Plus, Trump’s Senate impeachment trial formally gets underway today, White House trade advisor Peter Navarro spelled out what the U.S. is looking for in the next round of trade negotiations with China, and Morgan Stanley reported an earnings beat.
Stocks were higher to start Thursday with the Dow adding 150 points, or 0.5%. The S&P 500 rose 0.5%, breaking above 3,300 for the first time, while the Nasdaq gained 0.6%.
The Dow closed above 29,000 for the first time Wednesday following the signing of the “phase one” trade agreement between the U.S. and China. As he signed the trade truce, President Donald Trump promised ongoing negotiations with China set to begin “very, very shortly” and that tariffs on $360 billion worth of Chinese goods would remain in place as leverage. White House trade advisor Peter Navarro told CNBC this morning that, as part of the “phase two” deal, the Trump administration wants China to stop subsidizing its state-owned enterprises and to stop “cyber intrusions.” “It’s just insane that Chinese government officials continue to hack into American businesses and steal trade secrets,” Navarro said. “It’s very destructive to our businesses.” In other trade news, the Senate passed the new United States-Mexico-Canada Agreement—or USMCA—this morning, and the three-nation pact will now head to Trump for signature and still needs Canada’s approval before going into effect.
Trump’s impeachment trial gets underway today with the House managers reading the two articles of impeachment to the Senate, and U.S. Chief Justice John Roberts swearing in all 100 senators as jurors. While there’s still uncertainty around whether or not witnesses will be called during the trial, new information has come to light that could impact proceedings. Rudy Giuliani associate Lev Parnas told MSNBC host Rachel Maddow last night that President Trump lied when he said he didn’t know what Parnas and Giuliani were up to in Ukraine. “President Trump knew exactly what was going on,” Parnas said in the interview. Meanwhile, Ukrainian police have opened an investigation into possible illegal surveillance on the former U.S. ambassador to Ukraine Marie Yovanovitch when she was serving in the country after text messages between Parnas and an associate hinted to such monitoring. And according to a report from the Government Accountability Office (GAO) released this morning, the Trump administration broke the law by withholding congressionally approved military aid to Ukraine last summer as the aid was withheld “for a policy reason, which is not permitted under the Impoundment Control Act.” “Faithful execution of the law does not permit the President to substitute his own policy priorities for those that Congress has enacted into law,” the GAO report said, while also noting that the Constitution “specifically vests Congress with the power of the purse.” Senator Chris Van Hollen, a Maryland Democrat, said in a statement regarding the GAO report, “This violation of the law reflects a contempt for the Constitution and was a key part of his corrupt scheme to abuse the power of the presidency for his personal political purposes. The GAO’s independent findings reinforce the need for the Senate to obtain all relevant documents and hear from key fact witnesses in order to have a fair trial.”
The last of the big bank stocks reported earnings this morning. Morgan Stanley shares are up nearly 8% following the firm reporting that Q4 profit rose 46% to $2.24 billion, or $1.30 per share, beating analysts’ estimates. “We delivered strong quarterly earnings across all of our businesses,” said CEO James Gorman in an earnings release. “Firmwide revenues were over $10 billion for the fourth consecutive quarter, resulting in record full year revenues and net income. This consistent performance met all of our stated performance targets.” Morgan Stanley management also discussed its 2 year objectives on a call with analysts, including boosting the pretax margin in its wealth management business to a range of 28 – 30% and lower its efficiency ratio to a target range of 70 – 72% with the return on tangible common equity coming in between 13 – 15%.
Bombardier shares are down 30% this morning after the company warned of lower 2019 profits as it may have to significantly write down the value of its partnership with Airbus on the A220 jets. Bombardier sold control of the A220 to Airbus in 2018 in an effort to raise cash but said that while the program was “winning” with airlines, the project appears to need more cash to ramp up production, and would generate lower returns and take longer to break even. “This may significantly impact the joint venture value,” the company said. “Bombardier will disclose the amount of any write-down when we complete our analysis and report our final fourth quarter and 2019 financial results.”
And XPO Logistics shares are up 13% after the company said that it was considering “strategic alternatives,” indicating that management may be willing to take steps such as selling assets or pursuing a merger as they are unhappy with the valuation the market has assigned to the stock. “We continue to trade at well below the sum of our parts and at a significant discount to our pure-play [logistics] peer,” said CEO Bradley Jacobs in a press release. “That is why we believe the best way to continue to maximize shareholder value is to explore our options.” Cowen analyst Jason Seidl said in a note that the firm believes “XPO shares are undervalued at 8 times 2021 [estimated] Ebitda, at the low end of its historical 7 times to 11 times range. Furthermore, based on the news announced today, we view shares are undervalued from a SOTP standpoint.”
Stocks We’re Watching
Rockwell Medical (NASDAQ: RMTI): Rockwell Medical shares jumped 31% yesterday after it announced that it has entered into a license and supply agreement with a subsidiary of Sun Pharmaceutical Industries for the rights to commercialize Rockwell’s Triferic in India. “We are pleased to establish this important relationship with Sun Pharma, which has a strong presence in the nephrology segment in India,” said Rockwell President and CEO Stuart Paul. “With a dedicated business unit, market leading sales force and medical support personnel, together with its experience with license and distribution partnerships with large global pharmaceutical companies, Sun Pharma is well positioned to ensure that hemodialysis patients have access to our innovative therapeutic. This is a meaningful advancement for Triferic as we expand our global footprint and drive the long-term value of Triferic.”
Fluent Inc (NASDAQ: FLNT): Fluent shares surged as much as 78% on Wednesday following the company’s announcement that it expects to exceed its guidance for Q4 and full-year 2019. Fluent said it expects full-year revenue to come in between $280.8 million to $281.8 million, representing 12% year-over-year growth. “The improvement in our core commercial trending we noted in early November gained considerable further traction as the quarter progressed, closing out the year on a particularly strong note,” said CEO Ryan Schulke. “We look forward to discussing our final full-year results in March.”