Morning Preview: May 7, 2018

Scott GreenDaily Market Report

Early Look

Monday, May 7, 18

Stock futures are higher to start the week, as markets look to extend its rally from Friday which saw major averages close near their highs, rallying over 1%. With the Federal Reserve meeting, monthly jobs report and the bulk of the earnings season behind us, U.S. equity investors will have no choice but to turn their focus back to global trade headlines and macro headlines related to Iran. Oil markets are higher, with WTI crude trading back above $70 per barrel, with prices near late-2014 highs as a decision looms on whether the United States walks away from a deal with Iran and instead re-imposes sanctions. Trump will decide by May 12 whether to curb that deal and reimpose economic sanctions on Iran which could hurt its export of oil. In trade, Nafta talks resume in Washington Monday. U.S. Commerce Secretary Wilbur Ross said talks could drag on for months, while there is also Chinese trade data due Tuesday. Markets got through late last week unscathed with negative headlines after US officials visited China in an attempt to soothe trade tensions between the two power houses. Tech remains strong with AAPL closing at record highs Friday, rising 3.9% and posting the biggest weekly gain in 6 1/2 years, while the stock has also posted the biggest five-day price gain in its history. The stock has run up 13.3% this week, the biggest five-day percentage gain since the 14.1% jump during the five days ending Oct. 14, 2011, after the company reported better-than-expected earnings and Warren Buffett said he boosted his stake in the company. In Asian markets, The Nikkei Index shares fell -5 points to 22,467, the Shanghai Index jumped 45 points to finish at 3.136 and the Hang Seng Index gained 67 points to settle at 29,994. In Europe, the German DAX is up around 40 points at 12,860 and while the FTSE 100 is up over 60 points topping 7,560. In the consumer space, Nestle reached a $7 billion deal to market its consumer and foods service products. Major averages finished mixed last week as the Dow and S&P each slipped 0.2% last week, while the Nasdaq rose 1.3%.

Market Closing Prices Yesterday

· The S&P 500 Index jumped 33.69 points, or 1.28%, to 2,663.42

· The Dow Jones Industrial Average rose 332.36 points, or 1.39%, to 24,262.51

· The Nasdaq Composite spiked 121.47 points, or 1.71%, to 7,209.62

· The Russell 2000 Index advanced 19.05 points, or 1.23% to 1,565.60

Events Calendar for Today

· 8:25 AM EST Fed’s Bostic welcome comments at Financial Markets conference

· 2:00 PM EST Fed’s Barkin speaks in moderated Q&A

· 3:00 PM EST Consumer Credit for March

· 3:30 PM EST Fed’s Kaplan speaks on panel at Financial conference

· 3:30 PM EST Fed’s Evans speaks at Atlanta Fed Financial Markets conference

Earnings Calendar:

· Earnings Before the Open: CRNT, CTSH, GCI, LPX, MD, SRE, SSP, SYY, TSN, WBT, WLTW, XRAY

· Earnings After the Close: AIV, AMC, ANDV, BHF, CARB, CBT, DK, EVHC, MOS, MYGN, OAS, PI, SHO, TREX, VECO, ZG

World News

· German manufacturing orders dropped unexpectedly in March due to weak foreign demand, especially for capital goods. Total manufacturing orders fell by 0.9% from the month before compared to an estimate of up 0.5%

· President Donald Trump could decline a possible subpoena from special counsel Robert Mueller to avoid committing perjury by testifying under oath, said Rudy Giuliani, who recently joined the president’s defense team. “We don’t have to” comply with a possible subpoena for Trump, Giuliani said during an appearance Sunday on ABC’s “This Week.”

Sector News Breakdown


· Nestlé SA (NSRGY) said Monday it has entered a deal to market coffee chain Starbucks Corp.’s (SBUX) consumer and food service products. The deal will give Nestle perpetual rights” to market Starbucks products globally outside of its coffee shops and will pay the U.S. coffee chain $7.15 billion up front as part of the agreement.

· International Flavors & Fragrances Inc. (IFF) said it has entered into a definitive agreement to buy Israel-based Frutarom Industries Ltd., in a cash and stock deal valued at around $7.1 billion.

· Wolverine World Wide (WWW) mentioned cautiously in Barron’s saying the shoemaker is on the hook for chemical contamination of the water supply in communities around its factories; notes it has set aside $35M, or 28c to cover its legal and cleanup costs, but it might not be enough. Also notes the stock is up 80% since start of 2016


· Exxon Mobil Corp. (XOM) positive in Barron’s noting though sometimes seen by investors as a fossil of the fossil-fuel era, is building for a comeback as demand for oil and natural gas grows. The company plans to increase output by 25% and double earnings by 2025

· ConocoPhillips (COP) has moved to take Caribbean assets of Venezuela’s state-run PDVSA to enforce a $2 billion arbitration award over a decade-oil nationalization of its projects in the South American country – Reuters

· Northern Oil and Gas (NOG) Q1 EPS 17c/$78.75M vs. est. 12c/$74.27M; daily production exceeded guidance, increasing 35% year-over-year and 7.5% sequentially


· Berkshire Hathaway (BRK/A) Q1 operating earnings $5.29B vs. $3.56B last year; reports Q1 revenue $58.47B vs. $64.37B last year. At March 31, Berkshire’s book value per Class A equivalent share was $211,184.

· Willis Towers Watson (WLTW) Q1 EPS $2.71/$2.3B vs. est. $2.65/$2.17B as results include the revenue standard impact; sees FY18 adjusted EPS $9.88-$10.12 vs. est. $9.69; says without the impact of ASC 606, for 2018, the Company continues to expect constant currency revenue growth of around 3%, and 4% on an organic basis

· CaixaBank SA (CABK.MC) said it will acquire Allianz SE’s (ALV.XE) 8.4% stake in Banco BPI S/A (BPI.LB) ahead of a planned delisting of the Portuguese bank from the Lisbon stock market. CaixaBank said it agreed to pay Allianz 178M euros ($212.9M), or about EUR1.45 a share, for the stake, which will bring its total holding in BPI up to almost 93%.

· NRG Yield (NYLD) files automatic mixed securities shelf


· Roche Holding AG (RHHBY) said the US FDA has granted its drug Tecentriq priority review for the first-line treatment of a type of lung cancer.

· Sarepta Therapeutics (SRPT) mentioned positively in Barron’s saying it has been winning over investors with rising sales of its drug to treat Duchenne muscular dystrophy and a promising pipeline of drugs targeted at the fatal muscle-wasting disease. Part of the optimism is that it can bring to market two drugs similar to Exondys 51, which treats about 13% of DMD patients

· Eleven Biotherapeutics (EBIO) holder files to sell 7.97M shares

· Dentsply (XRAY) Q1 EPS 45c/$956.1M vs. est. 42c/$942.2M; Q1 internal growth 1.4%; boosts share repurchase program by $500M to $1B

· Celgene (CELG) downgraded to Outperform from Top Pick at RBC Capital

Industrials & Materials

· Continental AG (CON.GY) shares can gain some traction according to Barron’s noting the shares trade at 13x forward earnings, less than the Stoxx Europe 600’s multiple of 15. The stock is down about 2% this year after warning of exchange rate headwinds, but with the euro rally in the rear-view mirror, UBS analysts predict a 14% upside

Technology, Media & Telecom

· Tower Semi (TSEM) shares fell -16%; sees Q2 revs$335M plus or minus 5% vs. est. $343.7M

· Cognizant (CTSH) Q1 EPS $1.06/$3.91B vs. est. $1.06/$3.9B; sees Q2 EPS at least $1.09 and revs $4B-$4.04B vs. est. $1.12/$4.03B

· Disney’s (DIS) “Avengers: Infinity War” will surpass $1 billion at the box office on May 5, 11 days after its release and faster than any movie in history

· Warren Buffett’s Berkshire Hathaway (BRK.A, BRK.B) disclosed this morning that its stake in Apple (AAPL) rose to $40.7B as of March 31, 2018, or the end of Q1.

· BWX Technologies (BWXT) Q1 adjusted EPS 67c/$457M vs. est. 61c/$448.11M; backs FY18 EPS view $2.45-$2.55 and revenue view $1.75B-$1.85B vs. es.t $2.52/$1.84B

· China’s ZTE Corp has submitted an application to the U.S. Commerce Department’s Bureau of Industry and Security (BIS) for the suspension of a business ban, it said in a filing to the Shenzhen stock exchange


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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