Morning Preview: March 28, 2018

Scott GreenDaily Market Report

Early Look
Wednesday, March 28, 18
Stock futures are mixed, with technology stocks dragging futures lower overnight, though Dow and S&P futures have managed to reverse losses after yesterday’s sharp declines. Shares of technology companies were under increased pressure on Tuesday after reports that the Trump administration is considering measures against Chinese investments in U.S. technologies. The comments fanned the flames of fear on China retaliation. Reuters reported that China will soon announce a list of retaliatory tariffs on United States exports to China to counter an expected announcement from the United States of proposed new tariffs on Chinese imports. Outside of the “tech-wreck” yesterday amid a strong of negative headlines for high profile companies of late (FB, TWTR, NVDA, TSLA), some attention will turn to U.S. data, as we get an update on Q4 gross domestic product at 8:30 AM EST.
U.S. stocks plunged on Tuesday, as a selloff in the technology sector fueled a rout that wiped out much of Monday’s sizable gains. The Dow Jones Industrial Average dropped 344.89 points, or 1.4%, to 23,857.71, with 25 of its 30 members finishing in negative territory, while the S&P 500 index declined 45.93 points, or 1.7%, to 2,612.62, with seven of its 11 main sectors closing lower (defensive utilities and Telco advanced). However, the Nasdaq Composite Index sank 211.74 points, or 2.9%, to 7,008.81, led by hefty declines in FB, NVDA, TSLA and TWTR all on news. With two more sessions to go, the stock market is on track to post big monthly losses with the Dow down 4.7% in March, and it is off 3.5% so far this year. The S&P is down 3.7% so far this month, while the Nasdaq is down 3.6% in March.
In Asian markets, The Nikkei Index dropped -286 points to settle at 21,031, the Shanghai Index dropped -44 points to settle at 3,122 and the Hang Seng Index declined -768 points (2.5%) to finish at 30,022. In Europe, the German DAX is down over -100 points around 11,850, while the FTSE 100 slides over -20 points at 6,975.
Market Closing Prices Yesterday
·      The S&P 500 Index dropped -45.93 points, or 1.73%, to 2,612.62
·      The Dow Jones Industrial Average fell -344.89 points, or 1.43%, to 23,857.71
·      The Nasdaq Composite plunged -211.74 points, or 2.93%, to 7,008.81
·      The Russell 2000 Index declined -30.15 points, or 1.95% to 1,513.57
Events Calendar for Today
·      7:00 AM EST       MBA Mortgage Applications Data
·      8:30 AM EST       Gross Domestic Product (Annualized) for Q4…est. 2.7%
·      8:30 AM EST       Personal Consumption for Q4…est. 3.8%
·      8:30 AM EST       GDP Price Index for Q4…est. 2.3%
·      8:30 AM EST       Core PCE QoQ, for Q4…est. 1.9%
·      8:30 AM EST       Advance Goods Trade Balance for February…est. (-$74.4B)
·      10:00 AM EST     Pending Home Sales MoM for February…est. up 2%
·      10:30 AM EST     Weekly DOE Inventory Data
·      12:00 PM EST     Fed’s Bostic speaks to financial professionals in Atlanta
World News
·      North Korean leader Kim Jong Un paid a surprise visit to China this week, in his first known overseas trip since taking power in late 2011. During a three-day stop in Beijing, Kim met Chinese President Xi Jinping and other senior officials, where they discussed bilateral ties and Korean peninsula tensions, Chinese state media said
·      Investor Intelligence Poll shows the newsletter writers classified as bulls slip after 3-weeks of gains, tumble to 49.5% vs 55.5% last week; those considered bearish climb a 4th week to a 6-month high of 17.5% vs 16.8% last week and those expecting a correction snaps three week decline, rises to 3-week high of 33.0% from 27.7%
Sector News Breakdown
·      Lululemon (LULU) Q4 EPS $1.33/$928.8M vs. est. $1.27/$912.4M; total comparable sales increased 12% vs. est. 8.6% or increased 11% on a constant dollar basis vs. est. 8.6%; comparable store sales increased 2% or increased 1% on a constant dollar basis; sees FY18 EPS $3.00-$3.08 vs. est. $3.02; sees FY18 revenue $2.985B-$3.022B vs. est. $2.94B
·      RH (RH) Q4 EPS $1.69/$670.3M vs. est. $1.55/$672.61M; Q4 comparable brand revenue growth 2% YoY vs. est. 6.9%; sees FY18 adjusted EPS $5.45-$6.20 vs. est. $5.53 while cuts FY18 revenue view to $2.53B-$2.57B from $2.58B-$2.62B (est. $2.6B); sees Q1 EPS 95c-$1.05 on revs $555M-$565M vs. est. 59c/$590.4M; says remain confident in long term goal of $4 to $5 billion in North American revenues – full RH recap
·      Sonic (SONC) Q2 EPS 17c/$88.1M vs. est. 15c/$94.2M; Q2 franchise comparable sales -2.8% vs. estimate +0.5% and Q2 system-wide comparable sales -2.9%, vs. Bloomberg estimate +0.5%; sees FY18 adjusted EPS $1.43-$1.50 vs. est. $1.52 and sees FY18 system SSS growth (1%)-1%
·      Shoe Carnival (SCVL) Q4 adjusted EPS 11c/$243.2M vs. est. 9c/$248.21M; Q4 comp sales fell (-0.5%); sees year EPS $1.85-$2.00 vs. est. $1.94
·      Moody’s Investors Service downgraded Tesla, Inc.’s (TSLA) Corporate Family Rating (CFR) to B3 from B2, unsecured note rating to Caa1 from B3, and Speculative Grade Liquidity rating to SGL-4 from SGL-3. The outlook is negative
·      General Mills (GIS) 22.7M share Secondary priced at $44.00
·      At Home Group (HOME) 6M share Secondary priced at $30.00
·      OneSmart Education (ONE) 16.3M share IPO priced at $11.00
·      Concho Resources Inc (CXO) said it would buy smaller rival RSP Permian Inc (RSPP) for an equity value of about $8 billion; under the all-stock deal, RSP shareholders will get 0.320 of CXO shares valued at $50.24 per share, a 29% premium to yesterday close
·      The American Petroleum Institute (API) reported that U.S. crude supplies rose by 5.3M barrels for the week ended March 23, showed a drop of -5.8M barrels in gasoline stockpiles, while inventories of distillates shed -2.2M barrels
·      Dominion (D) commences registered direct offering of 20M shares of common stock; backs FY18 operating EPS view $3.80–$4.25 vs. est. $4.04; will seek divestiture of non-core assets that could include stake in Blue Racer Midstream, an unregulated natural gas gathering and processing joint venture focused on the Utica natural gas basin
·      BGC Partners (BGCP) said it sees Q1 results above high end of previously (Q1 EPS consensus is 29c for EPS and $906.35M for revenue)
·      Genworth (GNW) & Oceanwide extend merger pact to allow CFIUS review – Bloomberg; extends the April 1 deadline to July 1 to allow additional time for regulatory reviews
·      OP Bancorp (OPBK) 2M share IPO priced at $11.00
·      Japan’s Takeda Pharmaceutical Co. said that it is considering making an offer for Shire PLC (SHPG); Takeda said it hasn’t approached Shire’s board and the proposal is at a “preliminary and exploratory” stage. Takeda didn’t disclose any financial details
·      Homology Medicines, Inc. (FIXX) priced 9M shares IPO at $16.00 per share
·      PTC Therapeutics (PTCT) commences offering of 4M shares of common stock
Industrials & Materials
·      Celanese Corporation (CE) announced it will increase the price of vinyl acetate-based emulsions sold in Greater China by RMB200/MT effective March 27, 2018, and Asia outside of China by $50/MT effective March 27, 2018
·      Rio Tinto (RIO) sells 80% interest in Kestrel coal mine for $2.25B
·      Jacobs Engineering (JEC) upgraded to Buy from Neutral at MKM Partners
Technology, Media & Telecom
·      Facebook Inc. (FB) will delay the unveiling of its upcoming smart speaker with a digital assistant, Bloomberg News reported late Tuesday. The device was set to be previewed at Facebook’s upcoming developers conference in May, but will be put on hold
·      NXP Semiconductors NV (NXPI), the target of a $44 billion takeover by Qualcomm Inc (QCOM) that is awaiting approval by Chinese anti-monopoly regulators, has sold its stake in a Chinese chip-design joint venture
·      Apple (AAPL): Goldman Sachs cuts its March and June quarter iPhone units estimate by 1.7m and 3.2m, to 53.0m and 40.3m units, respectively; also reduces ASP estimate for June quarter by 2.3% due to above-average forecast inventory burn of 6.0m units
·      Bilibili (BILI) prices 42M ADS IPO at $11.50 per ADS
·      Viacom (VIAB) upgraded to neutral at Citigroup and raise tgt to $30


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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