Morning Preview: May 15, 2018

Scott GreenDaily Market Report

Early Look

Tuesday, May 15, 18

Stock futures are indicating a lower open for major U.S. averages, with European stocks mixed and Asia stock markets also dealing with worries around trade, growth and geopolitics. The bond sell-off deepened, with the yield on the 10-year rising to 3.01%, while the dollar edged higher and oil advanced. Home Depot (HD) shares slip after quarterly comp sales missed (citing weather), while investors brace for readings on retail sales and the housing market, as well as Federal Reserve speeches. U.S. stocks jumped on Monday, boosted as trade tensions with China eased over the weekend with President Trump pledging to work with Chinese President Xi Jinping to help ZTE Corp saying too many jobs in China had been lost. ZTE had shut its main operations after the Commerce Department banned U.S. companies from selling components to ZTE for seven years after it violated the terms of a settlement deal for illegally shipping goods made with U.S. parts to Iran and North Korea. Shares of semis NXPI and QCOM as well as several other optical suppliers that sell to ZTE benefitted on Monday on news of the potential work around for the company. The S&P 500 posted modest gains led by strength in commodities and healthcare companies offsetting losses at REITs and utilities. Meanwhile, the Dow Industrials rose for an 8th day, the longest rally since September and the Small Cap Russell 2000 neared January’s intraday all-time high before reversing gains to end the day down 0.4%. The Dow remains 6.5% below its January record close, but the blue-chip gauge has flipped positive for the year, showing a gain of 0.7% as of Monday’s finish. Also, today, Richard Clarida, a top executive of Pacific Investment Management Co, and Michelle Bowman, a banking regulator from Kansas, will start their journey to the Federal Reserve Tuesday with testimony to the Senate Banking Committee today. In Asian markets, The Nikkei Index slipped -47 points to settle at 22,818, the Shanghai Index gained 18 points to settle at 3,192 and the Hang Seng Index dropped -389 points to finish at 31,152. In Europe, the German DAX is down around -15 points at 12,960, while the FTSE 100 is up around 20 points at 7,730.

Market Closing Prices Yesterday

· The S&P 500 Index climbed 2.41 points, or 0.09%, to 2,730.13

· The Dow Jones Industrial Average rose 68.24 points, or 0.27%, to 24,899.41

· The Nasdaq Composite gained 8.43 points, or 0.11%, to 7,411.32

· The Russell 2000 Index declined -6.45 points, or 0.40% to 1,600.34

Events Calendar for Today

· 7:45 AM EST ICSC Weekly Retail Sales

· 8:30 AM EST Empire Manufacturing for May…est. 15.0

· 8:30 AM EST Retail Sales Advance MoM for April…est. 0.3%

· 8:30 AM EST Retail Sales Less Autos MoM for April…est. 0.5%

· 8:55 AM EST Johnson/Redbook Weekly Sales

· 10:00 AM EST Fed nominees Clarida and Bowman testify before Senate Panel

· 10:00 AM EST Business Inventories for March…est. 0.1%

· 10:00 AM EST NAHB Housing Market Index for May…est. 69

· 1:00 PM EST Fed’s Williams to speak at Economic Club of Minnesota

· 4:00 PM EST Net Long-term TIC Flows for March…prior $49.0B

· 4:30 PM EST API Weekly Inventory Data

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

· Goldman Basic Materials Conference, 5/15-5/16, in New York

· Bank America Healthcare Conference, 5/15-5/17, in Las Vegas

· JPMorgan Technology, Media and Communications Conference, 5/15-5/17, in Boston

World News

· German ZEW economic sentiment stays at -8.2 in May, missing forecasts of -7.8

Sector News Breakdown


· Home Depot (HD) shares fell -2%; Q1 EPS $2.08/$24.9B vs. est. $2.06/$25.21B; Q1 comp sales up 4.2% vs. est. 5.6%; backs FY18 EPS growth view of 28% to $9.31 vs. est. $9.45 and sees FY18 revenue growth guidance of approximately 6.7%; sees FY18 comp sales up approximately 5%; seeing ‘strong momentum’ in all business lines in first weeks of May

· Ford (F) downgraded to Neutral from Overweight at Piper Jaffray

· Scotts Miracle-Gro (SMG) upgraded to Buy from Hold at SunTrust

· Famous Dave’s (DAVE) Q1 EPS 13c/$12.8M; Q1 company-owned comparable restaurant sales increased 5.2%, with traffic up 5.3%

· YogaWorks (YOGA) Q1 net loss $3.5M vs. adj. net loss $2M last year on revs $15.5M


· Matador (MTDR) announces 7M share common stock offering


· Capital One (COF) April net charge-offs 5.04% vs. 5.29% MoM, while April 30-plus day performing delinquencies 3.33% vs. 3.57% in March

· Synchrony (SYF) April Credit Card Charge-Offs 5.64% vs. 4.81%; reports April delinquencies 2.84% vs. 3.03% in March

· Discover Financial (DFS) April net-charge offs 3.2% vs. 3.3% in March; 30-day delinquency rate 2.3%, the same as in March

· JPMorgan (JPM) April net charge-offs 2.63% vs. 2.65% MoM, while delinquencies 1.17% vs. 1.22% MoM

· Invitation Homes (INVH) Q1 core FFO 29c/$424M vs. est. 28c/$408.99M; Q1 same Store NOI grew 3.6% YoY on 4.1% Same Store Core revenue growth and 5.1% Same Store Core operating expense growth

· Curo Group (CURO) files to sell 5M shares of common stock for holders


· Agilent (A) shares fell 7%; Q2 adjusted EPS 65c/$1.21B vs. est. 64c/$1.21B; sees Q3 adjusted EPS 61c-63c on revs $1.185B-$1.205B vs. est. 65c/$1.21B; narrows FY18 adj. EPS view to $2.63-$2.67 from $2.62-$2.68 (est. $2.70) and cuts FY18 revenue view to $4.85B-$4.87B from $4.885B-$4.905B vs. est. $4.92B (watch shares of TMO, MTD)

· Merck KGaA (MRK.XE) shares fell by 4% after the company said that, despite organic growth, its first-quarter sales declined, dragged by currency headwinds and continuing market-share decline in performance materials in China.

· Pfenex (PFNX) announced top-line results from its PF708-301 study, which showed comparable overall profiles between PF708 and Forteo after 24 weeks of daily injection in osteoporosis patients

· Valeant (VRX) upgraded to Buy from Neutral at Mizuho

· Dicerna (DRNA) Q1 EPS loss (30c)/$1.545M vs. est. loss (38c)/$1.87M

Industrials & Materials

· AZZ Inc. (AZZ) Q4 adjusted EPS 15c/$200.7M vs. est. 44c/$231.53M; sees FY19 adj. EPS $1.75-$2.25 on revs $900M-960M vs. est. $2.61/$884.79M

· Eagle Materials (EXP) Q4 EPS 76c/$284.7M vs. est. $306.7M

· A Southwest Airlines (LUV) jet had to make an emergency landing over the weekend after it suffered a “pressurization issue in flight” — marking the company’s third safety scare in the past month.

· Myers Industries (MYE) files to sell 3.75M shares of common stock

· Itron (ITRI) Q1 EPS 13c/$607.2M vs. est. 13c/$572.6M; Q1 gross margin 29.6% vs. 33.0% last year and reports Q1 adjusted EBITDA of $40M vs. $46M last year; said as anticipated, margins and EPS declined from last year, driven by costs related to our global supply chain transitions, higher component and commodity prices and product mix

· Primo Water (PRMW) files to sell $65M in common stock

Technology, Media & Telecom

· Switch (SWCH) Q1 EPS 2c/$97.7M vs. est. 5c/$99.83M; 1Q adjusted Ebitda $46.9M vs. est. $49.5M; backs FY18 revenue view $423M-$440M (est. $431.31M), backs FY18 Adjusted EBITDA in the range of $216M-$224M and sees capital expenditures in the range of $260M-$310M

· Altair (ALTR) Q1 EPS 8c/$91.7M vs. est. 3c/$86.9M

· Alteryx (AYX) files to sell $200M of convertible notes due 2023

· Voxx (VOXX) reported Q4 EPS 51c on revs $122.2M; Q4 automotive revenue $45.1M, 4Q Premium Audio revenue $37.4M and Q4 Consumer Accessories revenue $39.8M

· New Relic (NEWR) proposes private offering of $435M of convertible senior notes

· Vipshop (VIPS) Q1 EPS 17c/$3.17B vs. est. 18c/$3.08B; sees Q2 revenue growth 17%-22% YoY (est. $3.36B as sees its total net revenue to be between RMB20.5B-RMB21.3B

· Virtusa (VRTU) Q4 EPS 55c/$281.3M vs. est. 55c/$280.48M


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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