC:SSNLF) event highlights new phones, tablets, folding device. Berkshire Hathaway (BRK.A, BRK.B) continues BofA (NYSE:BAC) buying spree. Underwater J.C. Penney (OTCPK:JCPNQ) lenders seek higher bids. Bezos sells a bit less than 1% of Amazon (NASDAQ:AMZN) stake for $1.42B. Blue Apron (NYSE:APRN) falls 16% premarket after pricing 4M equity offering. Wednesday's Key Earnings CVS Health (NYSE:CVS) -0.9% despite Q2 beat and guidance raise. Etsy (NASDAQ:ETSY) +3% AH hitting all-time highs on strong growth. Moderna (NASDAQ:MRNA) -3.4% as rival vaccine makers reported good news. Roku (NASDAQ:ROKU) -4.4% AH logging a 42% revenue burst. Teva Pharmaceutical (NYSE:TEVA) +7.3% continuing a years-long turnaround. Today's Markets In Asia, Japan -0.4%. Hong Kong -0.7%. China +0.3%. India +1%. In Europe, at midday, London -2%. Paris -1.2%. Frankfurt -0.9%. Futures at 6:20, Dow +0.1%. S&P flat. Nasdaq flat. Crude -0.9% to $41.81. Gold +0.6% to $2060.80. Bitcoin +0.7% to $11689. Ten-year Treasury Yield -2 bps to 0.52% Today's Economic Calendar 7:30 Challenger Job-Cut Report 8:30 Initial Jobless Claims 10:00 Fed's Kaplan Speech 10:30 EIA Natural Gas Inventory 4:30 PM Money Supply 4:30 PM Fed Balance Sheet Companies reporting earnings today » Gapping up In reaction to strong earnings/guidance: APPS +18.5%, OTRK +17.8%, AVXL +16.5%, BFAM +13.2%, VSTO +12.4%, INFN +12.2% (also says CEO to step down), ELF +11.1%, DCP +11.1%, AMAG +10.6%, EMKR +10.2%, PVG +10%, HI +9.4%, NTLA +9.4%, COLL +9.2%, TRMB +8.4%, GLRE +8.4%, COMM +8.4%, GDDY +8.2%, VIACA +8.1%, MAXR +8%, HIMX +8%, HUBS +7.9%, NICE +7.9%, YETI +7.5%, MTW +7% (also names new CEO), VVI +7%, HEAR +7%, GMED +6.7%, TAST +6.1%, UHAL +5.5%, NTRA +5.5%, JLL +5.1%, DOX +5%, CHNG +5%, RCII +5%, ING +5%, ZNGA +4.9% (also to acquire mobile game developer Rollic), STFC +4.9%, JACK +4.8%, GBT +4.6% (also files for $200 mln mixed securities shelf offering ), IRM +4.5%, MDWD +4.4%, PRVB +4.4%, NUS +4.2%, ECPG +4.1%, CFX +4%, IBP +4%, CTL +3.9%, BMY +3.9%, CPA +3.8%, MATX +3.6%, OR +3.5%, KTB +3.5%, ATNX +3.5%, DAR +3.4%, FISV +3.2%, CCMP +3.1%, PH +3%, TTEC +2.9% (also to acquire VoiceFoundry), ENSG +2.8%, NOMD +2.8%, SRCL +2.8%, VG +2.8%, IAG +2.7%, INSM +2.7%, PAAS +2.6%, BTG +2.6%, PK +2.6%, GLMD +2.6%, OUT +2.5%, ACIW +2.5%, AMRX +2.5%, SWIR +2.5%, ABMD +2.5%, HL +2.3%, FNV +2.1%, SILK +2%, AES +2%, SEE +2%, TWNK +1.9%, TM +1.9%, VOYA +1.8%, ACRE +1.8%, KRO +1.7%, VSLR +1.6%, PDCE +1.6%, ANIP +1.6%, TEN +1.6%, FOUR +1.6%, MWA +1.5%, BNFT +1.5%, ACAD +1.5%, KBR +1.5%, FLIR +1.5%, KBR +1.4%, EAF +1.4%, TRGP +1.4%, NMIH +1.3%, EPAM +1.3%, KELYA +1.3%, WELL +1.2%, PRMW +1.1%, ECOM +1%, . Clock Ticks as Congress Struggles for Consensus on Next Aid Bill Talks between Congressional Democratic leaders and White House officials on the next round of coronavirus aid are continuing on Capitol Hill this week, but a final deal that can pass both chambers of Congress appears to be a week to two weeks away. Pressure on the two sides has increased after two key provisions of the CARES Act, the $2.4 trillion aid package approved by Congress in late March, expired at the end of July. Enhanced unemployment benefits of $600 per week expired on July 31st and a federal moratorium on evictions ended on July 25th. Lawmakers had hoped to reach agreement and pass another round of aid before the end of July, but were unable to find consensus. The deal is being negotiated among House Speaker Nancy Pelosi (D-Calif.), Senate Minority Leader Charles Schumer (D-N.Y.), Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows. Notably, Senate Majority Leader Mitch McConnell (R-Ky.) has been mostly sidelined from the discussions. He has acknowledged that roughly 20 Republican senators are unlikely to support any bill due to their concerns about the impact of excessive spending on the federal deficit and other objections. As a result, any compromise needs to be palatable to Democrats and the White House. While both sides said that “a little progress” was made during discussions on August 3rd, they also acknowledged that a full agreement remains distant. Adding to the urgency is the congressional schedule. The Senate is scheduled to begin its annual August recess on August 7th, with plans to remain out of session until after Labor Day. The recess is likely to be delayed until the next round of coronavirus aid is approved. The House has already technically begun its recess, but leaders informed all lawmakers that they would be given 24 hours’ notice to return to Washington for votes on the coronavirus aid package. Leaders of both parties have said they plan to remain in Washington until a deal is done. There is a growing sense that this will be the last major aid bill at least until after the election, so the incentive to get something across the finish line remains strong. Vastly different approach than earlier coronavirus aid bills The bitter divide between the two parties is a stark contrast to the bipartisanship that guided earlier coronavirus aid responses on Capitol Hill. Congress passed four different bills, totaling about $2.8 trillion, in March and April in response to the pandemic. All four were negotiated in a bipartisan fashion and passed both the House and Senate by unanimous or near-unanimous votes. But the current round of aid has seen a much more partisan approach. House Democrats approved the HEROES Act on May 15 on a nearly party-line vote that saw just one Republican support the bill. Senate Republicans rejected the bill out of hand and made no attempt to propose an alternative until late July, when they introduced the HEALS Act without Democratic support. The $3 trillion HEROES Act package includes roughly $900 billion for state and local governments; another round of $1,200 stimulus payments (plus $1,200 per child) to lower- and middle-income taxpayers; $200 billion in hazard pay for front-line workers; $175 billion for assistance with rent, mortgage payments and utilities; $100 billion for hospitals and health-care providers; $25 billion for the Postal Service; student loan forgiveness for certain borrowers; and more. The bill would also extend the $600 per week in enhanced unemployment benefits through January 2021. The Republicans’ HEALS Act proposal is a much smaller package, with a price tag of about $1 trillion. It includes a reduction in the enhanced unemployment benefits to $200 per week through October; another round of $1,200 stimulus payments (plus $500 per child) to lower- and middle-income taxpayers; an expansion of small business loan programs; more than $100 billion for schools; increased tax credits for employers that keep employees on the payroll; a tax credit for taking steps to provide a safe work environment for employees such as enhanced cleaning and the provision of personal protection equipment; liability protections for business; and other provisions. Common ground between the two bills is minimal, underscoring the vast divide that needs to be bridged during negotiations. The one major provision both sides appear to agree on is another round of stimulus checks to individual taxpayers. Key unresolved issues Among the key issues that have stymied negotiations and will need to be resolved are: Unemployment benefits: Many Republicans have opposed extending the enhanced benefits, arguing that they discourage employees from returning to work because some employees earn more from the benefits than they do on the job. More recently, Republicans have offered to continue extra benefits, but at a lower amount than the $600 that was in the CARES Act. Democrats have advocated extending the extra $600 per week through early 2021; last week, Pelosi proposed tying the amount of the benefit to the unemployment rate, with the benefit shrinking as the unemployment rate decreases. Aid for state and local governments. With nearly every state facing a budget shortfall—some of catastrophic proportions—money to help states and municipalities is the centerpiece of the Democrats’ HEROES Act. Republicans included no money for states and municipalities in their HEALS Act proposal, but numerous Republicans have acknowledged that they will need to meet Democrats somewhere in the middle. The two sides have not settled on a number yet, but it is widely expected that a compromise figure will eventually be reached. Liability protections. Senate Republicans have proposed a sweeping plan to shield businesses, schools, non-profit organizations and government agencies from COVID-19 related lawsuits as long as they make “reasonable” efforts to protect employees. Most Democrats are balking at the scope of the proposal. Finding a middle ground on this issue is proving to be particularly tricky. Postal service. Another major point of contention is aid for the U.S. Postal Service. Democrats support a significant increase in funding, both for general pandemic-related impacts and to help the service prepare for an anticipated huge increase in voting by mail this fall. Some Republicans have expressed concern about whether voting by mail is secure. The funding of the Postal Service has become a proxy for this larger debate over the integrity of the November election. Once a framework has been agreed to, a bill will need to be passed by both chambers and signed into law by the president. That process is likely to take several days at a minimum, likely pushing final resolution into mid-August. Bottom line for investors Despite the slow pace of negotiations, we continue to think a deal will be struck this month—an outcome the market seems to be anticipating. The enhanced unemployment benefits have been a lifeline for millions of displaced workers in recent months, and returning to their home states without an agreement on that issue alone would seem to be a political impossibility for lawmakers on both sides of the aisle. For municipal bond investors, additional aid for state and municipalities would be welcome. While we continue to think that is likely, nothing is certain until the final bill is approved.