Morning Preview: April 30, 2018

Scott GreenDaily Market Report

Early Look

Monday, April 30, 2018

U.S. stock futures are pointing to a stronger open, getting a lift following a few $20B & $30B merger deal announcements, as major averages try to hold on to their month to date gains of around 1%. The Dow is on track for a monthly gain of 0.9% as of Friday’s close, cutting its year-to-date loss to 1.7%. The S&P is up 1.1% in April, but down 0.1% in 2018, and the Nasdaq has tacked on 0.8% this month, stretching its year-to-date advance to 3.3%. Over the weekend, there were two notable M&A deal announcements with Telecom companies and Sprint finally agreeing to merge in a $26B deal, setting up a third power house in the wireless sector along with Verizon and AT&T. This morning in the refiner space, Marathon (MPC) agreed to acquire Andeavor (ANDV) in a $35B deal. There was also another deal in the REIT space, with Prologis agreeing to acquire DCT Industrial for $8.4B. In addition to the M&A news, and another heavy dose of corporate earnings this week (Apple tomorrow night), there are several economic data reports this morning for investors to watch (inflation, manufacturing and housing data). In Asian markets, The Nikkei Index was closed, the Shanghai Index edged higher 7 points to finish at 3,082 and the Hang Seng Index was closed. In Europe, the German DAX is up over 20 points, trading above 12,600, while the FTSE 100 is up around 40 points at 7,540. China and Japan holiday overnight and mainland Europe holiday tomorrow. The prospect of a trade war between the U.S. and China remains in investors’ minds, though geopolitical fears have eased after the North Korean President has eased his stance about conflict. On the Federal Reserve front, no speeches are scheduled as the central bank’s policy makers are slated to start a two-day meeting on Tuesday.

Events Calendar for Today

· 8:30 AM EST Personal Income for March…est. 0.4%

· 8:30 AM EST Personal Spending for March…est. 0.4%

· 8:30 AM EST PCE Deflator MoM for March…est. 0.0%

· 8:30 AM EST PCE Core MoM for March…est. 0.2%

· 8:30 AM EST PCE Core YoY for March…est. 1.9%

· 9:45 AM EST Chicago Purchasing Managers Index for April…est. 58.0

· 10:00 AM EST Pending Home Sales MoM for March…est. 0.5%

· 10:30 AM EST Dallas Fed Manufacturing Activity for April…est. 25.0

Earnings Calendar:

· Earnings Before the Open: AGN, AKS, ARNC, CTB, FDC, L, MCD, MOH, WPPGY


Market Closing Prices Yesterday

· The S&P 500 Index gained 2.97 points, or 0.11%, to 2,669.91

· The Dow Jones Industrial Average dropped -11.15 points, or 0.05%, to 24,311.19

· The Nasdaq Composite inched higher 1.12 points, or 0.02%, to 7,119.80

· The Russell 2000 Index declined -1.66 points, or 0.11% to 1,556.24

World News

· Growth in China’s services industry picked up in April, an official survey showed on Monday. The official non-manufacturing Purchasing Managers’ Index (PMI) rose to 54.8 from 54.6 in March. The composite PMI covering both manufacturing and services activity rose to 54.1 in April, from March’s 54

· Growth in China’s manufacturing sector eased in April, as factory-gate prices stayed subdued. The official Purchasing Managers’ Index (PMI) released on Monday fell to 51.4 in April, from 51.5 in March

Sector News Breakdown


· J Sainsbury PLC (SBRY.LN) said agreed to merge with Walmart Inc.’s (WMT) U.K. operating arm, Asda Group Ltd., to create an enlarged business with combined revenue of around GBP51 billion ($68.9 billion) in 2017.

· Wayfair (W) downgraded to neutral from outperform at Wedbush

· JetBlue (JBLU) downgraded to Neutral from Overweight at JPMorgan


· Marathon Petroleum (MPC) to buy Andeavor (ANDV) in $35.6 billion deal; the deal includes a $600M termination fee; Andeavor shareholders can choose between 1.87 Marathon shares or $152.27 in cash per share they own, representing a 24.4% premium to Andeavor’s closing price on Friday

· CNX Resources (CNX) sees Q1 revenue $471M-$521M vs. est. $392.68M; sees Q1 net income of between $518M-$573M, which includes a gain on the remeasurement to fair value of the previously held equity interest, compared to a net loss of $39M in Q1 of 2017

· Ensco (ESV) mentioned positively in Barron’s saying the oil-drilling firm is poised to rise as U.S. President Donald Trump is likely to reintroduce harsh sanctions on Iran. Each increase of 1% in the price of oil should result in a 0.85% increase in the stock, on average. Other key oil stocks that may benefit include EOG Resource (EOG), Transocean (RIG), Exxon Mobil (XOM), Halliburton (HAL), ConocoPhillips (COP) and Devon Energy (DVN) it added

· Marathon Petroleum (MPC) Q1 EPS 8c/$18.98B vs. est. 15c/$20.05B

· Enterprise Products (EPD) Q1 EPS 41c/$9.3B vs. est. 38c/$8.1B; 1Q adjusted Ebitda $1.69B; Q1 distributable cash flow $1.39B

· Diamond Offshore (DO) Q1 EPS loss (16c)/$295.51M vs. est. loss (19c)/$295.14M


· Prologis Inc. (PLD) agreed to buy logistics-property owner DCT Industrial Trust Inc. (DCT) for $8.4B including debt; DCT shareholders will receive 1.02 Prologis shares for each share, valuing the deal at $67.91 per DCT share

· Citigroup (C) files $100M mixed securities shelf

· BlackRock (BLK) files automatic mixed securities shelf

· Barron’s noted a continuing slide in Treasury prices could bolster financial shares. For bulls, Credit Suisse recommends an options trade known as a call spread on the SPDR S&P Regional Banking exchange-traded fund (KRE), which tracks smaller financial companies like BB&T (BBT) and East West Bancorp (EWBC) of California


· Centene (CNC) announces offering to sell $2.6B in shares of common stock

· Molina Healthcare (MOH) Q1 EPS $1.71/$4.65B vs. est. 75c/$4.72B; raises FY18 adjusted EPS view to $4.24-$4.74 vs. est. $3.63 (Q1 results had included a benefit of $0.84 per diluted share from the termination fee for a proposed acquisition)

· Flexion Therapeutics (FLXN) announced the presentation of positive preclinical data supporting the FX201 program at the Osteoarthritis Research Society International 2018 World Congress

Industrials & Materials

· Manufacturers are competing to secure supplies of steel and aluminum as the Trump administration mulls ending some tariff exemptions that could result in a tightening of supplies and an increase in prices, the Wall Street Journal reports

· AZZ Inc. (AZZ) files to delay FY18 earnings saying the carryover effects of the accounting error on future periods and the ongoing efforts to complete its 10-Q for the quarter ended November 30, 2017, means it cannot file its 10-K for FY18 by April 30

· Armstrong World (AWI) Q1 adjusted EPS 79c/$227.3M vs. est. 81c/$231.4M; sees 2018 EPS $3.60-$3.82 vs. est. $3.62 and reaffirms FY18 revenue growth view of 5%-7% vs. est. $947.26M

Media & Telecom

· Sprint (S) and T-Mobile (TMUS) agreed to combine in a $26.5 billion all-stock merger and believed they could win over skeptical regulators because the merger would create thousands of jobs; all-stock transaction is at a fixed exchange ratio of 0.10256 T-Mobile shares for each Sprint share, or the equivalent of 9.75 Sprint shares for each T-Mobile US share

· Watch potential weakness in tower stocks: American Tower (AMT), Crown Castel (CCI) and SBA Communications (SBAC), following the announced merger between T-Mobile and Sprint. AMT said in a statement that Sprint makes up 4% of property revenue and T-Mobile 3% of property revs

· Disney’s (DIS) “Avengers: Infinity War” opened in North America, earning $250M in 4,474 theaters, which would surpass “Star Wars: The Force Awakens” for the biggest domestic opening weekend of all time which took in $248 million on its opening weekend in 2015. Overall, Marvel Studios’ “Avengers: Infinity War” collected $630M this weekend


· On Semiconductor (ON) Q1 EPS 40c/$1.38B vs. est. 39c/$1.37B; sees Q2 revs $1.41B-$1.46B vs. est. $1.42B; sees Q2 gross margins 37%-39%

· Twitter (TWTR) sold data to the Cambridge University academic who harvested millions of Facebook users’ information without their knowledge, the Sunday Telegraph reported without citing sources; said Aleksandr Kogan, bought the data from Twitter in 2015 (TWTR confirmed the report on Sunday)

· Netflix (NFLX) may soon surpass Walt Disney (DIS) in market value Barron’s notes, as investors cheer on the streaming service’s continued subscriber growth. Investors who buy Disney shares now could have a long wait before they learn whether the streaming push will result in a rebounding price/earnings ratio, but that is where a diversified business model helps

· Xerox Corp.’s (XRX) deal to sell a majority of itself to Fujifilm Holdings Corp. was temporarily blocked Friday night by a judge who said the transaction was negotiated by a “massively conflicted” chief executive who was looking out for his own interests over Xerox shareholders’


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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