Monday, May 14, 18
U.S. stock futures advance to start the week, extending last week’s more than 2% gains for major averages, as improved relations between the U.S. and China help boost sentiment early. Ahead of trade talks with China, U.S. President Donald Trump tweeted Sunday that he was working with Chinese President Xi Jinping to keep Chinese telecom giant ZTE in business after the company was hit by sanctions roughly a month ago (ban of American companies from selling to it). However, Trump said that he has asked for a stay of that order, as ZTE said its survival is being threatened. After a week of stellar gain amid optimism over earnings, tamer inflation, a pullback in bond yields and the dollar all contributing to gains last week, a positive development in trade negotiations with China could help the gains continue. Watch shares of NXPI/QCOM which has a pending deal and optical stocks such as ACIA, AAOI, LITE, OCLR, which were hurt from the ZTE ban. In Asian markets, The Nikkei Index gained 107 points to settle at 22,865, the Shanghai Index gained 10 points to end at 3,174 and the Hang Seng Index jumped 419 points to settle at 21,541. In Europe, the German DAX is down around -15 points trading under the 13,000 level, while the FTSE 100 is down a few points at 7,720. There are no major economic data points today, but a busy week ahead along with several FOMC speakers as well.
Last week, the Dow rose 2.3%, the S&P 500 advanced 2.4%, and the Nasdaq climbed 2.7%. The gain on Friday marked the Dow’s seventh straight positive session, its longest winning streak since November, while the S&P 500 gained 0.2% to 2,728 and the Nasdaq Composite Index slipped less than 0.1% to 7,403. Friday’s decline was the first loss for the Nasdaq of the past six sessions. The Russell 2000 index of small-capitalization stocks rose 0.2% which is 0.5% below its all-time high. With another big week of gains, the S&P 500’s energy index is logging a nearly 14% gain since the middle of April, easily trouncing the S&P’s 4.6% advance, Bloomberg reported.
Market Closing Prices Yesterday
· The S&P 500 Index gained 4.65 points, or 0.17%, to 2,727.72
· The Dow Jones Industrial Average rose 91.64 points, or 0.37%, to 24,831.17
· The Nasdaq Composite slipped -2.09 points, or 0.03%, to 7,402.88
· The Russell 2000 Index advanced 3.08 points, or 0.19% to 1,606.79
· 2:45 AM EST Fed’s Mester speaks at Bank of France Conference
· 9:40 AM EST Fed’s Bullard speaks at Crypto Conference in New York
Other Key Events:
· JPMorgan Homebuilding/Building Products Conference, 5/14-5/15, in New York
· Piper Financial Services Conference, 5/14-5/16, in Palm Beach, FL
· The European Central Bank is approaching the end of its net asset purchases and will need to update its guidance on the timing of the first-rate hike, Bank of France governor Francois Villeroy de Galhau said Monday
· China’s fiscal revenue and government spending both grew at a slower pace last month, data showed. Fiscal revenue rose 12.9% in the January-April period from a year earlier, compared with a 13.6% increase in the first three months of the year, the ministry said. In April, the fiscal revenue rose 11% from a year earlier to 1.85 trillion yuan ($292.12 billion)
Sector News Breakdown
· Ford (F) plans to resume production of F-150 vehicles on Friday, May 18 at its Dearborn and Kansas City factories, Reuters reports
· Kroger (KR) mentioned positively in Barron’s saying shares could climb to $30, a 25% return when including dividends, as the grocer has been increasing its market share and is poised to benefit from consumers’ apparent preference for picking up groceries they purchased online, rather than having them delivered.
· Housing/lumber news; Barron’s said the be leery for falling lumber prices, which have been on a tear since the U.S. Commerce Department announced new duties on Canadian timber imports (rising 32% this year) but says the market appears to resemble an “unsustainable bubble.”
· SeaWorld (SEAS) mentioned cautiously in Barron’s noting shares fell to lows around $11 last fall, as operating income fell by 60%, dividends were suspended and two CEOs jumped ship. Notes the stock has rallied more than 25% this year, boosted by the surprise first quarter rise in sales, but says the stock really is not as cheap as a bargain hunter would like.
· Tesla (TSLA) shares could be active after reports that Matthew Schwall, a senior executive who is the company’s main technical contact with U.S. safety regulators, has left for rival Waymo LLC.
· Solar industry mentioned in Barron’s noting California requiring homebuilders to install solar panels on nearly all new residential buildings should boost shares of Sunrun (RUN) according to Guggenheim’s analyst. The company should gain market share as the industry consolidates, she said, boosting its shares by 12% to $12. Also said Vivint Solar (VSLR) could gain, too
· ConocoPhillips (COP) has moved to take control of PdVSA facilities in the Caribbean after winning a $2 billion legal judgment tied to Venezuela’s seizure of its assets in 2007
· Cadence Bancorp (CADE) agreed to buy State Bank Financial Corp (STBZ) in an all-stock deal valued at about $1.4 billion; State Bank shareholders will receive 1.160 shares of Cadence class A common stock for each State Bank share https://reut.rs/2Gd421c
· Barron’s cautious on shares of Valeant Pharma (VRX) saying investors should be wary of as shares have jumped 40% since March 2. Barron’s notes the company soon to be known as Bausch Health is contending with a number of government investigations, $25.3 billion of debt that could get more expensive to service as the company extends maturities, and the strong possibility that its pipeline of new drugs won’t generate as much revenue as its current stockpile
· Australian hospital operator Healthscope Ltd (HSO.AX) said it received a A$4.35 billion ($3.3 billion) proposal from Canada’s Brookfield Asset Management Inc (BAM.TO), $180 million more than a private equity firm offered it in April. https://reut.rs/2rFVGKZ
· Abeona (ABEO) filed $500M mixed securities shelf
· Arcadia Biosciences (RKDA) files $50M mixed securities shelf
· Boston Scientific (BSX) announced results from an analysis of the LATITUDE database which evaluated the successful reduction of inappropriate shocks using the SMART Pass sensing filter in patients implanted with the EMBLEM Subcutaneous Implantable Defibrillator System
Industrials & Materials
· Genesee & Wyoming (GWR) carloads up 3.7% in April, with April traffic of 270,101 carloads, an increase of 9,661 carloads from a year earlier. The company’s same-railroad traffic in April 2018 was 269,583 carloads, an increase of 3.5% from a year earlier
· UPS Inc. (UPS) upgraded to Buy from Neutral at Bank America
· Cummins (CMI) and Anhui Jianghuai Automobile Co. announced that the two parties will form a 50:50 joint-venture after Cummins purchased Navistar’s (NAV) 50% equity of the JAC-Navistar Diesel Engine Company
· Heartland Express (HTLD) announces 5M share repurchase program
Technology, Media & Telecom
· ZTE suppliers listed in Asia, Chinese tech stocks are among companies that may move after U.S. President Donald Trump tweeted that he and Xi Jinping are working to give ZTE “a way to get back into business, fast.” Watch shares of optical stocks: Acacia Communications (ACIA), Lumentum Holdings (LITE), Oclaro Inc. (OCLR), Inphi Corp. (IPHI) and NeoPhotonics Corp (NTPN)
· Xerox Corp. (XRX) said it will back out of its merger deal with Fujifilm Holdings Corp. as it reached a new settlement with two of its biggest shareholders. Xerox said it reached a settlement to replace its chief executive and overhaul its board https://on.mktw.net/2KVRkaC
· Apple (AAPL) could buy back as much as $80B worth of shares annually over the next few years, more than doubling its buyback yield to nearly 8% as its share count could drop by 15% by 2020, according to Barron’s