Wall Street to launch new week lower, Tyson Foods in the spotlight

Summary

- Stocks and EM currencies drop at the beginning of a new week
- S&P 500 (US500) turns lower after failing to overcome 50-session moving average
- Tyson Foods (TSN.US) will shut operations at Kansas plant after Friday’s fire

Investors launched new week in somewhat mixed moods. Gains were spotted on the Asian stock markets but early bounce on the European bourses was quickly erased and majority of the indices from the Old Continent trade below Friday’s closing prices. Apart from that, it should be noted that EM currencies underperform as a group. Sentiment towards EMs was spoiled by unexpected defeat of Argentinian President Macri in primary presidential ballot held over the weekend as well as Friday’s political intervention in the Central Bank of the Republic of Turkey that resulted in dismissal of CBRT chief economist.

S&P 500 (US500) failed to break above the 50-session moving average last week. The index is moving lower in pre-session trading echoing lacklustre performance of the European equities. Failure to rally back to the ATH can be seen as a worrying signal. In case the downward move is to deepen, the support zone ranging above the 2865 pts handle should be closely watched. Breaking below this hurdle would risk the price revisiting the latest local low in the vicinity of 2800 pts handle. Source: xStation5

BlackRock (BLK.US), the world's biggest asset manager by AUM, is making interesting moves in the pre-session trading. The stock is trading higher after news surfaced saying that the company made a major investment into Authentic Brands Group. Namely, the asset manager invested $875 million in brand management company and, in turn, became its largest shareholder. The investment is the first one for BlackRock’s private equity fund that was launched earlier this year. Authentic Brands Groups owns a vast portfolio of different brands that generates annual sales of over $9 billion. While neither BlackRock, nor Authentic Brands Group commented on the valuation of the company, the Wall Street Journal article hints at the latter company being valued at $4 billion including debt.

Tyson Foods (TSN.US) is another stock that may experienced elevated volatility today. Fire broke out in company’s meat-processing unit in Kansas on Friday night. The fire is said to have caused significant damage and as a result as much as 3800 workers will be out of work for some time. It is unknown at this moment for how long the facility will remain shut. However, a point to note is that the company will provide workers with “some guaranteed pay”. Disruption in operations combined with payout of “guaranteed pay” is likely to be a setback for the company. Moreover, in case the damages take long to repair, the company may be forced to move cattle that was ready for slaughter to another meat-processing plant and it will, of course, result in additional costs.

Tyson Foods (TSN.US) saw a decline of over 40% between December 2017-December 2018. However, impressive recovery started at the beginning of 2019 not only brought the stock to late-2017 highs but even allowed it to paint a fresh ATH. Price reached the 112.8% exterior retracement last week and may turn lower on the back of Kansas’ meat-processing plant shutdown. Source: xStation5