China warns of “necessary response” to Huawei blacklisting, Trump’s battle with Congress heats up, and Tesla bears circle. Here are some of the things people in markets are talking about today.
Chinese officials continue to warn that the country will retaliate to the U.S. blacklisting of Huawei Technologies Co., while also refusing to be drawn on what form that response might take. Chip makers came under pressure in the wake of the ban, which the Commerce Department yesterday eased slightly by granting a 90-day reprieve for certain U.S. companies and customers using the manufacturer’s equipment. In China, suppliers to Huawei rallied as investors bet it will become increasingly reliant on domestic sources of equipment.
Trump vs Congress
President Donald Trump’s long-running battle with Democrats in Congress is coming close to boiling point again. The White House has asserted immunity in directing former Counsel Don McGahn not to appear before the House today. Democrats won a judgment yesterday which said lawmakers have power to demand the president’s financial records, a decision Trump said he would appeal. The standoff may make Democrats feel they have little option other than to begin impeachment proceedings, a move House Speaker Nancy Pelosi remains cautious about.
Tesla Inc.’s shares have dropped in nine of the last 10 trading days and dipped below $200 in yesterday’s session. There are many catalysts for the move, but one of the most important ones cited by analysts is lack of demand for the company’s mass-market Model 3 sedan. According to data from S3 Analytics, mark-to-market profit for short sellers of the company has already exceeded $1 billion in May, with the electric carmaker remaining one of the most popular short positions among U.S. stocks. Morgan Stanley this morning cut their “bear case” price target from $97 to just $10 a share.
Overnight the MSCI Asia Pacific Index slipped 0.3% while Japan’s Topix index closed 0.3% lower as technology shares dragged the gauge down. In Europe, the Stoxx 600 Index was 0.5% higher by 5:50 a.m. Eastern Time as technology stocks recovered some of yesterday’s losses. S&P futures pointed to a similar rebound at the open, the 10-year Treasury yield was at 2.416% and gold was down.
U.S. existing home sales data for April is published at 10 a.m. Fed watchers have Chicago Fed President Charles Evans and Boston Fed President Eric Rosengren to look forward to later. In earnings, it’s all about retailers today with Home Depot Inc., Kohl’s Corp., JC Penney Co. Inc., Nordstrom Inc., Urban Outfitters Inc. and TJX Cos Inc. due to report.