foxex: WeWorked

The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Tuesday's Headlines

1. Impeachment Concerns Pummel Stocks

2. WeWork CEO Agrees to Step Down

3. Vote on Cannabis-Related SAFE Banking Act

4. Netflix Negative

Markets Closed

Dow
26,807.77 -0.53%

S&P
2,966.60 -0.84%

Nasdaq
7,993.63 -1.58%

VIX
17.05 +14.35%

Bitcoin
$8,401.87 -14.78%

US 10-Yr Yield
1.635 -4.27%

Markets Today

Impeachment concerns pummel stocks
Trump impeachment proceedings may not matter for markets
Trump won't accept a "bad deal" in U.S.-China trade negotiations

Stocks started out the trading day optimistically on Tuesday as rising hopes for a near-future resolution to the U.S.-China trade war helped buoy market sentiment. The mood quickly turned south, however, as the specter of impeachment proceedings against President Trump loomed.

U.S. House Speaker Nancy Pelosi said early on Tuesday that she would make an announcement amid growing support for impeaching Trump among Democrats. Calls for impeachment have increased after recent allegations surfaced that the President had asked Ukrainian President Volodymyr Zelensky over the phone this past summer to investigate former Vice President Joseph Biden and his son, Hunter Biden, over business dealings in Ukraine.

But on Tuesday afternoon, Trump tweeted that he would authorize "the release tomorrow of the complete, fully declassified and unredacted transcript of my phone conversation with President Zelensky of Ukraine." Trump went on to tweet that "You will see it was a very friendly and totally appropriate call. No pressure and, unlike Joe Biden and his son, NO quid pro quo!"

Here are the tweets:

Trump's messages temporarily helped alleviate some pressure on markets, but were not enough to provide much lasting respite.

After the market close on Tuesday, Pelosi indeed made an announcement calling for an impeachment inquiry into President Trump.

Though we generally like to steer clear of politics, it's worth noting that impeachment proceedings, in and of themselves, may not be as bad as one might think in terms of pressure on the markets. Here, from FT Alphaville, is a chart of S&P 500 moves surrounding the impeachment proceedings of former President Bill Clinton.

Granted, Clinton was ultimately acquitted, but the road to that acquittal was characterized by a generally bullish market.

Also weighing on stocks Tuesday was Trump's speech to the United Nations General Assembly, in which he stated that he would not accept a "bad deal," referring to upcoming trade negotiations between the U.S. and China. This comment was seen as an escalation of the ongoing trade conflict, helping to weigh on stocks as well as crude oil.

WeWork CEO Agrees to Step Down

After having been pressured to step down from his role as CEO of WeWork amid recent preparations for an initial public offering, as well as personal and professional controversies, co-founder Adam Neumann has agreed to do just that. He will, however, continue on as non-executive chairman of the board. According to the company's press release on Tuesday, "WeWork's Artie Minson, formerly co-president and chief financial officer, and Sebastian Gunningham, formerly vice chairman, have been named co-CEOs of the company. These changes are effective immediately."

Also from the press release, Neumann was quoted as saying, in part: "While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction, and I have decided that it is in the best interest of the company to step down as chief executive. Thank you to my colleagues, our members, our landlord partners, and our investors for continuing to believe in this great business."

Vote on Cannabis-Related SAFE Banking Act

An important vote related to financial regulations for cannabis providers is expected to be held in front of the U.S. House of Representatives shortly. The SAFE Banking Act was first introduced to Congress in May 2017, reintroduced in the House this past March, and then amended in June. According to a March press release from the House Committee on Financial Services, the SAFE Banking Act "addresses an urgent public safety concern for legitimate businesses that currently have no recourse but to operate with just cash." In other words, legal cannabis companies.

According to our own Investopedia definition, the Secure And Fair Enforcement (SAFE) Banking Act "would prohibit regulators from terminating or limiting either deposit or share insurance of such a financial institution for the sole reason that it does business with a cannabis company. It would also prohibit regulators from barring such institutions from offering financial services to these companies, as it would stop regulators from encouraging financial institutions to not do business with those companies." There's more about the SAFE Banking Act under our Word of the Day, below.

If this act passes as it's expected to, we'll likely be seeing both fledgling and established cannabis companies receive a significant boost.

Netflix Negative

Back in May and then again in July, when Netflix (NFLX) shares were up nearly 50% year-to-date, it didn't seem plausible that the stock would ever actually be down for this year. But it happened on Tuesday (see chart below)—shares of the streaming entertainment company sliced below their 2019 opening price of 259.28.

Netflix's pivotal drop in price comes amid a flurry of increasing concerns about the company's business and competitive landscape. These concerns have manifested as lowered analyst ratings and price targets ahead of upcoming earnings results from the company.

Incidentally, NFLX is the only one of the five FAANG stocks (FB, AMZN, AAPL, NFLX, and GOOGL) that is even close to being negative for the year.

More News:

5 Stocks That Could Get Crushed By Opioid Lawsuit Tidal Wave

Robo-Advisors 2019: Still Waiting for the Revolution

Alphabet's Cloud could be its Secret Weapon

chart courtesy www.koyfin.com

Shares of HanesBrands rose by over 2% following the announcement of their partnership with How2Recycle as part of an initiative to help customers properly recycle its product packaging. Conagra's stock price also increased by 2% today, after the Conagra Brands Foundation awarded its annual "Nourish our Community" grant to the Alpha Community Center in Sidney, Ohio.

Several oil companies fell today, including Marathon Oil (7%), Helmerich & Payne (6%), and Halliburton (5%), amid a general decline in crude oil futures following President Trump's dour speech to the UN.

Word of the Day

SAFE Banking Act

The Secure And Fair Enforcement (SAFE) Banking Act was introduced to Congress in May of 2017 under the sponsorship of Senator Jeff Merkley (D-OR). This bill would impact the ability of federal banking regulators to intervene in the actions of a depository institution dealing with a legal cannabis business.

The SAFE Banking Act is a direct response to issues faced by legal cannabis companies operating in the United States. Specifically, the Act is designed to bridge a gap between those companies' legal standing in particular states and the current non-legal status of marijuana sales and usage on a federal level. A company conducting legitimate operations within a state that has moved to legalize marijuana may nonetheless face problems interacting with financial institutions like banks and lenders on account of concern among those institutions about punishment on the federal level. Practically, this may make it difficult for these companies to seek loans to help grow their businesses or launch new ones, to recover from burglaries or other negative events, and so on.

Today in email History

Sept. 24, 1979:

CompuServe (CIS) offers one of the first online services to consumers; it will dominate among Internet service providers for consumers through the mid-1990s.