Morning Preview: April 4, 2018

Scott GreenDaily Market Report

Early Look
Wednesday, April 4, 18
  
Stock futures are tumbling, with Dow futures down over -500 points and the S&P down roughly 2% as the prospect of trade wars has intensified as China announced tariffs on $50 billion of U.S. goods on 106 American products with targets include politically sensitive soybean exports and Boeing aircraft, a retaliatory move after the U.S. recent $60B tariffs hit to China. Soybean prices are getting smashed to almost a two-month low after China’s 25% tariff on a slew of U.S. agricultural products while Dow component Boeing (BA) was hit on China’s proposed 25% tariff on U.S. aircraft as well. The move raises the stakes for the U.S., with weakness in materials, industrials and agriculture names under pressure this morning. Outside of the trade-war fears (though will likely dominate today’s action), investors prepare for a busy week of economic data, highlighted by private payroll data today from ADP and the nonfarm payroll report, unemployment rate and hourly wages on Friday.
 
U.S. stocks rose on Tuesday, as the benchmark S&P 500 bounced off a seven-week low and recaptured its key 200-day technical support level (2,590) it breached on Monday (snapping a 442-day streak above that level), as tech shares paced the recovery and automakers advanced on better-than-expected March sales. The S&P, Dow Industrials, Nasdaq and Russell 2000 all advanced more than 1% ahead of key jobs economic data this week. Treasury prices dropped yesterday, pushing up yields, as the yield on the benchmark 10-year Treasury note climbed 5.3 bps to 2.784%, the biggest one-day yield climb since Feb. 14, snapping a fourth straight session of falling yields, while the 2-year note yield rose 4.2 basis points to 2.286%, its largest one-day yield gain since Feb. 21.
 
In Asian markets, The Nikkei Index rose 27 points to settle at 21,319, the Shanghai Index dipped -5 points to close at 3,131 and the Hang Seng Index plunged -661 points to settle at 29,518. In Europe, the German DAX is off over -150 points at 11,850, while the FTSE 100 is down around -30 points around the 7,000 level.
 
Market Closing Prices Yesterday
·      The S&P 500 Index gained 32.57 points, or 1.26%, to 2,614.45
·      The Dow Jones Industrial Average rose 389.17 points, or 1.65%, to 24,033.36
·      The Nasdaq Composite spiked 71.16 points, or 1.04%, to 6,941.28
·      The Russell 2000 Index advanced 19.62 points, or 1.31% to 1,512.15
 
Events Calendar for Today
·      7:00 AM EST       MBA Mortgage Applications Data
·      8:15 AM EST       ADP Employment Data…est. 210K
·      9:45 AM EST       Markit US Services PMI, Mar-F…est. 54.2
·      9:45 AM EST       Markit UC Composite PMI, Mar-F
·      9:45 AM EST       Fed’s Bullard speaks on US Economy and Monetary Policy
·      10:00 AM EST     ISM Non-Manufacturing Composite for March…est. 59.0
·      10:00 AM EST     Factory Orders for February…est. 1.7%
·      10:00 AM EST     Durable Goods Orders, Feb-F…
·      10:30 AM EST     Weekly DOE Inventory Data
·      11:00 AM EST     Fed’s Mester speaks on diversity in economics
   
World News
·      China announced overnight tariffs on $50 billion of U.S. goods on 106 American products with targets include politically sensitive soybean exports and Boeing aircraft, a retaliatory move after the U.S. recent $60B tariffs hit to China
·      The Trump administration details $50 billion in tariffs against imports from China-In the U.S.’s most powerful challenge in decades to China’s economic practices, the Trump administration detailed the $50 billion of goods that it plans to hit with 25% tariffs unless Beijing makes major trade and investment concessions soon
·      President Donald Trump is not currently a criminal target of special counsel Robert Mueller’s investigation, the Washington Post reported Tuesday night. The Post said that Mueller told Trump’s attorneys last month that he is continuing to investigate the president but needs to interview Trump in order to complete his probe into Russian election meddling and possible collusion with the Trump campaign
·      Business activity in the U.K.’s construction sector dropped in March following five months of marginal growth, as IHS Markit said its purchasing managers’ index for the construction industry fell to 47.0 in March, down from 51.4 a month earlier
·      China’s central bank pledged to strengthen its efforts to maintain financial stability, days after President Xi Jinping called it “a matter of national security.”
 
Sector News Breakdown
Consumer
·      Dave & Buster’s (PLAY) Q4 EPS 61c/$304.9M vs. est. 60c/$305.49M; sees year comp sales $1.2B-$1.24B vs. est. 41.25B and year comparable store sales decrease in the low-to-mid single digits in fiscal 2018
·      Domino’s Pizza (DPZ) downgraded to Hold from Buy at Deutsche Bank
·      Boston Beer (SAM) upgraded to Market Perform from Underperform at Cowen
 
Energy
·      The American Petroleum Institute (API) said U.S. crude-oil inventories fell by -3.3M barrels last week, reported a 1.1 million barrel rise in gasoline inventories
·      Royal Dutch Shell PLC (RDSA) said that it has reached an agreement with the Palestine Investment Fund to sell its entire stake in the Gaza Marine license, offshore Palestine
·      SM Energy (SM) enters into pact to sell remaining non-core assets in Williston Basin located in Divide County, North Dakota for $292M
 
Financials
·      Chubb (CB) announced preliminary net loss estimates in the first quarter of 2018 attributable to natural catastrophes, including the California mudslides, of $380M pre-tax, or $305M after tax. Losses from the California mudslides are estimated at $125M pre-tax
·      MarketAxess (MTXS) said March total trading volume $152.3B; Trading volume consisted of $86.6 billion in U.S. high-grade volume, $60.2 billion in other credit volume, and $5.5 billion in liquid products volume
·      Riot Blockchain (RIOT) said it would delay its Form 10-K filing with the SEC, saying “The compilation, dissemination and review of the information required to be presented in the Form 10-K for the relevant period has imposed time constraints that have rendered timely filing of the Form 10-K impracticable without undue hardship and expense to the registrant
 
Healthcare
·      Agilent Technologies (A) to acquire the remaining shares of Lasergen, an emerging biotechnology company focused on research and development of innovative technologies for DNA sequencing, for $105M
·      Cellectis (CLLS) announces $175M ADS offering
 
Industrials & Materials
·      Boeing (BA) and Caterpillar (CAT) shares among the hardest hit after China announced $50B in tariffs on 106 American exports
·      Alcoa (AA) signed group annuity contracts with Sun Life Financial, Desjardins Financial Security Life Assurance and Industrial Alliance Insurance to transfer $555M in obligations and assets of defined benefit pension plans in Canada; sees recording a $175M charge in Q2
·      Landec (LNDC) Q3 EPS 58c/$149.3M vs. est. 9c/$146.0M; sees year EPS 40c-42c vs. est. 43c
·      Ryerson (RYI) sees Q1 revenue $930M-$950M vs. est. $909.2M
·      Jacobs Engineering (JEC) upgraded to Buy from Neutral at Goldman Sachs
 
Technology, Media & Telecom
·      CBS Corp. (CBS) has made an offer to acquire Viacom Inc. (VIAB), and the bid is contingent on its management team being at the helm of the merged entity. The all-stock offer is below Viacom’s current market valuation of $12.5B, according to reports https://www.marketwatch.com/story/cbs-makes-an-offer-for-viacom-below-its-125-billion-market-value-2018-04-04
·      Cloudera (CLDR) shares fall -29%; Q4 adjusted EPS loss (10c)/$103.5M vs. est. loss (23c)/$98.64M; sees Q1 adjusted EPS loss (19c)-(17c) on revs $101M-$102M vs. est. loss (18c)/$99.66M; Q4 subscription revenue up 50% y/y to $84.3M and sees Q1 subscription revenue in the range of $85M to $86M, representing approximately 32% YoY growth; guides year revs $435M-$445M vs. est. $460.3M
·      The board of directors of WPP PLC (WPP) is looking into allegations of improper personal behavior by CEO Martin Sorrell and also probing charges that Sorrell misused company assets, according to The Wall Street Journal
·      SS&C Technologies (SSNC) priced 26.3M share secondary at $47.50 per share
·      Aehr Test Systems (AEHR) Q3 EPS 2c on revenue $7.4M
·      Clear Channel Outdoor Holding (CCO) announced that the company will be delayed in filing its Annual Report on Form 10-K for the fiscal year ended December 31, 2017

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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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