Early premarket gappersGapping up:
- LXRX +30.2%, TTOO +25.9%, XERS +5.2%, DOMO +2.2%, EQT +0.7%, CSCO +0.5%
Gapping down:
- FARM -21.4%, ZS -18.7%, GME -16.5%, PLAY -15.4%, REI -9.6%, BHGE -3.8%, NYMT -2.7%, CRWD -2.2%, RH -1.5%, HLIT -1.4%, TLRY -0.9%
Sent from Bloomberg Professional for Android
Closing Stock Market SummaryThe S&P 500 (+0.03%) eked higher on Tuesday, finishing at its best levels of the day after trading with modest losses the whole day. Tuesday's action saw investors continuing to rotate out of this year's best-performing stocks for those perceived as having more potential value.
The Dow Jones Industrial Average (+0.3%) was lifted by its highest-priced component, Boeing (BA 369.49, +10.71, +3.0%), while the Russell 2000 (+1.2%) outperformed amid big gains in energy stocks. The Nasdaq Composite (-0.04%) finished just below its flat line amid relative weakness in shares of technology companies.
Value-oriented stocks, in this case those that have underperformed amid growth concerns, have come to life this week. Improved sentiment pertaining to growth and trade has contributed to this value trade, which was made most pronounced in the outperformance in the S&P 500 energy sector (+1.3%), SPDR S&P Retail ETF (XRT 43.61, +1.18, +2.8%), and Dow Jones Transportation Average (+1.5%) on Tuesday.
The gains in the transportation space further padded the S&P 500 industrials sector (+1.0%), while Dow Inc. (DOW 46.32, +1.87, +4.2%) boosted the materials sector (+1.0%).
The same underlying sentiment boosting these stocks contributed to the selling in the Treasury market and in the S&P 500 information technology (-0.5%), consumer staples (-0.6%), and real estate (-1.4%) sectors. The tech and real estate sectors have been this year's best-performing sectors, largely due to their respective high-growth and defensive-oriented dispositions.
Treasury yields finished noticeably higher, as the crowded Treasury market continued to see less demand. The 2-yr yield increased nine basis points to 1.66%, and the 10-yr yield increased eight basis points to 1.70%. The U.S. Dollar Index increased 0.1% to 98.38.
In corporate news, Apple (AAPL 216.70, +2.53, +1.2%) held its annual product event where it unveiled its latest iPhone. The $4.99/month pricing for its TV+ streaming service came as a surprise to some and contributed to weakness in Netflix (NFLX 287.99, -6.35, -2.2%).
Wendy's (WEN 19.71, -2.24, -10.2%) was a part of the broader effort to sell momentum stocks, but shares were further pressured by the company cutting its EPS guidance. The lower guidance accounted for its plan to launch a breakfast menu in all locations in 2020.
Reviewing Tuesday's economic data, which included the NFIB Small Business Optimism Index for August and the JOLTS - Job Opening report for July.
- The NFIB Small Business Optimism Index for August declined to 103.1 from 104.7 in July. The August reading was its lowest in five months, but the index remains running at elevated levels.
- The July Job Openings and Labor Turnover Survey showed that job openings declined to 7.217 million from a revised 7.248 million in June (from 7.348 million).
Looking ahead, investors will receive the Producer Price Index for August, Wholesale Inventories for July, and the weekly MBA Mortgage Applications Index on Wednesday.
- Nasdaq Composite +21.8% YTD
- S&P 500 +18.9% YTD
- Dow Jones Industrial Average +15.4% YTD
- Russell 2000 +14.4% YTD
VIVENDI SPOKESMAN DENIES MEDIA REPORT ABOUT MEDIASET TAKEOVER PLAN
L Brands chief Wexner ‘embarrassed’ by Epstein ties
Billionaire behind Victoria’s Secret seeks to distance himself from disgraced financier
Les Wexner, the head of Victoria’s Secret parent company L Brands, has moved to further distance himself from the disgraced money manager Jeffrey Epstein, saying he was “embarrassed” by his relationship with the deceased accused sex trafficker.
The 82 year-old was for decades a client of Epstein, who committed suicide last month while awaiting trial on charges of sex trafficking underage girls.
Mr Wexner used introductory remarks at L Brands’ investor day in Ohio on Tuesday to respond to concerns over his connections to the convicted sex offender, who had also once served as a trustee of The Wexner Foundation philanthropic group.
“Being taken advantage of by someone who was so sick, so cunning, so depraved, is something that I’m embarrassed I was even close to,” he told the audience. “But that is in the past”.
“We are all at some point betrayed by friends,” the retail group’s chairman and chief executive added. “Everyone has to feel enormous regret from the advantage that was taken of so many young women.”
Scrutiny over Mr Wexner’s ties to Epstein, who was found dead in a Manhattan jail cell, has been an unwelcome distraction for L Brands, whose shares have lost about 30 per cent so far this year as it grapples with falling sales at Victoria’s Secret.
The lingerie company, which describes itself as “the sexiest brand in the world”, has fallen out of favour as consumers defect to rivals less reliant on sexualised marketing.
Speaking at the start of a day of presentations by L Brands executives, Mr Wexner said he was feeling “very good” about the business and that it was well prepared for the holiday shopping season.
Mr Wexner had previously disclosed that he had met Epstein in the mid-1980s through friends and believed he could trust him. He went on to give Epstein control of his personal finances and power of attorney.
Mr Wexner wrote in a letter to members of The Wexner Foundation last month that Epstein had “misappropriated vast sums of money” from him and his family. He said it came to light in 2007 when he sought to unwind the relationship.
The board of L Brands, which also owns toiletries retailer Bath & Bodyworks, has hired outside counsel to conduct a review of the connections.
Mr Wexner was one of many high-profile associates of Epstein, who cultivated relationships with elites in business, academia and politics. At the weekend, the head of Massachusetts Institute of Technology’s prestigious Media Lab stepped down over revelations that he had concealed donations from Epstein.
Before his death, US authorities accused Epstein of recruiting girls to give him massages at his mansions in New York and Palm Beach, Florida, where he would sexually abuse them and pay them hundreds of dollars in cash afterwards.
Federal prosecutors in Manhattan alleged that Epstein had created “a vast network of underage victims for him to sexually exploit”. The charges came just over a decade after he avoided a lengthy jail sentence on charges of soliciting a prostitute. Victims’ lawyers have vowed to pursue his estate for compensation.
EDF/French nuclear: pressurised decisions
Cash-strapped government has a strong incentive to treat shareholders well
EDF of France has discovered flaws in the manufacture of nuclear reactor parts. Details are scant. It looks like a significant setback for a nuclear-focused energy utility plagued by cost overruns and delays on big projects. The shares fell sharply on Tuesday. Time for shareholders to flee? Not necessarily.
The French energy sector is high risk for private investors. Gilets jaunes protests show the sensitivity about energy prices. Neighbouring Germany is abandoning nuclear power. EDF is 85 per cent state-owned. It is almost a ministry. But French president Emmanuel Macron wants it to be reorganised. He faces re-election in 2022, and needs to mobilise private capital for a shift to renewables.
Paris may in effect nationalise EDF’s nuclear activities by buying out minorities. That makes even more sense after Tuesday’s news. Nuclear power’s life cycles and potential liabilities make it uninvestable. EDF plans to extend the life of 58 existing reactors. That will cost at least €45bn. It is also pioneering next-generation European Pressurised Reactor technology, in China, India and elsewhere. Cost projections for its Hinkley Point project in the UK are controversial, however. In July, EDF confirmed delays at its flagship Flamanville project in northern France. Tuesday’s news hinted at fresh problems with its nuclear aspirations.
A reorganisation of EDF could involve spinning off some chunky businesses — including fast-growing renewables — into a listed EDF Vert. Ebitda from its renewables will grow by an average of 19 per cent year at least until 2023, Bernstein estimates. EDF Vert shareholders could benefit from the game of catch-up.
Germany’s energy sector has already restructured. Shares in utilities such as RWE and Eon have powered ahead of EDF stock. France’s revamp will not be easy. Brussels will watch for unfair state aid. Trade unions will battle to preserve jobs. EDF shareholders have little idea how they will be treated, or the terms of any swap into EDF Vert shares. But the cash-strapped government has a strong incentive to treat shareholders well.