Week of Aug 25 2017 Weekly Recap & The Week Ahead
Monday, August 28th, 2017“The easiest thing to do is prepare. If you don’t, on behalf of the other market participants, we thank you.” — unknown
1. Trump ‘s Afghanistan Strategy Puts Defense Stocks in Focus — President Trump has revealed a reversal of strategy in Afghanistan, warning against creating a vacuum for terrorists, but declined to give details on troop levels. Defense stocks have nearly doubled the S&P 500’s performance since Trump’s election, with the SPDR S&P Aerospace & Defense ETF (NYSEARCA:XAR) rising 26% since Nov. 8 vs. a 13.5% gain for the S&P500 Index. Stocks effected are: RTN, NOC, LMT, OA, GD, BA. Also, The U.S. Air Force has awarded Boeing (NYSE:BA) and Northrop Grumman (NYSE:NOC) separate contracts to continue work on the Ground-Based Strategic Deterrent program, which is planned to replace aging Minuteman missiles. It’s the first step in a three-pronged $500B refresh of the U.S. nuclear arsenal, which includes a long-range bomber being built by Northrop (NOC) and new nuclear submarines now under construction by General Dynamics (NYSE:GD).
2. Next OPEC meeting set for Sept. 22 to Discuss Oil Output — the next joint committee meeting of OPEC and non-OPEC producers will be held in Vienna on Sept. 22. All options, including extending supply cuts beyond Q1 of 2018, are “left open to ensure that all efforts are made to re-balance the market,” according to an OPEC statement. The group also confirmed that its deal achieved a conformity level of 94% as of July.
3. Texas Refining Industry on Watch for Hurricane Harvey — nearly a third of U.S. refining capacity appears to be in Harvey’s path on the Texas and Louisiana coastlines, while forecasters expect the tropical storm to reach hurricane strength soon. Anadarko Petroleum (NYSE:APC) has pulled workers from its Gulf of Mexico platforms, and refiners are assessing their operations.
4. Offshore Driller Seadrill Prepares for Chap. 11 — Once the biggest offshore rig firm by market value, Seadrill (NYSE:SDRL) plans to begin its Chapter 11 debt restructuring in the coming weeks, while revealing a $100M loss in the second quarter. The negotiations will likely involve bankruptcy “on or before Sept. 12,” as the company plans to raise $1B in new capital and obtain a five-year extension for its bank facilities.
5. Trump to Push for Major Tax Reform — “Starting next week, the president’s agenda and calendar is going to revolve around tax reform,” National Economic Council Director Gary Cohn told FT. “He will start being on the road making major addresses justifying the reasoning for tax reform and why we need it in the U.S.” The current American tax system has remained largely unchanged for three decades.
The week ahead — Economic data from Econoday.com: