Plus, the ECB cut rates, SmileDirectClub debuted, and Groupon might be about to make an offer for Yelp.
The Dow was up 60 points, or 0.2%, at the open this morning. The S&P 500 added 0.2%, while the Nasdaq traded 0.4% higher.
The Dow was up by as much as 159 points this morning after it was reported that the Trump administration was considering an interim trade deal with China that would delay and remove some tariffs, but hopes were soon dashed when a senior administration official denied the report. The official said the U.S. is “absolutely not” considering a limited trade agreement with China. In other trade war news, Trump announced on Wednesday that he would delay the tariffs on $250 billion worth of Chinese goods from October 1 to October 15 as a “gesture of good will” to China. “At the request of the Vice Premier of China, Liu He, and due to the fact that the People’s Republic of China will be celebrating their 70th Anniversary on October 1st, we have agreed, as a gesture of good will, to move the increased Tariffs on 250 Billion Dollars worth of goods (25% to 30%), from October 1st to October 15th,” Trump tweeted. Negotiators from both countries are expected to meet in Washington early next month to restart talks to end the trade war, though there’s little sign that much progress is being made on the two countries’ differences. “The negotiators have had a year to come to an agreement, and they remain structurally at odds on key issues,” said the co-founder of research firm Trivium China, Andrew Polk. “Another two-week reprieve doesn’t change those fundamentals.”
Investors are digesting the latest decision from policymakers at the European Central Bank, who decided today to cut the ECB’s bank deposit rate by 10 basis points to -0.5% and said it will buy debt beginning on November 1 at a pace of 20 billion euros ($22 billion) a month for as long as necessary to hit the central bank’s inflation goal. “We have headroom to keep going on for some time at this rhythm,” President Mario Draghi, whose eight-year term ends next month, said at the press conference following the announcement. “We still think the probability of recession for the euro area is small, but it’s gone up.” Henderson Rowe’s head of research, Artur Baluszynski, said that the ECB pushing rates further into negative territory is “essentially a tax on euro zone banks, and for the already weakened bank-financed economy like the euro zone, this move could spell more trouble. Also, with the Fed still being the tightest of the G-7 central banks, the eurodollar liquidity could come under pressure adding further stress to the increasingly challenged European banking system.” The euro dropped -0.2% against the dollar following the announcement. Meanwhile in the U.S., a measure of underlying inflation accelerated by more than forecast in August, complicating the Federal Reserve’s decision on whether to ease policy further at its meeting next week.
Executives from 145 companies wrote a letter to the Senate on Thursday urging the governmental body to take action on gun safety. Pointing to gun violence nationwide, the letter called it a preventable “public health crisis.” “That’s why we urge the Senate to stand with the American public and take action on gun safety by passing a bill to require background checks on all gun sales and a strong Red Flag law that would allow courts to issue life-saving extreme risk protection orders,” the chief executives from well known companies including Dick’s Sporting Goods, Gap, Levi Strauss, Uber, Lyft, and Beyond Meat wrote in the letter. The letter comes as companies have been forced to reckon with the risk that mass shootings pose to their businesses and follows Walmart dramatically stepping back from ammunition sales at its stores after two shootings at Walmart stores this summer. The big box retailer also asked customers at Walmart and Sam’s Club to no longer openly carry firearms, a move that other retailers have since reiterated.
Digital dentistry company SmileDirectClub began trading publicly Thursday morning. The company, trading on the Nasdaq with the ticker SDC, priced its IPO at $23 per share yesterday exceeding the expected range of $19 to $22. SmileDirectClub sells teeth aligners direct to consumer on its website and in its “SmileShops” starting at $1,895 for a two-year plan. The company currently operates more than 300 locations, and has inked partnerships with Walgreens and CVS to open its “SmileShops” in their drug stores. It reported $432.2 million in sales last year, a 190% increase from the $146 million it reported in 2017, and posted a net loss last year of $74.8 million. At the time of writing, SDC shares were down -12.3% from the initial price.
Shares of Oracle are down -5% this morning after the business software giant released its quarterly earnings report late yesterday with revenue coming in slightly below analyst expectations. Oracle also announced yesterday that Co-Chief Executive Mark Hurd would be taking a leave of absence for health reasons. Executive Chairman and Chief Technology Officer Larry Ellison and Co-CEO Safra Catz will take over for Hurd during his absence. Shares of Yelp are up 3.58% currently following a report from the Wall Street Journal that daily deals company Groupon is interested in acquiring it. The paper said that Groupon is planning an acquisition amid shareholder discontent about its performance, and that the online review site could be a logical matchup. And shares of Activision Blizzard are up just over 1% this morning after Nomura upgraded the stock to a Buy, noting momentum from the August launch of “World of Warcraft Classic” and positive reception going into the October launch of “Modern Warfare.”
Stocks We’re Watching
Yuma Energy (OTC: YUMA): Shares of this this oil and natural gas exploration and production company jumped as much as 120% yesterday after it said investment advisor and hedge fund Red Mountain Capital Partners bought of all of Yuma’s senior secured debt ahead of an expected “comprehensive” debt restructuring of about $35 million. “We are pleased to have the opportunity to work with Red mountain in an effort to realign our outstanding debt with the combined goal of establishing a meaningful path forward for the company,” said Yuma CEO Anthony Schnur. “This is the first step toward strengthening our capital base, improving our liquidity and positioning the company to pursue growth opportunities.”
Bioxcel Therapeutics (NASDAQ: BTAI): Shares of this clinical-stage biopharmaceutical are up 166% so far this year and 7% over the last week after HC Wainwright issued a Buy rating on the stock with a $25 price target, indicating possible upside of 142% over the next twelve months. Bioxcel’s lead candidate—BXCL501, a sublingual thin film formulation of dexmedetomidine designed for acute treatment of agitation resulting from neurological and psychiatric disorders—is in Phase 2 trials to study the treatment for patients with schizophrenia. In the Phase 1 trial that wrapped up earlier this year, BXCL501 showed a favorable safety profile at therapeutic exposure levels.