17Apr2018 Pre-Market Commentary: Wall Street To Continue Bull Rally, DOW Is Heading For Another Triple-digit Rise At The Open, Goldman Sachs Beats 1Q Expectations

Here is the current market situation from CNN Money

European markets are higher today with shares in Germany leading the region. The DAX is up 0.93% while France’s CAC 40 is up 0.55% and London’s FTSE 100 is up 0.21%.

Futures rise on strong earnings from Netflix, health majors

(Reuters) – U.S. stock index futures rose on Tuesday as strong earnings from Netflix, Johnson & Johnson and UnitedHealth boosted optimism over what is expected to be the strongest earnings season in seven years.

U.S. strike on China’s ZTE another blow for Qualcomm

SHANGHAI/BEIJING (Reuters) – A move by the United States to ban American firms selling components to the Chinese telecom equipment maker ZTE Corp will also hit a target closer to home: Qualcomm Inc, a U.S. company that is a major supplier of chips for ZTE’s phones.

Tesla production pause adds to Model 3 concerns

(Reuters) – Tesla Inc shares fell as much as 2 percent in premarket trading on Tuesday, a temporary halt in production of its Model 3 sedan adding to nerves about the electric car maker’s consistent failure to keep its promises on vehicle output.

Goldman profit up 27 percent as trading surges

(Reuters) – Goldman Sachs Group Inc reported a 27 percent rise in quarterly profit on Tuesday, driven by a surge in trading revenue due to increased market volatility.

J&J quarterly profit beats on demand for cancer drugs

(Reuters) – Johnson & Johnson reported a better-than-expected first-quarter profit on Tuesday and raised its full-year sales forecast, helped by growing demand for its cancer drugs.

UnitedHealth profit beats on strong growth across businesses

(Reuters) – UnitedHealth Group Inc on Tuesday posted a quarterly profit that beat Wall Street estimates, fueled by growth in its core insurance and health-services businesses and raised its earnings forecast for the year.

Exclusive: Chinese exporters concerned about U.S.-China trade spat – survey

GUANGZHOU, China (Reuters) – As Washington and Beijing face off in a simmering trade dispute, Chinese exporters are expressing concerns about an escalation, although many say they expect the worst to be averted as negotiations continue.

U.S. ban on sales to China’s ZTE opens fresh front as tensions escalate

LONDON/NEW YORK/HONG KONG (Reuters) – The United States has banned American firms from selling parts and software to China’s ZTE Corp for seven years, potentially devastating for the telecoms equipment maker and exacerbating tensions between the world’s two largest economies.

Tech giants remain most crowded trade for third month running: BAML survey

LONDON (Reuters) – The world’s biggest tech stocks were investors’ top pick for the third straight month despite mounting worries over regulation, Bank of America Merrill Lynch’s April fund manager survey found on Tuesday.

China Slaps 179% Tariff On US Sorghum Hours After US Bans Exports To China’s ZTE

In response to reports that the US is ramping up the “third front” in its trade spat with China by authorizing another investigation under Section 301 of the Trade Act of 1974 – this time, aimed at obstacles that prevent US tech firms from competing in cloud computing and other high-tech industries – China has, as we anticipated, retaliated by slapping tariffs on US sorghum imports.

Yesterday, the US also revealed that it would stop US tech firms from selling components to Chinese telecom giant ZTE after accusing the company of lying during settlement negotiations – eliciting an angry response from Chinese officials, who urged US lawmakers to create a “fair, just and stable legal and policy environment” for Chinese companies, according to Xinhua.

Like Chinese tariffs on US pork products that were imposed earlier this month, the sorghum tariffs aren’t merely a threat: Rather, China says they will take effect on Wednesday, per Bloomberg.

US sorghum imports will incur a 178.6% tariff, China’s Ministry of Commerce said in a preliminary ruling on Tuesday. Wang Hejun, chief of the trade remedy and investigation bureau at the Ministry of Commerce, said the tariffs comply with domestic law and World Trade Organization standards.

The ruling follows a probe into Sorghum imports that began in February after Trump slapped tariffs on imported solar panels and washing machines – a decision that was viewed as an indirect slight at China.

Dollar Gains After Mnuchin Walks Back Trump FX Tweet As “Warning Shot”

After tumbling yesterday following President Trump’s FX manipulator tweet, the Dollar Index rebounded overnight (on a collapse in German economic confidence) and is extending gains now after Treasury Secretary Mnuchin told CNBC that Trump’s tweet was not a signal for a weaker dollar but a “warning shot” to Russia and China not to devalue their currency in the future.

The initial gains overnight in the USD were due to EUR weakness after ZEW survey showed economic expectations in Germany have collapsed to 6 years lows…

But then Mnuchin rescued the dip (for now)…

As a reminder, and as Mn …

Goldman Reports Blowout Earnings: Q1 Turmoil Leads To Highest Revenue In 3 Years

If there is anything the recent reports from money center banks showed, it was the the February volatility surge was a gift to bank equity trading desks, which is why Wall Street was eagerly anticipating this morning’s Goldman Sachs results to see how much the “cleanest” trading desk on Wall Street would benefit from the turmoil in Q1.

It was not disappointed, because moments ago Lloyd Blankfein, in one of his last quarters as Goldman CEO, reported results that blew expectations out of the water.

Goldman reported net earnings of $2.83 billion, transalating into EPS of $6.95, far above the $5.58 consensus estimate, which however was largely driven by the plunge in the company’s tax rate. This was a 15.4% annualized ROE. This is what Goldman said on the matter:

The effective income tax rate for the first quarter of 2018 was 17.2%, down from the full year rate of 61.5% for 2017, as 2017 included the estimated impact of Tax Legislation, which increased the firm’s effective income tax rate by 39.5 percentage points.

So to avoid the noise from the swing in the tax rate, we looked simply at the top line and it was here that Goldman truly shone, reporting total Q1 revenue of $10.04BN, up 25% Y/Y and not only smashing consensus expectations of $8.74BN, but above the highest Wall Street estimate, mostly thanks to equity trading and its prop desk.

Here are the standouts:

Equities sales & trading revenue $2.31 billion, estimate $1.85 billion, up 38% from $1.67 billion

Trading revenue $4.39 billion, estimate $3.89 billion, and up 31% from $3.36 billion

Investing and Lending (Prop) revenue $2.087 billion, up 43% from $1.464 billion

Here is how Goldman’s breakdown of its institutional client services revenue:

Net revenues in Institutional Client Services were $4.39 billion for the first quarter of 2018, 31% higher than the firs …

The Bullish And Bearish Case For Oil

Authored by Nick Cunningham via OilPrice.com,

Oil prices could rise due to the “perfect storm of stagnant supply, geopolitical risk, and a harsh winter,” according to an April 12 note from Barclays.

Geopolitical events specifically could help keep Brent above $70 through April and May, which comes on the back of a substantial decline in oil inventories.

The investment bank significantly tightened its forecast for Venezuelan production, lowering it to 1.1-1.2 million barrels per day (mb/d), down sharply from its previous forecast of 1.4 mb/d. That helped guide the bank’s upward revision for its price forecast for both WTI and Brent in 2018 and 2019, a boost of $3 per barrel.

The flip side is that the explosive growth of U.S. shale keeps the market well supplied, and ultimately forces a downward price correction in the second half of the year, Barclays says. In fact, the investment bank said there are several factors that could conspire to kill off the recent rally. One of the looming supply risks is the potential confrontation between the U.S. a …

How Long Until China Cranks Up the Debt Engine?

The country’s first-quarter growth was strong, boosted by a seasonal industry rebound. But it masked some worrying signs.

U.S. Tech Caught in Crossfire of China Trade Fight

One of China’s most successful global companies has been punished by the U.S. government. That means trouble for its suppliers too.

Is This as Good as It Gets for the Big Banks?

The laggards of American banking are at last producing unambiguously good results. The challenge for the banks now is to prove they can deliver healthy profits in less than ideal conditions.

In One Chart: U.S. stock valuations are at multiyear highs — and multiyear lows

With the start of the first-quarter earnings season, U.S. stock-market investors are waiting to see whether the results point to an American corporations that is thriving in the current economic environment, or whether the market’s rally over the past several years has been overdone.

Bond Report: Treasury yields mixed ahead of economic data, Fed speakers

Treasury yields are mixed on Tuesday ahead of a raft of data and a docket full of speakers from the Federal Reserve, which could a better picture of the economic landscape and upcoming monetary policy.

In One Chart: A sideways stock market could lead to this ominous chart pattern by Memorial Day

Memorial Day is a holiday for the U.S. stock market, but this year it may not be one that many on Wall Street will want to celebrate, from an investment perspective.