Wall Street Breakfast: What Moved Markets This Week

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Stocks rallied to yet more record highs Friday, rebounding in the final minutes and shaking off some doldrums spurred by a comment from President Trump that he hadn’t yet agreed to a tariff rollback on China. The S&P 500 gained 0.8% for the week, while the Dow rose 1% and Nasdaq 1.1%. Import/export trade data from China was better than expected while still reflecting ongoing challenges for the country. Back in the U.S., with the holiday shopping season set to kick off, consumer sentiment ticked up in the U. of Michigan survey to 95.7 from 95.5. And one more dip for Treasurys pushed the 10-year yield up 2 basis points to 1.939%.

Saudi Aramco kicks off long-delayed IPO

Shares of the state-owned oil giant are set to begin trading on the Saudi stock market in early December, while the IPO prospectus will likely be released on Nov. 10. The Capital Market Authority did not list a time frame or say how much Aramco (ARMCO) would sell, but sources told Reuters the oil giant could offer 1%-2% of its shares on the local bourse, raising as much $20B-$40B. Producing one-tenth of the world’s crude output, Saudi Aramco is the world’s most profitable company, making $111B in net income in 2018.
Go deeper: Bearish on the listing, Robert Boslego discusses the Aramco IPO.

McDonald’s CEO sacked over consensual relationship

A surprise announcement early in the week revealed the ousting of McDonald’s (NYSE:MCD) CEO Steve Easterbrook for having a consensual relationship with an employee. “This was a mistake. Given the values of the company, I agree with the board that it is time for me to move on,” Easterbrook wrote in an email. Chris Kempczinski, who previously ran McDonald’s U.S. business, will replace him, though he will have big shoes to fill. MCD shares doubled during Easterbrook’s tenure as he revived all-day breakfast options and a charge into online ordering and delivery.
Go deeper: Aristofanis Papadatos revisits his ‘Never Short McDonald’s’ thesis.

Rationale for T-Bill buying

“With roughly $2.4T of Treasury bills outstanding and daily turnover of around $95B, the bill market has substantial capacity to support our activity, and we expect to be able to maintain the current pace of Treasury bill purchases for some time,” said Lorie Logan, who is the acting leader of the Markets Desk at the New York Fed. “So far, reserve management purchase operations have proceeded smoothly,” she added, noting that the Fed “is prepared to adjust the pace and other parameters of the reserve management purchases as necessary.”

Signs of trade progress resurface

Optimism was seen on Wall Street throughout the week, with the Dow, S&P 500 and Nasdaq all netting new record highs. The world’s two largest economies agreed to remove duties on each other’s goods in phases, providing a road map to end the bruising trade war. President Trump also said the two sides had come to a substantial “Phase One” trade agreement on intellectual property, financial services and big agricultural purchases, though a location has not yet been set to sign the deal.

Softbank pays price for WeWork debacle

SoftBank’s first quarterly loss in 14 years is putting a spotlight on founder Masayoshi Son’s high-risk approach of investing in cash-burning startups, as he attempts to raise a second giant investment fund. Recording an operating loss of ¥704B ($6.46B) in the third quarter, SoftBank marked down the total value of WeWork’s (WE) equity to $7.8B, a major write-off given the office-sharing company was valued at $47B before its attempt to go public backfired. While SoftBank (OTCPK:SFTBY) hasn’t calculated the effect of WeWork’s $9.5B rescue package on its earnings, the Japanese group said it suffered an $8.9B hit at its Vision Fund.
Go deeper: Christoph Liu debates whether SoftBank should keep The We Company alive.

Gloom in the IPO market

Due to concerns over rising rents, Jersey City residents voted overwhelmingly in favor of stricter regulations on short-term rentals, rebuking Airbnb (AIRB), which spent at least $4.2M on an effort to sway voters. Officials at Airbnb fear the new proposed regulations would mean an outright ban on listings in New Jersey and that it could mean an end to the company altogether as it prepares to go public. In related news, Uber (NYSE:UBER) shares tumbled nearly 6% on Monday after reporting another mega $1.2B loss, while Peloton (NASDAQ:PTON) shares fell 7.6% the next day amid profit concerns.
Go deeper: Hendrick Fulton is waiting for sub-$20 PTON shares before investing.

Xerox weighs takeover offer for HP

In a deal that would unite some old-line tech names, Xerox (NYSE:XRX) is considering a bold takeover of HP (NYSE:HPQ). A cash-and-stock offer would follow closely on news that Xerox was selling its stake in a 57-year-old joint venture with Fujifilm (OTCPK:FUJIY) and an announcement from CEO John Visentin that the company would get aggressive. At a market cap of about $27B, HP is more than three times Xerox’s size, but the latter reportedly has an informal funding commitment from a major bank. Late in the week, CNBC reported that HP recently held detailed talks to acquire Xerox, which ended when HP requested more time for due diligence.
Go deeper: Mark Ashton discusses HP’s recent transformation.

Kicking off 6G development

It was only last week that China launched commercial services for its superfast 5G mobile networks, but the country is not stopping there. The government has charged 37 experts at various universities and institutes to oversee the research of 6G, according to a statement by the Ministry of Science and Technology. While 5G is known to have data transmission speeds at least 10x greater than 4G – rolled out in 2009 – it’s too early to tell what 6G could be or what technologies it would advance.

Magical results from the Mouse House

Major profits at Disney’s theme parks (+17% to $1.4B) and movie studio divisions (+79% to $1.1B) pushed earnings past Wall Street targets late Thursday, more than offsetting a decline at the company’s media networks division and sending shares up 5% AH. The company said it also spent less than it had projected on its big plunge into streaming ahead of Disney+’s (NYSE:DIS) launch next week. “We’re making a huge statement about the future of media and entertainment and our continued ability to thrive in this new era,” CEO Bob Iger told analysts on a conference call.
Go deeper: ‘Netflix And Disney Will Rule The Streaming Kingdom’ by Nikolaos Sismanis.

Shifting retail landscape

Another wave of Sears (OTCPK:SHLDQ) store closures is on the horizon as billionaire owner Eddie Lampert struggles to return the big-box retailer to its former glory days. Following the closures, there will be just 182 Sears/Kmart stores in operation, down from 425 locations as of February, when Lampert rescued Sears from bankruptcy proceedings in a $5.2B deal. The company has posted seven straight years of losses and shuttered hundreds of outlets under Lampert’s leadership as shopping trends shifted online or to rivals like Walmart (NYSE:WMT).
Go deeper: Crispus Nyaga comments on another retail war: Walmart Vs. Target.

Weekly Market Movement Wrap

U.S. Indices
Dow +1.2% to 27,681. S&P 500 +0.9% to 3,093. Nasdaq +1.1% to 8,475. Russell 2000 +0.6% to 1,599. CBOE Volatility Index -1.9% to 12.07.

S&P 500 Sectors
Consumer Staples -0.6%. Utilities -3.4%. Financials +2.4%. Telecom +0.8%. Healthcare -0.5%. Industrials +1.7%. Information Technology +1.1%. Materials +1.6%. Energy +2.8%. Consumer Discretionary -0.3%.

World Indices
London +0.8% to 7,359. France +2.2% to 5,890. Germany +2.1% to 13,229. Japan +2.4% to 23,392. China +0.2% to 2,964. Hong Kong +2.% to 27,651. India +0.4% to 40,324.

Commodities and Bonds
Crude Oil WTI +2.2% to $57.44/bbl. Gold -3.4% to $1,459.6/oz. Natural Gas +2.8% to 2.79. Ten-Year Treasury Yield -1.4% to 128.27.

Forex and Cryptos
EUR/USD -1.33%. USD/JPY +1.01%. GBP/USD -1.26%. Bitcoin -5.5%. Litecoin +3.5%. Ethereum -0.1%. Ripple -5.7%. Bitcoin-Cash flat.

Top Stock Gainers
NextCure (NASDAQ:NXTC) +203%. Constellation Pharmaceuticals (NASDAQ:CNST) +119%. Fulgent Genetics (NASDAQ:FLGT) +68%. Clovis Oncology (NASDAQ:CLVS) +64%. Agile Therapeutics (NASDAQ:AGRX) +61%.

Top Stock Losers
AnaptysBio (NASDAQ:ANAB) -74%. ObsEva (NASDAQ:OBSV) -62%. Party City Holdco (NYSE:PRTY) -59%. Red Lion Hotels (NYSE:RLH) -55%. Fluidigm (NASDAQ:FLDM) -54%.

Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section.