Morning Preview: April 18, 2018

Scott GreenDaily Market Report

Early Look

Wednesday, April 18, 18

Stock futures are pointing to slightly better open, on track for a third straight day of gains, helped after President Trump confirms this morning that CIA director Pompeo met with North Korean leader Kim-Jong Un last week and said the meeting went smoothly, helping ease tensions with the country. Outside of that, earnings remain the key focus again today. The U.S. dollar advanced as the Pound declines on softer inflation data, while markets prepare for several Federal Reserve speeches and the central bank’s Beige Book report later this afternoon. In Asian markets, The Nikkei Index jumped 310 points to finish at 22,158, the Shanghai Index rose 24 points to settle at 3,091 and the Hang Seng Index gained 221 points to close at 30,284. In Europe, the German DAX is down a few points above 12,550, while the FTSE 100 is up around 50 points at 7,275. Markets are looking to put the macro picture behind for the time being and focus on the fundamentals with a busy couple of weeks coming up related to earnings.

It was a strong day for stocks on Tuesday as U.S. equity markets closed solidly higher amid a rally in technology and consumer discretionary stocks. Investors welcomed a round of better-than-expected earnings reports and economic data releases (housing and industrial production) with a more than 1% gain for the S&P 500, Russell 2000 and the Nasdaq Composite following earnings results that came in above expectations. Fear has subsided for the time being as the CBOE Volatility index (VIX) declined for a 6th consecutive day, falling 7.8% to 15.27.

 

Market Closing Prices Yesterday

· The S&P 500 Index jumped 28.55 points, or 1.07%, to 2,706.39

· The Dow Jones Industrial Average rose 213.59 points, or 0.87%, to 24,786.63

· The Nasdaq Composite spiked 124.82 points, or 1.74%, to 7,281.10

· The Russell 2000 Index advanced 16.77 points, or 1.07% to 1,579.80

Events Calendar for Today

· 7:00 AM EST MBA Mortgage Applications Data

· 10:30 AM EST Weekly DOE Inventory Data

· 2:00 PM EST Fed Beige Book released

Earnings Calendar:

· Earnings Before the Open: ABT, ASML, MS, MTG, QCRH, TXT, USB

· Earnings After the Close: AA, AXP, BHP, CP, BXS, CATY, CCI, CCK, PIT, PTC, SLG, STLD, TCBI, URI

World News

· Former first lady Barbara Bush has died at 92, the Bush family said in a statement late Tuesday. Barbara Bush was married to former President George H.W. Bush for 73 years, and is survived by him and five children, 17 grandchildren and seven great-grandchildren

· CIA Director Mike Pompeo secretly met with North Korean leader Kim Jong Un over Easter weekend, the Washington Post reported late Tuesday. The rare face-to-face meeting came after Pompeo had been nominated by President Donald Trump to be secretary of state

· Inflation in the U.K. cooled by more than expected in March, as consumer prices rose an annual 2.5% in March, a slower rate of growth than the 2.7% annual pace recorded in February

· Investor Intelligence shows that newsletter writers classified as bulls rises to 43.6% from 42.2% (last week saw the fewest bulls since Nov. 2, 2016), while bearish sentiment climbs a 7th week to 19.8% from 18.6% last week, highest since September and those expecting a correction slips to 36.6% from last week’s 39.2%, which was the highest since May 25, 2016

Sector News Breakdown

Consumer

· United Continental (UAL) shares rose 3%; Q1 EPS 50c/$9.03B vs. est. 38c/$8.99B; narrows FY capacity to 4.5%-5.5% from prior 4%-6%; Sees FY adjusted EPS $7.00-$8.50 vs. prior view $6.50-$8.50 (est. $7.77); 1Q PRASM +2.7%

· Tesla Inc. (TSLA) said it is aiming at a “steady” production run-rate of 6,000 Model 3 sedans a week by the end of the year, and will run its California assembly plant around the clock and hire hundreds of new employees to achieve the goal,

· The Scotts Miracle-Gro (SMG) entered into a definitive agreement to acquire the assets of Sunlight Supply; to pay $425M in cash and $25M in SMG equity to Sunlight Supply upon completion of the deal

· Southwest Airlines Co. (LUV) said it is accelerating inspections of some engines following a fatal failure on a flight between New York and Dallas; said it expects within 30 days to complete its examination of fan blades on CFM56 engines of the type that broke apart on a Boeing Co. 737-700 on Tuesday.

· Ethan Allen (ETH) guides Q3 EPS 10c-11c, below est. 16c

· German prosecutors conducted a large-scale raid on several premises of Volkswagen’s sports car maker Porsche as part of an investigation connected to the diesel-emission scandal, German newspaper Handelsblatt reports https://on.mktw.net/2qEM8PU

· Home Depot (HD) is launching its biggest tech hiring spree ever to protect its lead over Amazon, Recode reports

Energy

· The American Petroleum Institute (API) reported U.S. crude supplies fell by roughly 1 million barrels for the week ended April 13, showed a decline of nearly 2.5 million barrels in gasoline stockpiles, while inventories of distillates fell by 854,000 barrels

· First Solar (FSLR) upgraded to buy from neutral at Bank America and raise tgt to $83 from $75

· Total (TOT) has entered into an agreement with the controlling shareholders of Direct Energie for the proposed acquisition of 74.33% of its share capital, at a price of EURO42 per share, ex-dividend of EURO$0.35 per share, representing an aggregate acquisition price of about EU$1.4B

Financials

· Interactive Brokers (IBKR) Q1 EPS 65c/$527M vs. est. 59c/$480.1M; Q1 Total DARTs 939K, up 43% YoY; Q1 Customer equity grew 33% YoY to $129.2B and customer debits increased 40% to $29.3B; Q1 Customer accounts increased 27% from the year-ago quarter to 517K

· LegacyTexas (LTXB) Q1 EPS 52c vs. est. 71c; Q1 net interest margin 3.85% and Q1 provision for credit losses $15.7M

· Fulton Financial (FULT) Q1 EPS 28c (in-line); Q1 net interest income $151.3M, an increase of $1.9M, or 1.3%, from the Q4

· Hope Bancorp (HOPE) Q1 EPS 38c and Q1 net interest margin 3.66%

Healthcare

· Intuitive Surgical (ISRG) shares rose 5%; Q1 EPS $2.44/$848M vs. est. $2.09/$783.28M; 1Q worldwide procedure growth +15% and 1Q surgical system placements 185

· Rigel Pharmaceuticals Inc. (RIGL) confirmed Tuesday that the FDA had approved the use of fostamatinib for a disease known as thrombocytopenia, which causes patients to bleed and bruise easily. The drug, which will be marketed as Tavalisse, has been Rigel’s core focus

· Bellicum Pharmaceuticals (BLCM) 8M share Secondary priced at $7.50

· Aetna Inc. (AET) said it would reorganize its business units ahead of its expected acquisition by CVS Health Corp. (CVS)

· Catabasis (CATB) to cut 42% of jobs, focus on Edasalonexent; sees one-time severance and related costs of ~$1M in 2Q, annual savings of ~$3.3M in personnel-related costs; is restructuring to focus on its late-stage lead program, Edasalonexent for the treatment of Duchenne muscular dystrophy

· Healthcare Services (HCSG) Q1 EPS 0c/$501.8M vs. est. 38c/$505.18M

· Egalet (EGLT) announced that two large Northeast regional health plans have placed ARYMO ER, or morphine sulfate, extended-release tablets for oral use only -CII in a preferred formulary position effective immediately

Industrials & Materials

· CSX Corp. (CSX) Q1 EPS 78c/$2.88B vs. est. 66c/$2.8B; Q1 operating ratio for the quarter improved 950 basis points to 63.7% from 73.2% in the prior year

· Textron (TXT) Q1 EPS 46c/$3.30B vs. est. 48c/$3.07B; authorizes stock buy back of up to 40M shares; reaffirms 2018 EPS outlook of $2.95-$3.15

· Badger Meter (BMI) Q1 EPS 26c/$105.04M vs. est. 37c/$107.3M

· Emerson (EMR) announced it has signed an agreement to purchase the Tools and Test Equipment business of Textron (TXT) for $810M

Technology, Media & Telecom

· IBM (IBM) shares fell -4%; Q1 EPS $2.45/$19.1B vs. est. $2.42/$18.82B; Q1 cognitive solutions revenue $4.30B, up 6%; Q1 Global Business Services revenues of $4.2B up 4%; cloud revenue over the past 12 months $17.7B, up 22% from last year; backs FY18 non-GAAP EPS of ‘at least $13.80 vs. est. $13.84; backs FY18 free cash flow view of about $12B; 1Q adjusted gross margin 43.7%, vs. est. 45.4%

· Lam Research (LRCX) shares fell -5%; Q3 EPS $4.79/$2.89B vs. est. $4.30/$2.86B; Q3 shipments of $3.13B and revenue of $2.89B; reports Q3 non-GAAP gross margin of 46.8%, non-GAAP operating margin of 30.0%;

· Adtran (ADTN) Q1 EPS loss (29c)/$120.8M vs. est. loss (18c)/$126.83M

· ASML (ASML) sees Q2 net sales EU2.5B-EU2.6B vs. estimate EU2.48B and sees 2Q gross margin about +43%, estimate +46.7%; said Q1 bookings EU2.44B, net sales EU2.29B

· Amazon (AMZN) and Best Buy (BBY) announced a collaboration to bring the next generation of Fire TV Edition smart TVs to customers in the United States and Canada

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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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