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China Could Agree To A Partial Trade Deal – But There’s A Catch

Plus, the Fed is buying bonds again, PG&E cut power to more than 500,000 households in Northern California, and Roku was just upgraded.

The three major indexes rebounded this morning, with the Dow up 0.6%, the S&P 500 up 0.7%, and the Nasdaq up 0.8%.

Stocks were higher on trade optimism after China indicated that it may be willing to discuss a partial trade deal with the U.S. at the negotiations beginning on Thursday. Bloomberg reported that while Chinese officials are not confident about a broad deal, they are still open to coming to agreement on a partial deal. The catch? China will only accept a partial deal as long as the Trump administration agrees to stop imposing more tariffs on the country, including the two rounds of higher tariffs already scheduled for the remainder of this year. In exchange for agreeing to no more new tariffs, China would agree to non-core concessions like greater agricultural products purchases without giving way on bigger issues at the heart of the trade spat.

The Trump administration effectively stonewalled the House impeachment inquiry in a letter sent to Speaker Nancy Pelosi, House Intelligence Chairman Adam Schiff, Oversight Chairman Elijah Cummings, and Foreign Affairs Chairman Eliot Engel late yesterday. The eight-page letter from White House counsel Pat Cipollone called the proceedings “baseless” and “unconstitutional,” and came hours after the administration blocked a key witness, U.S. Ambassador to the European Union Gordon Sondland, in the impeachment probe from testifying before the House panels. “You have designed and implemented your inquiry in a manner that violates fundamental fairness and constitutionally mandated due process,” Cipollone wrote in the letter. “Put simply, you seek to overturn the results of the 2016 election and deprive the American people of the President they have freely chosen.” Pelosi responded with a statement dismissing the letter, saying that continued resistance from the Trump administration would be “regarded as further evidence of obstruction.” “The White House letter is only the latest attempt to cover up his betrayal of our democracy, and to insist that the President is above the law,” Pelosi said. “Despite the White House’s stonewalling, we see a growing body of evidence that shows that President Trump abused his office and violated his oath to ‘protect, preserve and defend the Constitution.’”

The Fed is going to start buying bonds again, but don’t call it quantitative easing. Federal Reserve Chairman Jerome Powell said in a speech yesterday that the central bank will resume purchases of Treasuries in an effort to avoid a recurrence of the recent chaos in money markets. “My colleagues and I will soon announce measures to add to the supply of reserves over time,” Powell said at a National Association for Business Economics conference in Denver. “I want to emphasize that growth of our balance sheet for reserve management purposes should in no way to confused with the large-scale asset purchase programs that we deployed after the financial crisis. Neither the recent technical issues nor the purchases of Treasury bills we are contemplating to resolve them should materially affect the stance of monetary policy.” Powell also indicated in a question-and-answer session after the speech that the Fed may indeed deliver another rate cut at their next meeting by comparing the current period to two instances in the 1990s when the Fed issued three successive rate cuts in an effort to keep an economic expansion going. “Another rate cut as early as this month remains a real possibility,” said Wells Fargo senior economist Sarah House, though Barclays economist Michael Gapen cautioned, “but it’s not a done deal” yet.

PG&E Corp cut power to more than 500,000 customers in Northern California yesterday in an effort to keep power lines from sparking blazes like last year’s deadly fires amid fierce winds, and hot and dry weather. Another 230,000+ customers will lose power starting at noon today, and more than 2.7 million people may be ultimately affected by the shutoffs, based on city estimates. The utility’s equipment has been blamed for wildfires late last year that killed 85 people and destroyed the town of Paradise. The winds are expected to be the strongest and most widespread in the region in two years, and PG&E said that there was no other choice by to stage the largest preventative blackout in state history given the increased danger. “This is a last resort,” said Sumeet Singh, head of PR&E’s Community Wildfire Safety Program “This is unprecedented in terms of what all of us are facing as a community. We are doing everything we can to minimize the impact on our customers’ lives.” California Gavin Newsom called on the utility to upgrade and fix its equipment so there’s not a repeat of such a massive outage. “No one is satisfied with this, no one is happy with this,” Newsom said. According to PG&E, it could take as many as five days to restore power to customers.

Shares of Roku are up nearly 9% this morning after Macquarie Research upgraded the stock to Outperform from Neutral, and boosted its 12-month price target to $130. The firm said that despite competition, it sees “powerful growth” in connected TVs and advertising, which will benefit Roku. Target shares are up 2.25% currently after an announcement yesterday that it is partnering with the parent of the Toys R Us brand, TRU Kids, on relaunching ToysRUs.com, a move that both allows Toys R Us to have an online presence following its bankruptcy, and could boost Target’s holiday toy sales. The announcement came on the heels of an upgrade from Raymond James. Analyst Matthew McClintock issued a Strong Buy rating on the stock on Monday and said, “Target is one of the few multi-product category discretionary retailers that is exceptionally well positioned to take market share.”

Stocks We’re Watching

Domino’s Pizza (NYSE: DPZ): Domino’s shares have been on a wild ride after reporting earnings yesterday. The pizza chain reported third quarter earnings that matched estimates, but a miss on same store sales. Management also cut guidance causing the stock to drop at market open yesterday. Then the stock rebounded nearly 6% as Wall Street cheered the company’s plan to buyback $1 billion of DPZ stock and the company clarified that its lowered guidance reflects a shorter time frame rather than decreased confidence. “We’ve got a unique opportunity right now to solidify market share gains for the long-term as our competitors retreat and as these third-parties fundamentally alter the economics of many players in the restaurant industry,” CEO Ritch Allison told analysts on the conference call, referring to on-demand food delivery sites like UberEats and Postmates.

Hecla Mining (NYSE: HL): Shares of this miner are up nearly 10% over the last week after it reported Q3 silver production jumped 31% year-over-year, and gold production gained 6% year-over-year. Hecla said that its cash holdings increased by $24 million to $33 million in the quarter as the company expected that “dialing back our expenditures while achieving our expected production and sales targets would increase our cash flow generation,” and added that it expects more in Q4.

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