Plus, China’s growth is slowing, the U.K. parliament is gearing up to vote on Johnson’s new Brexit deal, and AT&T is in talks with activist Elliott Management about possible changes.
Stocks were lower to start Friday with the Dow losing 97 points, or -0.4%. The S&P 500 traded -0.3% lower, while the Nasdaq fell by -0.5%.
The world knew China’s growth was slowing, but maybe not quite this much. China reported today its gross domestic product rose just 6% in the three months ended in September, its slowest pace in more than 27 years.While there were some bright spots in the report, including retail sales up 7.8% year-over-year and industrial output climbing 5.8%, it’s clear the trade war is weighing on China’s economy. “Weak growth data confirmed that the trade disruptions with the U.S. have continued taking a toll on China’s economy during the third quarter and a trade truce is the only way to put the EM giant back on its feet,” said Ipek Ozkardeskaya of London Capital Group. “In this respect, and despite the rising tensions with the U.S., Chinese leaders are working hard to find an agreement with their U.S. counterparts. With economic growth poised on the brink of the critical 5% level, Xi needs a deal more than ever.”
U.K. Prime Minister Boris Johnson is now on the battle path to sell his new Brexit deal to a skeptical parliament ahead of a critical vote on Saturday. Johnson doesn’t have a majority in the House of Commons, and Northern Ireland’s Democratic Unionist Party has said they’ll refuse to sign it, so the prime minister must now convince reluctant holdouts from his own party and try to persuade opposition Labour politicians to vote for the deal. “This is our chance in the U.K. as democrats to get Brexit done,” Johnson said in a press conference in Brussels yesterday. “People want to move this thing on, it’s been going on for a long time.” If Johnson’s new Brexit deal doesn’t pass, EU leaders have left open the possibility of allowing Britain to request another extension, which Johnson has repeatedly vowed he will not do. Any attempt to leave the EU without a deal will be met with a legal challenge and Johnson may have to see his deal tested in a general election or even a second referendum. Voting is expected to finish up by 2:30pm London time tomorrow.
Federal Reserve Vice Chairman Richard Clarida said in a speech this morning that the central bank’s policymakers don’t have their minds made up about where policy will be headed and will have to weigh conditions when they meet at the end of the month. “Looking ahead, monetary policy is not on a preset course, and the Committee will proceed on a meeting-by-meeting basis to assess the economic outlook as well as the risks to the outlook, and it will act as appropriate to sustain growth, a strong labor market, and a return of inflation to our symmetric 2 percent objective,” Clarida said in a speech in Boston. While Bank of Kansas City President Esther George said in another speech that cutting interest rates now to insure against economic risks could also lead to overheating and put the country’s financial stability at risk. “The ability of the Federal Reserve to offset any unintended effect related to financial stability at this stage of the business cycle seems limited,” George said in a speech in Denver. “One potential cost is that such an insurance policy risks overheating the sectors of the economy that are already performing well,” which could lead to “a misallocation of resources toward those interest rate-sensitive sectors,” she said.
AT&T and Elliott Management are talking about the issues the activist hedge fund brought forward last month when it revealed a $3.2 billion stake in the company and pushed for change at the telecom and media giant. Elliott sent the company a four-part proposal for changes, and is pushing for AT&T to cut costs, scale back it expansion efforts, and review “any assets that do not have a clear, strategic rationale for being part of AT&T.” The fund says the changes it is pushing for could lift AT&T shares by at least 60% through 2021. The Wall Street Journal reported the talks could lead to a resolution between the two parties as soon as this month, though talks could still fall through.
Coca-Cola shares are up nearly 3% this morning after the beverage giant reported quarterly profit of $0.56 per share, with higher than expected revenue at $9.5 billion. While soda consumption has been declining in the U.S., Coca-Cola has been driving sales with drinks containing less sugar and smaller packaging, and its Coke Zero Sugar product once again saw double-digit growth. “We were very impressed with KO’s better-than-expected topline, although we note it was entirely driven by price mix (+6%) & partially offset by concentrate sales down 2% (due to shipment timing),” said Wells Fargo’s Bonnie Herzog. And shares of E*Trade Financial are up almost 5% today after it reported quarterly earnings of $1.08 per share, beating analyst estimates by $0.07. E*Trade announced earlier this month that it was dropping commission fees on online U.S. stock, ETF, and options trades. “With this new commission schedule we are further raising the bar, delivering an unrivaled experience at price points that cannot be beat,” said E*Trade CEO Mike Pizzi at the time.
Stocks We’re Watching
Assembly Biosciences (NASDAQ: ASMB): Shares of this biotech are up a whopping 83% over the last week after the company reported positive data on hepatitis B virus (HBV) core inhibitor candidates ABI-H0731 and ABI-H2158, which Assembly will discuss in a session at the American Association for the Study of Liver Diseases (AASLD) Annual Meeting next month. “We are very encouraged that the final Phase 2a data indicate that the addition of 731 to nucleos(t)ide therapy not only produces faster and deeper declines in HBV DNA and pgRNA for patients, but also subsequent declines in the surrogate markers predictive of cccDNA pool depletion,” said John McHutchinson, AO, MD, CEO and President of Assembly. “These data combined with a favorable safety and tolerability profile following long-term treatment indicate the potential for our core inhibitor regimens on the path to HBV cure. We continue to advance our clinical portfolio of core inhibitors with interim data from the Phase 1b trial of 2158, our second generation candidate, demonstrating potent antiviral activity as a mono therapy over 14 days of treatment.”
Limelight Networks (NASDAQ: LLNW): Limelight shares are up 21% this week after it topped revenue estimates in its Q3 earnings results. Revenues gained 4% year-over-year and 12% sequentially to a Q3-record of $51.3 million, which also marks the company’s second-highest revenue number ever. “We believe the fourth quarter will see year-over-year acceleration in revenue growth and meaningful improvements in gross margin and overall profitability,” said Limelight CEO Bob Lento. “Even at the low end of our guidance, fourth quarter growth rates exceed 35% year-over-year and in excess of 15% sequentially. These healthy trends validate our strategy to focus on video-based edge services. We believe this positions us for a strong 2020 and beyond and will lead to the creation of tremendous shareholder value.”