Morning Preview: April 23, 2018

Scott GreenDaily Market Report

Early Look

Monday, April 23, 18

U.S. stocks futures are pointing to a mixed open, falling initially as Treasury yields extend last week gains, with the 10-year yield touching its highest level in over 4 years, rising about 2.98% and the shorter term 2-year rising above 2.97%. Stocks slipping ahead of some key earnings results later today (HAL this morning and GOOGL tonight), following mixed results last week. Stocks finished lower on Friday, pulled down by weakness for technology and consumer staples shares, though the major indexes still posted weekly gain. The Dow Jones Industrial Average ended the week up 0.4%despite a -200-point decline on Friday while the S&P 500 also rose 0.4% over the week after a near 1% drop Friday. The Nasdaq Composite Index dropped 1.3% to 7,146.13 but gained 0.5% for the week. The rise in U.S. interest rates has as expectations have risen for the Fed to hike interest rates four times in 2018, rather than the three signaled by policy makers. Easing geopolitical risks were in focus after North Korean leader Kim Jong Un said Saturday that his country would shut down its nuclear test site and suspend testing of long-range missiles. In Asian markets, The Nikkei Index dropped -74 points to settle at 22,088, the Shanghai Index slipped -3 points to settle at 3,068 and the Hang Seng Index declined -163 points to settle at 30,254. In Europe, the German DAX is down over -30 points at 12,500, while the FTSE 100 is off a few points around the 7,360 level.

Market Closing Prices Yesterday

· The S&P 500 Index dropped -22.99 points, or 0.85%, to 2,670.14

· The Dow Jones Industrial Average fell -201.95 points, or 0.82%, to 24,462.94

· The Nasdaq Composite sunk -91.93 points, or 1.27%, to 7,146.13

· The Russell 2000 Index declined -9.69 points, or 0.62% to 1,564.12


Events Calendar for Today

· 8:30 AM EST Chicago Fed Nat Activity Index for March…est. 0.27

· 9:45 AM EST Markit US Manufacturing PMI, Apr-P…est. 55.2

· 9:45 AM EST Markit US Services PMI, Apr-P…est. 54.1

· 10:00 AM EST Existing Home Sales MoM for March…est. 5.55M

World News

· U.S. Treasury Secretary Steven Mnuchin said he’s considering a trip to China amid a trade dispute with Beijing. Mnuchin said he’s “cautiously optimistic” of reaching an agreement with China that bridges their differences over trade

· Mitt Romney’s, the 2012 Republican presidential candidate and former Massachusetts governor failed to win the Utah Republican Party’s nomination, which means he must face 11 challengers in a June primary for the U.S. Senate seat being vacated by retiring U.S. Sen. Orrin Hatch

· Federal Reserve Bank of San Francisco President John Williams says it makes sense to keep raising interest rates through next year given improvement in the economy, according to comments to Spain’s ABC newspaper – Bloomberg

· North Korea has achieved its goal of developing a nuclear arsenal and is suspending further tests of atomic weapons or intercontinental ballistic missiles, its state-run media reported, citing leader Kim Jong Un (late Friday – Bloomberg)

Sector News Breakdown


· Hasbro (HAS) Q1 adjusted EPS 10c/$716.3M vs. est. 32c/$819.4M; Expects its full-year underlying tax rate to be at the high end of its previously projected range of 15% to 17%

· Alaska Air (ALK) Q1 adjusted EPS 14c/$1.83B vs. est. 12c/$1.83B; sees year capacity up about 6.5%, had seen up about 7.5%; sees 2Q capacity up about 8.5%, had seen about 9.5% and sees 2Q RASM down 2.75%-3.75%

· Cruise operators, like Carnival (CCL), Royal Caribbean (RCL) and Norwegian Cruise Line (NCLH), can offer nice yields and solid dividend growth, but economic downturns can pressure payouts, Barron’s reported; said another option for investors looking for yield among cruise operators is Walt Disney (DIS)

· Delta Air Lines’ (DAL) positively mentioned in Barron’s saying it valuation is just too low and shares should trade at 11x earnings, citing Morgan Stanley analyst who has a price target of $72

· General Mills (GIS) mentioned positively in Barron’s saying though shares have fallen 27% so far this year and while the drop seems deserved because earnings growth has stalled, a closer look suggests sales trends are improving, thanks in part to new-product launches

· Tapestry (TPR) mentioned positively in Barron’s saying shares could see more stock gains, as the Coach’s parent company Tapestry has “stitched together” a strong recovery, with plenty of room for more growth

Energy & Industrials

· Halliburton (HAL) Q1 EPS 41c/$5.7B vs. est. 40c/$5.72B; Q1 adjusted operating profit $619M

· Exxon Mobil (XOM) upgraded to Market Perform from Underperform at Raymond James

· CenterPoint (CNP) to buy Vectren (VVC) in a deal valued at $27B; CNP to acquire Vectren for $72.00 per share in cash

· MLP sector: Energy infrastructure master limited partnerships look cheap as oil and gas production rebounds and earnings rise, Barron’s says. Alerian and other MLP-dedicated funds are set to be more tax-efficient as the corporate rate drops to 21% from 35%. MLP, such as Enterprise Products Partners (EPD), Magellan Midstream Partners (MMP), MPLX (MPLX), Plains All American Pipeline (PAA), could reward investors with higher yields as cash flows rise

· Libya is looking into various intervention options in a deal announced last month for Total to buy Marathon Oil’s stake in Libya’s Waha concessions, Reuters reports,

· Caterpillar (CAT) upgraded to Buy from Neutral at Citigroup


· In financials in Barron’s earnings-per-share of financial-services company Lincoln National (LNC) are expected to increase by 8% to 11% this year, while student-loan servicer Navient’s (NAVI) shares are set to rise closer to Sallie Mae’s (SLM) valuation of 12 times earnings

· Farmland Partners (FPI) files $300M mixed securities shelf


· AKRX falls -31%; Fresenius SE (FMS) said it had decided to pull out of its planned acquisition of Akorn (AKRX) after it found data integrity breaches at the U.S. generic drug maker. Fresenius agreed last year to buy AKRX for about $4.75B but said recently it could terminate the deal if its own independent probe found Akorn breached U.S. FDA data integrity

· Merck & Co (MRK) upgraded to buy from neutral at Goldman Sachs

· Henry Schein (HSIC) and Vets First Choice say Henry Schein to spin off its Animal Health business and merge it with Vets First Choice; HSIC to receive $1.0B-$1.25B as part of animal health business spinoff

Technology, Media & Telecom

· AT&T Inc. (T), Verizon Communications Inc. (VZ) are under investigation by U.S. antitrust officials over whether the companies colluded to make it tougher for consumers to switch wireless carriers, Bloomberg reported late Friday afternoon

· Alphabet Inc. (GOOGL) to report earnings after the close

· Apple Inc (AAPL) said component failure in a limited number of MacBook Pros has caused built-in battery to expand, adding, it will offer worldwide free replacement for such batteries


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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