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Fly Intel - End of Day Brief - Wednesday August 14, 2019

Stocks slide as bond prices flash recession signal

Stocks were lower from the open, with almost no sign of investors stepping in to buy the dip, after the 30-year bond's yield sunk to a record low and the 10-year yield fell below the two-year for the first time in over a decade. In response, President Donald Trump said in a series of tweets: "We are winning, big time, against China...China is not our problem, though Hong Kong is not helping. Our problem is with the Fed. Raised too much & too fast. Now too slow to cut...Spread is way too much as other countries say THANK YOU to clueless Jay Powell and the Federal Reserve. Germany, and many others, are playing the game! CRAZY INVERTED YIELD CURVE! We should easily be reaping big Rewards & Gains, but the Fed is holding us back."

ECONOMIC EVENTS: In the U.S., the July trade price report beat estimates with 0.2% month-over-month gains for both import and export prices. In trade news, senior U.S. officials said that China has not made any concessions to the U.S. after President Trump delayed threatened tariffs on certain imports from Beijing until mid-December, according to Reuters.

In China, July data was soft, as industrial production grew by a lower than expected 4.8% and retail sales rose by a smaller than forecast 7.6%.

In Europe, Eurozone GDP growth was in-line with expectations for Q2, rising 0.2% quarter-over-quarter, while German GDP for Q2 was in-line with a 0.1% quarter-over-quarter decline.

TOP NEWS: Shares of Macy's (M) dropped 13.3% after the department store operator reported worse than expected quarterly profit and cut its fiscal year earnings forecast. While CEO Jeff Gennette highlighted that Macy's "delivered another quarter of comparable sales growth," he also noted that "rising inventory levels became a challenge" and the company had to take markdowns to clear excess Spring inventory.

Also lower were both CBS (CBS) and Viacom (VIAB) in a delayed, negative reaction to yesterday afternoon's confirmation of a deal to merge in an all-stock transaction. Following the deal news, Bernstein downgraded CBS to Underperform, while BMO Capital and Macquarie moved to the sidelines on CBS and Viacom, respectively. More bullish on the stocks after the deal, Bank of America Merrill Lynch upgraded CBS to Buy while analysts at Guggenheim and Deutsche Bank both raised Viacom's ratings to Buy. At the close, CBS shares had fallen 8.3% while Viacom Class B shares were 8.5% lower.

We Company, the parent of WeWork, filed its form S-1 with the SEC related to its initial public offering of Class A common stock. The company intends to apply to list under the symbol "WE," but the filing does not yet make clear which exchange the stock will be listed on or any details about expected pricing. The filing shows that We Company's 2018 revenue was $1.82B and its net loss was $1.93B.

Meanwhile, Disney (DIS) and Charter Communications (CHTR) announced a comprehensive distribution agreement to continue to deliver Disney's lineup of premier sports, news and entertainment content to Spectrum customers. The new deal will contemplate Charter's future distribution of Disney's streaming services, including Hulu, ESPN+, and the upcoming Disney+, the companies said.

Additionally, Ford (F) issued a safety recall for 103,374 2015 Ford Fusion and 2015 Lincoln MKZ vehicles in the U.S. for an issue involving seat belt anchor pretensioners. The recall also covers 4,002 vehicles in Canada and 1,023 in Mexico.

MAJOR MOVERS: Among the noteworthy gainers was Presidio (PSDO), which surged more than 22% after entering into a definitive agreement to be acquired by funds advised by BC Partners in an all-cash transaction valued at approximately $2.1B, including Presidio's net debt. Also higher was Purple (PRPL), which gained 18.8% after reporting quarterly results.

Among the notable losers was Myriad Genetics (MYGN), which plunged 42.8% after it reported downbeat Q4 results and provided lower than expected guidance for Q1 and fiscal 2020. Also lower after reporting quarterly results were recent IPOs Luckin Coffee (LK) and RealReal (REAL), which fell a respective 16.7% and 16%.

INDEXES: The Dow fell 800.49, or 3.05%, to 25,479.42, the Nasdaq lost 242.42, or 3.02%, to 7,773.94, and the S&P 500 declined 85.72, or 2.93%, to 2,840.60.


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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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