Monday, February 5, 18
Stock futures are slumping early, adding to last Friday’s sharp market pullback, as rising borrowing costs (amid piking inflation fears), increase Fed rate hike expectations (on stronger economic data), and general market momentum lower (out of riskier stocks), have fueled the first real stock market pullback of 2018. Despite last week’s losses, the S&P 500 and Dow are still up more than 3% year to date. A very busy of week of U.S. corporate earnings should dominate action. Wells Fargo (WFC) shares are down early amid sanctions from the Fed after its fake account scandal. Energy giants Exxon and Chevron look to bounce back from Friday’s decline after lower earnings.
The 10-year Treasury yield was modestly higher Monday after giving up an earlier advance that put it above 2.88%. Bonds have been enduring a broad decline in the past week, as inflation concerns and strong economic data helped to drive yields higher. Oil prices are lower, adding to last week’s losses that were driven in large part by a stronger dollar and rising U.S. crude production. Bitcoin dropped another 10%, falling below $8,000 on news a major Lloyds Banking Group had banned purchases of digital currencies via its credit cards (adding to BAC and JPM last week).
Last week, a stronger-than-expected U.S. monthly jobs report weighed on stocks Friday, raising interest rate hike expectations by the FOMC as the S&P 500 index posted its biggest one-day drop since September 2016, falling over 2%. The Dow Jones Industrial Average tumbled 665.75 points, or 2.5%, to end at 25,520. Those two indexes suffered their biggest weekly declines in more than two years. The Nasdaq Composite Index slid 144.92 points, or 2%, to end at 7,240.95.
In Asian markets, The Nikkei Index dropped -592 points to settle at 22,682, the Shanghai Index gained 25 points to finish at 3,487 and the Hang Seng Index declined -356 points to settle at 32,245. In Europe, the German DAX is adding to last week’s losses, falling around -125 points to 12,660, while the FTSE 100 is down nearly -100 points at 7,350.
Market Closing Prices Yesterday
· The S&P 500 Index plunged -59.85 points, or 2.12%, to 2,762.13
· The Dow Jones Industrial Average dropped -665.75 points, or 2.54%, to 25,520.96
· The Nasdaq Composite declined -144.92 points, or 1.96%, to 7,240.95
· The Russell 2000 Index plummeted -32.59 points, or 2.06% to 1,547.27
Events Calendar for Today
· 9:45 AM EST Markit US Services PMI, Jan-F…est. 53.3
· 9:45 AM EST Markit UC Composite PMI, Jan-F
· 10:00 AM EST ISM Non-Manufacturing Index for January…est. 56.7
· Earnings Before the Open: ARNC, BAH, BMY, CHD, HES, ON, SYY
· Earnings After the Close: APTI, BMI, CRUS, FN, FTNT, MAC, MTSC, NOV, OCLR, RE, SWKS
· U.S. President Donald Trump said on Saturday that a controversial memo attacking federal law enforcement written by congressional Republicans vindicates him in the investigation of Russian meddling in the 2016 U.S. presidential election.
· IHS Markit Ltd. said its UK purchasing managers index for the services industry–which accounts for some 80% of the U.K. economy–fell to 53.0 in January, down from 54.2 the previous month, falling to a 16-month low
Sector News Breakdown
· General Motors (GM) shares could rise more than 35% according to Barron’s saying it has been turning in strong profits, which have helped it fund research into autonomous and electric cars
· Spirit Air (SAVE) mentioned positively in Barron’s saying following a steep decline, shares offer plenty of potential upside, now trading for less than 12 times forward earnings estimates
· Well Fargo & Co. (WFC) shares fell 9% after the U.S. Federal Reserve said it can’t grow any further until its submits a plan that proves it has beefed-up its risk management and board oversight following a 2016 “fake accounts” scandal that rocked the country’s third-largest bank
· Barron’s noted TD Ameritrade (AMTD) is offering customers more social media capabilities and has added round-the-clock trading in 12 exchange-traded funds, from Sunday evening through Friday evening using its “thinkorswim” trading platform or TD Ameritrade Mobile Trader app
· GlaxoSmithKline (GSK) and Reckitt Benckiser are the only companies to have submitted bids for Pfizer’s (PFE) consumer business after rival candidates walked away, including Johnson & Johnson (JNJ) and Sanofi (SNY), according to Bloomberg. https://goo.gl/dJAJYa
· Bristol Myers (BMY) to report earnings later this morning
Industrials & Materials
· Booz Allen (BAH) Q3 EPS 48c/$1.50B vs. est. 43c/$1.52B; boosts its dividend; sees year EPS view $1.87-$1.95 below the $2.03 estimate
· Two Amtrak personnel were killed and over 100 others were injured when an Amtrak passenger train collided with a parked CSX Corp. (CSX) freight train early Sunday just outside the capital of South Carolina, officials said
Technology, Media & Telecom
· Broadcom Ltd (AVGO) plans to unveil a new approximately $120 billion offer for Qualcomm Inc (QCOM) on Monday, aiming to ratchet up pressure on its U.S. semiconductor peer to engage in negotiations. Broadcom is scheduled to meet with its advisers later on Sunday to finalize an offer that values Qualcomm between $80 and $82 per share, two of the sources said. Broadcom’s previous $70 per share offer consisted of $60 in cash and $10 in stock. https://goo.gl/D2qsZX
· Considering the challenges, they face, both Apple (AAPL) and Facebook (FB) shares held up well, Barron’s said. Apple offered a forecast for its March quarter that missed expectations, and Wall Street now thinks that the company is reaching a bit too far in pricing the iPhone X at $999-$1150, but says its still an empire very much in control of its destiny. Meanwhile, Facebook said people are spending less time than before on the site, but Mark Zuckerberg calmly assured the Street that he thinks it is a good thing, the report points out
· Apple Music is adding U.S. subscriber accounts at a higher rate than Spotify, WSJ reports, citing people in the record business; Apple’s subscriber base in the U.S. growing about 5%/month vs Spotify’s 2% – WSJ
· Tech giants Cisco Systems (CSCO) and Texas Instruments (TXN) are expected to lift their dividends in 2018, topping Barron’s list of large-cap companies with rising dividend estimates. Analysts expect Cisco to pay $1.20 a share in its current fiscal year ending in July, 13% more than the forecast six months ago, and TXN estimate is $2.40 a share, an 11% increase
· Some owners of Apple’s (AAPL) iPhone X are reporting a glitch that delays the touchscreen display during an incoming call preventing users from being able to tap the virtual button required to answer the call, the Financial Times reports, citing posts on Apple forums
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.