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Family Business

01 August 2019 by jbchevrel

The family behind Nordstrom Inc. (JWN) was reportedly (WSJ) seeking to increase its stake in the department-store chain to >50%. Historically, the 3 brothers co-managed JWN, acting like one CEO. The oldest of the 3 brothers and ex co-president, Blake Nordstrom, had died unexpectedly in January. This development came yesterday night and happens at a juncture where JWN stocks have lost more than ½ of their value since last Q4 and 1/3 YTD so it looks like a good entry point on the chart, for the two remaining brothers and co-presidents. The stocks soared on that news, as buying back shares at a premium looks like a plausible option. However, than was bad for credit. Spreads widened c30bp on the 5y CDS and the 3s5s steepened by more than half of that. Interestingly, such a family-led buyout was at $50/share in 2018, before some directors blocked it arguing the price was too low. At the time the stock was north $50 by a tad. Now it is low 30s… The US macro picture was also on the weak side yesterday after the Fed’s ‘hawkish cut’ but risk reverted today. Data-wise, in the US, today the ISM manufacturing index declined wile expectations were for a small increase. While new orders component increased, both the production and employment components pulled back. Construction spending also decreased (for June), although its growth in prior months got revised upwards. That let risk go stronger (SPX gained more than 1% after the data) and rates went richer (10y note now yielding 195bp). Although it can be volatile, the Atlanta Fed GDPnow index rose to 2.2% from 2%. Tomorrow the main data to watch will be the employment report.