Gapping down
In reaction to strong earnings/guidance:
- SFIX -19.6%, PEP -1%
M&A news:
- ARNC -2.9% (to sell Texarkana, Texas rolling mill to Ta Chen International for approx $300 mln in cash plus contingent consideration of up to $50 mln; expected to close in the fourth quarter)
Other news:
- GWPH -2.4% (announces $300 mln proposed public offering of ADSs )
- UTX -1.4% (Justice Department confirms will require UTX to divest two aerospace businesses to proceed with acquisition of Rockwell Collins)
- TPX -0.6% (following late decline on reports of AMZN selling mattresses)
Analyst comments:
- MDB -3.9% (downgraded to Reduce from Neutral at Nomura)
- WHR -3.4% (initiated with a Sell at Goldman)
- VNE -3.2% (downgraded to Sell from Neutral at UBS)
- EW -2.8% (downgraded to Neutral from Buy at Guggenheim)
- SKX -2.3% (downgraded to Neutral from Buy at Citigroup)
- X -2.1% (downgraded to Hold from Buy at Deutsche Bank)
- CENX -2% (downgraded to Hold from Buy at Deutsche Bank)
- SERV -1.9% (downgraded to Equal-Weight from Overweight at Morgan Stanley)
- BECN -1.8% (downgraded to Neutral from Outperform at Robert W. Baird)
- COP -0.7% (downgraded to Neutral from Buy at Goldman)
- MS -0.6% (downgraded to Hold from Buy at HSBC Securities)
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Gapping up
In reaction to earnings/guidance:
- SEAS +8.3%
Other news:
- OMER +13.9% (after closing more than 40% lower on the day)
- IGC +11.8% (continued strength)
- PYX +6.6% (receives Access to Cannabis for Medical Purposes Regulations cultivation license from Health Canada)
- PZZA +3.5% (Legion Partners discloses 5.46% active stake; believes the current market price does not reflect the intrinsic value)
- WIFI +3.1% (to offer $175 million aggregate principal amount of its convertible senior notes due 2023 )
- TEN +2.5% (indicated higher after the completion of its acquisition of Federal-Mogul from Icahn Enterprises (IEP) and Icahn confirming 9.9% active stake in Tenneco)
- LLY +1% (Results from two phase 3 studies show Lilly's ultra rapid lispro met primary efficacy endpoint in people with type 1 and type 2 diabetes) .
Analyst comments:
- SGMS +3.7% (initiated with a Buy at SunTrust)
- GE +2.6% (upgraded to Outperform from Sector Perform at RBC Capital Mkts)
- AQUA +2.4% (upgraded to Strong Buy from Outperform at Raymond James)
- YRCW +2.1% (initiated with Buy at Loop Capital)
- DBX +1.1% (upgraded to Neutral from Reduce at Nomura)
- LOW +0.8% (added to US 1 List at BofA/Merrill)
- DFS +0.8% (upgraded to Overweight from Neutral at JP Morgan)
- CVX +0.5% (added to Conviction Buy List at Goldman)
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The signs of a "blue wave" are adding up, and barring some dramatic shift in the next five weeks, it's likely to be more than enough to wipe out the Republican majority in the House — and the Senate may not be out of reach either.
Why it matters: Democrats only need 23 seats to win the House.
Fed Rethinks How to Define a Big Bank
Central bank may change criteria it uses to apply some of its capital, liquidity rules for biggest U.S. lenders
WASHINGTON—The Federal Reserve could broaden the number of banks receiving regulatory relief from Trump-appointed officials under an initiative that changes how it defines a big bank.
As part of a series of rule changes still under development, the Fed is preparing to revise asset-size and other thresholds in its capital and liquidity rules, according to people familiar with the matter.
The changes could lead to lower regulatory costs for some large U.S. banks, including Capital One Financial Corp. , PNC Financial Services Group Inc. and U.S. Bancorp. It is less clear the changes will help gigantic firms the Fed considers “systemically important” to the global financial system, such as Citigroup Inc. and Goldman Sachs Group Inc.
Likely candidates for the rule changes include the liquidity coverage ratio, which requires banks to hold assets they can easily convert to cash in a pinch, and “advanced approaches” rules, one of several capital regulations that limit banks’ borrowing.
Fed Vice Chairman for Supervision Randal Quarles, who is set to testify before the Senate Banking Committee on Tuesday, has previously said those rules are worth revisiting.
“It is clear that there is more that can and should be done to align the nature of our regulations with the nature of the firms being regulated,” Mr. Quarles said in testimony prepared for the hearing.
The potential changes were discussed at a recent meeting between top officials at the Fed and the two other primary U.S. bank regulators, the Office of the Comptroller of the Currency and Federal Deposit Insurance Corp., one of the people familiar with the matter said—a sign the Fed is beginning to turn Mr. Quarles’s ideas into formal proposals. But it isn’t clear when the Fed will formally propose the changes. The regulator has a crowded agenda and some of the changes may also need the approval of other financial regulators.
The changes are part of the Trump administration’s broader push to revisit bank rules it believes are overreaching. Other parts of that effort include a proposed rewrite in May of the Volcker rule trading restrictions and an April proposal to alter a big bank capital rule known as the leverage ratio.
Another motivator: This summer, Congress passed bipartisan legislation amending the 2010 Dodd-Frank financial regulatory law to say that the Fed “shall … differentiate among companies on an individual basis” when applying its most stringent bank rules, even if a bank is very large. Dodd-Frank had said “may” instead of “shall.” The change gives the Fed an impetus to grant banks regulatory relief.
The new law separately allows the Fed to exempt banks with fewer than $250 billion in assets from some tough rules, including annual stress tests—a change from the previous level of $50 billion. It tells the Fed to take into account banks’ size as well as other “risk-related” factors.
In several of its rules, the Fed defines a big bank as holding more than $250 billion in total assets or more than $10 billion in foreign exposures on its balance sheet. Mr. Quarles has pointed out these thresholds were developed more than 10 years ago.
One key regulation that relies on those thresholds is the liquidity coverage ratio, which was adopted after the 2008 crisis. It requires banks to hold enough cash or easy-to-sell assets to cover a month’s worth of liabilities. The idea is to prevent a repeat of 2008, when even strong banks faced collapse because they were too reliant on volatile, short-term funding.
The liquidity rule applies equally to all banks that trip either threshold of $250 billion in assets or $10 billion in foreign exposures.
Regional banks have argued the rule is unfair because it puts them in the same bucket as global banking behemoths. Capital One, PNC and U.S. Bank have more than $250 billion in assets but are less one-fifth the size of JPMorgan Chase & Co., the largest U.S. bank by assets. American Express Co. is smaller, but has to follow the Fed’s toughest liquidity rule because of the foreign-exposure threshold.
A firm following a looser liquidity rule could have more freedom to jettison Treasury bonds or other safe assets and boost riskier, more profitable activities such as loans. Such a change could also affect the pricing or availability of deposits, since the rules effectively tax deposits that regulators judge likely to leave the bank in a crisis.
The Fed also uses the $250 billion-asset and $10 billion foreign exposure thresholds in so-called advanced approaches capital rules. These rules predate the financial crisis, and involve calculating a bank’s capital position using complex and expensive mathematical models.
A Fed rule change could reduce the cost of running the models, although it may not lower the bank’s overall capital requirement as long as other capital rules remain in effect.
Early premarket gappersGapping up:
- IGC +32.5%, OMER +23.3%, SEAS +8.3%, SGMS +3.7%, PZZA +3.4%, WIFI +3.1%, TEN +2.8%, YRCW +2.1%, LLY +1%, COL +0.5%, OSTK +0.5%, HUBS +0.5%, PEP +0.5%
Gapping down:
- SFIX -21.6%, ARNC -2.9%, GWPH -1.4%