Morning Preview: September 25, 2017

Regal HelpdeskDaily Market Report

Early Look
Monday, September 25, 17
U.S. stock futures are inching lower after major averages closed mixed on Friday and all of last week. European markets are also mixed, with the euro slipping following the result of the German election that saw Angela Merkel hold on to power but also increased support for her nationalist opponent. Investors look for cues on monetary policy as several Federal Reserve and European Central Bank officials are set to speak this week. In Washington, President Donald Trump and Republican leaders plan to release a tax blueprint this week that would dramatically cut taxes for corporations and the wealthy and includes a proposal to cut the corporate tax rate to 20%-35%. Major indexes finished on a mixed note last week amid geopolitical tensions linked to North Korea. The Dow industrials gained 0.4%, posting a second weekly advance. Meanwhile, the S&P 500 added just 0.1%, and the Nasdaq Composite Index finished the week 0.3% lower, led by a decline in Apple.
In Asian markets, The Nikkei Index rose 101 points to end at 20,397, the Shanghai Index fell -10 points to 3,341 and the Hang Seng Index fell -380 points (1.36%) to close at 27,500. In Europe, Chancellor Angela Merkel’s conservative alliance won the German election, as her center-right bloc’s victory on Sunday, projected at about 33% to 21%, over the center-left Social Democrats means that Merkel is virtually assured of a fourth term as chancellor. The German DAX is up around20 points, topping the 12,600 level, while the FTSE 100 is lower by about -15 points trading under 7,300
Market Closing Prices Yesterday
·      The S&P 500 Index inched higher 1.62 points, or 0.06%, to 2,502.22
·      The Dow Jones Industrial Average slid -9.64 points, or 0.04%, to 22,349.59
·      The Nasdaq Composite gained 4.23 points, or 0.07%, to 6,426.92
·      The Russell 2000 Index advanced 6.60 points, or 0.46% to 1,450.78
Events Calendar for Today
·      8:30 AM EST       Chicago Fed Nat Activity Index for August…prior -0.01
·      8:30 AM EST       Fed’s Dudley speaks on Workforce Development
·      10:30 AM EST     Dallas Fed Manufacturing Activity for September…est. 11.5
·      12:40 PM EST     Fed’s Evans speaks on Economy and Monetary Policy in Grand Rapids
·      6:30 PM EST        Fed’s Kashkari speaks at Townhall in North Dakota
World News
·      German business sentiment slipped in September, albeit from a high level, as the German think tank said that its business climate index fell to 115.2 points from 115.9 points in August.
·      President Donald Trump on Sunday slapped new travel restrictions on citizens from North Korea, Venezuela and Chad, expanding the list of countries covered by his original travel bans. Iran, Libya, Syria, Yemen and Somalia were left on the list.
·      U.S. trade negotiators will only partially unveil new text on modifying a key chapter on investment under NAFTA, two well-placed sources said on Sunday – Reuters
·      Presidential son-in-law and senior adviser Jared Kushner has corresponded with other administration officials about White House matters through private email account set up during transition last December, Politico reports
Sector News Breakdown
·      Under Armour (UAA) upgraded to overweight from sector weight by KeyBanc saying the company’s 3Q inventory write-down points to a trough, with more sustainable growth to come after a difficult 2017
·      General Motors (GM) upgraded to buy from hold with $51 target
·      American Outdoor Brands Corp. (AOBC) upgraded to outperform from neutral at Wedbush and increasing price target from $16 to $19.50
·      Unilever PLC (UN) has agreed to buy Carver Korea, a Seoul-based maker of toners and moisturizers, for $2.7 billion
·      iRobot (IRBT) mentioned cautiously in Barron’s in a follow-up story after it warned in July that iRobot’s Roomba robot vacuum now has a “formidable” new rival, with the recent introduction of cheaper products from SharkNinja. While iRobot has maintained a commanding share of the product category it pioneered, aggressive marketing, broad sales distribution, and value-priced products have quickly won SharkNinja a hunk of the market for conventional vacuum cleaners
·      Six Flags (SIX) cautious mention in Barron’s noting investors have had an incredible ride with the theme-park operator, with shares climbing six-fold since it exited bankruptcy in 2010, but with the number of individuals coming to the parks flat for years, upside looks limited
·      BP PLC (BP) said that production from the Khazzan gas field in Oman, the company’s largest project start-up in 2017, has begun, operated in partnership with Oman Oil Company Exploration and Production. The field, which is initially expected to produce 1 billion cubic feet of gas per day, began ahead of schedule and under budget
·      Offshore drillers Noble (NE), Ensco (ESV), Diamond Offshore (DO), Rowan (RDC) and Transocean (RIG) all upgraded to buy at UBS citing early signs of a slow recovery and believes a bottom has been reached in offshore utilization for both floaters and jackups and that demand will slowly move higher in 2018; raises tgts on the sector
·      A proposal by U.S. Republicans to repeal and replace the Obamacare health insurance program suffered serious new setbacks within the party on Sunday, when Senator Ted Cruz expressed his opposition and Senator Susan Collins dug in with strong criticism of the legislation. Republican senators, John McCain and Rand Paul, already said last week they would vote against the bill.
·      Gene therapy is rapidly emerging as one of the most exciting areas in biotechnology according to Barron’s, generating new hope for patients with rare and often deadly inherited diseases. Notes the first regulatory approval for replacement gene therapy could come as soon as January, if the FDA gives the go-ahead to Spark Therapeutics (ONCE) for its one-time treatment that targets a rare, inherited retinal condition leading to blindness. Other publicly traded companies in this treatment includeAveXis’ (AVXS), Regenxbio (RGNX), Audentes Therapeutics (BOLD), and Voyager Therapeutics (VYGR)
·      Quest Diagnostics (DGX) responded to the Centers for Medicare and Medicaid Services (CMS), publication of proposed 2018 Medicare reimbursement rates for clinical laboratory tests under the Clinical Lab Fee Schedule. “We are deeply disappointed that CMS has issued draft 2018 Medicare payment rates that are not market-based and derived from flawed market data collection that excluded key components of the lab market, said its CEO
·      Johnson & Johnson’s (JNJ) Janssen Biotech, Inc. (Janssen) said it has received a complete response letter from the U.S. FDA for the Biologics License Application (BLA) seeking approval of sirukumab for the treatment of moderately to severely active rheumatoid arthritis (RA). The complete response letter indicates additional clinical data are needed to further evaluate the safety of sirukumab in the treatment of moderately to severely active RA
·      NewLink Genetics (NLNK) said it sees $100M cash, equivalents at year end; expects to provide certain revised forward-looking guidance at the Cantor Conference today
·      La Jolla Pharmaceutical (LJPC) announced EMA CHMP has issued favorable Scientific Advice regarding the EU regulatory pathway for LJPC-501 (angiotensin II) for the treatment of hypotension in adults with distributive or vasodilatory shock who remain hypotensive despite fluid and vasopressor therapy
·      LabCorp (LH) objects to proposed PAMA 2018 Medicare payment rates
Industrials & Materials
·      General Electric Co. (GE) agreed to sell its industrial-solutions business to Switzerland’s ABB Ltd., for $2.6 billion; the unit makes electrical equipment for utilities
·      Potash Corporation of Saskatchewan Inc (POT) has hired Goldman Sachs and BofA Merrill Lynch to explore selling its 32% stake in Chile’s Sociedad Quimica Y Minera (SQM), Chilean paper La Tercera reported on Saturday.
·      AZZ Inc. (AZZ) cuts FY18 EPS view to $1.80-$2.30 from $2.60-$3.10 (est. $2.62) and lowers FY18 revenue guidance to $825M-$885M from $880M-$950M (est. $873.13M)
Technology, Media & Telecom
·      Walt Disney Co (DIS) has threatened to pull its programming from the fourth largest U.S. cable distributor, Altice USA (ATUS),if the two parties cannot reach a deal before the end of the month, the cable company said on Sunday
·      Oracle (ORCL) mentioned positively in Barron’s saying the company’s revenue from its cloud business has been growing quickly from a small base, and shares have responded; notes at $48, shares look like “a good deal,” and could return 20% in a year
·      Xilinx (XLNX) and Synopsys (SNPS) mentioned favorably in Barron’s calling them “rising stars” as everyday items get “smart,” and the technology around artificial intelligence gets more real
·      SAP (SAP), Europe’s biggest technology company, has agreed to buy U.S.-Israeli customer identity software company Gigya for $350M
·      Switch sets IPO at 31.25M shares and sees price $14-$16 per share range – Bloomberg
Market commentary provided by Hammerstone Markets, a division The Hammerstone Group, a firm separate from and not affiliated with Regal Securities L.P.  Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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