Picks of the Day November 14,2017

Mattel Lifts Market Despite GE Plunge

What a day for GE! The stock plunged 7%, the company CEO, John Flannery, hoping to fan optimism and getting nothing less than the exact opposite. Flannery announced a company reorganization aimed at streamlining the conglomerate’s vast operations. That, though, didn’t come without costs. The annual dividend was slashed in half; it was only the second time since the Great Depression that the company cut its dividend. The stock saw its largest daily decline since the housing recession. Selling pressure didn’t abate, lasting all day long, shares trading down as much as 8.5% at one point in intraday trading. Having historically encompassed a huge range of businesses – with interests in media, chemicals, railroads, banking and marine engines – the company’s new focus will be on this trio: health care, aviation and energy.

GE, though, didn’t stop stocks from ending higher. The market bucked the dour news from the industrial powerhouse, also not getting bogged down by tax reform worries and concerns. Mattel (MAT) provided the counterweight, helping the S&P 500 rise 0.1% on the day, offsetting in very large part the weaker than expected 2018 guidance from GE.

Hasbro (HAS) made a bid for MAT. MAT jumped 20%, HAS adding as much as 8% in morning trading. The market sees the deal as positive all around, especially after Toys R Us declared bankruptcy. The economies of scale and pricing power the joint company would have certainly found favor in the market’s eyes. Their ability to leverage their unique niches is what made the market salivate, eagerly anticipating the blockbuster deal.

The NASDAQ also tacked on 0.1%, Facebook, Apple, Amazon and Netflix pushing ahead, biotech stocks and Apple, though, slipping on the day.

The Dow, in turn, got a lift from Boeing, with contributed the most to the 17 point gain on the blue chip index. GE, on the other hand, was the index’s biggest loser. Emirates, the Dubai airline, announced a provisional order for 40 Boeing 787 Dreamliner. For Boeing, the deal is worth $15.1 billion.

At the same time, it’s impossible to entirely tuck under the rug the prospect that tax reform won’t be completed until next year. As things have it, another worry gnawing at investors is that even if tax reform is pushed through this year, a corporate tax cut – if the Senate get its druthers – won’t make it through both houses of Congresses until 2019. Though the House wants a vote to be held already this week, the Senate doesn’t seem to want to budge. First Standard Financial chief market economist, Peter Cardillo, shared, “As the tax debate intensifies, investors are becoming more skeptical.” Cardillo added, “I think the market is caught in a reality check right now.”

Before Opening: Home Depot will be reporting Q3 earnings today before the opening bell. Hurricanes Harvey, Irma and Maria are likely to show up, giving the company a boost. The hurricanes hit in the company’s two key markets, Texas and Florida. KeyBanc wrote in a note, “We believe that both Home Depot and Lowe’s could report about a 200 basis-point sales lift considering the magnitude, costs, and the concentration of damage in Florida and Texas, the two key markets for Home Depot and Lowe’s.”  FactSet expects HD to see EPS of $1.82, up from $1.60 last year.

On the tech front, Amazon was compelled to sell off a large part of its hardware assets from its China public cloud business. Tightening online data regulations are clamping tech firms’ ability to operate. Being the world’s second largest economy, China’s Communist Party’s policy decisions can have far-reaching implications and consequences for large American firms. The jury is out to see how things will further develop; among other things, China’s lax patent protection has enabled cheap rip-offs that bite into global tech firms’ earnings, Apple likewise suffering, along with other companies.

Hot Stocks: AAP, ARMK, DKS, HD, MDLY, SSYS, CHCI, JNP

IPOs:

New York Strategy Swing