Plus, the impeachment inquiry is moving on to the Judiciary Committee, the FAA is tightening its grip on Boeing, and Deere shares are sliding.
Stocks traded just above the breakeven line to start Wednesday with the Dow adding 17 points, or 0.1%. The S&P 500 also gained 0.1%, while the Nasdaq traded 0.2% higher.
President Donald Trump said yesterday that negotiators are close to reaching an initial trade deal after both sides spoke by phone. “We’re in the final throes of a very important deal,” Trump told reporters at the White House. “It’s going very well.” Later in the day, Trump told Fox News host Bill O’Reilly that he’s “holding it up because it’s got to be a good deal. We can’t make a deal that’s like, even. We have to make a deal where we do much better, because we have to catch up.” The impact from the delay in reaching an agreement can be seen in the latest U.S. trade data which showed the merchandise trade deficit unexpectedly narrowed to the lowest point in more than a year as imports plummeted, a clear signal of the impact of tariffs on shipments.
The U.S. economy grew at a moderate 2.1% pace over the summer, according to a report from the Commerce Department, slightly ahead of estimates. However, many economists say growth is slowing sharply in the current quarter. While the year started off with a 3.1% GDP rate, many economists have estimated that GDP growth is weakening this quarter to as slow as a sub-1% annual rate as the trade war has led businesses to curbing investments and inventories. Also on the economic data front, the Federal Reserve is releasing its Summary of Commentary on Current Economic Conditions, also known as the Beige Book, at 2:00pm EST today.
On the impeachment front, news broke yesterday that President Trump knew about the bombshell whistleblower complaint that exposed his pressure campaign against Ukraine at the time he decided to release the withheld military aid package to the country. White House lawyers told Trump of the whistleblower’s complaint in late August prior to the aid being released to Ukraine in mid-September, and explained that they were trying to determine whether they were legally required to give the complaint to Congress. The impeachment inquiry, meanwhile, is entering its next phase as the House Judiciary Committee begins public testimonies next week. The Judiciary Committee has invited the White House to question witnesses in its hearings, which will feature constitutional scholars testifying on what is impeachable conduct.
The FAA tightened its grip on Boeing, announcing that it will review hundreds of new 737 Max planes individuals before they can be delivered to customers, adding another wrinkle to the already-delayed certification of the beleaguered planes that have been grounded since last March following two fatal crashes. “The FAA has determined that the public interest and safety in air commerce require that the FAA retain authority to issue airworthiness certificates and export certificates of airworthiness for all 737 Max airplanes,” an FAA letter to Boeing stated. “The FAA will retain such authority until the agency is confident, that, at a minimum, Boeing has fully functional quality control and verification processes in place; delivery processes are similarly functional and stable; and Boeing’s 737 MAX compliance, design, and production processes meet all regulatory standards and conditions for delegation and ensure the safety of the public.” The FAA also issued a statement reiterating that it “has not complete its review of the 737 Max aircraft design changes and associated pilot training. The agency will not approve the aircraft for return to service until it has completed numerous rounds of rigorous testing.”
Shares of Deere are down around -5% this morning after the manufacturing company issued lower guidance as trade tensions continue to slow farmers’ equipment purchases. Deere says it now expects net income to come in between $2.7 billion to $3.1 billion in fiscal 2020, lower than analysts’ estimates for $3.5 billion for the year. “Lingering trade tensions coupled with a year of difficult growing and harvesting conditions have caused many farmers to become cautious about making major investments in new equipment,” COE John May said in a statement. “John Deere’s performance reflected continued uncertainties in the agricultural sector.” Though May added, “General economic conditions have remained favorable. This has supported demand for smaller equipment and led to solid results for Deere’s construction and forestry business, which had a record year for sales and operating profit.”
Stocks We’re Watching
ChemoCentryx Inc (NASDAQ: CCXI): Shares of ChemoCentryx rocketed as much as 358% yesterday after the company’s announcement that its Phase 3 trial for its oral selective complement 5a receptor inhibitor, avacopan, successfully treated patients with anti-neutrophil cytoplasmic antibody-associated vasculitis (ANCA-associated vasculitis or ANCA vasculitis). Following the announcement, H.C. Wainwright analyst Edward White said, “The superiority finding was a positive surprise. As a reminder, the company is planning to market avacopan on its own in the U.S., and it has already begun its plans, including senior level sales management hires. … ChemoCentryx expects to file an NDA in 2020, followed by an MAA filing also next year.” White reiterated his Buy rating on the stock and boosted his price target to $40 – 34% higher than the price as of this writing.