MORNING CHAI BRIEFING


  • Global equity markets are closing out the week on a mixed note. S&P Futures continued to pursue higher ground, pushing through the 3500 level. Spoos are currently up 0.3% to trade around the 3495 area. The overnight range widened compared to the last two nights with a high of 3509.50 and a low of 3485.25. 
  • In Asia, the divergence between Japan and China continued with the Shanghai rising 1.6%, while the Nikkei sank 1.4%. The biggest news within the region was the announcement by Japan's Prime Minister Abe that he would resign due to health reasons. This caused the yen to spike higher and equities to fall. The Shanghai started out lower, but buyers stepped in after the first hour. The bid did not relinquish as the Chinese benchmark closed at the high of the day.
  • In Europe, the major bourses are trading modestly lower. Weaker than expected German Consumer Confidence soured sentiment early on and the DAX has failed to recover. Financials are among the bright spots with Deutsche Bank and Commerzbank trading 2-3% higher. The FTSE has been buoyed by strength in the mining sector with gold futures touting a gain of 1.7%thus far. 

Market Updates

The S&P 500 futures trade 15 points, or 0.4%, above fair value as the market looks to finish this historic week on a positive note. For context, the S&P 500 is up 2.6% this week, having closed at a record high in every session. 

There's no specific catalyst driving the positive bias in the futures trade, suggesting the market continues to ride the positive momentum higher amid a lack of negative news. A day after the Fed introduced a new inflation policy, investors will receive the Fed's preferred inflation gauge -- the PCE Price Index (Briefing.com consensus +0.4%) -- for July at 8:30 a.m. ET.

The inflation data will be included in the report for Personal Income (Briefing.com consensus -0.2%) and Personal Spending (Briefing.com consensus +1.5%). Wholesale Inventories for July and the Advance International Trade in Goods report will also be released at 8:30 a.m. ET.

After the open, the Chicago PMI for August will be released at 9:45 a.m. ET, followed by the final University of Michigan Index of Consumer Sentiment for August (Briefing.com consensus 72.8) at 10:00 a.m. ET.  

U.S. Treasuries trade near their flat lines. The 2-yr yield is down one basis point to 0.15%, and the 10-yr yield is flat at 0.75%. The U.S. Dollar Index is down 0.8% to 92.26, which has helped gold prices ($1970.60, +37.80, +2.0%). WTI crude futures are little changed at $43.04/bbl.

In U.S. Corporate news:

  • Workday (WDAY 242.60, +25.97): +12.0% after beating top and bottom-line estimates.
  • Ulta Beauty (ULTA 255.58, +31.63): +14.1% after beating top and bottom-line estimates.
  • Dell (DELL 64.45, +2.02): +3.2% after beating top and bottom-line estimates.
  • HP (HPQ 19.30, +0.60): +3.2% after beating top and bottom-line estimates and guiding the mid-point of OctQ EPS guidance above consensus.
  • VMware (VMW 142.25, -0.65): -0.5% despite beating top and bottom-line estimates. 


  • S&P Futures vs Fair Value: +14.0
  • 10 yr Note: 0.751%
  • USD/JPY: 105.53   -1.03
  • EUR/USD: 1.906  +0.0085
  • Europe: FTSE +0.1%  DAX -0.3%  CAC -0.4%
  • Asia: Hang Seng +0.6%, Shanghai +1.6%, Nikkei -1.4%
  • Gold (1965.20 +32.00) Silver (27.80 +0.78) Crude (42.96 -0.08)


 A surprising party has joined the race for TikTok, as Walmart (NYSE: WMT) joined forces with Microsoft (NASDAQ: MSFT) to buy the U.S. assets of the popular short video app. The bid could total $30B or even more, and as odd as that coupling seems, CNBC reports that Walmart originally sought majority ownership of TikTok in a consortium with Alphabet (GOOG) and SoftBank (OTCPK: SFTBY). "We believe a potential relationship could provide Walmart with an important way for us to reach and serve omnichannel customers as well as grow our third-party marketplace and advertising businesses," the company said in a statement. Oracle (NYSE: ORCL) is another U.S. company vying to acquire the assets of TikTok, and parent ByteDance (BDNCE) is expected to pick a bidder to enter into exclusive talks as early as today.

Covid

Rapid coronavirus tests

In a move that would substantially expand the nation's capacity for rapid testing, the Trump administration has unveiled a $750M deal to buy 150M rapid COVID-19 tests from Abbott Laboratories (NYSE:ABT). "This is a major development that will help our country to remain open, get Americans back to work and kids back to school," White House senior adviser Alyssa Farah declared. Abbott said the new antigen test (about the size of a credit card) has demonstrated a sensitivity of about 97% and could returns results in 15 minutes.


Tech

Look out, Fitbit!

Amazon (NASDAQ:AMZN has introduced a wristband for health and fitness tracking called Halo, priced at $64.99, alongside a subscription service and smartphone app. It brings some new offerings, including technology to track people's body fat percentages, sleep temperature and their emotional state, as well as two microphones and an LED indicator light, but notably lacks a screen. It's Amazon’s first significant move into wearables, which Gartner estimates will be a $52B market in 2020.



Central Banking

Interest rates to stay low

The fun in Jackson Hole wraps up today as the two-day virtual symposium concludes with the last live streams from central bankers and other influential officials. Nothing is likely to compare to yesterday's speech from Fed Chair Jerome Powell, which will have a transformative effect on U.S. monetary policy for the foreseeable future. The central bank said it will keep interest rates low to help prop up the pandemic ravaged economy even if inflation rises above its target level of 2% for periods of time. Prices of stocks, bonds and gold all made several U-turns on the news, while equities attempted another green session overnight. Dow and S&P 500 futures are up 0.5% and 0.4%, respectively, while Nasdaq futures are hugging the flatline.



Aviation

Europe to start 737 MAX test flights

Boeing's (NYSE:BA) grounded 737 MAX is taking a major step toward returning to the skies after the European Union Aviation Safety Agency said it would send pilots to Canada to conduct test flights, bypassing coronavirus-related travel curbs. EASA will carry out the validation flights from Vancouver during the week of Sept. 7, two months after the FAA and Boeing completed certification test flights in the U.S., followed by Canada this week. Boeing recently reeled in its first 737 MAX order this year, as Poland's Enter Air placed an order for two jets with options to buy two more. BA +1% premarket.



What else is happening...

Overlooked bond market stars may be winners in the new FED POLICY.

Amazon (NASDAQ: AMZN) orders 1800 electric vans for European deliveries.

Hertz (NYSE:htz) seeking up to $1.5B in bankruptcy financing - WSJ.

Israel lists first commercial passenger flight to UAE.

United Airlines (NASDAQ:ual ) warns pilots may be furloughed in October.


Gapping up
In reaction to earnings/guidance:

  • ULTA +15%, NTNX +14.1% (also announces Bain Capital will invest in $750 mln in convertible notes; also CEO to retire), WDAY +11.2%, MBUU +7.9%, HIBB +4.3%, VEEV +4.2%, DELL +3.5%, HPQ +2.9%, PAGS +2.1%, OLLI +1.4%

Other news:

  • IBIO +20.9% (entered into an exclusive worldwide license agreement with Planet Biotechnology for the development of Planet's COVID-19 therapeutic candidate, ACE2-Fc)
  • QEP +9.7% (receives expected AMT tax credit refund)
  • TLSA +6.5% (provides clarification for filing an amended ADS registration statement)
  • GAN +4.2% (deal with CHDN to be platform for CHDN's Internet sports betting and Internet casino gaming business)
  • SPNE +3.8% (commercial launch of Shoreline RT Cervical Interobdy Implant Symptom)
  • CCL +3.3% (will resume cruise operations with fall and winter voyages)
  • ABT +2.6% (HHS confirms The Trump administration will deploy 150 million rapid tests in 2020)
  • PSN +2.6% (DZSP 21 to continue long-term support of joint navy and air force base operations in Guam with $545.3 mln)
  • WMT +2.3% (Walmart wanted to be lead buyer for TikTok, but US government wanted the lead buyer to be a tech company; therefore Walmart (WMT) teamed up with Microsoft (MSFT) on potential bid for TikTok US, according to CNBC)
  • CHDN +1.7% (announces multi-year agreements with GAN and Kambi)
  • BKI +1.1% (acquires DocVerify)
  • KO +1.1% (outlines strategic steps to reorganize its business for future growth)
  • ARWR +1% (announced the presentation of Phase 2 clinical data from the AROHBV1001 phase 1/2 study on a double combination of JNJ-3989)

Analyst comments:

  • SURF +9.2% (initiated with an Outperform at Wedbush; tgt $12)
  • MBUU +7.9% (upgraded to Buy from Neutral at B. Riley FBR)
  • BLDR +4.4% (upgraded to Overweight from Equal Weight at Barclays; upgraded to Buy from Hold at Deutsche Bank)
  • DELL +4% (upgraded to Outperform from Sector Perform at RBC Capital Mkts)
  • SSTK +2.4% (upgraded to Buy from Hold at Truist)
  • EAT +2.2% (upgraded to Equal-Weight from Underweight at Morgan Stanley)
  • ESRT +1.3% (upgraded to Market Perform from Underperform at BMO Capital Markets)
  • K +0.8% (initiated with a Buy at Citigroup)

Gapping down
In reaction to earnings/guidance:

  • BILL -3.6%, OKTA -2.5%, GPS -0.5%, MRVL -0.5%, BIG -0.5%

Other news:

  • PLT -6.4% (announces partial exit of investment by Siris Capital)
  • NIO -5.2% (announces commencement of 75 mln ADS offering)
  • WLKP -0.7% (issues statement on operations at Lake Charles)

Analyst comments:

  • CDLX -2.8% (downgraded to Equal Weight from Overweight at Wells Fargo)
  • DKNG -2.4% (downgraded to Equal-Weight from Overweight at Morgan Stanley)
  • PENN -2.2% (downgraded to Equal-Weight from Overweight at Morgan Stanley)


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