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New Quarter, New Positive Outlook -- Plus TSLA, GE

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Monday, October 1, 2018

Pre-market indexes for the first trading day of calendar Q4 is off with a bang, with Dow futures up 160 points 45 minutes ahead of the bell, Nasdaq +40 points and the S&P 500 up a baker’s dozen. This week brings new labor market numbers on the front side of Q3 earnings season, which really gets going in a couple weeks.

No new economic data is hitting the news wires prior to today’s opening bell, but two manufacturing reads are expected after the market opens: PMI and ISM, both for the month of September. ISM Manufacturing is expected to tick down slightly from its previous headline to 60.8%, while PMI posted 55.6 last time around.

Markets are responding favorably to a long-awaited trade deal between the U.S. and Canada, which aligns with the deal reached earlier with Mexico. In effect, President Trump has re-negotiated NAFTA; over time we’ll be able to see how this new trade deal compares to the original free-trade agreement signed 25 years ago.

Trump’s main trade negotiator, Robert Lighthizer, just last week had expressed skepticism regarding a new trade deal between the U.S. and its neighbor to the north, so this last-minute deal late Sunday may come as a surprise to many market participants. Yet here we are, and the Dow especially looks to be breathing a big sigh of relief, and sending the index up toward new all-time highs to kick off the new quarter.

For more on the new deal, click here: U.S., Canada Reach New Trade Deal

Other favorable market news revolves around the leadership of two beleaguered companies — Tesla (TSLA - Free Report) and General Electric (GE - Free Report) . Tesla founder and CEP Elon Musk, changing course from his earlier defiant stance regarding SEC charges of securities fraud, has agreed to settle with the agency. This news has sent Tesla shares up 16% following last week’s precipitous fall.

Musk will pay $20 million himself — and Tesla is on the hook for an additional $20 million — as part of the settlement, which also requires Musk step down as Chairman of the electric vehicle leader. He’ll remain CEO, but not be eligible to return as Chairman for 3 years. These charges stem from tweets Musk made about taking his company private with claims believed to be manipulating his company’s stock price.

GE CEO John Flannery — who took over for Jeffrey Immelt as the head of the energy, healthcare and defense behemoth 13 months ago — is now out, with the company board bringing in Larry Culp, former CEO at Danaher Corp. (DHR). This is a clear changing of the guard for GE, bringing in an outsider to right the myriad wrong turns made at the company, mostly under Immelt’s tenure.

Shares of GE had tumbled more than 53% during Flannery’s time at the head of the company. It was Flannery who pointed out the extraordinary challenges facing the conglomerate, but the pace of change at the firm was apparently frustratingly slow for its board of directors. With Culp in charge, investors are hopeful the businesses will shift to a higher gear. Shares of the company are up 15% in today’s pre-market.

Mark Vickery
Senior Editor

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