Cracks Are Starting To Appear In Consumers’ Confidence

Plus, trade discussions between the U.S. and China have finally been scheduled, the Ukraine whistleblower scandal continues, and IPOs have had a rough week.

Stocks were slightly higher Friday morning, with the Dow up 96 points, or 0.4%, on the open. The S&P 500 gained 0.3% to open, while the Nasdaq added 0.2%.

Optimism among investors this morning came as reports were released that the trade talks between the U.S. and China are set to resume on October 10 – 11. News of the scheduled meeting bolstered the conviction that tensions between the two countries have eased over the last month. While it remains to be seen whether a trade deal will be reached at this upcoming meeting, President Donald Trump said in a speech this week at the UN that he will not accept a “bad deal” with China.

Speaking of Trump… His comments recorded at a closed-door gathering of U.S. diplomats yesterday look likely to add fuel to the impeachment fire. Trump labelled the whistleblower—who is protected under federal law—“almost a spy” and suggested their actions were treasonous. “You know what we used to do in the old days when we were smart? Right? The spies and treason, we used to handle it a little differently than we do now,” Trump said in a thinly veiled threat. After reports emerged of Trump’s statements, Republican Senator Susan Collins said, “Whistleblowers have been essential in bringing to the public’s attention wrongdoing, fraud, waste, abuse, law-breaking, and I very much disagree with the president’s characterization.” Meanwhile, House Speaker Nancy Pelosi said this morning that it appears the Justice Department is engaged in covering up Trump’s actions, which she says imperils national security and U.S. elections. According to Pelosi, Attorney General William Barr has “gone rogue” in directing Acting Director of National Intelligence Joseph Maguire to withhold the whistleblower’s complaint from Congress. “I think where they are going is a cover-up of the cover-up,” Pelosi said.

Cracks are starting to appear in consumer confidence. According to the University of Michigan’s Surveys of Consumers showed that a near record number of consumers cited anxiety about the trade war with China as a negative factor weighing on the economy. “Trade policies have had the greatest negative impact on consumers, with a  near record one-third of all consumers negatively mentioning trade policies in September when asked to explain in their own words the factors underlying their economic expectations,” Said Richard Curtin, Surveys of Consumers’ chief economist. “The overall trends in the sentiment index remain quite favorable, but show signs of a slow erosion.” While the survey’s final reading for the month rose above last month’s lowest level in almost three years, the results also signal that consumers may offer the economic expansion less of a boost than they have in recent quarters, despite a solid job market. “The problem is so much is riding on the consumer that any sign of consumer spending flagging raises the hairs on the back of your neck,” said Nela Richardson, investment strategist at Edward Jones. “But overall, it still looks like the consumer is in the driving seat and will push us past some of the political uncertainty.”

Moving on to Brexit drama, Scottish First Minister Nicola Sturgeon said today that it’s time for members of Parliament to remove Prime Minister Boris Johnson in an effort to remove the risk of a no-deal Brexit. Her Scottish National Party would be willing to back the Labour party’s leader, Jeremy Corbyn, or another MP as a temporary premier. In other Brexit news, expectations are low for today’s talks between the U.K. and EU today. European officials have reportedly given up hope of finding a way forward and have said that they will refuse to negotiate on the matter at a leaders’ summit in mid-October.

Thursday was a bad day for IPOs. First, Peloton debuted at $27, below its IPO pricing of $29 per share, and then quickly dropped -11% on its first day of trading, joining a growing list of big-name IPO flops this year. “We obviously wish the stock traded better on the first day, but we’re in it for the long haul and are excited for capital to continue to grow our business,” Peloton CFO Jill Woodworth said. After Peloton’s rough opening, Endeavor Group Holdings pulled its IPO just hours before it was supposed to begin trading. The offering now won’t happen until next year, at the earliest, according to a person familiar with the matter. “Investors are taking recent losses in IPOs – and investors are fleeing for safety in larger caps and Treasurys,” said Kathleen Smith, principal at Renaissance Capital, which manages IPO-focused ETFs.

Stocks We’re Watching

WillScot Corp (NASDAQ: WSC): Shares of this mobile office trailer rental services company jumped as much as 8% yesterday on reports that it is looking at making an offer to buy Mobile Mini for about $1.2 billion. Analysts are positive about a possible deal, and Reuters reported that activist investor Elliott Management has a stake in Mobile Mini and will support an acquisition. 

Semtech Corp (NASDAQ: SMTC): Shares of this chip stock are up 5.6% over the week on reports that Amazon may be using its LoRa technology for its new Sidewalk low-bandwidth network for keeping track of IoT devices in and around users’ homes. While it can’t quite be confirmed if Amazon is using Semtech’s LoRa, the announcement of the new product appears to be a win for Semtech and Piper Jaffray wrote that it could take the company’s LoRa “to the next level, with significant proliferation and growth opportunities.” Piper Jaffray reiterated its Overweight rating, and increased its price target to $55 – 12% higher than the current price.

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