Morning Preview: March 2, 2018

Scott GreenDaily Market Report

Early Look
Friday, March 2, 18
Stock futures are sliding, on track for a 4th consecutive decline and another deep weekly loss as President Donald Trump said “trade wars are good,” a day after announcing that the U.S. will impose tariffs on steel and aluminum imports. After rising interest rates and inflation expectations sunk the S&P 500 and Dow Industrials early February as much as 10% from record highs, worries over the prospect of a global trade war rattled markets yesterday after Trump said he would sign off on imposing 10% tariffs for foreign aluminum and 25% for steel imports next week. The news lifted U.S. metal companies such as X, AKS, STLD, CENX and AA, but weighed on market sentiment overall. Some of the U.S.’s biggest trading partners have already threatened to retaliate, including the European Union, China and Australia. Canada called the “tariffs unacceptable,” while the vice secretary general of the China Iron and Steel Association said it was “an extremely stupid move,” according to a Washington Post report. The tariff news overshadowed a second day of testimony by newly appointed Fed Chair Powell to the Senate who struck a less hawkish tone on the economy from his prior commentary Tuesday.
After yesterday’s sell-off, the three main benchmarks are down more than 2% on the week, on track to break a two-week run of gains. The U.S. dollar falls to 105.28, trading at lowest vs. yen since November 2016, while the euro rises back above $1.23 as dollar’s loss deepens vs. major rivals. Gold prices are benefitting from the dollar decline, surging 1.4%. In Asian markets, The Nikkei Index plunged -542 points (2.5%) to settle at 21,181, the Shanghai Index declined -19 points to end at 3,254 and the Hang Seng Index dropped -460 points to settle at 30,583. In Europe, the German DAX is down over -250 points (over 2%) at 11,920, while the FTSE 100 is down around -70 points holding around 7,100.
Market Closing Prices Yesterday
·         The S&P 500 Index dropped -36.16 points, or 1.33%, to 2,677.67
·         The Dow Jones Industrial Average fell -420.22 points, or 1.68%, to 24,608.98
·         The Nasdaq Composite slumped -92.45 points, or 1.27%, to 7,180.56
·         The Russell 2000 Index declined -5.06 points, or 0.33% to 1,507.39
Events Calendar for Today
·         10:00 AM EST     University of Michigan Sentiment, Feb-F…est. 99.5
·         1:00 PM EST        Baker Hughes Weekly Rig Count
World News
·         U.K. February construction PMI at 51.4 vs. 50.2 in January; U.K. February construction PMI at 51.4 vs. 50.8 estimate; Pound rises to $1.3793 after U.K. construction PMI beats expectations
·         The U.S. imports four times as much steel as it exports, and imports are on the rise again. The top supplier to the U.S. in 2017 was Canada, followed by Brazil, South Korea, Mexico and Russia. Other notables include Turkey, Japan, Taiwan and Germany. –
·         Japan’s jobless rate fell to a low of almost 25 years in January, while a ratio of job openings remained at a 44-year high. The jobless rate fell to 2.4% in January, the lowest level since April 1993, data from the Ministry of Internal Affairs and Communications showed Friday. The result compares with a revised 2.7% in December
Sector News Breakdown
·         Gap (GPS) shares rose 9%; Q4 adjusted EPS 61c/$4.78B vs. est. 58c/$4.67B; Q4 comp sales up 5%; raises quarterly dividend from 23c to 24.25c per share; sees initial FY18 EPS $2.55-$2.70, vs. consensus $2.34; 4Q Old Navy comparable sales +9%, vs. Bloomberg est. +3.4%; 4Q Gap Global comparable sales 0%, and Q4 Banana Republic comparable sales +1%
·         American Outdoor Brands (AOBC) shares fell (17%); Q3 adjusted EPS 9c/$157.4M vs. est. 8c/$172.54M; sees Q4 adjusted EPS 9c-11c on sales $162M-$166M well below consensus 38c/$205.59M (shares of RGR also dropped in sympathy)
·         Nordstrom (JWN) Q4 EPS $1.20/$4.6B vs. est. $1.24/$4.62B; says EPS included impacts associated with corporate tax reform; sees FY18 EPS $3.30-$3.55 on revs $15.2B-$15.4B vs. est. $3.30/$15.66B; to open 13 new stores in U.S., Canada in 2018
·         Strayer (STRA) Q4 adjusted EPS $1.09/$118.7M vs. est. $1.29/$121.51M; Q4 student enrollment at the Company’s main operating unit, Strayer University, increased 6% to 48,144 compared to 45,509 for the same period in 2016; sees Capella merger closing in Q3
·         Foot Locker (FL) Q4 EPS $1.26/$2.21B vs. est. $1.28/$2.22B; Q1 comp sales fell (-3.7%) vs. est. (-2.4%; sees year flat to up low single digit comp sales
·         Capella Education (CPLA) Q4 EPS 86c/$112M vs. est. 99c/$112.85M; says FY18 is to deliver continued revenue growth
·         Dillard’s (DDS) announces new $500 share repurchase program
·         Southern Co. (SO): After 32 years of service to Southern Company, Joseph “Buzz” Miller, chairman, president and CEO of Southern Power, has announced his retirement, effective April 1
·         Southwestern Energy (SWN) Q4 adjusted EPS 12c/$809M vs. est. 9c/$804.92M;
·         Uniti Group (UNIT) Q4 AFFO 64c/$246.3M vs. est. $246.92M
·         eHealth (EHTH) Q4 adjusted EPS loss (93c)/$38.8M vs. est. loss ($1.10)/$38.3M; sees FY18 adjusted EPS 92c-$1.18 on revs $217.5M-$227.5M
·         Intrexon (XON) Q4 EPS loss (23c)/$77M vs. est. loss (32c)/$48.16M
·         MannKind (MNKD) opens enrollment of patients in Phase 1 trial of drug-device combination product for treatment of pulmonary arterial hypertension
·         NewLink Genetics (NLNK) Q4 EPS loss (37c)/$10.1M vs. est. loss (67c)/$3.14M; ended the year on December 31, 2017, with cash and cash equivalents totaling $158.7 million compared to $131.5 million for the year ending December 31, 2016
·         Omeros Corp. (OMER) reported Q4 Omidria sales of $13.8M vs. est. $23.4M; saying sales down 36.5% from Q3 despite unit pricing and total number of vials sold to ambulatory surgery centers (ASCs) and hospitals being unchanged from 3Q17; Q4 EPS loss (34c) vs. est. (14c)
·         OPKO Health (OPK) Q4 EPS loss (38c)/$193.7M vs. est. loss (8c)/$301.4M; during the three months ended December 31, 2017, revenue from services were negatively impacted by non-recurring reimbursement adjustments from commercial and federal payor programs
·         Puma Biotechnology (PBYI) Q4 adjusted EPS ($1.03)/$21.6M vs. est. loss ($1.98)/$20.0M; said needs more time to complete, file 10-K
·         Sarepta (SRPT) Q4 EPS loss (28c)/$57.3M vs. est. loss (32c)/$56.48M
·         Tandem Diabetes (TNDM) Q4 EPS loss ($1.23)/$40.29M vs. est. loss ($1.30)/$37.99M; sees FY18 revenue $132M-$140M vs. est. $132.53M
Industrials & Materials
·         ArcelorMittal MT (MT) said that it has signed a joint venture agreement with Nippon Steel & Sumitomo Metal Corp. to bid for Essar Steel.
·         Casella Waste (CWST) Q4 EPS 11c/$151.2M vs. est. 12c/$145.3M; sees FY18 revenue $$618M-$628M vs. est. $621.49M 
·         Keysight Technologies (KEYS) Q1 EPS 51c/$856M vs. est. 39c/$801.8M; sees Q2 EPS 81c on revs $964M vs. est. 90c/$970.05M
·         Ingevity (NGVT) announced that the U.S. Federal Trade Commission has cleared Ingevity’s proposed acquisition of Georgia-Pacific’s pine chemicals business, which was announced on August 22, 2017
Technology, Media & Telecom
·         Microchip (MCHP) to buy Microsemi (MSCC) for $68.78 per share in cash; acquisition price represents a total equity value of about $8.35B, and a total enterprise value of about $10.15B; MCHP narrowed the range of its prior guidance for net sales and EPS
·         Ambarella (AMBA) Q4 EPS 45c/$70.6M vs. est. 37c/$70.3M; sees Q1 revenue $54.5M-$57.5M, vs. consensus $58.25M; sees gross margin on a non-GAAP basis is expected to be between 60.0% and 62.0%
·         Pure Storage (PSTG) Q4 EPS 13c/$338.3M vs. est. 7c/$331.52M; sees 1Q adj. gross margin 63.5%-66.5% vs. est. 65.7% and year gross margin 63.5%-66.5%; sees Q1 revs $246M-$254M vs. est. $247.1M
·         Splunk (SPLK) Q4 adjusted EPS 37c/$419.7M vs. est. 33c/$390.88M; Q4 billings $622.8M; sees Q1 revenue $295M-$297M vs. est. $294.74M; sees Q1 adjusted operating margin down roughly 6%; sees FY19 revenue roughly $1.625B vs. est. $1.56B
·         VMware (VMW) Q4 EPS $1.68/$2.31B vs. est. $1.63/$2.26B; Q4 billings growth +14%
·         Nutanix (NTNX) Q2 EPS loss (14c)/$286.7M vs. est. loss (20c)/$283.2M; reports billings of $355.9M, growing 57% YoY from $227.4M; sees Q3 EPS loss (19c)-(21c) on revs $275M-$280M, vs. est. loss (23c)/$267.1M
·         NeoPhotonics (NPTN) Q4 adjusted EPS (27c)/$76.9M vs. est. loss (19c)/$72.15M; sees Q1 adjusted EPS loss (32c)-(22c) on revs $67M-$73M vs. est. loss (18c)/$69.7M
·         51job (JOBS) Q4 adjusted EPS 77c/$134M vs. est. 64c/$131.05M; sees Q1 adjusted EPS 43c-48c, on revs $116M-$120.7M vs. est. 55c/$115.96M


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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