Five things with @BayStreetAmber
Start your trading day with everything you need to know about the market
The family group chat was lighting up with ideas last night of what I should call my revived newsletter. My brother in law said I could call it Northern Market Exposure and gave himself a hearty “lol”. He came back to it 3 or 4 times before I finally confessed I didn’t understand the reference. He assured me boomers would love it. Please let me know if you do. My husband, ever the left-brain thinker, suggested I call it the Amber Kanwar newsletter. He balances me out though, insisting I scrap my own suggestion of “23 & P/E” and “Big Swinging Risk.” Sigh. The search continues. In the meantime, let’s begin.
Case of the Mondays: Futures are dipping this morning but keep in mind we are coming off a hot start to October. The S&P 500 is on a four-week win streak, ditto for the TSX which also closed at a record high on Friday. On both sides of the border the rally has looked the same: energy and tech are the best performers while we have seen a little bit of give back in bond proxies. This week is back-end loaded. On Wednesday in the US we will get the minutes from the Fed meeting that featured the first rate cut. Recall, while it was a larger than expected 50 bps point rate cut, it also featured a dissenter for the first time since 2005. Investors will look for more colour on that. The big show will be CPI on Thursday. Thanks to strong job growth last Friday, the market has priced out the odds of another 50 bps move and reduced the number of rate cuts expected. Earnings season kicks off Friday with JP Morgan and Wells Fargo reporting. In Canada, the fireworks will be Friday when we get the jobs report (+31,500 new jobs expected) and the Bank of Canada’s business outlook survey.
Pill popping: Shares of Pfizer are popping in the pre-market on reports of activist interest. Bloomberg is reporting that notable activist Starboard Value has taken a $1 billion stake. This will be welcome news to long suffering shareholders. Shares of Pfizer are down more than 50% from the Covid peak, trade at just an 11x forward PE and give investors about a 6% dividend yield. The stock has gone nowhere all year, underperforming its peers. Unclear if Starboard has a plan for Pfizer which is struggling to find its next big thing after squandering its pandemic riches. Stay tuned.
Opportunity strikes: Shares of Arcadium Lithium are rallying more than 30% in the pre-market after acknowledging it is in talks with Rio Tinto about a potential takeover. Shares of Arcadium are worth half of what they were at the start of the year and investors may view Rio Tinto as making an opportunistic move here. Spot lithium prices are down more than 85% from their peak as enthusiasm for this green energy transition metal faded. The news came out Friday and the entire sector rallied. Looks like names like Lithium Americas, Sigma Lithium and SQM are poised to continue the rally this morning. To track the market you can look at the Global X Lithium ETF, ticker LIT.
One man’s trash: Chevron is selling its stake in some of its oil sands and shale assets to Canadian Natural Resources for $6.5 billion. While it is yet another example of a foreign exodus in Canada’s energy sector, investors love it for CNQ. The shares up 2% in the pre-market and the company is boosting its dividend. Chevron also has a lot going on geographically speaking and seems to want to focus on the US Permian and its upcoming acquisition of Hess which will give it big exposure in Guyana. Chevron is also higher in the pre-market. Oil is bid right now (up 5 session in a row) and that is likely helping things.
Notable calls: We’ve got a bull-bear debate playing out on Netflix this morning. Barclays is downgrading the streamer saying valuation and growth forecasts are too high. While Piper Sandler is upgrading the stock to buy saying the stock is expensive for a reason, believing there are multiple levers for the business to pull. Amazon is under pressure in the pre-market, downgraded to hold at Wells Fargo. The analyst is worried that they won’t be able to sustain momentum and laments that Amazon Web Services strength alone is not enough. American Express is getting clipped, JP Morgan downgrading it on valuation and recommends investors buy Ally Financial instead.