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Closing Stock Market SummaryWall Street ended Thursday on a positive note, as investors looked ahead to a supposed meeting between President Trump and China's Vice Premier, Liu He, tomorrow. The S&P 500 rose 0.6%, comparable to the gains in the Dow Jones Industrial Average (+0.6%), Nasdaq Composite (+0.6%), and Russell 2000 (+0.4%).
The session began on flat note, which was a noteworthy feat considering U.S. futures dropped over 1.0% last night on a negative-sounding report from China. That report indicated that no progress was made among deputy officials in Washington and that officials may leave talks early. The latter was edited later to reflect the planned two-day stay.
A tweet from President Trump in which he said he will meet with the Vice Premier at the White House on Friday quickly sent stocks higher and U.S. Treasuries even lower. Ten of the 11 S&P 500 sectors finished in positive territory, with the energy (+1.3%) and financial (+1.0%) sectors advancing the most. The utilities sector (-0.1%) was the lone holdout amid the higher Treasury yields.
The 2-yr yield (1.53%) and the 10-yr yield (1.66%), which both rose seven basis points, initially started to sell off after yr/yr changes in consumer prices reflected a firming of consumer inflation. The U.S. Dollar Index fell 0.4% to 98.69. WTI crude rose 1.8% (+$0.94) to $53.57/bbl.
Regarding a possible outcome of tomorrow's talks, several news outlets reported that a partial deal could include a currency pact and an agreement to prevent any tariff rate increases. This could help the earnings prospects of companies with exposure to China, namely those within the materials (+1.0%), industrials (+0.9%), and information technology (+0.6%) sectors.
Corporate news was largely overshadowed by the influx of trade headlines.
Notable large-cap movers included Cisco Systems (CSCO 46.15, -0.69, -1.5%), Netflix (NFLX 280.48, +12.95, +4.8%), and Delta Air Lines (DAL 53.10, -0.82, -1.5%). Cisco was downgraded to Neutral from Buy at Goldman Sachs. Netflix brushed off two more analyst price cuts. Delta Air Lines guided Q4 EPS with a midpoint that was below expectations.
Outsized moves belonged to Bed Bath & Beyond (BBBY 12.09, +2.15, +21.6%) and PG&E (PCG 7.79, -3.19, -29.1%). Bed Bath & Beyond appointed former Target (TGT 110.57, +0.21, +0.2%) executive Mark Tritton as its President and CEO. In PG&E's case, a bankruptcy judge decided to allow other parties to put forth a Chapter 11 restructuring plan for the company.
Reviewing Thursday's economic data, which included the Consumer Price Index for September and the weekly Initial and Continuing Claims report:
- Total CPI was unchanged m/m in September (consensus +0.1%) while core CPI, which excludes food and energy, was up 0.1% (consensus +0.2%). That left the yr/yr changes at 1.7% and 2.4%, respectively, which were the same increases seen in August.
- The key takeaway from the report is that the yr/yr changes connote a firming of consumer inflation, which could give the Fed some possible cover to hold off on a rate cut in October.
- Initial claims for the week ending October 5 decreased by 10,000 to 210,000 (consensus 220,000). Continuing claims for the week ending Sept. 28 increased by 29,000 to 1.684 million.
- The key takeaway from this report was that the low level of initial claims connotes continuing firming in the labor market, which could give the Fed some possible cover to hold off on a rate in October.
Looking ahead, investors will receive the preliminary October reading for the University of Michigan's Index of Consumer Sentiment and Import and Export Prices for September on Friday.
- Nasdaq Composite +19.8% YTD
- S&P 500 +17.2% YTD
- Dow Jones Industrial Average +13.6% YTD
- Russell 2000 +10.1% YTD
Two men who helped Giuliani investigate Joe Biden are arrested
Foreign-born Republican donors linked to Trump’s personal lawyer face US campaign finance charges
Two businessmen who helped Rudy Giuliani investigate Joe Biden’s dealings in Ukraine have been charged with violating US campaign finance laws by secretly funnelling foreign money to American candidates and pro-Trump political groups.
Lev Parnas and Igor Fruman, who assisted Donald Trump’s personal lawyer as he sought to dig up dirt in Ukraine on Mr Biden, the former US vice-president and 2020 Democratic presidential candidate, were arrested on Wednesday evening at Dulles airport in Washington as they were about to board an international flight with one-way tickets, according to US prosecutors in Manhattan.
The pair, along with two others, were charged in a four-count indictment with conspiring to “funnel foreign money to candidates” in the US to “buy potential influence”.
The indictment alleged that in 2018 the pair made an illegal donation to an unnamed congressman whose help they sought in ousting Marie Yovanovitch, then US ambassador to Ukraine. Mr Trump’s decision to recall Ms Yovanovitch in May of this year is a key question in the ongoing Democratic impeachment inquiry.
The arrest of Mr Parnas and Mr Fruman will focus further attention on their relationship with Mr Giuliani, the former New York City mayor who prospected for business as a consultant in Ukraine before taking on a leading role in Mr Trump’s inner circle as the president’s personal lawyer.
In a statement, William Sweeney, FBI assistant director, said: ‘The American people expect an election process that hasn’t been corrupted by the influence of foreign interests, and the public has the right to know the true source of campaign contributions.”
Federal Election Commission records show that Mr Parnas and Mr Fruman have made a series of donations to Republican politicians and pro-Trump groups. John Dowd, an attorney for Mr Parnas and Mr Fruman, did not immediately return emails seeking comment. Mr Giuliani could not be reached immediately for comment.
Mr Dowd, who previously represented Mr Trump, told Congress last week in a response to a request for testimony and documents that Mr Parnas and Mr Fruman “assisted Mr Giuliani in connection with his representation of President Trump”.
“Mr Parnas and Mr Fruman have also been represented by Mr Giuliani in connection with their personal and business affairs,” Mr Dowd added, arguing that the information Democrats were seeking was covered by attorney-client privilege.
House Democrats issued subpoenas to Mr Parnas and Mr Fruman on Thursday shortly after news of their arrest emerged.
Both men are US citizens. Mr Parnas was born in Ukraine and Mr Fruman was born in Belarus. Last year, the Campaign Legal Center accused them of violating campaign finance laws by anonymously funnelling donations through a shell corporation.
The pair were indicted alongside David Correia, a Florida businessman who has collaborated with Mr Parnas on commodities trading and other ventures, and Andrey Kukushkin, a businessman and US citizen who was born in Ukraine. Mr Correia remains at large. Mr Kukushkin has been arrested in California, officials said.
In addition to the campaign against Ms Yovanovitch, the indictment also alleges a scheme, on behalf of a foreign businessman with Russian ties, to try to snag a licence to operate in the burgeoning US legal marijuana business.
Mr Parnas and Mr Fruman were little-known figures with patchy business records operating in immigrant milieus in south Florida and New York. In 2015, Mr Parnas was found by a federal judge to have reneged on a $350,000 loan from one of his and Mr Correia’s investment clients to support a purported film project involving actor Jack Nicholson. The loan was never repaid.
The two men burst on to the political scene in early 2018, making big donations and soon gaining access to Mr Trump at his Florida club, Mar-a-Lago, and rubbing shoulders with Mr Giuliani.
Their first sizeable donation came in May 2018, according to the indictment, when they contributed $325,000 to an election fund supporting candidates aligned with Mr Trump. That and other contributions were channelled through Global Energy Producers, a natural gas trading business that prosecutors allege was created for the sole purpose of masking campaign contributions.
The Campaign Legal Center complaint features a picture of a grinning Mr Parnas beside Mr Trump at the White House that May. It also detailed contributions to Pete Sessions, a longtime Republican congressman from Texas who lost his seat last year, and Ron DeSantis, governor of Florida.
According to the indictment, as their activities were attracting more attention, a person working with Mr Parnas remarked: “This is what happens when you become visible . . . the buzzards descend.”
“That’s why we need to stay under the radar,” Mr Parnas replied.
In May, Mr Giuliani described the men in a tweet as “my clients” without providing further details. They appeared to serve as intermediaries between Mr Giuliani and Rabbi Moshe Azman, the politically influential Kiev rabbi who has become a staunch Trump supporter.
Mr Azman launched a charity, Friends of Anatevka, to create a settlement for Jews forced to flee eastern Ukraine, where government forces are fighting Russia-backed separatists. Mr Fruman and Mr Parnas are members of its US board.
They accompanied Mr Giuliani last year during a meeting with Mr Azman in Paris, where he presented the former mayor with a commemorative key to Anatevka. A picture from that visit shows Mr Giuliani and Mr Azman sitting outside, smoking cigars. A Fox News tote bag sits on the table before them.
“I have a very good relationship with Giuliani and President Trump,” Mr Azman told a Ukrainian media outlet in August. “There were no presidents who helped and loved Israel as Donald Trump does. I pray for him every Saturday.”
FT - James Murdoch buys stake in Vice Media
Scion of Murdoch empire uses proceeds from Disney sale to build media portfolio
James Murdoch’s new holding company has agreed to buy a minority stake in Vice Media Group, according to people briefed on the deal, as the younger Murdoch son looks to make his own mark in media after the break-up of his family’s entertainment empire.
James Murdoch this year created Lupa Systems as an investment vehicle to assemble a new portfolio of media companies, using his $2bn in proceeds from the $71bn sale of most of the Murdoch family’s 21st Century Fox empire to Disney.
While the size of Lupa’s stake in Vice was unknown, two people briefed on the transaction said the Murdoch investment was small. The younger son of Rupert Murdoch has been on the board of Vice, a sprawling digital media group aimed at millennials, for several years.
The investment came alongside Vice’s mostly-stock acquisition of Refinery29, a lifestyle website aimed at young women, according to people familiar with the deal. Lupa Systems’ investment valued the newly combined Vice Media Group, including Refinery29, at about $4bn, these people said.
James Murdoch has been seeking to distance himself from the conservative outlets his father Rupert controls, according to people with knowledge of his plans.
Rupert Murdoch’s six children each received about $2bn from the sale of his entertainment businesses to Disney. James Murdoch set up Lupa with the intention of investing his proceeds, according to people briefed on his thinking. Earlier this year, Lupa acquired stakes in a comic book publisher and the Tribeca Film Festival.
James Murdoch has a history with Vice, which has struggled in recent years after initially storming the media scene with its edgy videos and online content that attracted scores of previously unreachable young consumers. Its journalistic high point came with the production of a video documenting the 2017 far-right rally in Charlottesville, Virginia.
The Murdochs’ 21st Century Fox invested in Vice back in 2013, funding Vice’s push into Asia through Fox’s Star India TV network, which James helped manage. He is also a friend of Jesse Angelo, the former New York Post publisher who joined Vice this summer as head of its news and entertainment business.
Vice’s valuation has been a source of scrutiny. The company was valued as high as $5.7bn by the private equity group TPG in 2017, but this year Disney wrote off its entire Vice stake. Peers in digital media have seen their valuations slashed as the online media sector has struggled to find a sustainable business model to match its ambitions.
Vice declined to comment. Mr Murdoch did not respond to requests for comment.
Nancy Dubuc last year replaced Shane Smith as chief executive of Vice to turn around the company. Ms Dubuc, a veteran of the television business having previously run A&E Networks, last week said the acquisition of Refinery29 signalled a “new era of lasting change in digital media”.
China Vice Premier Liu told US business leaders yesterday that China is willing to reach agreement on matters that both sides care about and to prevent friction from further escalation
- Said he hopes to agree with the US on issues; said US
-China trade relations are important and have global influence
Gapping down
In reaction to disappointing earnings/guidance:
- HEXO -18.5%, PHG -9.3% (guidance update), ADTN -3.8% (guidance update), DAL -3.4%
Other news:
- PCG -31.3% (lower on reports that Judge will allow for consideration of alternative restructuring plans)
- VFF -10.5% (announces CAD$25 mln bought deal public offering of common shares at CAD$9.40/share)
- SPLK -1.3% (files for 2,648,372 share common stock shelf offering by holders and separately files for ~177K share common stock offering by selling stockholders pursuant to Cloud Native Labs agreement)
- VKTX -1.2% (continued weakness)
- TGT -0.8% (appoints Michael Fiddelke as CFO, effective November 1)
Analyst comments:
- NTAP -4.1% (downgraded to Sell from Buy at Goldman)
- HPQ -2.7% (downgraded to Sell from Neutral at Goldman)
- CSCO -1.7% (downgraded to Neutral from Buy at Goldman)
- UNH -1.4% (downgraded to Hold from Buy at Jefferies)
- KR -1.3% (downgraded to Hold from Buy at Jefferies)