Morning Preview: January 29, 2018

Scott GreenDaily Market Report

Early Look
Monday, January 29, 18
Stock futures are pointing to a lower open to start the week, as bond yields extend their upward momentum, with the 10-yr topping 2.71% this morning and the 2-yr trading around 2.15% (long yield 30-yr yield bond up above 2.95%). Another busy week of potential market moving catalysts this week including a massive week of earnings (highlighted by AAPL, AMZN, GOOGL, MSFT) with around 125 S&P 500 components with results this week alone, President Trump’s State of the Union speech tomorrow night, the two-day FOMC results on Wednesday and the monthly jobs report on Friday. The dollar is looking to rebound after slumping last week, while commodity prices slip.
President Trump is expected to deliver an optimistic and uplifting speech Tuesday night where he is expected to tout the accomplishments of his administration while calling on Congress to pass an infrastructure bill worth at least $1T along with an overhaul of the immigration system, New York Times reported. Telecom companies could be active today after a report that he Trump administration wants to nationalize next-generation, high-speech 5G wireless networks to prevent China spying on U.S. mobile traffic.
Stocks ended last week on fire, as all major benchmark (Dow Industrials, S&P, Nasdaq) posted record closing high levels, posting their 4th straight week of gains, with the Dow Industrials rising over 200 on Friday, the Nasdaq topped 7,500 for the first time and the S&P climbed over 1%. The U.S. dollar slipped to 3-year lows, while WTI crude oil posts its best levels in 3-years and gold pulled back from best levels since Aug ’16. In bonds, the 2-yr yield topped 2.12% earlier – highest in 10-years on strong economic data and higher rate-hike expectations. The yield on the benchmark 10-year Treasury note rose 2.6 bps to 2.647%, leading to a weeklong gain of 2.3 points.
In Asian markets, The Nikkei Index slipped -2 points to settle at 23,629, the Shanghai Index fell -35 points to end at 3,523 and the Hang Seng Index dropped -187 points to settle at 32,966. In Europe, the German DAX is down about -30 points above 13,300, while the FTSE 100 is up a few points around 7,675.
Market Closing Prices Yesterday
·      The S&P 500 Index jumped 33.62 points, or 1.18%, to 2,872.87
·      The Dow Jones Industrial Average rose 223.92 points, or 0.85%, to 26,616.71
·      The Nasdaq Composite spiked 94.61 points, or 1.28%, to 7,505.77
·      The Russell 2000 Index advanced 6.39 points, or 0.40% to 1,608.06
Events Calendar for Today
·      8:30 AM EST       Personal Income for December…est. 0.3%
·      8:30 AM EST       Personal Spending for December…est. 0.4%
·      8:30 AM EST       PCE Deflator MoM for December…est. 0.1%
·      8:30 AM EST       PCE Core MoM for December…est. 0.2%
·      8:30 AM EST       PCE Core YoY for December…est. 1.5%
·      10:30 AM EST     Dallas Fed Manufacturing Activity for January…est. 25.4
Earnings Calendar
·      Earnings Before the Open: D, LMT, SOHU, STX
·      Earnings After the Close: ARE, CR, IDTI, PFG, RGA
World News
·      Mexico and Canada have rejected a proposal by the Trump administration to remake a corporate arbitration system that is a key part of the North American Free Trade Agreement, according to people involved in talks to update the pact
·      Republicans are looking to distance themselves from casino mogul Steve Wynn in the wake of a report of former employees describing a decades-long pattern of sexual misconduct, The Wall Street Journal reports (Wynn Resorts shares fell -10% on allegations last Friday)
Sector News Breakdown
·      Lowe’s (LOW) announces new $5B share repurchase program
·      Avon Products Inc. (AVP) could be active after news a group of activist investors is trying to push the seller of beauty products to find a buyer.
·      Activist hedge fund Third Point has established a stake in Pinnacle Foods (PF) and is seeing a meeting with the company’s management, Reuters reports, citing people familiar with the matter. It is not yet clear what the hedge fund’s plan for the company is
·      GEO Group (GEO), CoreCivic (CXW) shares gained late Friday after SunTrust said a leaked Trump memo suggests greater private prison use, saying the move could alleviate crowding
·      Snap-On (SNA) mentioned cautiously in Barron’s saying shares have tooled along nicely for years, but the joyride may be over soon as potential headwinds could cause the company to miss consensus earnings per share expectations this year
·      An interactive online map that shows locations of wearable fitness-tracker users inadvertently reveals the locations of secret U.S. military bases overseas, according to reports Sunday. The Global Heat Map from Strava, a San Francisco-based GPS tracking company, visualizes activity from tens of millions of users of its app from 2015 through September 2017. Its app can be used on popular devices such as Fitbit (FIT), Jawbone and Vito
·      Starbucks (SBUX) downgraded to Market Perform from Outperform at Bernstein
·      First Solar (FSLR) mentioned cautiously in Barron’s saying President Trump has imposed 30% tariffs on solar cells and modules, which will likely drive the panel’s prices higher and reshuffle the renewable-energy industry. First Solar’s products will be exempt from the tariff and its stock has jumped 54% since then, but investors should sell the stock and pocket that gain.
·      Range Resources (RRC) downgraded to Underperform from Market Perform at Raymond James
·      Helmerich & Payne (HP) downgraded to Market Perform from Outperform at Bernstein
·      Goldman (Sachs (GS) shares may surge 20% in the next year as it seeks out fresh revenue and trading conditions improve according to Barron’s; said it plans to go after an additional $5b in revenue, including $1b in fixed income, currencies and commodities
·      Sanofi (SNY) has agreed to buy Belgian biotech company Ablynx for 3.9 billion euros ($4.8 billion), beating Novo Nordisk (NVO) and marking its second big deal this month after buying Bioverativ
·      Biotech stocks mentioned favorably kin Barron’s saying shares could be headed for a revival. Biogen (BIIB) and Celgene (CELG) finished the week higher, AbbVie (ABBV) gained 14% after releasing earnings, and Gilead (GILD) rose 5% after a rating upgraded. Overall, the sector should also benefit from increased merger activity, lower taxes, and a less-onerous regulatory regime
·      Karyopharm (KPTI) files $250M mixed securities shelf
Industrials & Materials
·      Officials from the United States, Canada and Mexico will wrap up the sixth of seven planned rounds of NAFTA talks in Montreal on Monday, with little sign of agreement on U.S. proposals to overhaul the $1.2 trillion pact.
·      WestRock (WRK) to acquire KapStone (KS) for $35.00 per share in a deal valued at around $1.49B (including debt) (WRK) Q1 adjusted EPS 87c/$3.89B vs. est. 77c/$3.93B
·      Volkswagen (VLKAY) has apologized for a test that exposed monkeys to engine fumes to study effects to the exhaust
Technology, Media & Telecom
·      The Trump administration is considering nationalizing the next-generation, high-speed 5G wireless network in an effort to prevent Chinese spying on U.S. mobile traffic, according to reports Sunday. Axios first reported the proposal, and White House sources later confirmed it to Reuters. “We want to build a network so the Chinese can’t listen to your calls,” a source told Reuters
·      21st Century Fox’s (FOXA) “Maze Runner: Death Cure” climbed to the top of box office with $23.5M from 3,787 theaters. Sony’s (SNE) “Jumanji: Welcome to the Jungle” came in second, earning $16.4M from 3,553 locations in its sixth outing for a domestic total of $338M. Behind it was Scott Cooper’s “Hostiles,” with the Western ending the weekend with an estimated $10.2M for an early total of $12.1M. 21st Century Fox’s “The Greatest Showman” placed number four, grossing $9.5M in its sixth weekend
·      In initial disclosures about critical security flaws discovered in the company’s processors, Intel (INTC) notified a small group of customers, such as Chines technology companies, but did not tell the U.S. government – WSJ
·      DST Systems (DST) Q4 EPS $1.11/$552.7M vs. est. 84c/$552.7M


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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