Plus, the ADP jobs report was mixed, U.K. Prime Minister Boris Johnson’s bad week gets worse, Apple is taking advantage of cheap debt, and Facebook can now be used as a dating app.
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Stocks surged higher to start Thursday, with the Dow 459 points, or 1.7%, higher at the opening bell. The S&P gained 1.5%, and the Nasdaq was up 1.8%.
“Escalating U.S.-China trade tensions have been the biggest equity headwind for months, so a relief rally on news high-level trade talks are planned for early October is no surprise,” said Alex Young, FTSE Russell’s managing director of global markets research. “The bottom line is that stocks need earnings growth to move forward, and you can get that without progress on U.S.-China trade.”
“Early October.” That’s when the thirteenth round of face-to-face talks between officials from the U.S. and China will happen in Washington. That’s according to the Chinese Ministry of Commerce, who said the loose plans were made by phone between Vice Premier Liu He, U.S. Treasury Secretary Steven Mnuchin, and U.S. Trade Representative Robert Lighthizer. “Both sides agreed they should work together and take practical actions to create favorable conditions for the negotiations,” He said in a statement issued Thursday. The Chinese commerce ministry said lower-level officials will have “serious” discussions in the meantime to prepare for the talks, and the USTR said in a statement that officials will seek “to lay the ground-work for meaningful progress.” “Neither China nor the U.S. want to be blamed by the rest of [the] world for escalating the trade war and damaging the world economy,” said Zhou Xiaoming, a former commerce ministry official and diplomat. “But the talks don’t mean the two sides will inch closer or that their stances [will] soften.”
U.S. companies added 195,000 workers in August, according to ADP, beating Wall Street estimates, while jobless claims rose slightly to 217,000 despite no sign of rising or widespread layoffs. While many economists are watching for companies to start laying off workers, two indicators—hiring for temporary help positions and weekly working hours—have declined so far this year even as unemployment has remained near a half-century low. Such softening could be the canary in the coal mine for the jobs market as weakness in these two indicators often precedes wider trouble. Businesses worried about falling demand often reduce hours and temporary staff first before laying off full time workers. “The concern is that companies have already cut back on hours and the next shoe to drop is headcount,” said Grant Thornton Advisors’ chief economist Diane Swonk.
In Brexit news, members of Parliament derailed Prime Minister Boris Johnson’s do-or-die approach to exiting the EU on October 31—a bill that the House of Lords said they will complete passage on by Friday—and rejected his plan for a general election yesterday. Johnson is set to appeal directly to the public in a speech this afternoon aimed at triggering a general election to break the Brexit impasse. Early Thursday, Johnson’s bad week got worse when his brother Jo resigned as MP and minister citing tension between “family loyalty” and the “national interest.”
Despite sitting on a $210.6 billion cash pile, Apple is still looking to get some of the ultra-cheap money that’s up for grabs in the bond market. According to a prospectus filed yesterday afternoon, the iPhone maker borrowed $7 billion in its first bond sale in nearly two years for “general corporate purposes,” including share buybacks, payment of dividends, funding for working capital, and acquisitions. Apple joins a slew of companies that rushed to borrow in investment-grade debt following the Labor Day holiday, taking advantage of near all-time low yields. Tuesday saw a record 21 bond sales from names like Disney, Caterpillar Financial, and Capital One Financial, totaling nearly $27 billion, while more than a dozen companies priced deals on Wednesday. While concerns are growing that government bonds might be in a bubble, there is little to suggest that central banks are going to do much to stop the debt party any time soon as traders predict upwards of 58 rate cuts around the globe over the next twelve months, totaling 16% in global reductions.
Match shares are down more than -6% Thursday after Facebook said this morning that its “Facebook Dating” feature would be launching today. In a blog post, the social media giant said it will be giving people the ability to “start meaningful relationships” through things like common interests, events, and groups. “It takes the work out of creating a dating profile and gives you a more authentic look at who someone is,” the Facebook post said. Instagram users will also be able to integrate their posts directly into their “Facebook Dating” profile, and will be able to add followers to “Secret Crush” lists in the Instagram app. “Right now it’s a really feel-good mission, it’s just connecting people,” said Nathan Sharp, the product executive leading Facebook’s dating feature. “There are no plans for ads and no plans for subscriptions.” Facebook’s effort could be significant competition for Match Group, which owns Tinder, currently the most popular dating app. SunTrust Robinson Humphrey issued an ill-timed upgrade for Match this morning, saying in a note that MTCH is seeing “sustained momentum” in the third quarter and that the company has “further room to grow.”
Lyft shares are a Buy according to Deutsche Bank. “We initiate coverage of Lyft with a Buy rating and think the stock may be bottoming. The company reported robust 2Q results, and yet the stock has been weak,” Deutsche Bank research analyst Lloyd Walmsley said in a note to clients. “We think the recent sell-off in Lyft’s shares presents an attractive entry point, particularly for longer-term investors who can stomach a period of volatility given the uncertainty around when the market will start to give the company credit for an improving ramp towards profitability.” Meanwhile, Slack shares are down nearly -5% after the workplace messaging service reported an adjusted quarterly loss of $0.14 per share, less than the $0.18 loss expected by analysts, in its first report since its direct listing. It’s a signal that strong competition may be denting Slack’s rapid rise. And Mallinckrodt shares are down -42% after the company said it was weighing options including bankruptcy to help absorb the costs from opioid lawsuits where their potential liabilities could run into the tens of billions of dollars.
Stocks We’re Watching
Stereotaxis (OTC: STXS): It was reported earlier this week that shares of this St.Louis-based medical device maker will begin trading on the NYSE on September 6, less than a month after the company announced $25 million private placement equity financing. The STXS will continue trading OTC through the close of the market today. “This is another milestone in our effort to improve awareness of our differentiated technology, clinical value, and growth opportunity,” said Stereotaxis chairman and CEO David Fischel in a statement. “Listing on the NYSE American should support a more robust capital market for existing and new shareholders.”
Coupa Software (NASDAQ: COUP): Shares of Coupa Software are up 132% so far this year and jumped 9.7% in after-market trading yesterday after the company reported a revenue and billings beat in its second quarter yesterday. Coupa reported earnings of $0.07 per share, with revenue surging 54% to $95 million, while analysts expected the company to report a loss of $0.10 per share on revenue of $85.4 million. “These results demonstrate our continued momentum in delivering measurable and repeatable value to our customers,” said CEO Rob Bernshteyn. “By extending our leadership standing in Business Spend Management (BSM), we feel well positioned on our path to $1 billion in revenue.”