Plus, mortgage applications surged in the first week of the year, Goldman Sachs delivered an earnings beat, and Target’s holiday sales disappointed.
Stocks rose to start Wednesday with the Dow adding 160 points, or 0.6%, to reach a new all-time high. The S&P 500 also hit a new record, rising 0.4%, while the Nasdaq gained 0.5%.
Stocks were rising higher this morning on optimism surrounding President Donald Trump’s signing of the “phase one” trade agreement with Chinese Vice Premier Liu He. However, the market took a hit late yesterday following Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer saying in a joint statement that existing tariffs on billions of dollars worth of Chinese goods would stay in place until after the presidential election this coming November. And while the highly-anticipated “phase one” deal is being signed today, there’s no assurance that it will lead to negotiations toward the next round of agreements any time soon. “We can’t expect that China-US trade friction will disappear simply because of signing a deal,” a source close to China’s Ministry of Commerce told the Global Times. The source also said that arguments over trade, tariff threats, and U.S. investment restrictions on China will become the “new normal” over the long term.
House Speaker Nancy Pelosi tapped House Intelligence Committee Chairman Adam Schiff to lead seven impeachment managers at Trump’s impeachment trial in the Senate. The House will also vote to send the articles of impeachment to the Senate today in a resolution that will also confirm Pelosi’s choice of managers. Following that vote, House prosecutors will carry the two impeachment articles to the Senate where the trial is expected to begin next week. The House Judiciary Committee will also deliver to the Senate a trove of new evidence in the impeachment case that shed new light on Trump’s level of involvement in efforts to pressure the Ukrainian government to open investigations into the president’s political rivals. The new evidence includes new text messages and phone records from Lev Parnas, a Ukrainian American business partner of Rudy Giuliani, Trump’s personal lawyer and a central figure in the case, and includes a letter Giuliani wrote to Ukrainian President Volodymyr Zelenskiy. “All of this new evidence confirms what we already know: the President and his associates pressured Ukrainian officials to announce investigations that would benefit the President politically,” House Democratic chairmen said in a statement. “There cannot be a full and fair trial in the Senate without the documents that President Trump is refusing to provide to Congress.”
Weekly mortgage applications surged 30.2% in the first week of January, giving a strong start to the mortgage business for new home loans and refinances. According to the Mortgage Bankers Association (MBA), refinancing led the surge jumping 43% for the week thanks to a drop in mortgage rates. “Refinances increased for both conventional and government loans, as lower rates provided a larger incentive for borrowers to act,” said Joel Kan, an MBA economist. “It remains to be seen if this strong refinancing pace is sustainable, but even with the robust activity the last two weeks the level is still below what occurred last fall.” In other economic data, the Labor Department said this morning that U.S. producer prices edged up by 0.1% in December as a rise in the cost of goods was offset by weakness in services, in the latest indication of tame inflation pressures that could allow the Federal Reserve to keep interest rates unchanged this year. For all of 2019, the producer price index rose just 1.3%, the smallest gain since 2015.
Goldman Sachs delivered a revenue beat this morning, though its quarterly profit was marred by a $1.1 billion litigation charge. The investment bank posted quarterly revenue of $9.96 billion, a 23% jump and more than $1 billion above Wall Street expectations for $8.51 billion in revenue. But legal expenses stemming from an impending settlement of the bank’s 1MDB scandal drove a 22% decline in earnings per share to $4.69. “Strong performance in the fourth quarter helped us to deliver solid results for the year, while continuing to invest in new businesses,” said CEO David Solomon. “We aim to drive higher returns in the future, and look forward to sharing our strategic goals and financial targets at Investor Day later this month.”
Target shares are down more than 7% this morning after the big box retailer reported disappointing holiday sales results. Same-store sales at the retailer during the November and December holiday sales season were up just 1.4%, compared with growth of 5.7% in the year-ago period. Despite missing the mark, Target said that it is maintaining its outlook for Q4 earnings, and said that it remains on track to deliver its 11th consecutive quarter of same-store sales gains. CEO Brian Cornell said in a blog post, “While we knew this season was going to be challenging, it was even more challenging than we expected,” adding that Target “faced challenges throughout November and December in key seasonal merchandise categories.” Credit Suisse analyst Seth Sigman wrote in a note from this morning that despite the sales miss, “there are many bright spots within that would point to this being more of a blip rather than the start of a new trend, and the potential for comps to reaccelerate in the periods ahead.”
Stocks We’re Watching
XBiotech Inc (NASDAQ: XBIT): Shares of this biotech surged nearly 42% yesterday following its announcement that it will repurchase up to $420 million of its shares at a price no lower than $30—21% higher than the current price—nor no higher than $33. The repurchase follows Johnson & Johnson’s acquisition of XBiotech’s only clinical-stage asset, bermekimab, for $750 million in December.
Camping World Holdings (NYSE: CWH): Camping World shares are up roughly 14% since Monday following an upgrade from Northcoast Research. Analyst Brandon Rolle gave Camping World a Buy rating and set a price target for the stock at $20 – 21% higher than the current price. Northcoast sees a recovery in RV sales in 2020, which will benefit Camping World.