“The Ice Is Thawing” Between The U.S. & China On Trade

Plus, retail sales rose more than expected in August, Apple got a big downgrade, and the WeWork saga continues.

Stocks were higher to start Friday, with the Dow adding 78 points, or 0.3%, at the open. The S&P traded 0.2% higher, while the Nasdaq hovered just above the flatline.

24 hours after the fact, it seems not only was/is an interim trade deal with China an option on the table heading into next month’s negotiations, but President Trump has said he would consider such a deal. That’s a far cry from yesterday’s “absolutely not” answer from a senior administration official when asked about a possible interim deal. “If we’re going to do the deal, let’s get it done,” Trump told reporters as he was heading to a congressional Republican retreat in Baltimore. “A lot of people are talking about it, I see a lot of analysts are saying an interim deal – meaning we’ll do pieces of it, the easy ones first. But there’s no easy or hard. There’s a deal or there’s not a deal. But it’s something we would consider, I guess.” In other trade war news, China said it now plans to exclude more American goods from tariffs in an continued effort to ease tensions. The Chinese Ministry of Commerce said Friday that it will now exempt agricultural items such as soybeans an port from additional duties. “The ice is thawing,” said Chua Hak Bin, an economist at Maybank Kim Eng Research Pte. in Singapore. “China’s reciprocity to Trump’s goodwill gesture will set the stage for more cooperative trade talks.”

The Dow and S&P 500 are within striking distance of fresh all-time highs this morning on positive trade news and after the Commerce Department said retail sales rose more than expected in August. Last month, retail sales increased 0.4%, down from 0.8% in July, driven higher by healthy online sales and a surge in car buying. Excluding new cars and trucks, sales were flat for the first time since February. While the modest slowdown shows signs that consumer confidence has slipped a bit as the U.S.-China trade war intensified last month, it also demonstrates how consumers are continuing to buoy an economy beset by risks. Sales jumped 1.8% for auto dealers and online retail sales rose 1.6%, roughly the same amount as in July when Amazon held its annual Prime Day shopping event.

The WeWork saga continues after reports that the company’s IPO value could fall below $15, with a total valuation of around $10 to $12 billion, which is a far cry from its private valuations as high as $47 billion. We Co.—WeWork’s parent company—announced this morning that it will revamp a stock structure that previously gave co-founder and CEO Adam Neumann unlimited sway over the board by cutting his vote count ahead of its closely-watched IPO amid growing investor concerns. In an amended S-1 filing, We Co. said that it is changing its high-vote stock from 20 votes per share to 10 votes per share, curtailing Neumann’s voting power. The company—which will list on the Nasdaq under the ticker “WE”—also eliminated a provision that would have allowed Neumann’s wife, who is listed as a founder, and the chief brand and impact officer, to lead the search for his successor should he ever die or become permanently disabled, and “no members of Adam’s family will sit” on the company’s board. CNBC’s Jim Cramer said Friday morning, “Stop the WeWork deal. We don’t want that deal. I just wish they would go away.” Cramer raised concerns that the negative sentiment surrounding the slashed valuation for the company could be contagious to the overall market. “There are certain deals that can come and they can just really take the air out of any market,” the host said.

Shares of Apple are down -2.47% at the time of writing after Goldman Sachs significantly slashed its price target for the iPhone maker, predicting -26% downside because of a “material negative impact” on earnings for the accounting method the company will use for an Apple TV+ trial. “We believe that Apple plans to account for its 1-year trial for TV+ as a ~$60 discount to a combined hardware and services bundle,” Goldman analyst Rod Hall wrote in a note to clients. “Effectively, Apple’s method of accounting moves revenue from hardware to Services even though customers do not perceive themselves to be paying for TV+. Though this might appear convenient for Apple’s services revenue line, it is equally inconvenient for both apparent hardware ASPs and margins in high sales quarters like the FQ1’20 to December.” Apple said at its event on Tuesday that TV+ pricing will be $4.99 per month and will be included for free for the first 12 months with a hardware purchase.

Etsy shares are up nearly 3% this morning after Wedbush upgraded the e-commerce company. “We upgrade ETSY to OUTPERFORM as we now see a critical mass of new initiatives, highlighted by Etsy Ads and free shipping, that can drive stronger GMS growth and margin expansion over time,” Wedbush wrote in a note. “We particularly like the timing with both Etsy Ads and free shipping launching into the holiday season supported by Etsy’s brand marketing push, where it is seeing early signs of strong ROI on TV and Social.” Advanced Auto Parts shares are also up 1.5% after Citigroup upgraded the auto parts retailer from neutral to Buy, citing sales momentum and other factors. At the same time, Citi downgraded rival O’Reilly Automotive based on valuation saying, “Although we view O’Reilly as a best-in-class operator with superior supply chain / in-stock rates, strong management expertise and an admirable Pro business, we remain on the sideline because of valuation.”

Stocks We’re Watching

Sintx Technologies (NASDAQ: SINT): Shares of this silicon nitride medical device manufacturing facility company were up as much as 56% yesterday after analyst Edward Woo at Ascendiant Capital initiated coverage of the stock with a Buy rating and a $3 price target – 48.5% higher than the current price. Earlier this week, the company also announced the provisional filing of a new patent titled “Methods of Surface Functionalization of Zirconia-Toughened Alumina with Silicon Nitride.” In a statement announcing the new patent filing, Sintx chairman Dr. Sonny Bal said, “This innovation expands the scope of our technology yet further, by enabling the surface transformation of zirconia-toughened alumina (ZTA), a material widely used in hip replacements worldwide. ZTA has proven durability as a weight-bearing implant for decades, but its surface chemistry precludes bone healing. By 3-D laser-patterning silicon nitride into microscopic surface wells on ZTA, we combined the best properties of two different ceramics into one composed structure.”

Akamai Technologies (NASDAQ: AKAM): Shares of content delivery network and cloud service provider Akamai Technologies is up nearly 49% year-to-date. Earlier this week, the company announced that it has entered into an agreement to acquire Exceda, its largest channel partner in Latin America. “Akamai and Exceda both share the view that there is growing customer demand for Akamai’s Content Delivery Network and cloud security services in Latin America,” Rick McConnell, president and general manager of the company’s web devision, said. “Today, Akamai powers many of the top Latin American retail and large bank websites in the region and securely delivers major online events for regional broadcasters. By combining the Akamai and Exceda teams, we believe we can scale our Latin America business faster, better enable existing and new partners, and improve experiences for more customers.”

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