Plus, the U.S. and China are close to finalizing parts of the phase one trade deal, Intel delivered an earnings beat, and PG&E shares are in free-fall.
The Dow was up 107 points, or 0.4%, this morning, while the S&P 500 added 0.2% and the Nasdaq gained 0.3%.
The U.S. and China have made progress in trade negotiations and are close to finalizing parts of the phase one deal, the Office of the U.S. Trade Representative said this morning. This follows a trade discussion between U.S. Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin, and Chinese Vice Premier Liu He. “They made headway on specific issues and the two sides are close to finalizing some sections of the agreement,” the trade office said. “Discussions will go on continuously at the deputy level, and the principles will have another call in the near future.”
Intel delivered an earnings beat after hours yesterday, which sent the stock soaring more than 7% higher this morning. The technology giant posted Q3 earnings per share of $1.42 on revenue of $19.2 billion, compared to Wall Street consensus estimates of earrings per share of $1.23 on revenue of $18.1 billion. “We’ve been on a multiyear journey to reposition Intel’s portfolio to take advantage of the exponential growth of data,” said Intel CEO Bob Swan in the company’s earnings release. “Our third-quarter financial performance underscores our progress as our data-centric businesses turned in their best performance ever.”
But It wasn’t all good news on the earnings stage. Amazon shares are down nearly -3% after the e-commerce giant reported weaker-than-expected Q3 results late yesterday. The company posted its first year-over-year quarterly profit decline since early 2017, with its net income dropping to $2.1 billion, down -26% from the $2.9 billion reported in the same period last year. While revenue grew 24% to $70 billion in the quarter, earnings per share fell short at $4.23 versus analyst estimates of $4.62. Amazon also revised its Q4 revenue down to a range between $80 and $86.5 billion, well below the Street’s average estimate of $87.4 billion, indicating a light holiday sales outlook. But despite the earnings miss and weak guidance, analysts are still overwhelmingly positive on the stock. Amazon has 54 Buy ratings, two holds, and zero sells, though several analysts did cut their price targets for the stock in the wake of the earnings release. “With revenue growth accelerating for the second quarter in a row and a strong history of the company’s investments in fulfillment and infrastructure driving faster growth and high returns, we continue to believe Amazon represents one fo the best risk/rewards in internet,” Goldman Sachs analysts lead by Heath Terry wrote in a note to investors. The firm maintained its Buy rating on the stock but reduced its price target to $2,200 down from $2,350.
French President Emmanuel Macron blocked the European Union’s attempt to delay Brexit for another three months, raising the prospect the U.K. might not know whether it will get an extension or not until just hours before it is scheduled to leave the bloc on October 31, even without a deal. Macron wants to grant a delay until November 30, or sooner, to pressure the U.K. House of Commons to back Boris Johnson’s deal, while others say that deadline is too much of a gamble as it could lead to a no-deal Brexit and an extension until January 31, 2020, allows time for a general election. Johnson said yesterday that he will seek an election on December 12, but he will need a two-thirds majority to call an election and the Labour party has said it won’t support the call until there’s no risk of a no-deal Brexit. EU diplomats will have until Tuesday to come to a decision about an extension, and if no decision is made, the EU may hold an emergency summit of leaders to discuss prior to the October 31 deadline.
Shares of PG&E are down -25% this morning as the bankrupt utility scrambles to restore power to thousands of homes and businesses impacted by another round of preemptive power outages to prevent wildfires, even as the company is preparing to cut electricity again across much of its territory this weekend in anticipate of the strongest wind storm in years. News also broke late yesterday that a PG&E transmission tower broke near the origin of the Kincade Fire in Sonoma County. The 230-kilovolt PG&E power line went down at around 9:20pm local time, and the Kincade blaze was reported just five minutes later. The fire has prompted authorities to order the evacuation for more than 2,000 people as it has already destroyed 49 structures and incinerated 16,000 acres. As grim as the situation may be, generator stock Generac Holdings is up more than 5% this week as it has seen a “three, four hundred percent [increase] in [sales] volumes out in California” as large-scale power outages in the state become the new normal. “This caught us totally off guard. We didn’t see the largest utility in the U.S. coming out and saying ‘look, our only solution is to turn the power off,’” said Generac Holdings CEO Aaron Jagdfeld. “The (PG&E) CEO came out I think a couple of days ago and said a decade, it could be 10 years of this kind of activity.”
Stocks We’re Watching
MediPharm Labs Corp (OTC: MEDIF): Medipharm shares are up nearly 15% this week after it announced it has entered into a four-year strategic alliance with Loyalist College of Applied Arts & Technology for education, training, development, and applied research projects with the college’s Cannabis Applied Science program. “MediPharm Labs is pleased to partner with the forward-thinking team at Loyalist to help shape the future of the cannabis industry through innovative research and by contributing to the development of the next generation of cannabis scientists and professionals,” said MediPharm CEO Pat McCutcheon. “The possibilities for unique product development and further advancements in cannabis processing methodologies and technology are very exciting, made possible by uniting our respective skills and expertise through this unique private/public partnership.”
Spark Therapeutics (NASDAQ: ONCE): Shares of this gene therapy stock are up nearly 8% this week. News broke late yesterday that the U.S. Federal Trade Commission has recommended clearing Roche’s acquisition of Spark, which could mean the deal will close before the end of this year. RBC Capital Markets Kennen MacKay wrote in a note to clients that the firm sees “a high likelihood fo the deal closure before year-end 2019 (in line with Roche’s guidance) and narrowing the spread toward the $114.50 per share proposed acquisition price of Spark shares.”