Plus, housing starts surged in December, Gap isn’t spinning off Old Navy, and Comcast’s NBCUniversal just unveiled its Peacock streaming service.
Stocks opened higher to start Friday with the Dow adding 32 points, or 0.1%. The S&P 500 traded 0.2% higher, while the Nasdaq gained 0.4%.
Housing starts surged 16.9% to a 13-year high in December, according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. The results blew economists’ expectations for a 1.1% rise out of the water. But while at first blush the increase suggests the housing market recovery is back on track amid low mortgage rates, Pantheon Macroeconomics Chief Economist Ian Shepherdson warns that the growth is “spectacular but clearly unsustainable.” The report also showed that building permits fell 3.9% to an annual rate of 1.416 million, which should temper enthusiasm over the report. “The ingredients are there for a strengthening of the housing construction market. It’s just that today’s results look over the top,” said Chris Rupkey, chief financial economist at MUFG. “We would be shocked if today’s results stick.”
Just days after the U.S. and China signed the “phase one” trade agreement, the European Union has said the deal could violate World Trade Organization rules. EU Trade Commissioner Phil Hogan said his team will scrutinize the deal and whether China’s pledge to increase its purchases of U.s. goods and services by at least $200 billion over the next two years is compatible with the WTO. “We haven’t analyzed the document in detail, but we will and if there’s a WTO-compliance issue of course we will take the case,” Hogan said. “We’re not trigger-happy about taking cases to the WTO – we don’t want to create that impression. But we’ll stand up for our own economic interests.”
In impeachment news, President Donald Trump added Ken Starr—whose investigation led to the impeachment of President Bill Clinton—and Harvard law professor Alan Dershowitz, whose clients have included Jeffrey Epstein and O.J. Simpson. White House Counsel Pat Cipollone and Trump’s personal lawyer Jay Sekulow will head the defense team, which will not include Rudy Giuliani, a central figure in the case against Trump. Arguments by the president’s team and the House prosecutors will start early next week and will be televised. However, discussions on the most sensitive pieces of the trial will be done in closed-door sessions. Under Senate rules, all 100 senators serving as the jurors in the trial are expected to listen and not publicly debate the trial’s rules or Trump’s guilt or innocence. When the debates take place, the proceedings will go into secret session unless most senators agree to an effort by Minority Leader Chuck Schumer to keep things open.
Gap has called off its plans to spin-off its Old Navy brand, the company announced yesterday. President and CEO Neil Fiske is also leaving the company. “The plan to separate was rooted in our commitment to value creation from our portfolio of iconic brands,” Gap’s interim president and CEO Robert Fisher said in a statement. “While the objectives of the separation remain relevant, our board of directors has concluded that the cost and complexity of splitting into two companies, combined with softer business performance, limited our ability to create appropriate value from separation.” Fisher added, “The work we’ve done to prepare for the spin shone a bright light on operational inefficiencies and areas for improvement.” Bank of America analyst Lorraine Hutchinson said of the move, “We wholeheartedly agree with this decision,” while Credit Suisse analyst Michael Binetti said that “the market does not need two standalone negatively-comping specialty apparel retailers. …Optically, canceling the spin removes a negative.”
And Comcast’s NBCUniversal unveiled its Peacock streaming service to investors late yesterday, launching itself into the streaming wars alongside heavy hitters like Netflix, Apple, and Disney. The service will launch in the U.S. on July 15 and will include a free tier, Peacock Free, which will consist of 7,500 hours of programming including complete seasons of series, next-day access to episodes of current seasons, curated content collections, and select Universal movies, and no more than 5 minutes of advertising per hour. There will also be two paid tiers of Peacock Premium, including a $4.99-per month version with limited advertisements and a $9.99-per month option with no ads. NBCUniversal has a goal of reaching 30 to 35 million active Peacock subscribers by 2024.
Stocks We’re Watching
NovoCure (NASDAQ: NVCR): Shares of this medical device company are up 16.5% this week following NovoCure releasing preliminary Q4 and full year 2019 results at the JPMorgan Healthcare Conference earlier this week. The company expects Q4 revenue to come in at around $99.2 million, representing 42% growth, while full-year revenue is also expected to have gained around 42% to $351.3 million. “We continued to make substantial progress in 2019 towards becoming a global oncology leader with $351 million in net revenues, representing 42% annual revenue growth, and four advancing phase 3 pivotal trials creating the potential for substantial market expansion over the next five years,” said NovoCure CEO Asaf Danziger. “Our ongoing focus on product innovation generated 33 new patent applications in 2019 and we ended the year with $326 million cash on hand, an increase of $80 million versus 2018.”
Nano One Materials (OTC: NNOMF): Nano One shares are up 35% for the week after the company said that its latest battery durability improvements, engineered with the help of its patented, coated nanocrystal innovations, have piqued the interest of global car makers. “Tesla’s research provides evidence that batteries made with single crystal cathodes can last an order of magnitude longer than conventional composite cathode structures in battery cycle testing,” said Nano One CEO Dan Blondal. “These results help to substantiate Nano One’s technology advantage and have spawned a great deal of interest in our coated nanocrystal innovation which produces our patented single crystal cathode powders. This has generated a measurable increase in strategic level discussions and forms the basis of current relationships with several automotive players and chemical companies. We are working hard to add these developing relationships to our existing list of joint development partnerships.”