Market Snapshot
Asia: Japan +0.6% to 19855. Hong Kong +3.7% to 24393. China +5.8% to 3709. India -0.4% to 27574.
Europe: London +1%. Paris +1.7%. Frankfurt +1.6%.
Futures: Dow +0.8%. S&P +1%. Nasdaq +1%. Crude +1.2% to $52.28. Gold -0.2% to $1161.30.
Ten-year Treasury Yield +3 bps to 2.24%
Economic News
Chain Store Sales
8:30 Initial Jobless Claims
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
Key earnings before the open
PEP, SYRG, WBA
Key earnings after the close
CUDA, HELE, PSMT, VOXX
Markets
U.S. stocks rally into Thursday’s open, buoyed by calmer markets in Europe, plus a significant rebound in China’s Shanghai stock index and a greater-than-expected gain in weekly jobless claims that fueled expectations that the Federal Reserve could delay raising interest rates.
The stock market sell-off in China abated today as Beijing stepped up its barrage of measures to boost liquidity and calm investors following days of sharp declines. China’s securities regulator banned shareholders with stakes of more than 5% in a company from selling stock over the next six months, and vowed to “punch back” against illegal market activities by investigating “malicious short selling.” Dozens more companies have also requested their shares be halted from trading, adding to the list of more than 1,400 that have suspended their stock. Shanghai +5.8%; Shenzhen +4.3%; ChiNext +3%.
It will be “really difficult” to end the Greek crisis and save the country from bankruptcy, ECB President Mario Draghi told Italy’s Il Sole 24 Ore, saying he does not believe Russia will come to its rescue. Despite the cloudy outlook, European shares are heading higher on hopes of a deal. Yesterday, Athens submitted an application for a new three-year bailout from its eurozone creditors and is expected to reveal their full proposal before today’s midnight deadline. Greece’s stock exchange will also remain closed until July 13, after authorities decided to extend a bank holiday and capital controls.
Fed officials struck a dovish tone in their most recent discussions about monetary policy, while at the same time setting the groundwork for future rate hikes, according to minutes of the FOMC meeting in June. All but one of the 10 voting members said they needed more evidence that “economic growth was sufficiently strong and labor market conditions had firmed enough to return inflation to the Committee’s longer-run objective over the medium term.”
The Bank of Korea held its key interest rate at a record low today, but cut the country’s growth forecast for the year again, as the impact of an outbreak of MERS, a severe drought and slowing exports dent its economy. GDP for the year is now forecast to come in at 2.8%, down from a 3.1% projection made in April. At the start of the year the BOK expected to achieve 3.9% growth. Making it the largest outbreak outside Saudi Arabia, MERS has infected about 186 people and left 35 dead since the disease was first reported in the country on May 20.
According to new guidance issued by the IRS, hedge funds that used a strategy to claim billions of dollars in tax savings will face new scrutiny from the government. So-called basket options – complex financial structures that allowed hedge funds to bypass taxes on short-term trades – will now be labeled listed transactions. The rules will be retroactive, applying to all transactions dating as far back as Jan. 1, 2011.
Stocks
Alcoa (AA) gains this morning after kicking off another earnings season by beating revenue expectations.
Charter Communications may be hitting the high-grade debt market tomorrow with a multibillion-dollar M&A bond for its Time Warner Cable (TWC) acquisition, Reuters reports. Charter’s (CHTR) issuance is still dependent on conditions – which have been shaky recently due to Greece and China weighing heavily on investors’ minds. “The investment-grade (portion) is expected tomorrow, the high-yield maybe next week,” said a source, stating the funding plan would likely come to $31B.
For the third time in two months, Jawbone has filed legal action against archrival Fitbit (FIT), this time seeking to block the company from importing fitness trackers or their parts. In May and June lawsuits, Jawbone claimed that Fitbit stole trade secrets by hiring away employees who allegedly swiped confidential information, and infringed on several patents. Fitbit’s stock has doubled since its IPO pricing, and was at around $42/share on Wednesday.
General Motors is also recalling nearly 200K older model Hummer SUVs to fix problems that have led to three people being burned. Models recalled include the Hummer H3 in the 2006-10 model years and the Hummer HT3 from the 2009-10 model years; GM shed the Hummer brand in 2009 when it underwent restructuring and a government-sponsored bankruptcy. In a separate recall, 50K newer model Chevrolet Sparks will be recalled because of a software problem that may cause safety warnings not to work.
Honda is calling back another 4.5M vehicles worldwide due to faulty Takata (TKTDY) air bags, bringing the total number of “Takata plagued” cars recalled by Honda (HMC) to around 24.5M. Separately, Nissan (NSANY) on Wednesday disclosed its first Japanese injury related to defective Takata inflators. The rupture incident resulted in a car fire, and the driver suffered burns on the arm and cheek.
IBM has announced a new kind of ultra-dense chip, which squeezes in four times as much computing power as the best silicon currently available. The new chips will usher in the possibility of creating 7-nanometer transistors (a strand of DNA in comparison measures 2.5 nanometers in diameter). IBM (IBM) made the research advance by using silicon-germanium instead of pure silicon, allowing transistors to switch faster and use less power by sitting more densely on a chip.
After weeks of suspense, it seems that Lockheed Martin (LMT) and Textron (TXT) have emerged as final contenders to buy United Technologies’ (UTX) Sikorsky Aircraft unit, which could be valued at $8B. UTC may come to a decision by the end of the month, but it still could decide against an outright sale and instead spin off Sikorsky to shareholders in a tax-free deal. Boeing (BA), which had expressed interest in a potential deal, is no longer active in the sale process, and Airbus (EADSY) is also not in the running.
What happened at the New York Stock Exchange yesterday? A computer malfunction was said to have knocked out trading for close to four hours. Glitches noticed early in the day likely resulted from a software upgrade, NYSE (ICE) President Tom Farley said in an interview. Trading was then suspended, because “I didn’t feel like we had the level of trust in our systems that is required.”
With rival offers unraveling, Germany’s big car makers have reached a stand-off with Nokia (NOK) in their joint bid to buy the latter’s maps business HERE. BMW (BAMXY), Daimler (DDAIY) and Volkswagen (VLKAY) are feeling less pressure to pay a high price for HERE, amid signs that rival bidders such as Uber (UBER) have dropped out of the race. Analysts estimate the value of the mapping unit at €2B-€4B.
United Continental is still struggling to right its operations five years after its merger. A computer glitch yesterday grounded United’s whole U.S. fleet, canceling more than 60 flights and delaying nearly 1,200. The problem follows another ground stop in early June, marking the fifth such incident for the airline since 2012. United Continental (UAL) is also wrestling with unhappy unions, poor punctuality and a recent increase in maintenance-related delays and cancellations.
A few months after naming chief scientific officer Mehmood Khan a vice chairman, PepsiCo (PEP) has done the same for CFO Hugh Johnston. In addition to his CFO duties, Johnston will now be responsible for the company’s IT systems and solutions. Executive Vice President of Global Operations Enderson Guimaraes will also be leaving the firm and his duties will be split between two executives. The management reshuffle comes ahead of the firm’s Q2 results scheduled to be released this morning.
After more than 13 hours of debate, the South Carolina legislature passed a bill early Thursday to remove the Confederate flag from the state capitol grounds. The battle over the banner followed June’s Charleston Church Massacre and subsequent photos of the accused shooter posing with the flag bearing a racist manifesto. The national debate has also been discussed at the retail level. Since the shooting, Walmart (NYSE:WMT), Amazon (AMZN), eBay (EBAY) and Sears (SHLD) have all announced bans on the sale of Confederate flag merchandise.