Morning Preview: May 22, 2018

Scott GreenDaily Market Report

Early Look

Tuesday, May 22, 18

U.S. futures are firmly higher, looking to extend yesterday’s gains, as the Dow Industrial Average tries to stay above the 25,000 level as markets continue to cheer over easing trade tensions between the U.S. and China. The latest news on the trade front shows reports that China will cut import duties on passenger cars as of July 1 to 15% from the current 25% (helping boost shares of GM, F, FCAU early). The dollar was continuing to retrace gains on Tuesday, while the 10-year U.S. Treasury note yield was hovering around 3.07% about 5 bps off last week’s 7-yr highs above 3.11%. The S&P 500 and Dow Industrial Average each closed at 2-month highs on Monday, while the Russell 2000 index of small capitalization stocks rose 0.5%, ended at a record for a fourth straight day. Overall, U.S. stocks closed solidly higher on Monday, with industrial stocks leading the market higher as concerns over a potential trade war with China showed signs of fading. The Nasdaq Composite Index added 0.5% to 7,394 as weakness in biotech stocks weighed on the index. The mood was upbeat after Treasury Secretary Steven Mnuchin said over the weekend that the Trump administration would delay implementation of tariffs on Chinese goods and “put the trade war on hold” while working out details of a deal between the countries. Industrial stocks seen as having some of the highest exposure to trade issues, and the sector led the market’s gains on Monday (BA, CAT and MMM). In Asian markets, The Nikkei Index fell -42 points to settle at 22,960, the Shanghai Index was flat at 3,214 and the Hang Seng Index rose 186 points to end at 31,234. In Europe, the German DAX is up around 20 points, trading near 13,100, while the FTSE 100 is up a few points at 7,875.

Market Closing Prices Yesterday

· The S&P 500 Index gained 20.04 points, or 0.74%, to 2,733.01

· The Dow Jones Industrial Average jumped 298.20 points, or 1.21%, to 25,013.29

· The Nasdaq Composite climbed 39.70 points, or 0.54%, to 7,394.04

· The Russell 2000 Index advanced 10.81 points, or 0.66% to 1,637.44

Events Calendar for Today

· 7:45 AM EST ICSC Weekly Retail Sales

· 8:55 AM EST Johnson/Redbook Weekly Sales

· 10:00 AM EST Richmond Fed Manufacturing Index for May

· 4:30 PM EST API Weekly Inventory Data

Earnings Calendar:

· Earnings Before the Open: AAP, AZO, CBRL, DY, EV, IGT, KSS, PLAB, TOL, TJX

· Earnings After the Close: CTRP, HPE, INTU, RRGB, TCS, URBN

Other Key Events:

· UBS Global Healthcare Conference, 5/21-5/23, in New York

· UBS Global Oil & Gas Conference, 5/22-5/24, in Austin, Texas

· Wolfe Transportation Conference, 5/22-5/23, in New York

World News

· Minneapolis Fed President Neel Kashkari said Monday he was worried the central bank might get too aggressive with interest-rate hikes and push the economy into recession. “Let’s not overdo it,” Kashkari said during a question-and-answer session in Michigan

· Bank of Japan Governor Haruhiko Kuroda said on Tuesday the central bank would consider the side effects of its massive stimulus program in guiding monetary policy.

Sector News Breakdown

Consumer

· Auto stocks General Motors (GM), Ford (F) and Fiat Chrysler (FCAU) shares rise after Bloomberg reported that China will cut the import duty on passenger cars

· Toll Brothers (TOL) Q2 EPS 72c/$1.6B vs. est. 76c/$1.58B; Q2 backlog rose 27% to $6.36B while reports Q2 backlogged units up 17% to 7,030 units; Based on Q2-end backlog and the pace of activity at its communities, the Company now estimates it will deliver between 8,000 and 8,500 homes in FY 2018, compared to previous guidance of 7,800 and 8,600 units

· Advance Auto Parts (AAP) Q1 EPS $2.10/$2.87B in revs vs. est. $1.97/$2.91B; Q1 comp store sales fell (-0.8%) vs. est. +0.3%

· International Game Technology (IGT) Q1 EPS 15c/$1.21B vs. est. 27c/$1.16B; Q1 Ebitda $436M vs. est. $404.6M; sees year Ebitda $1.70B-$1.78B vs. est. $1.74B

· Estee Lauder (EL) files debt securities shelf

· One Group Hospitality (STKS) files $100M mixed securities shelf

· Libbey Inc. (LBY) said its Board of Directors has determined to suspend the Company’s quarterly dividend to increase focus on debt reduction and continued investment in strategic initiatives

Energy

· Crude oil prices settled at their highest levels since November 2014 on Monday as the U.S. imposes new sanctions on Venezuela following what it called the “sham” re-election of President Maduro; June WTI crude climbed 1.4% to settle at $72.24/bbl for the highest finish for a front-month contract since Nov. 26, 2014, and Brent crude recently rose 1.2% to $79.45/bbl

Financials

· Square Inc. (SQ) reports $750M convertible notes offering

· Envestnet (ENV) proposes issuing $300M convertible notes in private offering

Healthcare

· Amgen (AMGN) announced that the FDA has approved the use of Prolia, denosumab, for the treatment of glucocorticoid-induced osteoporosis, GIOP, in men and women at high risk of fracture, defined as a history of osteoporotic fracture, multiple risk factors for fracture, or patients who have failed or are intolerant to other available osteoporosis therapy

· FibroGen, Inc. (FGEN) announced that updated results from the company’s randomized, double-blind, placebo-controlled Phase 2b PRAISE study of Pamrevlumab in patients with idiopathic pulmonary fibrosis (IPF) were presented in several poster presentations at American Thoracic Society

· CEVA (CEVA) announced that its Board of Directors authorized the expansion of the company’s share repurchase program with an additional 700,000 shares of common stock available for repurchase

· Coherus Biosciences (CHRS) files to sell $75M in common stock

· MyoKardia (MYOK) files to sell 3.75M shares of common stock

· Melinta Therapeutics (MLNT) files to sell $75M in common stock

· Ardelyx (ARDX) files to sell $50M in common stock

Industrials & Materials

· Dycom (DY) shares fell -13% on light volume; Q1 adjusted EPS 65c/$731.4M vs. est. 69c/$734.86M; sees Q2 adjusted EPS $1.13-$1.28 on revs $830M-$860M vs. est. $1.79/$884.77M; cuts FY19 adjusted EPS view to $4.26-$5.16 from $5.22-$6.14 (est. $5.70) and cuts FY19 revenue view to $3.23B-$3.43B from $3.3B-$3.5B

· Honeywell (HON) guides Q2 EPS $1.97-$2.03 on sales $10.7B-$10.8B vs. est. $2.01/$10.8B

· Some Boeing Co (BA) workers at the plane maker’ s factory in South Carolina will vote on union representation later this month, the Wall Street Journal reported, citing U.S. labor regulators.

· Curtiss-Wright (CW) board authorizes additional $50M for share repurchases

Technology, Media & Telecom

· Adobe (ADBE) announced it has entered into a definitive agreement to acquire Magento Commerce, a commerce platform, for $1.68B, subject to customary purchase price adjustments; Adobe authorizes $8B share repurchase https://on.mktw.net/2Izz9da

· Sony Corp. (SNE) has agreed to buy Mubadala Investment Co.’s stake in EMI Music Publishing, which owns or administers over 2 million songs. SNE expects to pay total cash consideration of about $2.3 billion and will assume EMI Music Publishing’s gross debt, which was about $1.36 billion at March 31. https://on.mktw.net/2KFXGdl

· Pure Storage (PSTG) shares fell -10%; Q1 adjusted EPS loss (7c)/$255.9M vs. est. loss (12c); sees Q2 revenue $296M-$304M vs. est. $298.89M and sees Q2 Non-GAAP gross margin in the range of 63.5% to 66.5; sees 2Q adjusted operating margin -3% to -7.0%; Q1 adjusted gross margin +66.3% vs. estimate +65.3%

· Intel (INTC) and Microsoft (MSFT) have disclosed a newly discovered variant of the Spectre and Meltdown security flaws, revealing an additional vulnerability in chips used in hundreds of millions of computers and mobile devices, CNET reports https://cnet.co/2IEydQT

· Clear Channel Outdoor (CCO) Q1 revenue $598.71M vs. est. $599M

· Amazon.com Inc (AMZN) said it had hired Vernon Sanders to help run its television productions, tapping a former NBC executive who oversaw shows such as “The Blacklist,” “Friday Night Lights” and “30 Rock” for the U.S. network – Reuters

· SailPoint (SAIL) files to sell 15M shares of common stock for holders

· RealPage (RP) files automatic mixed securities shelf

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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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