Morning Preview: September 27, 2017

Regal HelpdeskDaily Market Report

Early Look
Wednesday, September 27, 17
Stock futures are pointing to a higher open ahead of the expected reveal of the tax reform plan out of Washington, ahead of several Fed speakers, and after earnings results from Dow component Nike overnight. US government bonds faced broad selling pressure on Wednesday, with the yield on the 10-year jumping about 6 bps to around 2.29% after Fed chair Janet Yellen remained steadfast in her view that gradual rate rises are needed despite softer inflation. The U.S. dollar pushed higher, rising against many of its peers ahead of eagerly awaited remarks from Donald Trump on tax reform. Shares in Micron rose after the chip maker reported better-than-expected earnings late Tuesday.
 
On Tuesday, the Dow Industrial Average finished less than 0.1% lower, the fourth down day in a row, leaving it around -0.6% below its record close hit a week ago. Meanwhile, the S&P 500 Index and Nasdaq Composite posted small gains on Tuesday, as North Korea-related fears subsided (for the moment) and as traders heard Federal Reserve head Janet Yellen’s sound a bit “hawkish” on the pace of interest rate hikes.
 
In Asian markets, The Nikkei Index fell -63 points to settle at 20,267, the Shanghai Index rose a point to 3,345 and the Hang Seng Index rose 129 points to settle at 27,642. In Europe, the German DAX is up over 50 points above 12,660, while the FTSE 100 is up a few points around 7,285. European stocks moved higher on Wednesday, led by gains for Alstom and Siemens after the two agreed to merge their rail operations.
Market Closing Prices Yesterday
·      The S&P 500 Index inched higher 0.18 points, or 0.01%, to 2,496.84
·      The Dow Jones Industrial Average fell -11.77 points, or 0.05%, to 22,284.32
·      The Nasdaq Composite gained 9.57 points, or 0.15%, to 6,380.16
·      The Russell 2000 Index advanced 4.91 points, or 0.34% to 1,456.86
 
Events Calendar for Today
·      7:00 AM EST       MBA Mortgage Applications Data
·      8:30 AM EST       Durable Goods Orders, Aug-P…est. 1.0%
·      10:00 AM EST     Pending Home Sales MoM for August…est. (-0.5%)
·      10:30 AM EST     Weekly DOE Inventory Data
·      1:30 PM EST        Fed’s Bullard speaks on Economy and Monetary Policy in Missouri
·      7:00 PM EST        Fed’s Rosengren to speak to Money Marketeers in NY
World News
·      China’s industrial-profit growth accelerated in August, driven by higher prices for industrial goods and lower production costs. China’s industrial profit rose 24% from a year earlier in August, picking up from a 16.5% increase in July, the National Bureau of Statistics said.
 
Sector News Breakdown
Consumer
·      Nike (NKE) shares down -3%; Q1 EPS 57c/$9.07B vs. est. 48c/$9.09B; Q1 inventory +6%, effective tax rate 11.4% and gross margin 43.7%; Q1 North America sales $3.92B, down 3%, Q1 EMEA sales $2.344B, up 4%, Q1 Greater China sales $1.1B, up 9% and Q1 APAC sales $1.189B, up 5%; sees FY18 revenue growth in mid-single digit range; company also warned that weak sales in North America will continue to weigh on results in Q2
·      Cintas (CTAS) Q1 EPS $1.45/$1.61B vs. est. $1.31/$1.57B; Q1 gross margin 45.9% vs. est. 44.9%; raises year EPS view to $5.27-$5.35 from prior $51.15-$5.35 (est. $5.23); Raises FY18 revenue view to $6.325B-$6.4B from $6.27B-$6.36B (est. $6.33B)
·      Six Flags Entertainment (SIX) will replace PAREXEL International (PRXL) in the S&P MidCap 400
·      CVC Capital Partners and Leonard Green & Partners are looking to sell BJ’s Wholesale Club for $4B to $4.5B and are currently premarketing the chain, the New York Post reports https://goo.gl/PJGoq5
 
Energy
·      The American Petroleum Institute (API) reported that U.S. crude supplies unexpectedly fell by 761,000 barrels for the latest week, gasoline stockpiles rose 1.5 million barrels, while inventories of distillates dropped by 4.5 million barrels
·      Sanchez Energy (SN) backs Q4 production view 80,000-84,000 Boe/d; Sanchez Energy announced that the company recently brought the D-17 pad on-line in Western Catarina. The six wells on the pad had an average 24-hour initial production rate of approximately 1,479 barrels of oil equivalent per day
·      Westlake Chemical Partners (WLKP) files to sell 4.5M units for limited partners
 
Financials
·      Invesco (IVZ) is expected to buy Guggenheim Partners ETF business as soon as Thursday with a price expected to be $1.1b-$1.3b cash, the Financial Times reported
·      RLI Corp. (RLI) announced that its estimate of pretax losses from Hurricanes Harvey, Irma and Maria will be in the range of $30M-$40M, net of reinsurance
·      S&P SmallCap 600 constituent Sterling Bancorp (STL) will replace Oil States International (OIS) in the S&P MidCap 400
 
Healthcare
·      The European Commission (EC) is still reviewing size and scope of the Alere’s (ALR) divestiture package to Quidel (QDEL) as part of securing clearance for Abbott (ABT) deal, Bloomberg reported late yesterday/FTC review “all but done”
·      Editas (EDIT) said the European Medicines Agency designates its EDIT-101 an Orphan Drug for the treatment of LCA10, an inherited disorder characterized by childhood blindness. An IND is on tap for mid-2018
·      Intra-Cellular (ITCI) files to sell $150M in common stock
·      Avinger (AVGR) said it received CE Marking approval for in-stent restenosis treatment
·      Ascendis Pharma (ASND) announces offering of $125M of ADS’
 
Industrials & Materials
·      German industrial company Siemens AG agreed to merge its rail operations with French train-maker Alstom SA. Under the deal, Siemens will have majority control of the new company, receiving slightly more than 50% of its shares, while Alstom shareholders will receive two special dividends totaling EUR1.8 billion
·      Landec (LNDC) Q1 EPS 8c/$123.4M vs. est. 6c/$123M; sees Q2 EPS 6c-8c on revs $135M-$140M vs. est. 10c/$137.29M; said guidance incorporates the impact from a shift in product shipments at Lifecore from Q2 to Q3 and Q4, which will have no impact on Lifecore’s FY18 projections
·      ARC Group Worldwide (ARCW) Q4 EPS loss (2c) on sales $22.1M; sold assets of Flange unit for $3.0M
·      The Justice Department on Tuesday filed an antitrust lawsuit challenging Parker Hannifin Corp.’s (PH) $4.3 billion acquisition ofClarcor Inc., alleging the deal created an unlawful monopoly. The deal was completed in February
 
Technology, Media & Telecom
·      Micron (MU) shares up 5%; Q4 EPS $2.02/$6.14B vs. est. $1.84/$5.96B; sees Q1 EPS $2.09-$2.23 on revs $6.1B-$6.5B vs. est. $1.84/$6.09B; sees 1Q adjusted gross margin 50% to 54% vs.  estimate 49.7%; said Q4 DRAM average selling prices +8% and gross margin 51.3%
·      Twitter Inc. (TWTR) shares up 2%; will lift its 140-character limit on tweets in an experiment with a small group that may expand to the entire social media platform. The test announced Tuesday will let users send tweets with as many as 280 characters
·      Lumentum (LITE) upgraded to buy from neutral at MKM Partners as firm is confident Lumentum’s 3D sensing orders have significantly increased
·      HubSpot (HUBS) raises Q3 EPS view to (4c)-(2c) from (10c)-(8c) vs. est. loss (9c) and raises Q3 revenue view to $95.9M-$96.9M from $92.8M-$93.8M (est. $93.36M)
·      Kornit Digital (KRNT) lowers Q3 revenue view to $27.0M-$28.5M from $34.0M-$38.0M
·      Twilio (TWLO) shares fell late day yesterday after Amazon Web Services said on its blog post that it is offering users a way to send text message responses programmatically (Twilio has partnered with Amazon on SMS messages) – shares rebounding this morning as one analyst suggests that the new Pinpoint service is actually powered by TWLO
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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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