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Fly Intel - End of Day Brief - Thursday August 15, 2019

Stocks end slightly higher after riding early trade headline roller-coaster

Stocks had a quiet trading day that ended with two of the three major averages closing slightly higher, but only after a volatile pre-market session that saw futures whipsawed by conflicting trade headlines. The futures dropped in early morning trading after China's Ministry of Finance released a brief statement promising "necessary countermeasures" in response to the announcement from the Office of U.S. Trade Representative that it plans to impose a 10% tariff on a further $300B in Chinese exports. However, the futures reversed course and jumped to the upside later in the morning following headlines that China hopes it can "meet halfway" with the U.S. on trade issues.

ECONOMIC EVENTS: In the U.S., retail sales climbed 0.7% in July. Initial jobless claims climbed 9,000 to 220,000 in the week ended August 10. Nonfarm productivity grew at a 2.3% pace in the preliminary second quarter reading. The Philly Fed index fell 5.0 points to 16.8 in August. The Empire State index inched up 0.5 ticks to 4.8 in August. Industrial production fell 0.2% in July from a revised 0.2% increase in June. The NAHB housing market index rose 1 point to 66 in August. Business inventories were unchanged in June with sales up 0.1%.

TOP NEWS: Shares of General Electric (GE) declined 11.3% after Harry Markopolos, the accounting expert who raised red flags about Bernie Madoff's Ponzi scheme, released a report on the company's accounting on a website called "," claiming on the front page of the new site that GE is "a bigger fraud than Enron." In an interview with The Wall Street Journal ahead of the launch of the website, Markopolos said his group found GE's insurance unit will need to bolster its reserves by $18.5B in cash. He also faulted the way the company is accounting for its oil-and-gas business. Afterward, chairman and CEO Larry Culp said in a statement to CNBC: "GE will always take any allegation of financial misconduct seriously. But this is market manipulation - pure and simple. Mr. Markopolos's report contains false statements of fact and these claims could have been corrected if he had checked them with GE before publishing the report."

Walmart (WMT) gained 6.1% after results at the world's largest retailer beat expectations in the second quarter, prompting a guidance raise. Walmart now sees FY20 adjusted earnings per share down slightly to up slightly compared to last fiscal year and sees FY20 net sales growth of around 3% in constant currency.

Offsetting the boost that the Dow received from the post-earnings jump in Walmart was the negative reaction that Cisco (CSCO) saw following its own quarterly report. Cisco, which reported fiscal Q4 results that Piper Jaffray analyst James Fish said "were fine overall," also gave flat year-over-year guidance for its current quarter, contributing to today's 8.6% decline.

In M&A news, Pivotal Software (PVTL) jumped 68.7% to $14.00 after confirming it is in talks with VMware (VMW) regarding a potential business combination. VMware is negotiating a deal to acquire all of the outstanding shares of Class A common stock of Pivotal it doesn't already own for $15 per share in cash and has also requested in writing that Dell Technologies (DELL) exchange all of the outstanding shares of Class B common stock of Pivotal other than shares of Class B common stock of Pivotal held by VMware for shares of Class A Common Stock of VMware, the companies noted. Following the announcement, VMware shares slid 7%.

MAJOR MOVERS: Among the notable gainers was Alibaba (BABA), which rose 3% after the company reported better than expected revenue and earnings. Also higher was Revlon (REV), which jumped 5.5% after Bloomberg's Katherine Doherty reported that the company has retained Goldman Sachs Group to advise as it explores strategic options, including a potential sale of all or part of the business.  

Among the noteworthy losers was Tapestry (TPR), which fell 22.2% after reporting in-line Q4 earnings and guiding FY20 earnings per share to be "about even" with FY19 EPS. Also lower was Canopy Growth (CGC), which dropped 14.4% following the Canadian cannabis producer's release of its quarterly results. 

INDEXES: The Dow rose 99.97, or 0.39%, to 25,579.39, the Nasdaq lost 7.32, or 0.094%, to 7,766.62, and the S&P 500 advanced 7.00, or 0.25%, to 2,847.60.


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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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