Morning Preview: March 7, 2018

Scott GreenDaily Market Report

Early Look
Wednesday, March 7, 18
  
Stock rattled as the Dow futures tumble after Gary Cohn, the head of President Donald Trump’s National Economic Council, resigned late Tuesday. Cohn, a former Goldman Sachs exec who was considered the chief architect of the corporate tax cuts signed into law last year, leaves as the administration prepares to impose steep tariffs on steel and aluminum that Cohn has opposed. The dollar slid, stocks tumbled (Dow futures fell over -350 points) and Treasuries climbed following the resignation news. His departure may cause further turbulence in financial markets, where investors saw him as a steady hand. Recall stocks had tumbled last August on reports of Cohn’s possible departure after disagreeing with how President Trump handled the violent nationalist protests in Charlottesville, VA, but he remained at his post which eased markets. News overnight that the Trump administration is considering clamping down on Chinese investments in the U.S. and imposing tariffs on a broad range of its imports to punish them for alleged theft of intellectual property (according to Bloomberg) also has markets on edge. The volatility comes ahead of key private payroll data later this morning (ADP at 8:15 AM EST) and the nonfarm payroll report Friday.
 
Yesterday, U.S. equities gained for a third day after government insiders including House Speaker Paul Ryan and White House economic adviser Gary Cohn expressed disagreement with President Trump’s stance on tariffs, giving investors hope that Trump may ease his position. The Russell 2000 SmallCap Index outperformed, rising 1%, while nine of the eleven sectors closed higher.
 
In Asian markets, The Nikkei Index dropped -165 points to settle at 21,252, the Shanghai Index fell -17 points to end at 3,271 and the Hang Seng Index dropped -312 points to settle at 30,196. In Europe, the German DAX is lower by around -50 points at 12,060, while the FTSE 100 is down a few points at 7,135.
 
Market Closing Prices Yesterday
·      The S&P 500 Index gained 7.18 points, or 0.26%, to 2,728.12
·      The Dow Jones Industrial Average rose 9.36 points, or 0.04%, to 24,884.12
·      The Nasdaq Composite climbed 41.30 points, or 0.56%, to 7,372.01
·      The Russell 2000 Index outperformed 16.16 points, or 1.04% to 1,562.20
 
Events Calendar for Today
·      7:00 AM EST       MBA Mortgage Applications Data
·      8:00 AM EST       Fed’s Dudley speaks in Puerto Rico
·      8:00 AM EST       Fed’s Bostic speaks on Economic Outlook
·      8:15 AM EST       ADP Employment Change for February…est. 200K
·      8:30 AM EST       Nonfarm Productivity, Q4-F…est. (-0.1%)
·      8:30 AM EST       Unit Labor Costs, Q4-F…est. 2.1%
·      8:30 AM EST       Trade Balance for January…est. (-$55.0B)
·      10:30 AM EST     Weekly DOE Inventory Data
·      2:00 PM EST        Fed Beige Book Released
·      3:00 PM EST        Consumer Credit for January…est. $17.65B
 
Other Key Events
·      Deutsche Bank Media, Telecom, Services Conference, 3/5-3/7, in Florida
·      Raymond James Institutional Investors Conference, 3/5-3/7, in Florida
·      RBC Capital Financial Institutions Conference, 3/6-3/7, in New York
   
World News
·      Gary Cohn, the head of President Donald Trump’s National Economic Council, resigned late Tuesday
·      The Trump administration is considering a broad range of import tariffs on Chinese goods, according to a Bloomberg report citing unnamed sources familiar with the matter. Under the most severe scenario being considered, the U.S. government would levy tariffs on items that range from shoes and clothing to consumer electronics https://goo.gl/FyxX4W
·      Federal Reserve Gov. Lael Brainard said that a higher path of interest rates could become warranted if a variety of economic “tailwinds” give the economy forward thrust.
·      A top adviser to the United Arab Emirates with ties to the Trump administration is cooperating with special counsel Robert Mueller’s investigation, the New York Times reported Tuesday
·      Coinbase, the popular cryptocurrency exchange, is launching a weighted index fund for digital currencies
 
Sector News Breakdown
Consumer
·      Urban Outfitters (URBN) shares fell -5%; Q4 comparable sales up 4%, driven by strong, double-digit growth in the digital channel partially offset by negative retail store sales. By brand, comparable retail segment net sales increased 8% at Free People, 5% at the Anthropologie Group and 2% at Urban Outfitters. Wholesale segment net sales increased 6.3%; Q4 EPS 69c /$1.09B vs. est. 64c/$1.09B; margins weaker for Q4 at 31.3% vs. Bloomberg est. 32.3%
·      Ross Stores (ROST) shares fell -5%; Q4 EPS $1.19/$4.1B vs. est. 93c/$3.96B; Q4 comp store sales rose 5% vs. est. 3.1%; raises stock buyback authorization to $1.075B from $875M; sees Q1 EPS $1.03-$1.07 vs. est. $1.03; sees year comp sales 1%-2%
·      NCI Building (NCS) Q1 EPS 14c/$421.3M vs. est. 10c/$402.79M; total consolidated backlog up 8.1% y/y to $569.9M; sees Q2 revenue $430M-$450M, vs. est. $436.76M and sees Q2 adjusted EBITDA $29M-$39M
·      Bojangles (BOJA) Q4 EPS 23c/$148.1M vs. est. 18c/$146.33M; 4Q system-wide comparable sales -3.1%, estimate -3.3%; Sees FY revenue $550.0M-$560M on EPS 64c-72c vs. est. $546.3M/82c
·      Korn/Ferry (KFY) Q3 EPS 70c/$447.6M vs. est. 58c/$414.54M; sees Q4 EPS 69c-73c on revs $448M-$462M vs. est. 67c/$436.7M
·      The J. M. Smucker Company (SJM) announced that the company and Conagra Brands (CAG) have agreed to terminate the definitive agreement for the company to acquire the Wesson oil brand from Conagra after FTC challenge
·      Park Hotels & Resorts (PK) 34.48M share Secondary priced at $25.75
 
Energy
·      The American Petroleum Institute (API) reported U.S. crude supplies rose 5.7M barrels for the week ended March 2, showed a decline of -4.5M barrels in gasoline stockpiles, while inventories of distillates saw a climb of 1.5M barrels
·      Sunrun (RUN) Q4 EPS 54c/$146.44M vs. est. 38c/$135.87M
·      Duke Energy (DUK) 18.5M share Spot Secondary priced at $75.00
·      Woodside Petroleum (WOPEY) has abandoned plans to build an LNG export facility at Grassy Point on the Canadian West coast, Reuters reports
 
Financials
·      H&R Block (HRB) Q3 EPS loss ($1.16)/$488M in revs vs. est. loss ($1.19)/$458.8M; the increase from the prior year was solely due to changes in the effective tax rate from tax reform; reaffirms revenue growth, margin guidance
·      Japan’s Nippon Life is negotiating with Deutsche Bank (DB) with regard to buying shares in the initial public offering of the latter’s asset-management arm, according to media reports https://goo.gl/SbbxTG 
 
Healthcare
·      PTC Therapeutics (PTCT) Q4 EPS 3c/$78M vs. est. loss (14c)/$74.4M; sees FY18 revenues $260M-$295M vs. est. $249.15M; anticipates FY18 Translarna net product revenue $170M-$185M
·      American Renal Associates (ARA) Q4 EPS 18c/$194.4M vs. est. 15c/$195.3M; Q4 total dialysis treatments increased 6.7%, of which 6.1% was non-acquired growth
·      Danaher (DHR) said it sees Q1 adjusted EPS to be above high end of 90c-93c (est. 93c)
·      Editas Medicine (EDIT) Q4 EPS loss (84c)/$3.67M vs. est. loss (75c)/$4.2M; cash, cash equivalents, and marketable securities at December 31, 2017, were $329.1M, compared to $295.7M at September 30, 2017
·      Ligand Pharmaceuticals (LGND) announced the signing of a license agreement granting Roivant Sciences exclusive global rights to develop and commercialize LGD-6972, Ligand’s glucagon receptor antagonist
·      Rigel Pharmaceuticals (RIGL) Q4 EPS loss (18c) vs. est. loss (13c); as of December 31, 2017, Rigel had cash, cash equivalents and short-term investments of $115.8M, compared to $74.8M as of December 31, 2016
·      Clearside Biomedical (CLSD) files to sell $75M of common stock
·      Zafgen (ZFGN) says the 0.9 mg dose produced a statistically significant placebo adjusted change in A1C at 8 weeks. The company will add a 1.8mg dose arm to the trial that will run alongside ZGN-1061 and won’t materially affected timing of potential Phase 2b trial
·      Zogenix (ZGNX) Q4 EPS loss ($1.17) vs. est. (90c); said due to the wind-down of Sumavel DosePro manufacturing operations, recorded no revenue for the three months ended December 31, 2017
 
Industrials & Materials
·      Boeing (BA) and Hawaiian Airlines (HA) announced that the carrier has selected the market-leading 787 Dreamliner as its flagship airplane for medium to long-haul flights. As part of the selection, Hawaiian intends to purchase 10 787-9 jets valued at $2.82B at list prices
·      ABM Industries (ABM) Q1 EPS 26c/$1.59B vs. est. 26c/$1.57B; sees FY adjusted EPS from continuing operations $2.00-$2.10 vs. est. $2.04 saying increase in guidance is primarily result of impact related to tax reform
·      AeroVironment Inc. (AVAV) shares fell -8%; swung to a surprise Q3 loss of (4c) vs. est. for gain of 2c and revs rising 20% to $64M vs. est. $63M; said it had been awarded a $44.5 million contract to provide drones for the ground forces of an unnamed Middle East regional power
 
Technology, Media & Telecom
·      Autodesk (ADSK) shares rose 10%; Q4 EPS loss (9c)/$544M vs. est. loss (11c)/$544.74M; 4Q total subscriptions 3.72M and 4Q annualized recurring revenue $2.05 billion; sees Q1 adjusted EPS 11c-14c on revs $565M-$575M vs. est. 16c/$581.74M
·      Carvana (CVNA) shares fell -14%; Q4 adjusted EPS loss (36c)/$265.1M vs. est. loss (34c)/$269.6M; retail units sold totaled 13,517, an increase of 141%; sees Q1 revenue of $325M-$355M vs. est. $413.1M; sees Q1 retail unit sales of 17,000-18,500, an increase of 104%-122% and gross profit per unit of $1,650-$1,750, an increase from $1,169 in Q1 2017; sees FY18 revenue of $1.725B-$1.825B vs. est. $2.03B
·      Guidewire Software (GWRE) Q2 EPS 33c/$163.8M vs. est. 19c/$154.22M; raises FY18 adjusted EPS view to 98c-$1.04 from 82c-90c (est. 88c) and raises FY18 revenue view to $644M-$650M from $631M-$641M (est. $638.84M)

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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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