Market Morning: BlackRock Bullish, DowDuPont vs Bayer, AT&T Layoffs, iPhone Production Cut, Ahoy Futures

BlackRock Isn’t Betting On A Bear

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BlackRock (NYSE:BLK) still loves tech stocks, not just in the United States, but in China as well. However, the top choice for the world’s largest asset manager is healthcare stocks, which offer defensiveness, income, and stability against a downturn, said BlackRock Chief Equity Strategist Kate Moore. She also believes that a floor could be reached if a deal is made on trade with China. On the other hand, if a deal is not reached, trade issues could hang over markets for “years, not quarters”. At least until 2020 through Trump’s first term, though trade tensions are likely to east considerably with China if Trump is ousted by a democratic challenger. Or even a Republican free-trade challenger in the primaries. The Republican establishment is still very much anti Trump, so a primary challenger does have a small chance.

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DowDuPont Gets Foot In Chinese Soybean Door

DowDuPont (NYSE:DWDP) has been approved by Chinese authorities for import of its Enlist E3 soybeans, which are genetically engineered to resist three different herbicides. Imports of these seeds were approved on Tuesday in a sign of easing trade tension, as DowDuPont is a US company. German competitor Bayer (OTCMKTS:BAYRY), through subsidiary Monsanto, already sells its Roundup Ready line of seeds including Roundup Ready 2 Xtend that are resistant to Roundup weed killer, though weed resistance to the chemical is already an issue, so DowDuPont could put Bayer on the defensive here. 45% of soy acres in 2018 were seeded with Roundup Ready 2 Xtend seeds, so DowDuPont has a lot of market share to make up for.

AT&T Layoffs Ahead

Has the job market topped? Perhaps so, though it will take a few more months to see any sort of trend change, if it is occurring. AT&T (NYSE:T) is about to start a new round of layoffs following its $85 billion acquisition of Time Warner. AT&T holds over $180 billion in debt, more than many small countries, but less than 1% of the US national debt, so that’s a good sign. Relatively. However, the telecom giant’s leverage is nearing 100%. The layoffs will include jobs at 10 hubs in New York, New Jersey, California, Missouri, Texas, and other states. Not wanting to look like the bad guy, AT&T issued the following statement: “We are hiring to meet the needs of the growth areas of our business. In fact, we hired more than 20,000 new employees last year and more than 17,000 the year before. In cases where we do have to adjust our workforce, we take steps to lessen the effect on employees.”

Apple Cuts iPhone Production by 10%

Following disappointing iPhone sales numbers out of China that took a 10% bit out of Apple’s market cap, Apple (NASDAQ:AAPL) has decided to reciprocate by cutting iPhone production by 10%. This is the second cut in 2 months, but will only last for the next 3 months, officially, so far. Year over year, if the cuts are implemented, would see a reduction in overall iPhone production by 20%. This will surely affect the employment picture in China as well, and what with Sears about to let go 60,000 workers in a bankruptcy liquidation, we could see the job market start to get lax across the world. A reduction in iPhone production also affects the companies that supply parts to the iPhone, and not just the factories that assemble the iPhone. Let’s see how far the waves reach, and whether the slack will be picked up by a different sector.

Asia, Europe, US Futures Up, Oil Above $50, Gold and Silver Steady

The pendulum is swinging back in China. Giddiness over a terse tweet by President Trump that trade talks are “going very well” is pushing up Asian markets , led by Hong Kong and Japan, though less so China. European stocks are also higher this morning, led by Italy, then France. Bond yields are up nearly everywhere except the US, with Italy’s 10Y pushing 3% and the ECB no longer buying.  US futures are splashing around, up slightly but nearly unchanged. Oil is up another full percent this morning, now back above $50 a barrel. Gold and silver are taking breather after a long rally.

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