Futures point to a carnage at Wall Street open
Bernie Sanders wins Democratic Party primaries in Nevada
Buffett does not see current M&A valuations as opportunity
Surge in the number of new coronavirus cases outside China has doomed equities in Asia and Europe today. US equities are unlikely to buck this trend as the futures market points to the S&P 500 index opening 2.3% lower. In other news, Bernie Sanders scored a big win in Nevada primaries while Warren Buffett’s Berkshire Hathaway released full-year results.
Bernie Sanders wins Nevada primaries
Bernie Sanders won Democratic primaries in Nevada, securing a support of 47.1%. Joe Biden received 21% of the votes while Pete Buttigeg had a support of 13.7%. The results cover 88% of the votes. Sanders has won all three primaries that were already held (Iowa, New Hampshire and Nevada) and is on his way to become November’s challenger to incumbent president Donald Trump. However, Nevada results may be misleading as Sanders’ biggest competitor - Michael Bloomberg) did not take part in primaries in the state. The real test for Sanders and Bloomberg will be next week, when the so-called Super Tuesday is held (Tuesday, March 3). Primaries will be run in 14 states on this day and support of 34% of all delegates is at stake.
US30 (Dow Jones futures underlying) is trading 2.5% lower today. The index tests the key support ranging between 28150 pts handle and the lower limit of the Overbalance structure (yellow box). The zone is additionally being strengthened by the 100-session moving average (red line). Unless some upbeat news on coronavirus see daylight later today, index’ trading may be focused on the aforementioned 28150 pts handle throughout the session. Source: xStation5
Berkshire Hathaway (BRKB.US) published Q4 and full-2019 earnings on Saturday. Company’s Q4 adjusted net profit of $4.42 billion was almost 30% lower than the median estimate compiled by Bloomberg. However, the company booked a $24.7 billion one-off gain, putting its unadjusted net profit at $29.16 billion. Revenue of $65.368 billion, trailed estimate by 1.7%. Full-2019 revenue grew 2.7% to $254.62 billion. Full-year net income of $23.972 billion was 45% higher than expected and 3.2% YoY lower.
Warren Buffett, chairman of the Berkshire Hathaway, expressed regret in his annual letter to shareholders over inability to find the next big acquisition. Buffett said that current M&A valuations do not create an opportunity and his company is likely to resort to buying smaller, non-controlling stakes in companies. The letter also renewed discussion over succession as chairman Buffett will turn 90 this year while vice-chairman Munger turned 96 on New Year’s Eve. In the letter Buffett said that two executives holding vice-chairman roles - Ajit Jain and Greg Abel - will have their presence increased at the incoming annual shareholder meeting in May. The two are has been named as potential successors to Buffett for some time already but this year’s letter did not hint on who is the front-runner.
Berkshire Hathaway (BRKB.US) bounced off the 50-session moving average (green line) at the end of the previous week. However, the stock is still trading below intraday ATH of €231.6 reached on January 17. The company's adjusted beta calculated with monthly returns over the previous 30 years stands at 0.73, hinting that Berkshire Hathaway may be more resilient than S&P 500 today. However, in case the market's plunge continues to gather pace, the stock may be set to test support at $223. Source: xStation5
Global stock markets are being roiled by coronavirus concerns. However, it does not mean that each and every stock is trading lower. Investors pour their money into shares of medical companies that announced they are working on vaccines for the novel coronavirus. Novavax (NVAX.US) is one such company. Shares are benefiting from recent rise in new coronavirus cases and trade over 15% higher in premarket. Co-Diagnostics (CODX.US) is also on the rise with shares trading 10% higher in premarket. The company recently submitted a COVID-19 diagnostic test for registration in Europe.
While miner stocks are sinking with commodities today, there is a group of miners that buck the trend - companies involved in precious metals mining. Newmont (NEM.US), the world’s largest gold miner, is an example. The company trades around 5% higher today, being fuelled by gold price surge and upbeat recommendation from CIBC. Analysts praised the company's earnings announced last week and decided to boost recommendation from “neutral” to “outperform”.
Newmont (NEM.US) gains on the ongoing gold market rally. Gold miner failed to reach the $50 resistance zone at the end of the previous week. However, premarket trades point to open near $52 handle, thanks to a 2% increase in gold price today. In such a scenario, the aforementioned $50 zone could serve as a floor today. The next major resistance in line is zone at 78.6% Fibo level of a drop started in late-2011. Source: xStation5
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