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Wall Street at Breakfast

  • All Awaiting Yellen´s talk

  • Global Markets Flat On Low Volumes,

  • Oil Slides

Markets heading into a three-day weekend in the U.S. and with a key speech from Federal Reserve Chairwoman Janet Yellen on tap. The Fed chief is due to speak at Harvard University in her first public appearance in a couple of months. Most Fed watchers expect Yellen to stay on script, although some Q&A is expected. The Stoxx Europe 600 Index is essentially flat in mid-day trading, while Asian markets made small gains to end a strong week. The Nikkei 225 Index rose 0.37% with President Obama in Japan for a historic visit to Hiroshima. Futures point to a calm opening for U.S. markets.

Today’s Markets

In Asia,Japan +0.4% to 16835. Hong Kong +0.9% to 20577. China -0.1% to 2821. India +1.1% to 26664.
In Europe, at midday,London +0.1%. Paris +0.1%. Frankfurt +0.1%.
Futures at 6:20,Dow +0.1%. S&P +0.1%. Nasdaq +0.2%. Crude -0.9% to $49.05. Gold flat at $1223.10.
Ten-year Treasury Yield Flat at 1.82%

Friday’s Economic Calendar

8:30GDP Q1
8:30Corporate Profits
10:00Reuters/UofM Consumer Sentiment
1:00 PMBaker-Hughes Rig Count
11:30Janet Yellen

Economy

Crude oil prices are back below $50 in early trading on a round of profit taking by investors and with the U.S. dollar perking up. Traders are also positioning themselves ahead of the next OPEC meeting scheduled for just around the corner on June 2. Energy market watchers are unsure if key OPEC members will agree on a production cap or increase output. WTI crude is down 0.9% to $49.05/bbl, while Brent crude trading in London is 0.89% lower at $49.15/bbl.

Japanese Prime Minister Shinzo Abe may delay a sales tax increase for another three years due to concerns on the global economy. A decision to postpone the tax is anticipated before an upper-house election in Japan later this summer. Abe already postponed the planned tax hike to 10% by 18 months, after the initial increase to 8% in April of 2014 edged Japan into economic hardship. Some economists think the country will be in better shape in 2019 just ahead of the 2020 Summer Olympics in Tokyo.

A British exit from the European Union would cost pensioners about £300M ($440B), according to a warning from the Treasury. The Treasury says Brexit would hurt state pensions by pushing up the rate of inflation, lead to huge job losses, and reduce house prices by as much as 20%. Political supporters of the Brexit call the statement from the Treasury an “outrageous” overstatement intended to sway voters. Polls in the U.K. show the “remain” in the EU option comfortably higher than the “leave” alternative. Also of interest, betting markets indicate the referendum will fail.

The second estimate on Q1 GDP is due out from the Commerce Department this morning. The revised figure is expected to jump to 0.9% from 0.5%. Yesterday, the Atlanta Fed caught the attention of economists by lifting its Q2 GDP forecast to 2.9% from 2.5%. The consensus mark of analysts is for 2.3% growth.

Stocks

In what may be a leg up over bidding competitors, Verizon (NYSE:VZ) has sought help on its pursuit of the core assets of Yahoo (NASDAQ:YHOO) from Bank of America, which was a key adviser to Yahoo last year. BofA offers intimate knowledge of Yahoo (it advised the Internet giant on whether it might spin off a stake in Alibaba) as well as a deep balance sheet that could help with funding a deal.

Adidas sold U.S. sportswear business Mitchell & Ness to an entity formed by private equity firm Juggernaut Capital Partners. The transaction will generate a one-time gain in the low to medium double-digit million euro range which will be used to reinvest in Adidas’ (OTCQX:ADDYY) “Creating the New” strategy. Adidas says Mitchell’s Nostalgia headwear and apparel isn’t core to its current strategy anymore.

Donald Trump said he would approve TransCanada’s (NYSE:TRP) Keystone XL pipeline proposal if elected, but would demand a better deal by receiving a piece of the profits for the U.S. There wasn’t great elaboration from the Republican presidential candidate on how the profits would be calculated or collected. Trump also said if he is elected to the White House, he will seek to cut regulation on the energy industry to make drillers and coal companies more competitive. He also indicated fracking will be supported under a Trump administration.

Deckers Outdoor named Dave Powers to the CEO position to replace the retiring Angel Martinez. Deckers (NYSE:DECK) indicated Martinez will stay on as the chairman of the board. Though the company topped estimates with its FQ4 report issued yesterday, profit guidance for the upcoming fiscal year arrived weak, with Deckers guiding for FY17 EPS of $4.05-4.40 versus $4.60 consensus. Shares are down about 3% premarket.

Valeant Pharmaceuticals moved sharply higher in after-hours trading on a report tipping that Takeda (OTCPK:TKPYY) and private equity firm TPG made a combined takeover approach in recent weeks that the company rejected. The approach came before Valeant (NYSE:VRX) hired Joseph Papa as its new CEO. Papa is expected to be given time by the board to chart a course for the specialty pharmaceutical and medical devices firm.

A jury has ruled in favor of Google (GOOG, GOOGL) in its retrial of a patent fight with Oracle (NYSE:ORCL) over Java. The 10-member panel decided that Google’s use of the programming language in its Android OS was fair use. Google had incorporated parts of Java in Android when Java was owned by Sun Microsystems, later acquired by Oracle in 2010. Oracle is already talking appeal on its claim that Google cost it billions of dollars in mobile opportunity by not paying license fees for using Java APIs.

Suncor Energy seeks to return the bulk of its displaced workers by next week and begin startup of its Alberta oil sands facilities, assuming wildfire danger is no longer present. Suncor’s (NYSE:SU) Firebag site and U1 upgrader would resume operations first, followed by MacKay River, while planned maintenance on the U2 upgrader would resume and likely take two weeks to complete.

Cybersecurity stocks are on watch after Palo Alto (NYSE:PANW) failed to provide the dazzling sales guidance expected by many investors. FireEye (NASDAQ:FEYE), CyberArk (NASDAQ:CYBR), Imperva (NYSE:IMPV), and Fortinet (NASDAQ:FTNT) are all tilting lower in premarket action. The PureFunds Cyber Security ETF (NYSEARCA:HACK) could also feel the impact of the Palo Alto surprise.

Royal Philips said it sold shares in the IPO of its 125-year-old lighting division at the lower end of the targeted range, valuing the business at €3B ($3.36B). The sale marked the end of Royal Philips (NYSE:PHG) as a sprawling conglomerate that produced everything from light bulbs and television sets to medical scanners and coffee machines.

Pioneer Natural Resources is growing more optimistic about the oil environment, and is planning for the return of 5-10 rigs once it is confident the upturn in oil is more sustainable. Senior VP Frank Hopkins said the rigs could be put back into action once Pioneer (NYSE:PXD) is convinced oil will stay above $50.

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