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World

Austin’s Manila visit to bring deal on expanded base access – Philippines official

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WASHINGTON/MANILA, Feb 1 (Reuters) – U.S. Defense Secretary Lloyd Austin’s visit to the Philippines this week is expected to bring an announcement of expanded U.S. access to military bases in the country, a senior Philippines official said on Wednesday.

Washington is eager to extend its security options in the Philippines as part of efforts to deter any move by China against self-ruled Taiwan, while Manila wants to bolster defense of its territorial claims in the disputed South China Sea.

Austin arrived in Manila on Tuesday night, and will meet his Philippine counterpart and other officials on Thursday “to build on our strong bilateral relationship, discuss a range of security initiatives, and advance our shared vision of a free and open Pacific,” he said on Twitter.

On Wednesday morning, Austin visited U.S. troops stationed at a Philippine military camp in the southern city of Zamboanga, according to Roy Galido, commander of the Western Mindanao Command.

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“Our working relationship to them is very strong,” Galido told reporters, adding that U.S. troops help in counter terrorism, and humanitarian and disaster response missions.

U.S. officials have said Washington hopes for an access agreement during Austin’s visit, which began on Tuesday, and that Washington has proposed additional sites under an Enhanced Defense Cooperation Agreement (EDCA) dating back to 2014.

“There’s a push for another four or five of these EDCA sites,” the a senior Philippines official said. “We are going to have definitely an announcement of some sort. I just don’t know how many would be the final outcome of that.”

The official declined to be named because of the sensitivity of the matter.

Manila and Washington have a mutual defense treaty and have been discussing U.S. access to four additional bases on the northern land mass of Luzon, the closest part of the Philippines to Taiwan, as well as another on the island of Palawan, facing the disputed Spratly Islands in the South China Sea.

EDCA allows U.S. access to Philippine bases for joint training, pre-positioning of equipment and building of facilities such as runways, fuel storage and military housing, but not a permanent presence. The U.S. military already has access to five such sites.

The Philippines official said increased U.S. access needed to benefit both countries.

“We don’t want it to be directed to just for the use of the United States purely for their defense capabilities … it has to be mutually beneficial,” he said.

“And obviously, we want to make sure that no country will see … anything that we’re doing … was directed towards any conflict or anything of that sort,” he added.

Manila’s priorities in its agreements with Washington were to boost its defense capabilities and interoperability with U.S. forces and to improve its ability to cope with climate change and natural disasters, the official said.

He said that after cancelling an agreement for the purchase of heavy-lift helicopters from Russia last year, Manila had reached a deal with Washington to upgrade “a couple” of Blackhawk helicopters that could be used for disaster relief.

“The deal with Russia was very attractive because for a certain budget we were able to get something like 16 of these heavy-lift helicopters,” the official said. “Now with the United States, obviously their helicopters are more expensive, so we’re looking at how we can fit in the budget that we’ve had.”

Gregory Poling, a Southeast Asia expert at Washington’s Center for Strategic and International Studies think tank, said access to sites in northern Luzon would help U.S. efforts to deter any Chinese move against Taiwan by putting the waters to the south of the island within range of shore-based missiles.

He said the U.S. and Philippine marines were pursuing similar capabilities with ground-based rockets, with Manila’s particular interest being to protect its South China Sea claims.

The Philippines is among several countries at odds with China in the South China Sea and has been angered by the constant presence of vessels in its exclusive economic zone it says are manned by Chinese militia. China is also Manila’s main trading partner.

Reporting by David Brunnstrom; additional reporting by Idrees Ali in Washington and Neil Jerome Morales and Karen Lema in Manila; Editing by Gerry Doyle

Our Standards: The Thomson Reuters Trust Principles.

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World

Austin’s assertion that US wants to ‘weaken’ Russia underlines Biden strategy shift

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A National Security Council spokesperson said that Austin’s comments were consistent with what the US’ goals have been for months — namely, “to make this invasion a strategic failure for Russia.”

“We want Ukraine to win,” the spokesperson added. “One of our goals has been to limit Russia’s ability to do something like this again, as Secretary Austin said. That’s why we are arming the Ukrainians with weapons and equipment to defend themselves from Russian attacks, and it’s why we are using sanctions and export controls that are directly targeted at Russia’s defense industry to undercut Russia’s economic and military power to threaten and attack its neighbors.”

US officials traveling with Austin said that the message is one that he planned to reiterate, according to a senior administration official. Russia coming out of the conflict weaker than before is an idea that other Biden administration officials have referenced. US officials, however, had previously been reluctant to state as plainly that the US’ goal is to see Russia fail, and be militarily neutered in the long term, remaining cautiously optimistic that some kind of negotiated settlement could be reached.

One eastern European official told CNN that mentality was incredibly frustrating. “The only solution to this is for Ukraine to win,” he said.

The shift in strategy has come about over the past few weeks, evidenced by a growing tolerance for increased risk with the more complex, western weaponry being sent in, and is a reflection of the belief that Putin’s goals in Ukraine would not end if he manages to seize part of Ukraine, as they didn’t after the 2014 annexation of Crimea, a British diplomat said.

“Even if they come up with some fix where (Putin) gets a bit of the Donbas and it all goes dormant, logic would dictate there’s more road to run in this. So therefore what you can take off the battlefield in this window is not only a short-term win it’s also a longer term strategy as well.”

Now, there is a growing realization among US and Western officials — especially after the Russians’ massacre of civilians in the Ukrainian town of Bucha — that Russia needs to be hurt so much economically and on the battlefield that its aggression is stopped for good, US and Western officials told CNN.

“So it has already lost a lot of military capability,” Austin said. “And a lot of its troops, quite frankly. And we want to see them not have the capability to very quickly reproduce that capability.”

Biden administration officials are optimistic that that is an achievable goal, sources told CNN. Administration officials and congressional sources said they believe that the continued military support to Ukraine could result in significant blows to Russia that will impair their long-term military capabilities, strategically benefiting the US.

Already, the US has begun to send heavier and more sophisticated equipment to Ukraine that it had refrained from providing in the past, including 72 howitzers and Phoenix Ghost tactical drones.

“The way we are looking at this is that it’s making an investment to neuter the Russian army and navy for next decade,” said a congressional source familiar with the ongoing military assistance to Ukraine.

White House press secretary Jen Psaki told reporters on Monday that while “obviously right now the war is in Ukraine,” the US and its allies are “are also looking to prevent (Russia) from expanding their efforts and President Putin’s objectives beyond that too.”

A delicate ‘balancing act’

Officials noted, though, that the US and its allies are carefully threading a needle when it comes to penalizing Russia — both because of the collateral damage harsh sanctions could have on the global economy, and because of the risk that Putin could lash out if he is backed too far into a corner.

A source familiar with the US’ intelligence assessments about Russia said “there is certainly a balancing act that needs to be taken into consideration” when punishing the country, “whether it’s in the sanctions space or in the military and intelligence support space.”

This person added that while the US still assesses that Putin’s red lines for use of nuclear weapons haven’t changed, “one of those red lines is regime stability,” they said — meaning that Putin could lash out if he feels his rule is seriously threatened.

A US official said separately that he believes Austin’s comments were not helpful for that reason, and because it could play into the Russian propaganda line that NATO and US support for Ukraine is a power play.

The goal is not to tell the Russians that “no matter what, the US and NATO are going to weaken you,” this official said, but rather that the West will aim to punish Russia as long as it is at war with Ukraine.

A State Department spokesperson said that the sanctions the US and its allies have put in place are “all in response to Putin’s war of aggression in Ukraine. They are intended to prevent Putin from buying more ammo, guns, missiles — to stop him from funding his war machine, to stop the killing. They are also intended to punish those who actively support Putin’s unprovoked, brutal war. This is not about harming the Russian people.”

It is still unclear what the US would do about the sanctions if Russia reached a meaningful peace deal with Ukraine and withdrew its forces. Multiple sources told CNN that in that scenario, the US would likely consider lifting some sanctions, in a show of good faith, while keeping others. The US and allies, including the UK, have also been weighing the feasibility of a “snapback” mechanism that would allow them to quickly reimpose the sanctions should Moscow violate any agreements reached with Kyiv, the sources said.

But with the conflict still raging and the prospects of a peace deal looking increasingly dim, those options are a very long way off from being implemented, officials said. Secretary of State Antony Blinken said in March that Russia’s change in behavior must be “irreversible” before the US considers lifting sanctions.

“They will want to make sure that anything that’s done is, in effect, irreversible, that this can’t happen again, that Russia won’t pick up and do exactly what it’s doing in a year or two years or three years,” Blinken said in an interview with NPR.

Shifting concerns about escalation

Russia’s poor performance and significant losses on the battlefield have contributed significantly to the US’ increasingly emboldened posture, officials said.

Whereas Washington had been previously concerned that sending heavy artillery might be viewed as a provocation, Biden has announced billions of dollars in new shipments of tanks, missiles and ammunition over the past month, an indication that some initial worries about escalating the conflict have waned.

The US is also preparing to train Ukraine’s armed forces on more state-of-the-art, NATO-capable weapons systems, Austin told reporters on Monday — a move that will allow the US and its allies to provide more powerful weapons to Ukraine more quickly, since those systems are more readily available than the Soviet-era equipment the west has had to scrounge for to date.

“There are a number of shifts happening simultaneously,” the British diplomat said. “One is looking at future capabilities and that’s related to the artillery and more modern weaponry. Two, let’s take out what’s on the battlefield.”

Biden himself has been steadily ratcheting up the rhetoric in describing Putin — going from calling him a war criminal to saying he cannot remain in power to accusing him of committing genocide — despite worries among some of his advisers the language could cause Putin to lash out.

But the President has downplayed those concerns in private, according to people familiar with the conversations, saying that articulating what is plainly evident is more important than risking possible escalation. And he has underscored that Russia’s military capabilities don’t appear as strong as the US once believed.

Ambassador Nathan Sales, who until 2021 served as acting under secretary for Civilian Security, Democracy, and Human Rights at the State Department, said the “bottom line” is that “a weaker Russia means a more stable world,” and that the US should prepare for its Russia policy

“As long as Putin is calling the shots, Russia is going to be a malign actor,” he said. “And so we can’t hope for Russia to be a constructive and responsible player in Europe or in the broader international system.” Sales added that the US should therefore prepare for “a prolonged period” of its Russia policy being aimed at limiting its ability “to cause mischief around the world.”

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Business

Dow Jones Futures: Stock Market Rally Reverses Higher; Tesla Austin’s ‘Cyber Rodeo’

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Dow Jones futures were little changed early Friday, along with S&P 500 futures and Nasdaq futures. Tesla (TSLA) held a “Cyber Rodeo” grand opening event Thursday night at its Austin plant.




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The stock market rally tested key support levels Thursday morning as Treasury yields continued to climb amid continued hawkish Federal Reserve statements. But the major indexes rebounded to close slightly higher.

Investors should be paying attention to sectors that are working but be cautious about new purchases overall. Exxon Mobil (XOM), Lockheed Martin (LMT), Horizon Therapeutics (HZNP), Dollar General (DG) and O’Reilly Auto (ORLY) are five stocks in leading sectors that are in or near buy points.

Tesla stock is on IBD Leaderboard. Tesla and HZNP stock are on the IBD 50. XOM stock is on the Big Cap 20, a list dominated by energy and commodity plays right now. ORLY stock was Thursday’s IBD Stock Of The Day.

Dow Jones Futures Today

Dow Jones futures were flat vs. fair value. S&P 500 futures and Nasdaq 100 futures were unchanged.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live

Stock Market Rally

The stock market rally sold off in the morning but then rebounded for slim gains.

The Dow Jones Industrial Average rose 0.25% in Thursday’s stock market trading. The S&P 500 index climbed 0.4%. The Nasdaq composite edged up less than 0.1%. The small-cap Russell 2000 fell 0.4%.

U.S. crude oil prices dipped 0.2% to $96.03 a barrel. Natural gas prices jumped to their highest close since December 2008.

The 10-year Treasury yield rose four basis points to 2.65%, a fresh three-year high and widening the yield curve slightly.

St. Louis Fed President James Bullard, one of the more hawkish policymakers, said the fed funds rate, currently at 0.25%-0.5%, should be at 3.5% to fight high inflation. The Federal Reserve is likely to raise rates by 50 basis points at each of the next three policy meetings, with balance sheet reductions kicking off after the early May event.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) climbed 0.6%, while the Innovator IBD Breakout Opportunities ETF (BOUT) advanced 0.9%. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.45%. The VanEck Vectors Semiconductor ETF (SMH) closed just above break-even.

SPDR S&P Metals & Mining ETF (XME) rallied 2.2% and the Global X U.S. Infrastructure Development ETF (PAVE) tilted higher. U.S. Global Jets ETF (JETS) descended 1.4%. SPDR S&P Homebuilders ETF (XHB) slipped 0.5%. The Energy Select SPDR ETF (XLE) rose 1.1%, with XOM stock a major component. The Financial Select SPDR ETF (XLF) dipped 0.1%. The Health Care Select Sector SPDR Fund (XLV) gained 1.9%

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) fell 1.2% and ARK Genomics ETF (ARKG) sank 0.7%. Tesla stock is the No. 1 holding across Ark Invest’s ETFs.

Five Best Chinese Stocks To Watch Now

Tesla Austin ‘Cyber Rodeo’

CEO Elon Musk Thursday night at a Tesla Austin plant event, dubbed the Cyber Rodeo. Tesla will officially begin Model Y deliveries from the plant on Friday. That follows initial deliveries from the Berlin-area plant last month. The two new plants will greatly expand Tesla’s capacity, but are expected to slowly ramp up production.

The Cybertruck made another cameo appearance. Tesla Austin will eventually make the Cybertruck and Semi, two vehicles that have been pushed back several times. Musk again said that Cybertruck production will hopefully start next year.

Musk made other comments about a future robotaxi service, as rivals launch self-driving services in San Francisco. But he didn’t offer many specifics about future products and services.

Meanwhile, the Tesla Shanghai plant has been closed since March 28 with the city in lockdown due to surging Covid cases. It’s possible Tesla will be able to restart Shanghai production soon, with workers staying on site. But that hasn’t happened yet.

Tesla Stock

The Tesla Austin “Cyber Rodeo” was too late for extended trading, so investors will weigh in Friday morning.

On Thursday, Tesla stock gained 1.1% to 1,057.26, reversing higher with the market. Shares are still in a pullback after racing up to a trendline entry early this week. The EV giant could be forming a handle within a deep cup base. A retreat to slightly below the 21-day line and 1,000 level could be helpful in shaking out some weak holders. A longer handle also would let the 50-day moving average catch up somewhat.

With highly valued growth stocks out of favor as interest rates rise, Tesla stock stands out as an exception. Can it hold up or move higher in this environment?

Tesla earnings are due on April 20.

Exxon Stock

Exxon stock rose 1.7% to 85.05, continuing to consolidate around its 21-day line and just above its 10-week line. Investors could buy XOM stock here or if it tops the March 25 high of 85.49. The oil major should have a proper base after the end of next week.

Several other energy stocks are holding up, including Exxon peers Chevron (CVX) and Shell (SHEL) as well as coal producer Arch Resources (ARCH) and the North Shore Global Uranium ETF (URNM).

Lockheed Stock

Lockheed stock advanced 2.4% to 465.51, clearing a short-term high as it works on a short consolidation. But LMT stock is 4.9% above its 21-day line and 10.1% over its 50-day. Shares could form a new base by the end of next week. A longer pause would let the major averages catch up.

Lockheed stock broke out in late February as Russia’s Ukraine invasion began. Shares raced higher for a few days as investors bet on higher defense spending in the short and long term, especially in Europe and especially on weaponry.

Northrop Grumman (NOC), General Dynamics (GD) and Raytheon Technologies (RTX) are also consolidating, with RTX stock already boasting a flat base.

Horizon Stock

Horizon stock popped 3.2% to 112.39, breaking above a 110.13 handle buy point in a consolidation going back to late October. That 110 area was short-term resistance at the end of last year.

Several biotechs and drug stocks have been showing strength. Vertex Pharmaceuticals (VRTX), Regeneron (REGN) and Eli Lilly (LLY) are now extended, while Pfizer (PFE) is flashing a possible trendline entry. More broadly, medicals are doing well, with health insurers hitting new highs and device makers building the right side of bases.

Dollar General Stock

Dollar General stock rose 1.1% to 241.69, hitting a record high and climbing within a buy zone. On Wednesday, DG stock jumped 4.2% to 239, clearing a 232.87 cup-with-handle buy point, according to MarketSmith analysis. The relative strength line, the blue line in the chart provided, is at a 52-week high.

Several discounters are doing well as investors bet on penny-pinching consumers focusing their spending on low-cost staples. Dollar Tree (DLTR) and Costco Wholesale (COST), which broke out a few weeks ago, are slightly extended now. Walmart (WMT) is technically in a buy zone but appears extended from a safer, early entry. Target (TGT) is starting to bounce back.

O’Reilly Stock

O’Reilly stock rose 3.7% to 726.83, breaking out to a new high. Investors could use 705.10 as an alternative entry or handle, though a prior 687.33 cup-with-handle buy point was still technically valid.

The relative strength line is near a new high on a daily chart and at record levels on a weekly chart.

With new cars scarce and expensive and consumers looking to curb spending amid high inflation, many drivers are keeping used vehicles longer and doing more auto work at home. O’Reilly rival AutoZone (AZO) broke out from a double-bottom base on Thursday.

Tesla Vs. BYD: Which Booming EV Giant Is The Better Buy?

Market Rally Analysis

The stock market rally staged a much-needed upside reversal, finding support at key levels Thursday.

The market rally moved to “uptrend under pressure” Wednesday as the major indexes fell below their 21-day moving averages. On Thursday morning, they weakened further, with the Nasdaq composite and Dow Jones undercutting their 50-day line.

But bulls fought back in the afternoon. The Nasdaq and Dow Jones popped back above the 50-day line. However, while the Dow reclaimed its 21-day, the Nasdaq hit resistance at that level. The S&P 500 reclaimed its 200-day and 21-day lines.

The Nasdaq moving back above its 21-day line would be a good sign for the market rally.

So would better breadth. Losers outnumbered winners on the NYSE and Nasdaq. New lows greatly outnumbered new highs on Thursday. The small-cap Russell 2000 and the S&P MidCap 400 rebounded off lows Thursday, but closed slightly lower. Both tumbled below their 50-day lines on Wednesday.

Growth stocks are still damaged. Meanwhile, concerns are growing that inflation — and Fed rate hikes to fight inflation — will weigh on consumer discretionary spending broadly.

Several sectors are still faring well. In addition to commodities, medicals, defense contractors, and discounters, investors can find REITs and insurance companies holding up well.

Time The Market With IBD’s ETF Market Strategy

What To Do Now

Just because the major indexes found support Thursday doesn’t mean they will continue to do so. The market rally is under pressure. Investors should wait for more strength before broadly adding exposure. There are few setups right now, while the growth sector faces a number of headwinds.

New buys, if any, should be small and limited to stocks in strong sectors. Don’t get too exposed to a particular sector, even if it’s working.

Remain engaged. If the market rally breaks significantly lower from here, investors will want to exit more positions, even going entirely to cash. On the other hand, a few good days and the market rally will look much better, while a number of stocks will likely flash buy signals.

In the latter scenario, investors want to be ready to act. So cast a wide net and keep working on your watchlists.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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