Fed says labor market strengthened even as economic activity slowed

The Federal Reserve said in today’s statement, “Information received since the Federal Open Market Committee met in Marcropped-527178_434502233267150_400064991_n.jpgch indicates that the labor market has continued to strengthen even as growth in economic activity slowed. Job gains were solid, on average, in recent months, and the unemployment rate declined. Household spending rose only modestly, but the fundamentals underpinning the continued growth of consumption remained solid. Business fixed investment firmed.

Inflation measured on a 12-month basis recently has been running close to the Committee’s 2 percent longer-run objective. Excluding energy and food, consumer prices declined in March and inflation continued to run somewhat below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.”

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China Woes Send Optical Communication Shares Lower!

Investors have been skittish on the prospects for RMB#optical communication companies since late last year, mostly centered on a slowdown in #China spending.

IHS Markit pointed out in a report from December 2016 that the pace of China’s spending on optical network equipment slowed in Q3 of 2016. Sales in China dropped more than 19% sequentially, according to the report. Operators in the country still spent 14% more than in Q3 of 2015, thanks to deployments of 100G infrastructure led by China Mobile.

A recent report from MKM Partners on #Oclaro $OCLR peer #Finisar $FNSR noted concerns on a number of fronts, “including China, for all products and 10G Datacom and Fibre Channel/SAN in the U.S. and Europe.” The analyst saw Q4 demand in China weak due in part to lower demand from Huawei with weakness in product demand across the board, including WSS,10G Datacom and Telecom, and CFP2.

According to the note, FiberHome and ZTE are also sluggish for Finisar. Oclaro CEO Greg Dougherty expanded on China during the company’s earnings call on Tuesday night. “In April, we were informed by both of our major Chinese customers that demand would be even slower than previously anticipated for Q4. While both customers have signaled a slowdown for demand in the China market, the majority of the projected Q4 impact is coming from one customer. This slide-dark-fibercustomer cited both the reduction in demand for the Chinese market as well as in inventory correction,” the CEO said.

On a positive note, #Dougherty sees the fundamental demand drivers in China still intact, and believes growth will return later this year from metro and provincial networks deployment.

ANALYSTS WEIGH IN: In a report out Wednesday morning, Jefferies analyst James Kisner said he believes the post-earnings selloff in shares of Oclaro brings a compelling entry point. The analyst was pleased with the gross margin performance and thinks the outlook suggests “healthy industry dynamics and product differentiation.” He lowered his price target for the shares to $12 from $14 and reiterated a Buy rating on the name. In a separate note out Wednesday, Needham analyst Alex Henderson pointed out that a C-Suite mandate to improve cash flow at Huawei is causing a more dramatic inventory correction than expected and that there was a “modest” amount of inventory to mop up at #ZTE.

OPTICALS DOWN: Shares of other companies in the space are also lower, including Finisar (FNSR), #Lumentum $LITE , #NeoPhotonics $NPTN , #Acacia Communications $ACIA , #Viavi $VIAV , and Applied Optoelectronics $AAOI .

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TESLA to build 4 additional Giga Factories to meet demand

TED organization has released highlights of Elon Musk’s appearance at the group’s conference Friday.tesla

Among statements, the #Tesla $TSLA CEO said the company is on track to complete a fully #autonomous cross-country drive by “November or December of this year.”

On Tesla’s semi truck project, Musk said the vehicle “can out-torque any diesel semi” while remaining nimble.

Turning to the company’s production plans, the CEO said Tesla plans to announce locations for an additional four #Gigafactories late this year.

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Wednesday’s Tax announcement likely to be only broad guidance and ideas

White House budget director Mick Mulvaney said on Sunday, “I think what you’re going to see on Wednesday is some specific governing principles, some guidance. Also some indication of what the rates are going to be. I don’t think you’re going to see something — and I don’t think anybody expects us to roll out — bill language on Wednesday. In fact, we don’t want to do that.

So what you’re going to see on Wednesday for the #FirstTime is: Here’s what our principles are, here’s some of the ideas that we like, some of the ideas we don’t like. Here’s some of the rates we’re talking about.”cropped-527178_434502233267150_400064991_n.jpg

Asked whether the #taxreform will be revenue neutral, #Mulvaney said, “I don’t think we’ve decided that part yet. Keep in mind, it’s a balancing act on that. You can either have a small tax cut that’s permanent, or a large tax cut that is short term. I don’t think we’ve decided yet, but you’ll know more on Wednesday.”

Questioned about his recent statement that he doesn’t expect a “real plan, specifics, meat on the bone” until June, Mulvaney responded, “I think that’s still probably fair. Again, we want to start working — and have already started working with the committees in the House and the Senate as we try to build some momentum.”

President Comments Move Stocks!

Here is a re-cap of how President Trump’s comments moved stocks last week:

1. STEEL SECTOR: On Thursday, Donald Trump met with several steel company CEOs at the White House to discuss the state of the industry and the administration’s plans to crack down on steel dumping. Following the sit down, he signed a memorandum related to section 232 of the Trade Expansion Act of 1962 and said he has directed the Commerce Department to launch an investigation into whether or not foreign companies, particularly those from China, are dumping steel on the U.S. market. Publicly traded companies in the steel space include Steel Dynamics $STLD , AK Steel $AKS , U.S. Steel $X and Nucor $NUE .TrumpHouseLogo_FINAL-1

2. HOSPITALS: Earlier this week, hospital stocks were under pressure following reports of Health bill progress. CNBC tweeted, “NEW: If health care changes in MacArthur memo are in bill text, they’d get 18-20 new @freedomcaucus votes. Brings total to
25-30, per source.” Publicly traded companies in the space include Community Health $CYH , HCA Holdings $HCA LifePoint $LPNT , Tenet $THC and Universal Health $UHS .

3. TECH COMPANIES: According to a news report by Recode, tech companies such as Amazon $AMZN , Apple $AAPL , Facebook $FB , Google $GOOG; $GOOGL , and Microsoft $MSFT have focused some of their lobbying sums in Washington over the past three months on fighting President Trump, as he looked toward major changes to the U.S. tax code and placed new restriction on foreign immigrants. Both issues are present on many companies’ first quarter lobbying reports, the publication notes.

4. HUMANA: On Friday, Jefferies downgraded Humana $HUM to Hold and lowered his price target on the shares to $221 from $237. The analyst told investors that he views the shares as expensive and pointed out that 2018 premium growth under President Trump is lower than 2017 under Obama. Events that would enhance Medicare Advantage decidedly above Medicaid and Commercial “are not blossoming,” Windley contended.

5. FINANCE-RELATED EXECUTIVE ORDERS: President Trump signed two finance-related executive orders on Friday aimed at unwinding regulations put into place after the financial crisis. The directives target “living wills” that banks must formulate to show how they would be broken up it there is danger of failure. Alongside banking measures, the administration is ordering a review on rules regarding inversions. Publicly traded money center banks include Bank of America $BAC , Citi $C , Goldman Sachs $GS , JPMorgan $JPM , Morgan Stanley $MS , U.S. Bancorp $USB and Wells Fargo $WFC .

6. TAX REFORM: On Thursday, Treasury Secretary Steven Mnuchin said during the International Finance Washington Policy Summit that the Trump administration is close to bringing forward “major tax reform.” The following day, Trump told Associated Press that he will unveil a tax plan next week that includes “massive” tax cut for individuals and businesses.

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POTUS calls for steel probe!

The White House published President Trump’s request today for an investigation into steel imports. The document states: “As imports of #steel to the United States continue to rise, an examination of foreign practices is urgently needed… President Donald J. #Trump is taking action to ensure America’s steel industry comes first, in addition to his Buy American and Hire American policies.panel-okays-20-provisional-safeguard-duty-on-steel-products

Today, the President signed a Presidential Memorandum prioritizing an investigation initiated by the Secretary of Commerce into whether steel imports threaten to impair the national security… By law the investigation must be concluded and a report submitted within 270 days. If the report concludes that steel imports threaten to impair the national security, and the President concurs, he may take several actions, including #tariffs.”

Publicly traded companies in the steel space include Steel Dynamics $STLD , AK Steel $AKS , U.S. Steel $X and Nucor $NUE $ZEUS

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AbbVie $ABBV says Study did not meet its end result

AbbVie announced that two Phase 3 studies evaluating #veliparib did not meet their primary endpoints. The studies evaluated veliparib in combination with the chemotherapy regimen carboplatin and paclitaxel in patients with squamous non-small cell lung cancer and triple negative breast cancer.

Full results will be presented at upcoming medical meetings or published in a peer-reviewed journal. “Research shows there is a role for PARP inhibitors in cancers associated with DNA repair deficits, such as those with BRCA mutations.

In these clinical trials, we wanted to explore whether a PA527178_434502233267150_400064991_nRP inhibitor could augment chemotherapy in patients with squamous non-small cell lung cancer and triple negative breast cancer by disrupting the repair of cancer cells,” said Gary Gordon, M.D., Ph.D., vice president, oncology clinical development, AbbVie. “Unfortunately, these data do not support the use of veliparib in combination with chemotherapy in these patients.”

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Pfizer receives grand jury subpoenas from DOJ

Pfizer $PFE confirmed that the company had received grand jury subpoenas from the U.S. Justice Department as part of an antitrust investigation focused onpfizer-logo intravenous saline solution makers, said Reuters.

Note that in a regulatory filing last night, ICU Medical $ICUI disclosed that on April 18, in connection with the Hospira Infusion Systems business that the company acquired in February 2017 from Pfizer.

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ICU Medical received a grand jury subpoena issued by the U.S. District Court for the Eastern District of Pennsylvania, in connection with an investigation by the U.S. Department of Justice, Antitrust Division.

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Oppenheimer bullish on Visa, MasterCard ahead of results

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The analyst is encouraged by “solid” January intra-quarter volume growth, improving gas price trends, strong retail sales growth, and broadly positive card issuer trends.

Further, Greene continues to believe that MasterCard and Visa are attractive at current levels, given their defensible market positions and strong long-term prospects. Nonetheless, he prefers Visa relative to MasterCard at present given the continuing U.S. volume boost from the Costco $COST wins and JPMorgan Chase $JPM Sapphire Reserve momentum, apparent conservative guidance, and Visa Europe accretion benefits.

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