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Wall Street Breakfast: Yellen To Set Stage For Rate Hikes In Jackson Hole
Aug. 26, 2016 6:48 AM ET|
Includes: APO, BRK.A, BRK.B, BUD, BX, GM, GME, HLF, MYL, PDCE, PE, PSX, QQQ, SBM
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(Insert personal update: I now have a versatile handy RED walker to use AND TOTE as necessary, and will be having knee surgery soon here in Sept. HE has very important appointments in Oct and the first of Nov. So, we are scheduling everything as necessary around each other, including FUN/Travel and or duties!} ONE DAY at a TIME......I also closed my Options Account
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"We see Jackson Hole as the 'ready' warning and look for Chair Yellen to err on looking at the optimistic side” of the outlook, says UBS's Drew Matus, though he doesn't expect an actual move on rates by the Fed until December. Barclays' Michael Gapen says a solid August employment report (due Sept. 2) means a September rate hike. If Yellen signals as such, it would be a surprise, as markets currently price in just about a 20% chance of a higher policy rate in September. The subject of Yellen's talk is "The Federal Reserve's Monetary Policy Toolkit," and it's due to start at 10:00 am ET.

Economy

A U.K. sentiment index from YouGov and the Centre for Economics and Business jumped to 109.8 from 106.6 in July. The July print was a three-year low, and the rise in August was the largest in three years. YouGov's Stephen Harmston: "It’s clear that the panic that gripped the public in the immediate aftermath of the referendum has subsided as institutions like the Bank of England take decisive action and the result becomes a part of life." This could all change though, warns Harmston, as details of the Brexit start to become reality, and should the BOE's forecast of a slowing economy hold true.

Stocks

Blackstone yesterday announced an agreement to invest $1.5B in a pair of drilling deals in West Texas, and committed another $500M to a group which has just purchased 16K acres in another area of the Permian Basin. The Blackstone (NYSE:BX) money for the deals came from an $8B pool raised early last year, but had mostly sat untapped. Other investors of late include Wilbur Ross, EIG Global Energy Partners and Apollo Global (NYSE:APO). Wall Street's rush could be a sign of a bottom... or a bubble - in some cases properties are going for higher prices that exceed those paid when oil was above $100 per barrel two years ago. "There’s this one corner of the world, the Permian Basin, where investors will keep financing you to keep on acquiring,” says Parsley Energy (NYSE:PE) CEO Bryan Sheffield, whose company has sold stock to buy land five times since 2014 (including a sale last week). PDC Energy (NASDAQ:PDCE) shot higher earlier this week on an agreement to buy $1.5B of Permian fields for an NY investment firm. "It’s like musical chairs," says a Dallas portfolio manager. "At some point in time, there’s not going to be a chair, and [oil producers] want to make sure they have a seat."

Adding another twist to the drama over Herbalife (NYSE:HLF), Jefferies has been looking for the past month to find buyers for Carl Icahn's 18% (roughly $1B) stake in the company, according to David Benoit in the WSJ. As if the idea of Herbalife's largest shareholder exiting wasn't enough of a story, the report also says Bill Ackman was among a possible group of buyers. Icahn's sale, of course, would come just weeks after he expressed renewed confidence in the company following the FTC settlement, but he's been a seller of a number of stocks this year amid what he sees as a bubbly stock market. That Ackman would consider buying isn't so surprising given the squeeze his short position is in.

Around 3% of the combined workforce of Anheuser-Busch InBev (NYSE:BUD) and SABMiller (OTCPK:SBMRY) could be laid off in the three years following the completion of their merger, says AB InBev. That 3% though, excludes sales and front-office supply staff, as AB InBev says regulatory restrictions prevent it from moving forward with integration plans at the moment. Combined, the two companies currently employ about 220K people.

Reacting to critical comments from Hillary Clinton, among others, Mylan (NASDAQ:MYL) announced a more generous patient assistance program to reduce out-of-pocket costs for EpiPen by up to 50%. The company is also doubling the eligibility for its patient assistance program to 400% of the federal poverty level - a family of four with an annual income of up to $97.2K, for example, would pay nothing for their EpiPen Auto-Injector.

After reporting an 11% plunge in same-store sales in Q2, GameStop (NYSE:GME) is lower by 7.8% premarket. Sales of new video game hardware fell 33% year over year. Looking ahead to Q3, the company expects same-store sales to be in a range from down 2% to ahead 1%. EPS is seen as $0.53-0.58. The company earned $0.27 in Q2.

A Texas jury found a General Motors (NYSE:GM) ignition switch was not to blame for a 2011 accident that killed one driver and injured another. It's the company's third victory this year in ignition cases. The plaintiff claimed he lost power steering and power brakes when his ignition switch jiggled off, causing him to smash into the oncoming truck; GM told jurors the accident was caused by the plaintiff's reckless speeding on a rain-slick road. Hundreds of ignition switch claims remain, prompted by GM's recall of millions of vehicles for a flaw ultimately linked to hundreds of deaths and injuries.

After buying more shares in the oil refiner this week, Berkshire Hathaway (BRK.A, BRK.B) now owns more than 15% of Phillips 66 (NYSE:PSX). This week's buys totaled 704K shares at an average price of $77.45 each, or more than $6B worth of stock.
Today's Markets

In Asia, Japan -1.2% to 16360. Hong Kong +0.4% to 22909. China -0.2% to 9743. India -0.1% to 27499.
In Europe, at midday, London +0.1%. Paris -0.1%. Frankfurt -0.2%.
Futures at 6:20, Dow flat. S&P -0.1%. Nasdaq flat. Crude -0.3% to $47.19. Gold +0.4% to $1329.20.
Ten-year Treasury Yield flat at 1.57%

Today's Economic Calendar

8:30 GDP Q2
8:30 Corporate Profits
8:30 International trade in goods
10:00 Reuters/UofM Consumer Sentiment
10:00 Janet Yellen speech
1:00 PM Baker-Hughes Rig Count

Companies reporting earnings today »
http://seekingalpha.com/earnings/upcoming