Morning Preview: May 24, 2018

Terrie AmengualDaily Market Report

Early Look
Thursday, May 24, 2018

U.S. stock futures are flat across the board, as volumes will likely dry up the next few days into the Memorial Day holiday weekend. U.S. stocks rebounded on Wednesday, closing near the best levels of the day after commentary from the Federal Reserve suggested the U.S. central bank was maintaining a calm attitude toward inflation, while they appear ready to raise rates at its June meeting. The comments offset ongoing uncertainty surrounding both trade policy and other geopolitical issues. There is a full-plate of economic data this morning with weekly jobless claims at 8:30, Housing data at 9:00 and then at 10:00 and manufacturing data at 11:00, sprinkled in with some Fed speakers. New President Trump tariff threat weighed on shares in Asian automakers, while in the financial space, Deutsche Bank confirms recent reports as they look to slash workforce by 25%. In Asian markets, The Nikkei Index dropped -252 points to settle at 22,437, the Shanghai Index slipped -14 points to end at 3,154 and the Hang Seng Index gained 94 points to settle at 30,760. In Europe, the German DAX is up over 10 points just under the 13,000 level, while the FTSE 100 is flat around 7,785.

Market Closing Prices Yesterday
· The S&P 500 Index jumped 8.85 points, or 0.32%, to 2,733.29
· The Dow Jones Industrial Average rose 52.40 points, or 0.21%, to 24,886.81
· The Nasdaq Composite spiked 47.50 points, or 0.64%, to 7,425.96
· The Russell 2000 Index advanced 2.37 points, or 0.15% to 1,627.61

Events Calendar for Today
· 4:15 AM EST Fed’s Dudley speaks on Reference Rate at BoE event
· 8:30 AM EST Weekly Jobless Claims…est. 220K
· 8:30 AM EST Continuing Claims…est. 1.746M
· 9:00 AM EST FHFA House Price Index MoM for March…est. 0.6%
· 9:45 AM EST Bloomberg Consumer Comfort Index…prior 54.6
· 10:00 AM EST Existing Home Sales MoM for April…est. 5.55M
· 10:30 AM EST Weekly EIA Natural Gas Inventory Data
· 11:00 AM EST Kansas City Fed Manufacturing Activity for May…est. 20
· 2:00 PM EST Fed’s Harker speaks about Technology Impact on Labor Market

Earnings Calendar:
· Earnings Before the Open: BBY, BRC, HRL, LXFT, MCK, MDT, RY, SSI, TD, TTC
· Earnings After the Close: ADSK, DECK, DXC, EGHT, GPS, LGF, NTNX, QSII, ROST, SCVL, SPLK, VEEV, ZOES

Other Key Events:
· UBS Global Oil & Gas Conference, 5/22-5/24, in Austin, Texas
· B Riley 19th Annual Investor Conference 5/23-5/24, in Santa Monica, CA

World News

· Bitcoin prices fall another 3%, dropping to around $7,350 after reports the Justice Department has opened a criminal probe into whether traders are manipulating the price of Bitcoin and other digital currencies. The investigation is focused on illegal practices that can influence prices — such as spoofing, or flooding the market with fake orders to trick other traders into buying or selling – Bloomberg
· U.K. retail sales bounced back in April, recovering from a spell of harsh weather March, climbing 1.6%, the Office for National Statistics said Thursday, with all sectors apart from department stores picking up from subdued March levels.

Sector News Breakdown

Consumer
· Autos active: Trump administration is considering a plan to impose new tariffs of up to 25% on imported vehicles on national-security grounds, WSJ reports, citing unidentified industry officials briefed on broad outlines of the plan (watch shares of TM, FCAU, HMC, NSANY)
· L Brands (LB) Q1 adjusted EPS 17c/$2.63B vs. est. 18c/$2.59B; sees Q2 EPS 30c-35c vs. est. 45c; cuts FY18 EPS view to $2.70-$3.00 from $2.95-$3.25 and below consensus of $3.14; 1Q L Brands stores & direct comp sales +3% vs. est. 2.6%; 1Q Victoria’s Secret comp sales +1% and 1Q Bath & Body Works comp sales +8%
· Williams-Sonoma (WSM) Q1 EPS 67c/$1.203B vs. est. 58c/$1.16B; Q1 comp sales 5.5% vs. est. 3.9%; sees Q2 adjusted EPS 65c-70c vs. est. 67c; sees Q2 revenue $1.25B-$1.275B vs. est. $1.24B; raises FY18 EPS view to $4.15-$4.25 from $4.12-$4.22 (est. $4.19); 1Q Pottery Barn comparable sales +2.7% vs. est. +1.6% and William-Sonoma comparable sales +5.6% vs. est. +1.4%
· The Kroger Co. (KR) and Home Chef, the country’s largest private meal kit company, today announced a merger agreement that will significantly accelerate availability of meal kits. The initial transaction price is $200M and future earn out payments of up to $500M over five years are contingent on achieving certain milestones https://on.mktw.net/2kjuopC
· Hormel Foods (HRL) Q2 EPS 44c/$2.3B vs. est. 45c/$2.39B; backs FY18 EPS view $1.81-$1.95 vs. est. $1.84 and still sees FY18 revenue $9.7B-$10.10B, vs. consensus $9.79B
· Copart (CPRT) Q3 adjusted EPS 52c/$478.2M vs. est. 50c/$440.79M
· Modine Manufacturing (MOD) Q4 EPS 44c/$566.6M vs. est. 40c/$528M; sees FY EPS $1.50-$1.65 vs. est. $1.37
· Stein Mart (SMRT) Q2 EPS 16c on revs $326.7M, and gross margin +29.4%; anticipates flat to low single-digit increases in Q2 comparable sales

Energy
· Utilities: Payouts to U.S. power generators climb in annual PJM auction; Generators that provide capacity to the largest U.S. power grid are going to get paid more for guaranteeing electricity when the market needs it. Capacity price for largest U.S. power grid $140/megawatt-day – figure for 2021-2022 compares with $76.53 for year earlier (NRG, EXC, PEG leveraged to rate hike)
· Bristow Group (BRS) Q4 EPS loss (48c)/$341.2M vs. est. loss (54c)/$363M; sees FY adjusted Ebitda $90M-$140M

Financials
· Deutsche Bank AG (DB) shares -3%; said it will cut a quarter of equities jobs and reduce overall positions by at least 7,000 as its CEO Sewing seeks to slash costs and boost profitability. The reductions will take the number of jobs at the Frankfurt-based lender to well below 90,000 and lead to a restructuring charge of as much as 800 million euros ($935 million) this year, it said.
· Toronto-Dominion Bank (TD) Q2 EPS C$1.62 vs. est. C$1.50; 2Q common equity Tier 1 ratio 11.8%, 2Q return on equity +16.8%, 2Q adjusted ROE +17.6% and 2Q efficiency ratio 50.9%
· Jefferies Financial Group Inc. (JEF), formerly known as Leucadia National Corporation, says today shareholders have overwhelmingly voted in favor of changing Leucadia National’s name to Jefferies Financial Group Inc., which is effective immediately
· Green Bancorp (GNBC) announces offering of 2M shares of common stock for holders

Healthcare
· Medtronic (MDT) Q4 EPS $1.42/$8.14B vs. est. $1.38/$7.98B; sees year EPS $5.10-$5.15 vs. est. $5.15
· Anika Therapeutics (ANIK) announces $30M accelerated share repurchase
· Melinta Therapeutics (MLNT) 22M share Secondary priced at $5.00
· Sellas Life Sciences (SLS) files $30M common stock offering
· Myriad Genetics (MYGN) announced seven new commercial coverage decisions for Prolaris, the company’s market leading prognostic test for patients with prostate cancer
· Kiniksa (KNSA) 8.5M share IPO priced at $18.00
· Scholar Rock (SRRK) 5.36M share IPO priced at $14.00

Industrials & Materials
· Steel Holdings proposes to buy Babcock & Wilcox (BW) for $3.00-$3.50 per share; Steel Holdings disclosed that on May 23 it submitted a proposal to the board of directors of Babcock & Wilcox with respect to the acquisition of the company https://on.wsj.com/2J2oeIn
· Huntsman (HUN) increases share repurchase authorization to $1B

Technology, Media & Telecom
· NetApp (NTAP) Q4 adjusted EPS $1.05/$1.64B vs. est. $1.01/$1.60B; sees Q1 EPS 76c-82c on revs $1.365B-$1.465B vs. est. 78c/$1.42B; sees FY19 revenue growth in mid-single digits and FY19 gross margins around 63%; sees FY19 Operating margins 20%-21%; doubles quarterly dividend to 40c per share
· Synopsys (SNPS) Q2 EPS $1.08/$776.8M vs. est. $1.08/$775.6M; sees Q2 non-GAAP EPS 89c-93c on revs $760M-$785M vs. est. 78c/$700.57M; sees FY18 non-GAAP EPS $3.76-$3.83 on revs $3.07B-$3.1B vs. est. $3.72/$2.94B
· CLPS Inc. (CLPS) 2M share IPO priced at $5.25
· GreenSky (GSKY) 38M share IPO priced at $23.00
· SailPoint (SAIL) 17.808M share Secondary priced at $22.50
· Microchip (MCHP) announced, in connection with its pending acquisition of Microsemi (MSCC), that it has obtained antitrust clearance from the Taiwan Fair Trade Commission

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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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