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Fly Intel - End of Day Brief - Wednesday Oct. 9, 2019

Stocks end sharply higher as trade deal optimism returns

Stocks regained a good deal of what they had lost over the prior two sessions after media reports said China is still willing to accept a limited trade deal and plans to offer to increase agricultural purchases despite the recent U.S. moves to blacklist Chinese technology firms and impose visa restrictions on Chinese nationals. The renewed optimism about a "skinny" trade deal could be short-lived if the talks that kick off tomorrow in Washington turn for the worse, but for now investors appear hopeful. The minutes from the Fed's last rate setting meeting, meanwhile, did little to change the market's view that the central bank will remain accommodative.

ECONOMIC EVENTS: In the U.S., the JOLTS report showed job openings dropped to 7.05M in August to hit their lowest level since March 2018. The wholesale trade report slightly undershot estimates with a flat sales figure for August and a slight downward revision of July's increase to 0.2%. A 0.2% rise in August inventories also undershot the 0.4% advance reading. 

Minutes from the latest Federal Open Market Committee meeting showed that "most participants" saw a 25 basis point cut as appropriate, with participants pointing to considerations related to the economic outlook, risk management, and the need to center inflation and inflation expectations on the Committee's longer-run objective of 2%. The minutes also highlighted discussions over seeking a "better alignment of market expectations" regarding the policy rate path.

TOP NEWS: A Philadelphia jury ruled that Johnson & Johnson (JNJ) must pay $8B in punitive damages to a man who was previously awarded $680,000 over his claims that antipsychotic drug Risperdal caused him to grow breasts. The Philadelphia Court of Common Pleas jury verdict was the first case in which a Pennsylvania jury had been able to weigh awarding punitive damage in one of thousands of Risperdal cases pending in the state, Reuters reported. In response, J&J called the jury award "grossly disproportionate with the initial compensatory award in this case" and said the company is "confident it will be overturned."

Pacific Gas and Electric (PCG) confirmed last night that it will implement a power shutoff in portions of 34 northern, central and coastal counties, affecting electric service for nearly 800,000 customers, as a precautionary measure to reduce wildfire risk during the forecasted severe wind event.

In M&A news, The Wall Street Journal reported that Lions Gate (LGF.A) is weighing splitting off its Starz channel into a separate company, as the studio seeks to reduce its large debt load and let shareholders invest directly in either of the businesses. People familiar with the matter say that the company has been in talks to separate the two entities through a variety of means, including a sale, a spinoff, or a special-purpose acquisition vehicle, according to the report.

MAJOR MOVERS: Among the noteworthy gainers was Roku (ROKU), which rose over 9% after Macquarie analyst Tim Nollen upgraded the stock to Outperform from Neutral and raised his price target on the shares to $130 from $110. Also higher was FireEye (FEYE), which gained almost 5% following its better than expected Q3 revenue pre-announcement.

Among the notable losers was James River Group (JRVR), which slid 22.6% after announcing that it delivered a notice of early cancellation, effective December 31, of all insurance policies issued to its largest customer, Uber (UBER) commercial auto business Raiser LLC. Also lower was U.S. Steel (X), which fell 8.4% after announcing the resignation of CFO Kevin Bradley.

INDEXES: The Dow rose 181.97, or 0.70%, to 26,346.01, the Nasdaq gained 79.96, or 1.02%, to 7,903.74, and the S&P 500 advanced 26.34, or 0.91%, to 2,919.40.


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Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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