Catch up on the top industries and stocks that were impacted, or were predicted to be impacted, by the comments, actions and policies of President Trump and his administration with this weekly recap compiled by The Fly:
1. HUAWEI CFO ARRESTED: Canada arrested Huawei Technologies CFO Meng Wanzhou on December 1 at the request of U.S. authorities on suspicion she violated U.S. trade sanctions against Iran, CNBC reported on Thursday. China has since demanded Canada release Wanzhou, one of the vice chairs on the company's board and the daughter of company founder Ren Zhengfei, the Associated Press reported. Following the arrest, Deutsche Bank analyst Zhiwei Zhang lowered his probability of the U.S. and China reaching a trade deal by March 1 to 30% from 40%. The arrest is a "clear signal that the trade war is escalating to a new level," the analyst argued. According to reports, Huawei accounted for nearly 17% of Lumentum's (LITE) sales in FY17, about 15% of FY17 sales for Oclaro (OCLR) and 11% of FY17 sales for Finisar (FNSR). The company competes in China with ZTE (ZTCOY), Infinera (INFN) and Ciena (CIEN).
2. POSTAL REFORMS: Earlier this week, the Trump administration released a report recommending the U.S. Postal Service enact reforms that could raise shipping rates for certain packages, which might inflame tensions with Amazon (AMZN) and other online retailers. “Although the USPS does have pricing flexibility within its package delivery segment, packages have not been priced with profitability in mind […] The USPS should have the authority to charge market-based prices for both mail and package items that are not deemed ‘essential services,’” reads an executive summary of the report. The administration’s task force recommends that the USPS divide its shipments into essential and commercial service categories, with many e-commerce shipments falling into the latter category, which would not be protected by existing price caps and thus be subject to rate increases. Commenting on the report, Craig-Hallum analyst George Sutton told investors that the conclusions are consistent with his expectations and substantially de-risk Stamps.com's (STMP) story. Meanwhile, his peer at Citi said he views the report as a "material positive" for parcel pricing. Analyst Christian Wetherbee told investors that the Task Force affirmed his view that the USPS's new business model needs to be structured around parcel and that pricing should be aimed at maximizing profit versus volume. Further, the analyst argued that the initiatives laid out in the report are likely to lead to higher parcel rates, which is a "long-term positive" for FedEx (FDX) and UPS (UPS).
3. AUTO INDUSTRY: Shares of several auto makers, including Ford (F), Fiat Chrysler (FCAU), General Motors (GM), Honda (HMC), Toyota (TM) and Nissan (NSANY), traded higher on Monday after President Donald Trump said, via Twitter, that China would “reduce and remove” tariffs on American cars. During the Group of 20 summit last weekend, President Trump and Chinese President Xi Jinping had reached an agreement to halt the imposition of new tariffs for 90 days as the world's two largest economies negotiate a lasting deal. Commenting on the tariff halt, Craig-Hallum analyst Anthony Stoss noted that the recent downward pressure on semiconductor suppliers had been primarily a result of cycle/tariff concerns post last quarter’s earnings, and fears that numbers could be cut again as trade disputes between the U.S. and China escalate. Stoss expects the automotive suppliers he covers will recover as fears of an escalation in the trade disputes subsides. Additionally, the analyst argued that automotive suppliers’ stocks are too cheap and should work higher. Stoss said on Monday that he remained a buyer of STMicroelectronics (STM), ON Semiconductor (ON), and Cypress Semiconductor (CY) at then-current levels.
4. BUILDING PRODUCTS COMPANIES: After the White House announcement that the U.S. would, for the time being, leave the tariff rate at 10% on $200B of Chinese goods, Wells Fargo analyst Stephen East said Masco (MAS) should receive the greatest reprieve, followed by Fortune Brands (FBHS) and Jeld-Wen (JELD). He added that the truce could be a modest headwind for Mohawk’s (MHK) equity as Chinese flooring imports will remain more competitive. East had previously assumed the 25% tariff would create a material headwind for Masco, followed by American Woodmark (AMWD), Fortune Brands, Jeld-Wen and PGT Innovations (PGTI), with little impact on Sherwin-Williams (SHW) and Owens Corning (OC).
"Week in Review" is The Fly's weekly recap of its recurring series of "Trump Effect" exclusive stories.