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Wall Street Breakfast: Oil Prices Hit Fresh 5-Year Lows

Seeking Alpha

Delc. 30, 2014

Economy

With prices at more than five-year lows, Brent oil extended losses into a fourth session today as continuing worries about a global supply glut offset concerns about output disruptions in Libya. Brent crude plunged to its lowest level since May 15, 2009 in overnight floor trade, and is now down 0.7% at $57.49. Yesterday, Nymex crude also settled at its lowest value since May 2009, losing over 50% since it touched a 52-week high of $107.26 in June.

European shares are in the red, tracking a weaker showing in Asia, with sentiment staying cautious as Greek politics remain at the forefront of concern and oil continues its collapse to fresh 5-1/2-year lows. The Athens General index fell a further 0.6%, after plunging 12% yesterday following a failed presidential vote.

In yet another bid toward profitability and economic growth, Japan's ruling coalition has approved a tax reform plan that will trim the corporate tax rate from April. Coming on top of a recent $29B stimulus package, the plan will likely cut the overall effective corporate tax rate by 2.51 percentage points to 32.1% - confirming a pledge made by Abe in June to lower the corporate tax rate to below 30% in the coming years.

After nearly 15 years, the Nasdaq is looking like it could finally regain its March 10, 2000, high of 5,048.62. Given the index's 15% gain this year, another 5% gain in 2015 should not be too difficult. So far, the other major indexes — the Dow, S&P 500 and Russell 2000 — have all surpassed their recent highs, setting all-time new records. The Nasdaq Composite ended at 4,807 yesterday, basically unchanged on the day.

Stocks

A health-care worker infected with Ebola was admitted to a specialist unit in a Glasgow hospital yesterday after she returned from working with Ebola patients in Sierra Leone. She is the second Ebola patient to be treated in the U.K. since the outbreak of the disease. Ebola-related stocks are up on the news premarket: Tekmira (NASDAQ:TKMR) +2.2%; BioCryst Pharmaceuticals (NASDAQ:BCRX) +1.2%.

Keith Meister's Corvex Management has disclosed a stake of nearly 65M shares, or 7.1% in troubled American Realty Capital (NASDAQ:ARCP). "It is clear to the Reporting Persons that this is a time of transition and a unique opportunity for a ‘new start’ for the company and its shareholders," says Corvex in the 13D. Corvex most recently was behind the overthrow of the board and management at Commonwealth REIT (now renamed Equity Commonwealth (NYSE:EQC)). ARCP +4.4% premarket.

A four-day outage of Google’s Gmail service in mainland China appears to have at least partly ended today, with some users reporting they have access to their accounts. Most of Google’s (GOOG, GOOGL) services were blocked in China this past June, ahead of the 25th anniversary of the Tiananmen Square massacre. Gmail users have still been able to access the service through third-party email applications such as Microsoft’s (NASDAQ:MSFT) Outlook or Apple’s (NASDAQ:AAPL) Mail, but the service appeared to have been cut last Friday.

Toyota will likely miss its 2014 objective of selling over 1.1M vehicles in China because of a faster-than-anticipated economic slowdown and resulting price war in the local auto market. An increase in models from premium German brands priced within reach of mainstream Japanese cars has also paved the way for heavy competition. Toyota (NYSE:TM) is scheduled to release full-year figures on Jan. 6.

Alternate theories of how Sony Pictures was hacked are starting to emerge. A Reuters report suggests that North Korea likely hired hackers from outside the country to execute the attack, as Pyongyang probably lacked the capability to conduct the sophisticated campaign by itself. Researchers from the cyber intelligence company Norse have said their own investigation into the Sony (NYSE:SNE) attack doesn’t point to North Korea at all, but instead indicates some combination of a disgruntled employee and piracy groups.

Indonesian authorities have confirmed that the debris sighted in the Java Sea is from AirAsia (OTC:AIABF) flight QZ8501 that went missing three days ago. Indonesian rescuers managed to recover 40 bodies from the wreckage before dusk fell, although there was still no word on the possibility of survivors. AirAsia shares rebounded on Tuesday, rising 1.5% in Kuala Lumpur, after dropping more than 7% yesterday.

Petrobras' growing corruption scandal may implicate its $24B employee pension fund and has led to a freeze on payments to 23 contractors allegedly involved in the scheme. Petrobras (NYSE:PBR) could also be declared in technical default on any of its more than 20 U.S. bonds as soon as today, if investors holding at least 25% of any one series request the action.

Fast food chain Shake Shack has filed for an initial public offering with a nominal fundraising target of $100M. Revenue for the first nine months of the year totaled $83.8M (+41% Y/Y), and net income $3.5M (-20% Y/Y). The company intends to list its common stock on the NYSE under the symbol "SHAK."

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Today's Markets:

In Asia, Japan -1.6% to 17451. Hong Kong -1.1% to 23501. China flat at 3167. India flat at 27404.

In Europe, at midday, London -0.9%. Paris -0.9%. Frankfurt -0.7%.

Futures at 6:20: Dow -0.1%. S&P -0.3%. Nasdaq -0.1%. Crude -0.6% to $53.30. Gold +0.4% to $1187.10.

Ten-year Treasury Yield flat at 2.2%

Today's economic calendar: