Plus, Goldman Sachs is out with its list of investment themes for 2020, Tesla unveiled its Cybertruck, and Nordstrom shares are climbing.
Stocks were higher to start Friday with the Dow adding 58 points, or 0.2%. The S&P 500 also gained 0.2%, while the Nasdaq rose 0.3%.
Chinese President Xi Jinping said he wants a trade agreement based on “mutual respect and equality” in his first comments regarding a limited phase one deal that he could possibly sign with President Donald Trump. “We didn’t initiate this trade war and this isn’t something we want,” Xi said in a meeting in Beijing. “When necessary, we will fight back, but we have been working actively to try not to have a trade war.” While Trump said just a few days ago that China wasn’t “stepping up to the level that I want” in ongoing negotiations, he said this morning that a trade deal is “potentially very close.” “The bottom line is, we have a very good chance to make a deal,” Trump told Fox & Friends. However, Trump also said that he “didn’t like [Xi’s] word ‘equality.’ This can’t be like an even deal.”
Goldman Sachs published its top themes for 2020. The firm sees the global economy and earnings stabilizing next year, which will allow riskier assets to flourish even as central banks keep policy little changed. Cyclical stocks will see upside while there will be a “baby bear market” in bonds. “We see upside in a variety of cyclically sensitive assets,” the Goldman Sachs analysts wrote. “At the same time, we are not expecting the type of go-go global growth environment that would sink the dollar or result in a major bear market for bonds. …We expect moderately better economic and earnings growth, and therefore decent risky asset returns. But we also see plenty of risks, and more challenging valuations, so the upside is limited.”
But the world’s largest hedge fund is betting that global stock markets will soon fall. Ray Dalio’s Bridgewater Associates has spent roughly $1.5 billion for options contracts that will reward the firm if the S&P 500 or Euro Stoxx 50 crash, according to a report from The Wall Street Journal. Dalio has said recently that trends like zero-interest rates, low returns, and rising economic inequality are unsustainable, and said this week that he sees a “great sag” is coming for global markets.
Tesla unveiled its long-awaited all-electric pickup truck last night. The Cybertruck will start at $39,900 and will get between 250 and 500 miles of range, depending on the package purchased, and the company said it expects to begin production of the lower-priced model in late 2021, with the higher-end models to follow. The vehicle represents as a large metallic trapezoid, and CEO Elon Musk has said that demand for the Cybertruck could be less than for the company’s Model S sedan and Model X SUV due to the futuristic design. In a research note published this morning, AB Bernstein analyst Toni Sacconaghi wrote, “Tesla’s Cybertruck looks weird… like, really weird. Musk had warned investors that Tesla’s pickup would be ‘really futuristic, like cyberpunk Blade Runner,’ and he wasn’t kidding. Add a little bit of dirt, and you could even say it gives off a retro-future vibe a la Mad Max.”
Nordstrom shares are up nearly 11% this morning after the department store reported fiscal Q3 earnings that beat analysts’ estimates. The retailer reported earnings per share of $0.81, compared to estimates of earnings per share of $0.64, on revenue of $3.67 billion. “We’ve been purposeful about improving inventory flow, refining product allocation, and emphasizing merchandise that’s seasonally relevant,” said Nordstrom co-president Erik Nordstrom on the earnings call. “Our favorable inventory position allows us to be opportunistic in the marketplace.”
Stocks We’re Watching
Molecular Templates Inc (NASDAQ: MTEM): Shares of this clinical-stage biopharma have surged 44% over the last week. On Monday, Vertex Pharmaceuticals announced that it will collaborate with Molecular Templates to discover and develop novel targeted conditioning regimens aimed at enhancing the process of hematopoietic stem cell transplantation (HSCT), including transplants conducted as part of treatment with ex vivo CRISPR/Cas9 gene editing therapies. “We believe that gene editing holds significant promise in the treatment of severe hemoglobinopathies such as sickle cell disease and beta thalassemia, and Molecular Templates’ unique technology platform could play an important role in creating a targeted conditioning regimen that could replace chemotherapy currently required in conditioning regimens and thus enhance the overall future treatment experience for patients,” said David Altshuler M.S., Ph.D., Vertex’s Executive Vice President and Chief Scientific Officer.
Shoe Carnival (NASDAQ: SCVL): Shoe Carnival shares were up nearly 8% at the open today after the company reported Q3 earnings and raised its guidance. “Our record earnings were fueled by solid comparable store sales growth throughout the quarter, including our 17th consecutive positive comparable store sales for the month of August,” said Shoe Carnival vice chairman and CEO Cliff Sifford. “This demonstrates that Shoe Carnival remains a destination for back-to-school family footwear. Our customer-centric organization and fun, engaging shopping environment continues to resonate with consumers and gives us confidence in our raise outlook for fiscal 2019. Going forward, we believe our strong foundation, combined with the recent addition of new customer data-driven resources, positions us well for sustainable, profitable growth for many years to come.”