Morning Preview: May 23, 2018

Scott GreenDaily Market Report

Early Look

Wednesday, May 23, 18

U.S. stock futures are broadly lower, following both Asian and European markets, as trade and geopolitical concerns weighed on markets on Wednesday. President Donald Trump said he wasn’t happy with the progress of U.S.-China trade talks and hinted that his summit with North Korean leader Kim Jong Un may not go ahead as planned. Stocks are adding to yesterday’s losses when stocks fell as concerns over tensions with North Korea resurfaced and the S&P 500 failed to hold early gains amid weakness in homebuilders and retailers. Earnings results this morning from Target and Lowe’s also not helping matters, as each reported a miss in quarterly results. Defensive and safe-haven assets are gaining early, as gold rebounds back above the $1,300 an ounce level, the yen strengthens back below 110 vs. the dollar and bonds gains, pushing the 10-year yield down to 3.01% (10 bps off last week highs). In addition to North Korea, Italy (gov’t concerns) and China trade spat fears, worries over Turkey’s financial-market stability drove the lira to successive record lows and weighed on emerging-market assets. In Asian markets, The Nikkei Index dropped -270 points to settle at 22,689, the Shanghai Index dropped -45 points to settle at 3,168 and the Hang Seng Index plunged -568 points to end at 30,665. In Europe, the German DAX is off nearly -200 points, falling back under the 13,000 level, while the FTSE 100 is down over -50 points at 7,825. The Dow is up 0.5% this year as of Tuesday’s close, while the S&P and Nasdaq have gained 1.9% and 6.9%, respectively. The Federal Reserve releases minutes of the central bank’s May 1-2 meeting on Wednesday as well as U.S. new home sales data for April at 10:00 AM EST to round out today’s agenda.

Market Closing Prices Yesterday

· The S&P 500 Index dropped -8.57 points, or 0.31%, to 2,724.44

· The Dow Jones Industrial Average slumped -178.88 points, or 0.72%, to 24,834.41

· The Nasdaq Composite dropped -15.58 points, or 0.21%, to 7,378.46

· The Russell 2000 Index declined -12.20 points, or 0.75% to 1,625.24

Events Calendar for Today

· 7:00 AM EST MBA Mortgage Applications Data

· 9:45 AM EST Markit US Manufacturing PMI, May-P

· 9:45 AM EST Markit US Services PMI, May-P

· 10:00 AM EST New Home Sales MoM for April

· 10:30 AM EST Weekly DOE Inventory Data

· 2:00 PM EST FOMC Meeting Minutes from May

Earnings Calendar:

· Earnings Before the Open: CIBC, CTRN, LOW, QIWI, RL, TGT, TIF

· Earnings After the Close: BRS, LB, MOD, NTAP, SAFM, SMRT, SNPS

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

· B Riley 19th Annual Investor Conference 5/23-5/24, in Santa Monica, CA

Sector News Breakdown

Consumer

· Target Corp. (TGT) shares fall -6%; Q1 EPS $1.32/$16.8B vs. est. $1.39/$16.5B; Q1 comp sales up 3% vs. est. 2.8%; sees Q2 comp sales into low-to mid-single digit range; sees Q2 EPS $1.30-$1.50 vs. est. $1.35

· Lowe’s (LOW) reports Q1 EPS $1.19/$17.4B vs. est. $1.22/$17.69B; Q1 comp sales up 0.6% vs. est. 2.2%; sees FY18 EPS $5.40-$5.50 vs. est. $5.48 and sees FY18 revenue up approximately 5%; also sees FY comp sales up 3.5%; expects to open approximately 10 home improvement stores

· Urban Outfitters (URBN) Q1 EPS 38c/$855.7M vs. est. 30c/$836.23M; 1Q gross margin +32.8% and Q1 inventory $404.6M; Q1 Urban Outfitters comparable sales +8% vs. est. 7.7% with Q1 Free People comparable sales +15% vs. est. +9.5% and Q1 Anthropologie comparable sales +10% vs. est. +8.3%; Q1 comparable retail segment sales +10% vs. est. +8.3%

· Tiffany (TIF) shares up 6%; Q1 EPS $1.14 vs. est. 83c; Q1 comp sales 7% vs. est. 2.6%; announces $1B share buyback plan; raises year EPS view to $4.50-$4.70 from prior $4.25-$4.55 view

· Container Store (TCS) Q4 EPS 18c/$232.8M vs. est. 23c/$229.03M; Q4 comp sales up 2.7% with Custom Closets contributing strongly to the increase; sees FY18 adjusted EPS 35c-45c on revs $880M-$890M vs. est. 42c/$882.98M; sees FY18 comp sales growth flat to up 1%

· Red Robin (RRGB) shares fell -19%; Q1 adjusted EPS 69c/$421.5M below est. 75c/$424.88M; sees Q2 EPS 55c-75c vs. est. 75c; CEO says taking steps to improve traffic trends; 1Q Company-owned restaurant comp sales (-0.9%) vs. estimate +0.7%

· Turtle Beach (HEAR) files to sell 1.86M shares of common stock for holders

Energy

· The American Petroleum Institute (API) reported Tuesday that U.S. crude supplies fell by -1.3M barrels for the week ended May 18, showed a rise of 980,000 barrels in gasoline stockpiles, while inventories of distillates declined by -1.3M barrels

· Energy stocks underperformed yesterday with shares of CXO, RRC, PXD, EOG among decliners as crude turned negative amid reports that OPEC is said to be considering raising oil output

Financials

· Intuit (INTU) Q3 adjusted EPS $4.82/$2.925B vs. est. $4.68/$2.85B; says increased Consumer Group revenue 15% in the quarter and 14% YTD, exceeding the annual guidance of 7%-9% provided at the beginning of the fiscal year; says grew to 683K Self-Employed subscribers within QuickBooks Online, up from 360K one year ago; sees year EPS $5.21-$5.53 vs. est. $5.43

· MetLife (MET) announces new $1.5B share repurchase program; says on track to return approximately $5B to shareholders in 2018

· Raymond James (RJF) raises its dividend to 30c from 25c and to buy back up to %250M in securities; note RJF shares rose a 13th straight day Tuesday, the longest winning streak since at least 1993 according to Bloomberg and rising 16% during that stretch

· LPL Financial (LPLA) said total net new assets for April were $2.1B, including $2.2B from the acquisition of the broker/dealer network of National Planning Holdings. Total client cash sweep balances at the end of April were $28.9B, down 2.4% from March. Total brokerage and advisory assets served at the end of April were about $652 billion, up 0.7% from end of March

· Congress took a big step to relax a wave of crisis-era restrictions placed on financial firms, as the House approved a plan to ease rules for small and midsize banks. The House voted 258-159 to approve the most significant bipartisan revamp of financial rules since Republicans took control of government last year. Thirty-three Democrats sided with Republicans to pass the bill.

· FB Financial (FBK) 3.2M share Secondary priced at $41.25

· Cadence Bancorp (CADE) 18M share Secondary priced at $28.00

· EVO Payments (EVOP) 14M share IPO priced at $16.00

· Barclays (BCS) is not exploring a potential merger with other banks, Reuters reports, citing two sources close to the bank. Financial Times reported today that Barclays’ senior board members were exploring possible mergers with rival banks

Healthcare

· Ardelyx (ARDX) 12.5M share Secondary priced at $4.00

· Coherus Biosciences (CHRS) 5.172M share Secondary priced at $14.50

· MyoKardia (MYOK) 3.75M share Secondary priced at $49.00

· Mersana Therapeutics (MRSN) announced that it will present interim data from the ongoing Phase 1 dose-escalation and expansion study evaluating the company’s investigational compound, XMT-1522, in patients with HER2-expressing breast, lung and gastric tumors

Industrials & Materials

· Late yesterday, U.S. president Donald Trump is considering trade measures to reduce European Union steel and aluminum exports to the U.S. by roughly 10%, in a sign that the bloc’s concessions to secure tariff exemptions aren’t meeting the administration’s demands, the Wall Street Journal reports, citing EU officials familiar with the talks

Technology, Media & Telecom

· Ctrip (CTRP) Q1 EPS 55c/$1.08B vs. est. 16c/$1.05B; sees 2Q revenue +12% to +17%

· HP Enterprise (HPE) Q2 EPS 34c/$7.5B vs. est. 31c/$7.38B; raises FY18 EPS $1.40-$1.50 (from $1.35-$1.45) vs. est. $1.41 (notes FY18 EPS estimates exclude after-tax impact of approximately 30c per diluted share, primarily related to transformation costs and the amortization of intangible assets, offset by the impact of U.S. tax reform); sees Q3 EPS 35c-39c vs. est. 36c

· Ooma (OOMA) Q1 adjusted EPS loss (4c)/$30.2M vs. est. loss (5c)/$29.72M; sees Q2 adjusted EPS loss (7c)-(4c) on revs $30.5M-$31.3M vs. est. loss (5c)/$30.56M

· BlackLine (BL) 3.5M share Spot Secondary priced at $40.35

· 2U (TWOU) 3.3M share Secondary priced at $90.00

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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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