Morning Preview: April 16, 2018

Scott GreenDaily Market Report

Early Look

Monday, April 16, 18

Stock futures rise as Syria fears fade, with attention now turning to a heavy dose of corporate earnings this week, as Bank of America reports this morning and Netflix (NFLX) due tonight. Bond strength is fading, as the yield on the 10-year rises above 2.86%, while gold futures are little changed and oil prices pullback after its strong returns last week. Investors return from the weekend digesting news late Friday that the U.S., along with coordination from the UK and France, announced missile strikes on Syria, which hampered al-Assad’s ability to use chemical weapons again, without encountering serious resistance from the Syrian military or its Russian allies. President Donald Trump summed up that achievement in two words: “Mission accomplished.” The United States is preparing new sanctions on Russia over its continued support of Syrian President Bashar-al Assad, the U.S. ambassador to the United Nations, Nikki Haley, said Sunday, which is weighing on Russian markets early. Also, investors await a round of economic data reports including retail sales, Empire manufacturing, and business inventories. Stocks will look to add to last week’s gains when the Dow booked a gain of 1.8%, the S&P rose 2% and the Nasdaq produced a weekly gain of 2.8%. U.S. equity markets closed lower on Friday, led by a selloff in banking stocks, though major averages still posted weekly gains. Shares of JPMorgan, Citigroup Inc. and Wells all declined on mixed results and cautious commentary about the market environment, though profits were in line or above expectations. In Asian markets, The Nikkei Index rose 56 points to settle at 21,835, the Shanghai Index…the Hang Seng Index dropped -492 points to settle at 30,315. In Europe, the German DAX is up around 20 points at 12,460, while the FTSE 100 is down over -20 points at 7,235.

Market Closing Prices Yesterday

  • The S&P 500 Index slipped -7.69 points, or 0.29%, to 2,656.30
  • The Dow Jones Industrial Average fell -122.91 points, or 0.50%, to 24,360.14
  • The Nasdaq Composite dropped -33.60 points, or 0.47%, to 7,106.65
  • The Russell 2000 Index declined -7.82 points, or 0.50% to 1,549.51

Events Calendar for Today

  • 8:30 AM EST       Empire Manufacturing for April…est. 18.6
  • 8:30 AM EST       Retail Sales MoM for March…est. 0.4%
  • 8:30 AM EST       Retail Sales Ex: Autos MoM for March…est. 0.2%
  • 10:00 AM EST     Business Inventories for Feb…est. 0.6%
  • 10:00 AM EST     NAHB Housing Market Index for April…est. 70
  • 1:15 PM EST        Fed’s Bostic speaks on the Economy
  • 4:00 PM EST        Total Net TIC Flows for Feb…prior $119.7B

Earnings Calendar

  • Earnings Before the Open: BAC, JBHT, MTB, SCHW
  • Earnings After the Close: CE, LAKE, NFLX, PNFP, SEAC, WTFC

World News

  • Federal Reserve President Neel Kashkari said recent steps by the federal government to stimulate economic growth, including tax cuts, make reaching a 2% inflation objective more likely. That means the Fed can most likely move ahead with additional planned interest-rate hikes this year, he said in an interview with the Wall Street Journal published early Monday.
  • Arab League leaders on Sunday called for an international probe into the “criminal” use of chemical weapons in Syria and condemned what they see as Iran’s interference in the affairs of other countries – Reuters

Sector News Breakdown

Consumer

  • Farm product tariffs and steel duties may be a drag upon, and impact earnings of Tyson (TSN), Hormel (HRL), Ford (F) and General Motors (GM), Barron’s said
  • Bratz doll maker MGA Entertainment said billionaire founder and CEO, Isaac Larian, had made an $890M bid for Toys ‘R’ Us stores in the United States and Canada. https://reut.rs/2EHxAmQ
  • S. egg company Rose Acre Farms recalls ~207M eggs after 22-illnesses reported according to the FDA; said recall as product may have been contaminated with salmonella, FDA says
  • Private equity firms Partners Group Holding AG and Charlesbank Capital Partners LLC are nearing a deal to acquire Hearthside Food Solutions LLC, a U.S. contract manufacturer used by food and drink companies such as Kellogg Co and PepsiCo Inc , for more than $2.4 billion, including debt https://reut.rs/2qysAwm
  • Kraft Heinz (KHC) and JM Smucker (SJM) both downgraded to Underperform at Credit Suisse

Energy

  • National Oilwell Varco (NOV) said 1Q preliminary revenue of $1.8B, vs. est. $1.94B, below prior expectations with the company attributing the shortfalls to reduced progress on new offshore rig construction and customer-delayed deliveries in equipment.
  • Occidental Petroleum (OXY) upgraded to overweight at Piper and raised tgt to $86 from $77
  • Seaspan (SSW) files $2B mixed securities shelf; files to sell 40.98M shares of common stock for holders
  • Canada’s federal government will talk to Kinder Morgan Canada Ltd about possible financial aid to end a crisis over a planned pipeline project, Prime Minister Justin Trudeau said

Financials

  • Bank America (BAC) Q1 EPS 62c vs. est. 59c; Q1 trading revs $4.1B mostly in-line, with FICC trading revs $2.5B and equities $1.52B
  • JPMorgan (JPM) March net credit losses 2.65% vs. 2.28% last month and 30-plus day delinquency rate 1.22% vs. 1.24% last month
  • Synchrony (SYF) reports March net charge offs 4.81% vs. 4.90% last month and 30-plus day delinquency rate 3.03% vs. 3.12% last month
  • Ellie Mae (ELLI) downgraded to Neutral from Buy at Bank America
  • S. Bancorp (USB) mentioned positively in Barron’s saying shares looks appealing after lagging behind most big banks during the past year; USB generates some of the industry’s highest returns and a modest price/earnings ratio of 12.6
  • Guggenheim Partners said it is “cooperating fully” with an investigation of its asset management subsidiary that is being conducted by U.S. securities regulators. The statement followed a report in the WSJ that said the company was asked to retain documents related to transactions involving a second company, ABS Capital Co LLC https://reut.rs/2GZ0rc5
  • Vornado (VNO) discloses items including a new GAAP accounting standard will cut its 1Q FFO by 37c per share

Healthcare

  • Shire (SHPG) announces the sale of its oncology business to Servier for $2.4B which unlocks embedded value within Shire’s portfolio and sharpens focus on core areas reinforcing our leadership in rare diseases https://on.mktw.net/2viDQ58
  • After AveXis (AVXS) accepted an $8.7B takeover bid from Novartis (NVS), Barron’s said the deal also looks bullish for Regenxbio (RGNX), which makes the viral delivery mechanism for AveXis’ marquee treatment for severe spinal muscular atrophy
  • Bristol-Myers Squibb Company (BMY) and Illumina, Inc. (ILMN) announced a collaboration that will utilize Illumina’s next-generation sequencing (NGS) technology to develop and globally commercialize in-vitro diagnostic (IVD) assays in support of Bristol-Myers Squibb’s oncology portfolio. The companies plan to develop a diagnostic version of the Illumina TruSight Oncology 500 assay to measure potentially predictive genomic biomarkers
  • Blueprint Medicines’ (BPMC) experimental treatment, BLU-667, was active and reduced tumors in 84% of patients with RET-altered solid tumors in a Phase 1 proof-of-concept study. Preliminary overall response rates were 50% in patients with non-small cell lung cancer (NSCLC), 40% in patients with medullary thyroid cancer (MTC) – Bloomberg
  • Merck & Co.’s (MRK) Phase III “Keynote-054” study of stage 3 melanoma patients at high risk of recurrence after surgery were 43% less likely to have their cancer come back or die if they were given Keytruda than those receiving placebo
  • Boston Scientific (BSX) acquired NVision Medical, a privately-held company focused on women’s health, for upfront cash payment of $150m and up to added $125m in potential clinical and commercial milestones over four years
  • Avenue Therapeutics (ATXI) files $75M mixed securities shelf

Industrials & Materials

  • General Electric (GE) restated its 2017, 2016 earnings due to accounting change; said were required to adopt several new accounting standards effective as of January 1, 2018. In addition, they voluntarily changed one accounting principle.
  • Cummins Inc. (CMI) mentioned favorably in Barron’s noting after a two-year run-up, shares of have been battered this year, with the stock descending over trade and tariff concerns that now seem overstated; said CMI remains a cyclical company, and results can be choppy, but it also has a strong balance sheet, which will help it withstand potential downturns
  • B. Hunt (JBHT) Q1 EPS $1.07/$1.95B vs. est. $1.07/$1.89B; 1Q Intermodal revenue $1.07B

Technology, Media & Telecom

  • Apple Inc. (AAPL) warned employees to stop leaking internal information on future plans and raised the specter of potential legal action and criminal charges, one of the most-aggressive moves by company to control information about its activities – Bloomberg
  • Facebook (FB), Amazon.com Inc. (AMZN) & Alphabet Inc. (GOOGL) should be good investments according to Barron’s because they each have “gigantic market opportunities they’re uniquely equipped to exploit,” said a T. Rowe Price Science and Technology fund (PRSCX) manager
  • Sir Martin Sorrell has stepped down as Chief Executive Officer of WPP (WPP) with immediate effect. Roberto Quarta, Chairman of WPP, becomes Executive Chairman until the appointment of a new CEO

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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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