Plus, the U.S. and China “reached consensus on properly resolving” key issues in ongoing trade talks, Dick’s Sporting Goods is surging, while Dollar Tree is slipping lower.
Stocks traded slightly higher to start Tuesday with all three major indexes adding just 0.1%.
The Chinese Ministry of Commerce said that China’s top negotiator, Liu He, spoke with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin yesterday. “Both sides discussed resolving core issues of common concern, reached consensus on properly resolving relevant issues (and) agreed to stay in contact over remaining issues for a phase one agreement,” the ministry said in a statement. But should the two sides fail to reach a deal by December 15, President Donald Trump will have to decide whether or not to impose the tariffs planned for that date. “Key is what happens if we do not get a deal by 15 December,” said Khoon Got, head of Asia research at Australia & New Zealand Banking Group in Singapore. “Will the U.S. agree to suspend the tariffs out of goodwill?”
Federal Reserve Chairman Jerome Powell said in a speech yesterday that the central bank is “strongly committed to symmetrically and sustainably achieving our 2 percent inflation objective,” and said he sees “the current stance of monetary policy as likely to remain appropriate” and “well positioned” as long as current “generally good” conditions persist. “At this point in the long expansion, I see the glass as much more than half full,” Powell said. “With the right policies, we can fill it further, building on the gains so far and spreading the benefits more broadly to all Americans.” But Dallas Fed President Robert Kaplan says “the fourth quarter is going to be weak,” with inventory reductions likely shaving half a point off of GDP as uncertainty over future conditions spurs low expectations. “This means people have been restocking and probably the reason they were restocking is there was a lot of pessimism over the last number of months over future growth prospects,”Kaplan said, but added “We think things will stabilize. We’ve got a good chance to grow at 2% next year.”
Best Buy shares are up more than 8% this morning after the retailer beat earnings and revenue estimates, and raised its earnings guidance for the year. Best Buy reported adjusted earnings per share of $1.13 on revenue of $9.76 billion, compared to analysts’ expectations for earnings per share of $1.03 on revenue of $9.70 billion. The company raised its forecast for fiscal 2020 adjusted earnings per share to a range of between $5.81 and $5.91, while analysts were expecting Best Buy to earn $5.74 per share in 2020. “Our teams delivered another strong quarter of top-and bottom-line growth,” said Best Buy CEO Corie Barry in the company’s release. “We are delivering on our purpose to enrich lives through technology by providing customers the products and solutions they want and need, combined with fast and convenient fulfillment.”
Dick’s Sporting Goods has surged more than 20% today following report of its strongest same-store sales gains since 2013. The sporting goods retailer said that its e-commerce sales grew by 13% in its latest quarter, helping it to achieve an earnings beat. Dick’s reported earnings per share of $0.52 on revenue of $1.96 billion, compared to Street expectations for earnings per share of $0.38 on revenue of $1.91 billion. “In our view, Dick’s… is benefiting from its initiatives, including an elevated and more premium footwear offering, faster e-commerce deliver times, and investment in in-store experiences and better performing categories,” said Telsey Advisory Group analyst Joseph Feldman in a note to clients.
But it wasn’t all good news in the retail space. Dollar Tree is down -15% this morning after it signaled for a disappointing holiday earnings quarter, citing tariffs imposed in the U.S.-China trade war. The company says it now sees four quarter earnings per share in a range between $1.70 and $1.80, well below expectations of $2.02 per share. “The decrease from prior implied fourth quarter guidance represents the expected effects of…the continued uncertainty regarding trade and the related tariffs,” the company said in a release, adding that additional pressure is coming from “lower-margin consumables growing faster than originally forecasted, payroll cost pressure in distribution centers, and increased run rates for repairs and maintenance, utilities and depreciation.”
Stocks We’re Watching
Sorrento Therapeutics (NASDAQ: SRNE): Shares of this biotech surged as much as 99% yesterday after the company announced that its board had unanimously rejected unsolicited offers from two unnamed biopharmaceutical companies to buy Sorrento for between $3 and $5 per share in cash. Sorrento said it is in late-stage licensing and collaboration discussions with other biopharma companies for its immune-oncology products, which it thinks have short- and long-term value and the offers undervalued the company.
Ambarella Inc (NASDAQ: AMBA): Ambarella shares gained 6% yesterday following the semiconductor design company’s stronger-than-expected fiscal Q3 of 2020 earnings release. The company reported adjusted earnings per share of $0.32 on revenue of $67.9 million, beating estimates of earnings per share of $0.20 on revenue of $65.03 million. “Despite the geopolitical and trade uncertainties, in Q3 we demonstrated continued progress toward our transition to a video AI company, with mass production shipments into the automotive and security camera markets continuing to ramp,” said Ambarella president and CEO Fermi Wang.