Daily Markets: Could We See Schwab Buy TD Ameritrade?

TD Ameritrade - Bloomberg
Credit: David Paul Morris / Bloomberg

Today’s Big Picture

Even as we continue to swim through a mixed bag of retail earnings reports today with some progress on the US legalization of marijuana, the near-term focus will remain on US-China trade talks. Yesterday, reports suggested the phase-one deal may not be executed until 2020 with others saying talks are in a “sensitive, make-or-break stage.” And while touring an Apple (AAPL) facility yesterday, President Trump said “China would much rather make a trade deal than I would... I don't think they're stepping up to the level that I want."

If you’re thinking of the Bruce Springsteen song, “One Step Forward, Two Steps Back,” so are we.

Add to the mix the passage of two bills by the US House of Representatives that support protesters in Hong Kong,  it’s no surprise investors are having renewed concerns over when and what is likely to comprise a phase-one trade deal between the US and China as the market sits near record highs.

Overnight, China's Vice Premier, Liu He, is said to remain cautiously optimistic about reaching a partial trade agreement and US negotiators have been invited for another round of talks in Beijing. To borrow a term coined by US Congressman Willard Duncan Vandiver, we suspect investors will increasingly want the US and China to "show them" progress on the trade talk front lest negotiation drama fatigue sets in. 

Asian equities finished the day lower and so far, European equities are currently joining them in the red. US equity futures point to a modest decline at the market open.  

Data Download

Today is another light day on the economic data front. So far, we’ve received the following reports:

  • Japan's September All Industry Activity Index rose 1.5% month over month, in-line with expectations.
  • Hong Kong’s October CPI reading rose 3.1% year over year, down from 3.2% in September and below the expected 3.3%. 
  • French Business Confidence for November came in as expected with a reading of 100, up a tick from 99 in October. 
  • September industrial orders for 1.1% year over year in Spain following a revised 2.0% drop in August. 

In terms of US-facing data, later today, we'll get the October Existing Home Sales Report and the weekly EIA Natural Gas inventory report. Several hours after the US market closes, several key indicators for the Japanese economy including October inflation and the Jibun Bank Flash Manufacturing Report for November. 

Stocks to Watch

Macy’s (M) reported quarterly EPS of $0.07, well ahead of the expected -$0.01, despite weaker than expected revenue for the quarter of $5.17 billion vs. the $5.3 billion forecast. Comparable sales for the quarter fell by 3.9%. Macy's now sees its 2020 EPS in the range of $2.57-$2.77, down from its prior forecast of $2.85-$3.05 with comp sales down 1%-1.5% vs. its prior guidance of flat to up 1%.

BJ’s Wholesale Club (BJ) reported quarterly EPS that was $0.01 ahead of expectations on revenue that was largely unchanged year over year. Comparable club sales for the quarter decreased 0.4% year over year on a reported basis and excluding the impact of gasoline sales rose 1.1%.

Reports suggest Charles Schwab (SCHW) is in talks to buy TD Ameritrade (AMTD) in a $26 billion deal that could be announced as soon as today. If this happens, this would be the latest in an industry that has been under rapid change during 2019. 

Cannabis companies such as Village Farms International (VFF)GW Pharmaceuticals (GWPH)Valens GroWorks (VWWCF) and others should see some get a little high-er today following the approval of a bill by the House Judiciary Committee that legalizes marijuana at the federal level and removes it from Schedule 1 of the Controlled Substances Act. Before we get too excited, the next step for the bill will be the Senate.

Energizer (ENR) is holding its Investor Day today and the company is expected to update its three-year outlook.  

Sitime Corp (SITM), a provider of silicon timing systems solutions, priced its 4.3 million share IPO at $13, the low end of the targeted $13-$15 range. 

Bitcoin mining company Canaan (CAN) priced its 10 million share IPO at $9.00, the low-end of the expected $9.00-11.00 range.

Before US market trading begins, Thermo Fisher Scientific (TMO) will replace Celgene (CELG) in the S&P 100, and ServiceNow (NOW) will replace Celgene in the S&P 500. 

Later today, Tesla (TSLA) is expected to unveil its Cybertruck pickup in Los Angeles 

Tiffany & Co (TIF) shares moved higher in aftermarket trading following reports of continued M&A talks with LVMH (LVMUY).

PayPal (PYPL) is acquiring shopping reward technology platform company Honey Science Corporation for roughly $4 billion. Honey has 17 million monthly users and its platform spans 30,000 online retailers.  

Tobacco stocks ranging from Altria (MO) and Philip Morris (PM) to British American Tobacco (BTI) moved higher yesterday on reports the FDA is no longer looking to cut nicotine levels in cigarettes. 

There are several earnings reports after the market close today that are likely to catch investor's eyes:

  • Apparel company Gap (GPS) is expected to report EPS of $0.51 on revenue of $3.96 billion.
  • Retailer Nordstrom (JWN) is expected to deliver EPS of $0.64 on revenue of $3.67 billion.
  • Discount retailer Ross Stores (ROST) is expected to report EPS of $0.98 on revenue of $3.77 billion.
  • Cybersecurity company Splunk (SPLK) is expected to deliver EPS of $0.55 on revenue of $605 million. 
  • For those looking for a more complete list, we suggest visiting Nasdaq’s earnings calendar page

On the Horizon

  • Upcoming IPOs:
    • Alpine Income Property Trust, Inc, a real estate company that owns and operates a high-quality portfolio of single-tenant commercial properties, is expected to price 7.5 million shares between $19 and $21 and begin trading on the NYSE on November 22nd.
    • Software Acquisition Group Inc., a newly organized blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, is expected to price 12.5 million shares at $10 on November 22nd and begin trading on Nasdaq Capital.
    • Saudi Aramco (ARMCO) - which is expected to be the largest IPO in history, produces about 1/10th of the world's crude and is the world's most profitable company - is set to begin trading on the Saudi stock market in early December. November 17th Saudi Aramco said in a press statement that it is looking to sell a 1.5% stake in the company which translates into about 3 billion shares with the indicative price range for the shares $8 to $8.53 for an IPO valuation of $1.6 to $1.7 trillion - yes, that’s with a T. A final price is expected to be set on December 4th.
    • For a more complete list of upcoming IPOs by month, please visit the Nasdaq IPO Calendar.
  • Dates to mark:
      • November 28 - US Stock Market Closed for Thanksgiving Holiday
      • November 29 - Black Friday; US stock market closes at 1 PM ET
      • December 2 - Cyber Monday
      • December 2 - Apple (AAPL) Press Event
      • December 5-6 - OPEC meeting
      • December 15: New tariffs on consumer goods from China scheduled to go into effect barring any deal

Thought for the Day 

“Have you ever noticed that anybody driving slower than you is an idiot, and anyone going faster than you is a maniac?” - George Carlin

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Chris Versace

Christopher (Chris) Versace is the Chief Investment Officer and thematic strategist at Tematica Research. The proprietary thematic investing framework that he’s developed over the last decade leverages changing economic, demographic, psychographic and technology landscapes to identify pronounced, multi-year structural changes. This framework sits at the heart of Tematica’s investment themes and indices and builds on his more than 25 years analyzing industries, companies and their business models as well as financial statements. Versace is the co-author of “Cocktail Investing: Distilling Everyday Noise into Clear Investing Signals” and hosts the Thematic Signals podcast. He is also an Assistant Professor at NJCU School of Business, where he developed the NJCU New Jersey 50 Index.

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Lenore Elle Hawkins

Lenore Elle Hawkins serves as the Chief Macro Strategist for Tematica Research. With over 20 years of experience in finance, her focus is on macroeconomic influences that create investing headwinds or tailwinds. Lenore co-authored the book Cocktail Investing and in addition to her Tematica work, provides M&A consulting services for companies in Europe looking to expand globally. She holds a degree in Mathematics and Economics from Claremont McKenna College, an MBA in Finance from the Anderson School at UCLA and is a member of the Mont Pelerin Society.

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