Powell finally spoke, China retaliated, Hasbro just bought the owner of Peppa Pig, and this stock was just named Guggenheim’s “best idea.”
Stocks fell on the open Friday as the Dow traded 31 points lower, or -0.1%, the S&P dipped -0.3%, and the Nasdaq pulled back -0.4%.
The speech on everyone’s mind this week finally happened this morning as Federal Reserve Chairman Jerome Powell addressed the crowd at Jackson Hole. Powell said in the speech that the Fed will do what it can to sustain the current economic expansion: “Our challenge now is to do what monetary policy can do to sustain the expansion so that the benefits of the strong jobs market extend to more of those still left behind, and so that inflation is centered firmly around 2 percent.” Powell went on to say that while the economy has “continued to perform well overall,” there is no “rulebook” for the trade war between the U.S. and China and that “trade policy uncertainty seems to be playing a role in the global slowdown,” adding that “fitting trade policy uncertainty into this framework is a new challenge” and there are “no recent precedents to guide any policy response to the current situation.” President Trump took to Twitter and again ripped into Powell after the speech, comparing him to Chinese President Xi Jinping. “My only question is, who is our bigger enemy, Jay Powel or Chairman Xi?” Trump tweeted, misspelling Powell’s last name.
In other trade talk, China announced it would retaliate against Trump’s latest round of tariffs by slapping its own tariffs on $75 billion worth of U.S. goods. The Chinese State Council said that the tariffs will range from 5% to 10% and will go into effect in two batches, the first effective on September 1 and the other on December 15, mirroring the Trump Administration’s timeline for its new tariffs. “In response to the measures by the U.S., China was forced to take countermeasures,” the Council said in a statement. “The Chinese side hopes that the U.S. will continue to follow the consensus of the Osaka meeting, return to the correct track of consultation and resolve differences, and work hard with China to end the goal of ending economic and trade frictions.” The extra 5% tariffs China is imposing starting next month will hit products including soybeans and crude oil. The resumption of a suspended extra 25% duty on U.S. automobiles will resume on December 15, with an additional 10% on top of that for some vehicles. With existing general duties on cars considered, the total tariff charged on U.S.-made cars will be as high as 50%. “China is back with a vengeance and today’s action has taken the ongoing trade war between the two countries into another territory,” said TF Global Markets chief market analyst Naeem Aslam. “Of course, the biggest fear for markets now is the counter reaction from Donald Trump who has been giving the wrong signal to markets that trade war issues aren’t a problem.”
Stocks fell sharply after Trump tweeted, “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.” According to CNBC, Trump is reportedly now meeting with his top trade advisors at the White House amid the slew of tweets that, among other things, characterized China President Xi Jinping as an “enemy.” Trade advisors Peter Navarro and Robert Lighthizer were seen just outside the Oval Office moments before the president’s tweets were published.
Hasbro is buying the U.K.’s Entertainment One in an all cash, $4 billion deal, the toymaker’s biggest ever acquisition. This marks a major push into media for Hasbro and gives the toymaker a studio that has experience making movies, TV, animation, and music, and gives it children’s brands like Peppa Pig which will help it expand into China. “Hasbro will leverage eOne’s immersive entertainment capabilities to bring our portfolio of brands that have appeal to gamers, fans and families to all screens globally,” Hasbro’s CEO, Brian Goldner, said. “With eONe’s content creation capabilities across TV and film, we can reach audiences on all screens, from major distributors to broadcast and cable to new media platforms, including streaming. It fuels experiences with Hasbro brands across the fan economy.” Hasbro will pay 5.60 pounds per share and will finance the deal with debt and $1.0 billion to $1.25 billion in cash from equity financing, the companies said. Entertainment One’s shares rose above the offer price Friday.
HP said CEO Dion Weisler is leaving the company to attend to a family health matter. Enrique Lores, head of the company’s printing business, will take over. Lores has been working with HP’s board on a “comprehensive global review of the company’s strategy and business operations” over the past year, and is expected to discuss some of his conclusions at a company event on October 3. “The need for us to keep reinventing is more important than ever,” Lores said. “I have great confidence in the direction we’re gong to be taking on the company.” The change in leadership is expected to be seamless and it should help to have a representative from the printer unit running the company and making that business a priority as HP continues to try to transform itself in the midst of a stagnant PC market and a printer business that faces an uncertain future in the digital era when offices are using less paper. Shares fell in after-hours tradingThursday and are down -2.65% Friday morning on concern HP’s profitable supplies business is still struggling. Toner and cartridge sales have been dented by third-party suppliers, particularly in China, that sell cheaper alternatives. Evercore ISI downgraded the stock to ‘in line’ as it believes “the stock may languish until we see an improvement in the Supplies revenue trajectory, something we currently do not have a line of sight for (management does not expect Supplies revenue to grow in FY20).”
Guggenheim named Nike as a ‘best idea,’ saying that concerns over tariffs and market conditions have pushed the athletic apparel and shoe maker lower, creating a compelling buying opportunity. “While we acknowledge NKE’s current robust multiple, with the current global uncertainty, we believe investors should embrace NKE’s 1) strong recent results (both reported and in CC), 2) focus on DTC/digital, 3) supply chain improvements/diversification, and 4) the company’s robust innovation pipeline. “Additionally, we believe NKE is one of the best-positioned names in our group to mitigate tariff risk through potential price increases.”
Stocks We’re Watching
Tandem Diabetes Care (NASDAQ: TNDM): Shares of this insulin pump maker are up 88% in the last twelve months, and 18.35% in the last week. The company reported a 290% surge in global pump shipments compared to the same period last year when it reported its Q2 earnings results earlier this month. Tandem also reported an operating loss of just $1.8 million for the quarter. And considering the company expects 2H 2019 revenue to grow 25% from the first half, profitability appears to be on the horizon for Tandem.
Keysight Technologies (NYSE: KEYS): This stock is up a whopping 20.41% this week after the company delivered an earnings beat in its fiscal third quarter report yesterday, with both top- and bottom-line results coming in ahead of consensus estimates. Revenue in its Q3 jumped 8% to $1.09 billion, compared to analyst expectations of $1.05 billion. Adjusted net income came in at $239 million, or $1.25 per share, while the Street was expecting adjusted profits of just $1.02 per share. Keysight finished the quarter with $1.4 billion in cash on its balance sheet.