Morning Preview: February 6, 2018

Scott GreenDaily Market Report

Early Look
Tuesday, February 6, 18
  
Stock futures are lower, failing after S&P futures bounced off lows overnight (S&P futures traded down over 2.5% to lows of 2,529 around midnight before rebounding to highs of 2644.50 around 4:00 AM EST). Dow futures are underperforming, trading down over 1%, while the VIX index (volatility) rises another 18% to trade above 44. The CBOE Volatility Index (VIX) reached its highest level since August 2015 late yesterday, blowing past the 35 level as U.S. stocks continued the previous week’s meltdown (ended around 35.31, up 18 points or 104%). So far, its three days of brutal selling pressure as investors run to take profits after major averages traded to historic all-time highs late January. There is no one reason cited, with many market specialists noting the selling yesterday did not appear to be the work of a “fat finger” or computer mistake, but just massive sell-orders. Note defensive assets such as bonds and gold are seeing early gains.
 
U.S. stocks resumed their downward selloff Monday, with all sectors of the S&P 500 contributing to its loss of as much as 4.5%, while the Dow at one time had given up almost 1,600 points. The Stoxx Europe 600 Index retreated for a sixth day, its longest losing streak since November, following similar moves across Asia as both regions took their cue from the U.S. rout on Friday. Treasury yields fell while the dollar stabilized. With the declines, the S&P 50 and Dow Industrials have now erased their 7% gains for the year to turn negative.
 
Some important levels/market movers yesterday: 29 of the 30 Dow Industrial Average components closed lower by more than 3% yesterday (AAPL down -2.5%). The NYSE exchange’s Arms Index shot up to record the biggest rise in 2 1/2 years as the volume weighted breadth measure, pushed up to 3.594, the first close above 2.0 since April 13, 2017, when it rose to 2.27.
 
Bitcoin prices drop another 11% falling to lows of $5,922 before trading back around $6,200(near its 200-day moving average of $6,276, down a 6th straight session (after falling -17% yesterday). Bonds gained on Monday as yields fell as stocks dropped; yield on the 10-year Treasury note slipped 5.8 bps to 2.794%, after rising as high as 2.883% earlier Monday (biggest daily drop since Sept)
 
In Asian markets, The Nikkei Index plunged 1,071 points (4.73%) to 21,610, the Shanghai Index…the Hang Seng Index also plunged -1649 points (5.12%) to end at 30,595. In Europe, stocks extending losses as well, with the German DAX down over -20 points (1.8%) to 12,450, while the FTSE 100 slides over -130 points (1.8%) to trade under 7,200 (10-month lows)
 
Market Closing Prices Yesterday
·      The S&P 500 Index plummeted -113.19 points, or 4.10%, to 2,648.94
·      The Dow Jones Industrial Average fell -1,175.21 points, or 4.60%, to 24,345.75
·      The Nasdaq Composite plunged -273.42 points, or 3.78%, to 6,967.53
·      The Russell 2000 Index declined -56.18 points, or 3.63% to 1,491.09
 
Events Calendar for Today
·      7:45 AM EST       ICSC Weekly Retail Sales
·      8:30 AM EST       Trade Balance, for December…est. (-$52.1B)
·      8:50 AM EST       Fed’s Bullard speaks on US Economy and Monetary Policy
·      8:55 AM EST       Johnson/Redbook Weekly Sales
·      10:00 AM EST     JOLTs Job Openings for December…est. 5961
·      4:30 PM EST        API Weekly Inventory Data
 
Earnings Calendar
·      Earnings Before the Open: ABC, ACM, ADM, AGN, ARW, AXTA, BDX, CMI, CNC, DNKN, EMR, ENTG, FIS, FLOW, GM, JHG, LH, LII, LITE, SAVE, SPGI, TPR, VSH, WCG
·      Earnings After the Close: ACLS, AKAM, APC, BLKB, BZH, CERN, CMG, DIS, EXTR, GHL, GILD, GLUU, MANH, MCHP, MODN, MTCH, MTSI, MYGN, MX, NANO, NEWR, NTGR, OI, PAYC, PFPT, PRO, PXD, SCSC, SGEN, SIMO, SNAP, UDR, ULTI, ZEN
   
Sector News Breakdown
Consumer
·      lululemon athletica (LULU) fires CEO Laurent Potdevin abruptly saying it “expects all employees to exemplify the highest levels of integrity and respect for one another, and Mr. Potdevin fell short of these standards of conduct.” The Board of Directors has immediately begun a search process for a CEO; reaffirmed its updated guidance provided on January 8, 2018
·      Harley-Davidson (HOG) raises dividend to 37c, announces new 15M share repurchase plan
·      Leggett & Platt (LEG) Q4 EPS 59c/$984M vs. est. 62c/$998.37M; sees FY18 EPS $2.65-$2.85 on revs $4.2B-$4.3B vs. est. $2.79/$4.17B; targets 2020 EPS $3.50, revenue $5B, EBIT margin of 13%
·      Steelcase (SCS) sees 4Q charge of $30M on Tax Reforms Act saying it will reduce EPS by about 22c per share; sees 4Q EPS 15c-17c vs. prior 14c-18c
·      Aramark (ARMK) Q1 EPS 59c/$3.97B vs. est. 56c/$3.87B and reports Q1 Organic Sales +5%; raises FY18 EPS view to $2.15-$2.30 from $2.10-$2.20 (est. $2.15)
 
Energy
·      National Oilwell (NOV) Q4 EPS loss (4c)/$1.97B vs. est. loss (4c)/$1.94B
·      Jones Energy (JONE) said Q4 average production in 4Q was about 21,200 Boe/d, proved oil reserves increased 23% to 29 MMbbl YoY; sees initial 2018 capital budget of $150M; sees 2018 full-year production of 19,300 to 21,500 Boe/d
·      Hess Midstream (HESM) Q4 revenue $150.5M vs. est. $147.62M; Q4 net income $77.1M up from $69.6M YoY; said generated Adjusted EBITDA of $21.2M and DCF of $21.0M in Q4
·      CMS Energy (CMS) raises quarterly dividend to 35.75c from 33.25c per share
·      AMSC Q3 EPS loss (18c)/$14.9M vs. est. loss (35c)/$15.9M; sees Q4 revenue 12M-$18M, vs. consensus $19.65M
·      Yingli Green Energy (YGE) announced that its wholly owned subsidiary, Yingli Green Energy Europe, S.L. has signed an agreement with Jenner Renewables, to provide Engineering, Procurement and Construction services for 12 ground-mounted PV plants in Chile, with the total capacity of 146MW
 
Financials
·      BNP Paribas SA (BNP.FR) Q4 net profit fell 1.1% compared with the year earlier to 1.43 billion euros ($1.78 billion) vs. est. EUR1.46 billion while revenue of EU10.53B beat expectations
·      Apollo Global (APO) 4.5M share Block Trade priced at $34.00
·      BGC Partners (BGCP) said it sees 4Q revs above the high end of previous guidance
·      Macerich (MAC) Q4 FFO $1.03 vs. est. $1.14; sees FY FFO per share $3.92-$4.02 vs. est. $4.07
·      Everest Re (RE) Q4 adjusted EPS $13.48 vs. est. $5.17; said Q4 gross written premiums for the quarter were $1.9B, an increase of 26% compared YoY
·      Black Knight (BKI) announced that it has signed an agreement with M&T Bank (MTB), one of the largest banks in the U.S., to implement Black Knight’s Enterprise Business Intelligence solution to provide broader and deeper insight into the bank’s mortgage portfolio and to help improve efficiency across M&T Bank’s origination and servicing operations
 
Healthcare
·      AmerisourceBergen (ABC) Q1 EPS $1.55/$40.5B vs. est. $1.35/$40.42B; raises FY18 adjusted EPS view to $6.45-$6.65 from $5.90-$6.15 (est. $6.29) primarily driven by U.S. Tax Reform benefit
·      Centene (CNC) Q4 EPS 97c/$12.81B vs. est. 93c/$12.54B; raises FY18 adj. EPS view to $6.95-$7.35 from $5.47-$5.87 (est. $6.11) and sees FY18 revenue $60.6B-$61.4B vs., consensus $59.12B
·      WellCare (WCG) Q4 EPS 32c/$4.33B vs. est. 21c/$4.32B; raises FY18 adj. EPS view to $9.55-$9.85 from $8.40-$8.65 (est. $9.19)
·      Premier (PINC) Q2 EPS 50c/$411.4M vs. est. 48c/$392.86M; raises FY18 adjusted EPS view to $2.24-$2.37 from $1.98-$2.09 (est. $2.12) and backs FY18 net revenue view $1.56B-$1.65B
 
Industrials & Materials
·      Clearwater Paper (CLW) Q4 EPS 87c/$436.7M vs. est. 88c/$429.23M; consolidated GAAP tax rate and adjusted tax rate for Q4 were a benefit of 333.2% and a provision of 39.9%, respectively, compared to provisions of 41.7% and 37.8%, respectively
·      MTS Systems (MTSC) Q1 EPS 41c/$194.2M vs. est. 41c/$194.52M; backs FY18 revenue $780M-$820M (est. $809.1M) and backs FY18 adjusted EBITDA $120M-$140M
·      Regal Beloit (RBC) Q4 EPS $1.14/$820.7M vs. est. $1.13/$794.65M; sees adjusted EPS $5.35 to $5.75 vs. est. $5.35
·      Simpson Manufacturing (SSD) Q4 EPS 27c/$231.7M vs. est. 35c/$224.48M; sees increase in market price for steel during Q1 of 2018
 
Technology, Media & Telecom
·      Skyworks (SWKS) Q1 EPS $2.00/$1.05B vs. est. $1.91/$1.05B; sees Q2 adjusted EPS $1.60 vs. consensus $1.64 and sees Q2 revenue midpoint $910M vs. est. $947.61M; announces new $1B stock repurchase program
·      Cirrus Logic (CRUS) shares fell over 15%; Q3 EPS $1.59/$482.7M vs. est. $1.78/$529.4M; announces $200M stock repurchase; sees Q4 revenue $300M-$340M below consensus $372.08M; sees Q4 GAAP gross margin expected to be between 48%-50%; said unanticipated weakness in smartphone demand that materialized in late December drove 3Q results below expectations and further impacted Q4
·      Micron Technology (MU) raised its q2 EPS view to $2.70-$275, up from prior view $2.51-$2.65 (est. $2.51) and raises Q2 revs view to $7.20B-$7.35B from $6.8B-$7.2B (est. $6.97B)
·      Apptio (APTI) Q4 EPS loss (6c)/$52.4M vs. est. loss (8c)/$49.9M; sees Q1 revenue $51M-$52M, vs. consensus $50.46M and sees FY18 revenue $220M-$225M vs. est. $216.4M
·      Fortinet (FN) Q4 EPS 32c/$416.7M vs. est. 29c/$408.9M; sees Q1 EPS 21c-22c on revs $387.0M-$393.0M vs. est. 22c/$389.85M; sees Q3 EPS 70c-73c on revs $316M-$324Mvs. est. 72c/$334.09M
·      Fortinet (FTNT) Q4 EPS 32c/$416.7M vs. est. 29c/$408.9M; sees FY18 EPS $1.30-$1.32 on revenue $1.695B-$1.715B vs. est. $1.20/$1.69B; appointed Keith Jensen to interim CFO effective February 16. Jensen replaces Drew Del Matto who served as CFO since January 2014
·      Oclaro (OCLR) Q2 EPS 14c/$139.3M vs. est. 12c/$138.83M; sees Q3 revenue $120M-$128M, vs. est. $132.77M; sees Q3 non-GAAP gross margin in 34%-37% vs. est. 37% and sees Q3 non-GAAP operating income in the range of $13M-$17M
 

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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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