Pre-Trade Tuesday – Markets Appear Untroubled But Weakening

Can't ague with that, Albo – not when TSLA is at $550 ($100Bn) while still losing money.  No reason SPCE can't do that too.  

Tariffs/Stock – How is this "news", I was talking about it in the morning post….  I swear, I just can't get used to how slow people are to comprehend what's written in newspapers.  

Done with /NQ as I feel like it was a lucky escape but still holding 4 /ES shorts at a $250 loss (each) at the moment (3,277) and 2 /YM shorts even (28,915).

WFC/Jasu – I take it those are short puts?  The 2021 $45 puts are now $2.60 but they should hold up, WFC has strong underlyings – they are just being fined, etc and it's messing with their bottom line.  The 2022 $45 puts are $4.80 but why not just be happy with the $2.60 you'll get on the original 5 and, if that goes well, THEN sell 5 more for another $2.60+ in 2022.  If it doesn't go well and WFC goes lower, THAT is a good time to sell 5 more puts at a higher price.  I think it's a scary market to over-commit in.  

You never know where the bottom is until you get there…

WBA/Sag – Nothing wrong with that, I think it's a high-percentage play. 

TSLA/Coulter – Or someone sold them!

Baby Yoda a catalyst for Build-A-Bear

• Shares of Build-A-Bear Workshop (BBW +14.9%) are marching higher after the retailer increased full-year guidance.
• Build-A-Bear also tipped off that it plans to release a Baby Yoda plush in the coming months.
• "I'm excited to share we will be one of the first companies to provide the digital and internet phenomenon who is trending higher than all the presidential candidates combined," Build-A-Bear CEO Sharon Price John revealed at ICR.
• Previously: Build-A-Bear lifts guidance ahead of ICR talk (Jan. 14)

Damn, when my kids were younger, I would have known about this!

Verizon launches privacy-oriented search engine

• Verizon Media (VZ -0.5%) has launched a new privacy-focused search engine.
• It says its OneSearch doesn't track, store or share personal/search data with advertisers, and it's looking for business partners to integrate the search into their privacy/security products.
• The site is ad-supported so it can be offered for free, but Verizon says ads are contextual (based on keywords) rather than history-based.
• The site's features include no cookie tracking, retargeting or personal profiling; no sharing of personal data with advertisers; no storage of search history; unfiltered search results; and encrypted search terms.
• It also features an advanced mode where the results link expires within an hour, improving security in the case of device or link sharing.
• It's available today in North America on desktop and mobile Web, and will be available via Android/iOS app later this month.

UBS wealth management starts job cuts in Asia, Europe – Bloomberg

• UBS Group (UBS +0.8%) has cut as much as 20% of the workforce in some European teams of its global wealth management business and is reducing management layers in Asia to speed decision-making, Bloomberg reports, citing people familiar with the matter.
• Job losses are occurring at every level from managing directors to assistants, they said.
• UBS hasn't said how many employees will be affected, but it's likely to about 500, people familiar with the matter told Bloomberg.
• The dismissals come about six months after Iqbal Khan, co-head of the wealth management unit joined the bank from Swiss rival Credit Suisse.
• U.S. and Switzerland are likely to be less affected by restructuring of the unit, one person said.
• UBS is also closing a unit dedicated to the ultra rich and moving some client advisers into regional divisions and others into its global family office unit.
• It's also eliminating a unit within wealth management called Investment Products and Solutions, which came up with financing structures and investment products. Some positions in structuring, sales, and trading preformed similar tasks.

JPMorgan positive on Macau

• JPMorgan estimates Macau gross gaming revenue will fall 2% Y/Y after a strong early start to the month is more than offset by the impact of the slowdown in front of the earlier Chinese New Year this year.
• "We wouldn’t be surprised to see January printing flat or even marginally positive growth in GGR," notes analyst DS Kim.
• Due to the Chinese New Year, Kim notes that it's more meaningful to look at January-February combined trends, which the firm models to decline 3% to 4%.
• "We stay positive on Macau stocks. Despite the recent share rebound, the sector’s valuation still appears inexpensive at 12x 2020E EV/EBITDA (vs. historical average of ~14x), which we view as quite attractive given limited estimate risks to consensus. Added to this is our view that 2020 will see a cyclical rebound in demand, and we stay constructive on the sector."

Spotlight on Netflix's offshore practices in U.K.

• Analysis from Tax Watch UK suggests that Netflix (NFLX +0.3%) could catch the eyes of regulators due to its shifting profit offshore to avoid British taxes.
• TW's breakdown of Netflix's offshore practices: "Sales are made from outside the UK, even though there is a substantial UK presence. This offshore sales hub is located in a jurisdiction with a strong treaty network (the Netherlands). The sales hub makes a very low profit margin as large costs are paid to related companies. The UK office sells its services to the wider Netflix group at a low margin and as a result there is little profit left in the UK."
• The investigative think tank says the Netflix structure is particularly concerning given the steep rise in the profits for the streamer in recent years, which suggests that the problem can only get worse.
• Some U.S.-based multinationals have faced regulatory backlash in Europe for their offshore practices.

Impossible Whopper momentum slows down

• Average daily orders of Impossible Whoppers (IMPF) at Burger King locations owned by Carrols Restaurant Group (NASDAQ:TAST) have fallen to 28 from 32, Carrols CEO Dan Accordino stated at the ICR conference.
• An average Burger King restaurant owned by Carrols sells 234 beef Whoppers a day, noted Accordino.
• Burger King plans to test an Impossible Croissan’wich breakfast menu item (made with a meatless sausage) later this year.

Encana wins shareholders' OK for move to U.S.

• Encana (ECA -1.6%) says 90% of shareholders voted in support of the company's plan to relocate to the U.S. and change its name to Ovintiv.
• The company is now free to move forward with its plan that has added to the gloom in Canada's oil industry, which is suffering from a lack of pipeline space that has depressed prices and prevented production increases.
• ECA said it wanted to move from Calgary to Denver because it would provide access to larger pools of investment capital, including U.S. index funds and passively managed accounts.
• According to Bloomberg data, 71% of ECA's shareholders are in the U.S. and 20% are in Canada.

Amazon offers loan to Deliveroo – Bloomberg

• Amazon (AMZN -1%) has offered food delivery company Deliveroo a loan to help with the startup's capital crunch, according to Bloomberg sources.
• The size of the loan is unknown, but Deliveroo is reportedly seeking "significant funds" to continue operations.
• Deliveroo had about $240M in cash and equivalents at the end of 2018 and a net loss of $302M.
• Amazon led a $575M round in Deliveroo last May and was seeking a minority stake, which was blocked by the UK competition regulator. The regulator is conducting a probe and will provide a decision by June 11.

Freeport McMoRan cut at Credit Suisse on copper surplus view

• Freeport McMoRan (FCX +0.3%) edges higher even after Credit Suisse downgraded shares to Underperform from Neutral with a $10 price target, cut from $11, citing valuation and the firm's copper surplus outlook.
• FCX "lacks valuation support" given mid-cycle EBITDA and the copper production reset "sharply lower" in 2023, Credit Suisse analyst Curt Woodworth says, adding copper has much less cost support than aluminum in a downturn and faces "sharply higher" supply-side risks in 2021-23.
• The U.S.-China Phase 1 trade deal likely will have minimal implications on metals demand, Woodworth also says.
• FCX surged 5% yesterday as copper prices are forecast to climb in 2020.
• FCX's average Sell Side Rating and Seeking Alpha Authors' Rating are both Bullish, while its Quant Rating is Neutral.

GameStop sliced up after holiday sales dud

• GameStop (GME -14.2%) falls sharply after an eye-popping 28% drop in holiday sales.
• Analysts for the most part aren't showing a lot of sympathy for the retailer today.
• Benchmark: "Deteriorating financial momentum has accelerated, management appears to have abandoned accountability and we see zero terminal value."
• Baird: The firm says "challenges continue," with the console and digital transitions representing a double whammy.
• Loop Capital Markets: The analyst team warns that fiscal 2019 results are tracking to be significantly worse than in the last year of the prior video game console cycle.
• Wedbush: "Once GameStop is debt free, the short thesis begins to deteriorate. The upcoming launch of new video-game consoles is seen as a positive catalyst."
• Shares of GameStop are still above where Michael Burry was reported to have taken a long position, leading to speculation on whether the famed Big Short investor is still long or took his firm's profit off the table.

Cheniere moves closer to bringing Sabine Pass storage tanks back online

• Cheniere Energy (LNG +1.2%) says it received regulatory approval to prioritize the return to service of one of the two storage tanks at its Sabine Pass LNG export facility that have been offline since a leak nearly two years ago.
• While Cheniere has effectively managed operations at the Louisiana terminal with three other storage tanks during the outage, the company says the ability to use the additional capacity will allow more flexibility, especially during times when consumption is high or access to feedgas may be limited because of pipeline maintenance.
• Cheniere has yet to receive formal approval to actual bring the tanks online, as it works to satisfy corrective actions the Pipeline and Hazardous Materials Safety Administration and the Federal Energy Regulatory Commission required to help prevent another leak.

MAX taken off American Air schedules through June 3

• American Airlines (AAL +1.7%) is pulling the Boeing (BA +1.2%) 737 MAX from its schedules until June 3, more than a full year later than it expected the jet to return to service.
• United Airlines also doesn't expect the MAX to return until early June, a sign that carriers are expecting the problem to extend to the peak second- and third-quarter travel seasons.
• American estimates the grounding cost it $540M in pretax income last year and recently reached an initial compensation agreement with Boeing (the airline had 24 MAX planes at the time of the grounding last year and 76 on order)

Disney rebounds on report of app download rush

• Walt Disney (DIS +0.8%) has gotten a big jump into positive ground after a report that says mobile downloads of its Disney Plus app have neared 41M.
• Disney Plus was the top app story of the year, Sensor Tower says in a new report, noting more than 30M downloads during Q4 (after a Nov. 12 launch).
• Disney Plus grossed more than $50M in its first 30 days, even with a seven-day free trial, according to the report – well ahead of subscription video rivals like HBO Now (T +0.2%) and Showtime.
• And it notes in December, Disney Plus earned more U.S. revenue than HBO Now's best month (even allowing for revenue spikes around the final season of Game of Thrones).

Dimon likes U.S.-China trade pact, sees some de-coupling

• The U.S.-China phase-one trade deal that's due to be signed tomorrow is a "real one" that has "has substance and depth", JPMorgan Chase (JPM +2.2%) Chairman and CEO Jamie Dimon told Fox Business Network's Maria Bartiromo in an interview today.
• He's not sure what will happen after this deal is signed, he said. Still, Dimon expects a "little bit of de-coupling between China's economic system" and the U.S.'s "for security purposes and otherwise."
• JPMorgan, though, isn't de-coupling with China. "I still think that China is going to continue to grow," he said. "I think they want JPMorgan to be there to help set transparency and standards and rules."
• As happenings in the U.S., Dimon expects to see more regional bank mergers in 2020. " I think there's a lot of business logic for it," he said.
• On the economic side of things the U.S. consumer which accounts for ~70% of GDP, continues to be strong.
• "Their confidence levels are very high," Dimon said. "Their jobs are going up. Their wages are going up. Their savings are strong."
• As for the corporate side of the economy, he sees some of last year's uncertainty from geopolitics and trade abating. "That’s behind us now," he said. "I don't think it could be totally gone, but hopefully a bunch is behind."

Hasbro seen having a better holiday than Mattel

• Stifel expects Hasbro (HAS -0.2%) to post strong holiday quarter sales when the toymaker reports, while Mattel (MAT +0.7%) is seen disclosing a drop in sales.
• The firm says Hasbro's quarter will see a significant boost from Frozen 2 and Star Wars products, while American Girls and Fisher-Price will underperform for Mattel in comparison to last year.
• Stifel has Hold ratings on both toy stocks into the earnings reports due out in a few weeks, but the firm's price target on Mattel of $13 implies a larger drop in share price than the Hasbro PT of $103.

Lithium producers rise on optimism over China electric vehicles

• Lithium producers are rallying this week, as investors bet on a rebound in electric car sales in China after government assurances its subsidies for buyers would not be cut further, Financial Times reports.
• Shares of Albemarle (ALB +1.7%) have climbed 9% and SQM (SQM +3.6%) are 15% higher YTD.
• Shares in Chinese lithium producer Ganfeng, which supplies Tesla, jumped 8% in Hong Kong today, while Tianqi Lithium surged 9% in Shenzhen.
• Recent comments from China's minister for industry and information technology that subsidies for electric car purchases would not be cut further this summer, sparking expectations of a rebound in electric car sales this year after sales of electric cars and hybrids fell 4% last year to 1.2M.
• Other relevant tickers include FMC, LTHM, LAC

Citigroup Q4 reveals 'number of positive trends'

• Wolfe Research analyst Steven Chubak sees "a good number of positive trends" in Citigroup's (C +2.2%) Q4 helping to boost its shares.
• Those trends include revenue growth across Global Consumer Banking, full year ROTCE of greater than 12%, and better efficiency; Chubak notes that Citi shares have been underperforming its peers YTD.
• Citi beat expectations on net interest income and noninterest revenue, but missed on provision expense and loan growth, KBW analyst Brian Kleinhanzl writes.
• Like JPMorgan's Q4, Citi's stronger-than-expected noninterest revenue was driven by trading, which increased 31% Y/Y and FICC, up 49%.
• On the earnings call, Wolfe's Chubak says he'll focus on updated ROTCE targets, CECL guidance, strong consumer loan growth and sustainability, and outlook for capital return.
• Conference call coming up at 11:30 AM ET.
• See Key Stats Comparison with those of its peers.
• Previously: Citigroup Q4 reflects gains in consumer, investment banking units (Jan. 14)

U.S. auto sales forecast to fall slightly in 2020

• TrueCar forecasts U.S. auto sales will dip 0.8% to 16.9M units in 2020.
• "While sales will dip below the 17 million mark for the first time since 2014, when you look at the broader picture, 16.9 million vehicle sales are healthy," says TrueCar Chief Industry Analyst Eric Lyman.
• Even as new vehicle sales are projected to soften slightly for 2020, revenue could be higher with the average transaction price for a new vehicle expected to rise by 2.5% Y/Y to $36,348 amid the continuing shift by buyers to SUVs and trucks.
• TrueCar forecasts manufacturer incentive per unit spending will rise 3.3% this year to $3,863 per unit.

Boeing posts negative orders for first time in at least 30 years

• Boeing (NYSE:BA) lost orders for 87 commercial airplanes for all of 2019, according to the company.
• A spokesman tells CNBC he's not sure when the last time that happened, but say's definitely not in the last 30 years.
• Rival Airbus (OTCPK:EADSF, OTCPK:EADSY) had positive orders of 768 in 2019.
• Boeing shares are modestly in the green today.

Atlantic Equities turns bearish on smartphone giant

• Atlantic Equities analyst James Cordwell downgrades Apple (AAPL -0.5%) from Neutral to Underweight and raises his target from $235 to $275, saying the upside potential from 5G is "now more than fully priced in"."
• Cordwell: "The extent to which 5G will ignite consumer demand is far from clear, particularly in the early stages of the technology’s rollout, when coverage of millimeter wave 5G (which will deliver the real uplift in connectivity speeds) will be very limited. Costs associated with 5G could also pressure gross margins, limiting the earnings growth that actually comes through in FY21."
• The analyst thinks few services will make a real impact on Apple's financials and that wearables are unlikely to make a major difference, even if the Apple Watch and AirPods continue to see momentum.
• Related: Earlier today, Wedbush outlined its $400 bull case for Apple on its 5G and services potential.

FEMA official rips PG&E's deal with California wildfire victims

• The Federal Emergency Management Agency is defending its effort to collect $3.9B in claims from PG&E (PCG +2.9%) for relief it provided after the utility's power lines sparked deadly wildfires in 2015-18.
• A top FEMA official yesterday criticized PG&E and fire victims' lawyers for negotiating a deal that could put the U.S. government in the position of trying to claw back money it already has paid to people who lost family members, homes and businesses.
• "It really, quite frankly, boggles my mind why the [fire victims’] lawyers would appear to want to relieve PG&E of its responsibility and make California and FEMA the enemy here," FEMA regional administrator Robert Fenton said.
• Fenton also expressed frustration that FEMA could be forced to seek money from the $13.5B fire settlement for some of the same losses the agency already doled out, even though FEMA was excluded in the confidential negotiations that led to the deal.
• PG&E and fire victims' lawyers repeatedly have asserted that the government agencies are not entitled to a cent from the settlement fund.

Analysts focus on Wells Fargo's expenses, weak fee income for Q4 miss

• Although Wells Fargo's (WFC -3.9%) Q4 net interest income and provision expenses exceeded KBW's estimates, the bank's expenses, average loan growth, deposit costs, and mortgage banking fees missed, writes analyst Brian Kleinhanzl.
• "The quarter was noisy but the end result was that noninterest revenues and expenses missed, he writes in a note.
• Jefferies analyst Ken Usdin calls Wells Fargo's Q4 EPS "messy, including a big litigation reserve and elevated expenses elsewhere."
• Reported EPS of 60 cents included several items that pushes core to 85 cents-90 cents (vs. $1.12 consensus), Usdin figures.
• He points to $1.5B litigation costs, still-elevated other operational losses, $362M gain on Eastdil sale, $166M of tech project write-downs, $134M gain on sale of Pick-a-Pay loans, $125M reserve release, and $153M Q/Q decline in LIHTC-related income related to timing.
• Weaker fee income and higher-than-expected expenses were the main drivers of the miss, writes Wolfe Research's Steven Chubak.
• "Until he [new CEO Charlie Scharf] is ready to help frame the timeline and opportunity on expenses and other profitability targets, and so long as fundamentals continue to lag Money Center peers, we expect shares will remain in purgatory," Chubak said.
• Previously: Wells Fargo Q4 disappoints, CEO says costs are too high (Jan. 14)