Plus, good news out of Hong Kong, Hurricane Dorian is making its way to the U.S., and Box shares are soaring.
Stocks opened higher Wednesday as tensions between the government and protesters eased in Hong Kong. The Dow gained 157 points, or 0.6%, at the bell, while the S&P 500 added 0.6%. The Nasdaq gained 0.8%.
“The main news is geopolitical, with less risk in Hong Kong, and Italy and the UK. Investors are reacting positively to the lower geopolitical risks even though there’s still concerns over trade tensions as well as slower economic growth,” said Kate Warne, an investment strategist at Edward Jones. “Overall, it’s a positive day. It’s about offsetting the worries of yesterday which really focused, I think, on geopolitical risks.”
Hong Kong leader Carrie Lam formally withdrew the contentious extradition bill that sparked months of mass protests. The move meets just one of five demands by protesters making it unclear if it will end the demonstrations that have resulted in more than 1,100 arrests. The Hang Sent index in Hong Kong jumped around 4% overnight on reports that the withdrawal of the bill was imminent, while the MSCI Hong Kong Index surged 5.4%. European luxury goods producers including Swatch Group, Kering SA, LVMH SE, and Hugo Boss all traded higher on the news.
Prime Minister Boris Johnson’s Brexit plan is in tatters after an humiliating defeat in Parliament yesterday. After seizing control over the parliamentary agenda late Tuesday, MPs will aim to pass a law banning Johnson from taking Britain out of the EU without a deal on October 31. The legislation being put forward by opposition and “rebel” Conservative Party lawmakers today would force the prime minister to request another delay to Brexit to January 2020 if no deal is reached by Halloween. The U.K. leader has repeatedly rejected a delay and has said he’ll seek a snap general election if a delay law succeeds, though he’ll need a two-thirds majority for an election. Today could also see a vote of no confidence in the government by the opposition. The pound rallied 1% as investors saw a lower risk of a no-deal Brexit following Johnson’s defeat in Parliament. “Sterling has managed to recover some ground against the euro and the dollar as investors price in less probabilities of a hard Brexit, or just take some profits on their pound shorts,” said Valentin Marinov, head of Group-of-10 currency strategy at Credit Agricole SA. “Johnson’s plan of taking the U.K. out of the EU with or without deal on Oct. 31 becomes quite unlikely.”
Gold could surge above $1,600 per ounce in the first half of next year, according to BNP Paribas. The catch? That prediction is based on the Fed issuing a quartet of rate cuts between its meeting this month and June 2020. As nominal yields fall with each reduction, “real rates will move and stay in negative territory, raising the appeal of holding gold,” Harry Tchilinguirian, head of commodity research at BNP Paribas, wrote in a note. However, Fed officials have stated differing opinions on whether there’s a need for a September rate cut at all. St. Louis President James Bullard said that last month’s decline in U.S. manufacturing warrants an “aggressive” cut, while Boston chief Eric Rosengren is unconvinced the central banks needs to cut rates at its upcoming meeting as the economy looks “relatively strong” despite heightened risks.
Hurricane Dorian is drenching the east coast of Florida today, while taking aim at the Carolinas. The center of the Category 2 storm is located roughly 90 miles east of Daytona Beach, Florida. President Trump declared a state of emergency in North Carolina and a storm surge warning was extended into Virginia. The slow-moving storm has devastated the Bahamas, where at least 7 people were killed. Grand Bahama is still 70% under water. “I don’t think there has been a populated area in the entire Atlantic basin in the climatological record that has experienced the severity and the intensity of impacts that Grand Bahama Island and Abaco have experienced in the past two days,” said Ryan Truchelut, president of Weather Tiger in Tallahassee, Florida. Even if Dorian doesn’t make landfall in the U.S., hurricane-force winds are still expected to threaten the coastline from central Florida to North Carolina over the next 36 hours. “Please listen to and follow all evacuation orders,” said North Carolina Governor Roy Cooper in a statement announcing a mandatory evacuation order for the state’s coast. “We have seen the life and death effects of this storm in the Bahamas, and we urge everyone on the islands at the coast to leave.”
Tyson Foods shares are down nearly -6% Wednesday morning after the beef and poultry producer cut its full-year earnings forecast to $5.30 to %5.70 per share, compared to a consensus estimate of $5.94 a share. Tyson cited the impact of a recent fire at a key factory as well as commodity market volatility. “The discrete challenges we’ve encountered this quarter now lead us to believe we will fall short of our previously stated guidance,” said Tyson Foods’ CEO Noel White. Meanwhile, shares of Box were up just over 11% after hedge fund Starboard Value disclosed that it has taken a 7.5% stake in the software company. Starboard is now Box’s biggest active shareholder, and has previously taken ownership positions in tech companies like Marvell, Symantec, and Yahoo.
Stocks We’re Watching
Insulet Corp (NASDAQ: PODD): Shares of Insulet are up nearly 112% year-to-date and more than 42% over the last month. The company is the leader in tubeless insulin pump technology with its Omnipod pump, and it delivered a better-than-expected quarterly report last month that sent shares surging. In Q2, Insulet’s revenue soared 43% year-over-year to $177.1 million, crushing the consensus estimate of $164 million. Earnings per share came in at $0.02 – versus a loss of $0.03 per share in the same period last year.
Alacer Gold (OTC: ALIAF): This miner is up 145% so far this year and is up 5.1% over the last month after Alacer announced positive results from its diamond drilling program for the Ardich Gold Project. In April 2019, Alacer announced a maiden Indicated and Inferred Mineral Resource of 639koz and 96koz from the first 100 diamond core drill holes at Ardich, and recently announced an additional 34 holes, extending the mineralized strike length to over 1,200m. “This is another exciting set of drill results for Ardich and more than doubles the mineralized strike length,” said Alacer president and CEO, Rod Antal. “The objective is to fast track Ardich, leveraging off the existing infrastructure, and provide options to sustain the oxide ore production form the Çöpler District. Ardich has the potential to become a significant component of the Alacer growth story and is our highest priority development project.”