Morning Preview: May 31, 2018

Terrie AmengualDaily Market Report

Early Look

Thursday, May 31, 2018

After two days of volatile moves for U.S. markets, futures are pointing to a slightly mixed open, as markets turn their attention back to trade as the European Union braces for U.S.-imposed tariffs on steel and aluminum. German markets are trading lower after reports U.S. President Donald Trump has threatened to hit European cars with a U.S. import tax if the European Union follows through on its threat to bring in $3.5B of its own levies on U.S. agriculture, steel and industrial products. Investors are also watching for new developments in Italy after the head of the 5 Star party, Luigi Di Maio, said he was open to withdrawing Paolo Savona as a candidate for finance minister. In Spain, lawmakers are expected to begin a formal debate Thursday over whether to hold a no-confidence vote Friday on Rajoy. Busy morning upcoming in the retail sector with expected earnings from AEO, DG, DLTR, LULU after GES and PVH report last night.

Stocks rebounded on Wednesday as the Dow Industrial Average gained over 300 points, partially offsetting the -391-point decline the day prior as political turmoil in Italy eased, sending bonds lower and yields off the lowest levels in weeks. Energy and financial sectors led the day’s advance, with oil snapping a 5-day losing streak and banks rebounding as yields recovered. However, gains were broad-based with all 11 main sectors finishing higher. The Russell 2000 index of small stocks closed at an all-time high, rising 22.70 points, or 1.4%, to 1,646.36. The euro rallied on Wednesday, rebounding from a roughly 10-month low and pushing the U.S. dollar down. In Asian markets, The Nikkei Index rose 183 points to end at 22,201, the Shanghai Index jumped 54 points to finish at 3,095 and the Hang Seng Index gained 411 points to settle at 30,468. In Europe, the German DAX is down around -50 points at 12,725, while the FTSE 100 is up a few points at 7,700.

Market Closing Prices Yesterday

· The S&P 500 Index jumped 34.15 points, or 1.27%, to 2,724.01

· The Dow Jones Industrial Average rose 306.33 points, or 1.26%, to 24,667.78

· The Nasdaq Composite gained 65.86 points, or 0.89%, to 7,462.45

· The Russell 2000 Index advanced 24.34 points, or 1.50% to 1,647.99


Events Calendar for Today

· 7:30 AM EST Challenger Job Cuts YoY for May

· 8:30 AM EST Weekly Jobless Claims…est. 228K

· 8:30 AM EST Continuing Claims…est. 1.733M

· 8:30 AM EST Personal Income for April…est. 0.3%

· 8:30 AM EST Personal Spending for April…est. 0.4%

· 8:30 AM EST PCE Core MoM for April…est. 0.1%

· 8:30 AM EST PCE Core YoY for April…est. 1.8%

· 8:30 AM EST PCE Deflator MoM for April…est. 0.2%

· 9:45 AM EST Chicago PMI for May…est. 58.3

· 9:45 AM EST Bloomberg Consumer Comfort Index…prior 55.2

· 10:00 AM EST Pending Home Sales MoM for April…est. 0.4%

· 10:30 AM EST Weekly EIA Natural Gas Inventory Data

· 11:00 AM EST Weekly DOE Inventory Data

· 12:30 PM EST Fed’s Bostic speaks in moderated Q&A in Orlando


Earnings Calendar:


· Earnings After the Close: CAL, COST, GME, ULTA, VMW, WDAY, YEXT


Other Key Events:

· Bernstein 34th Annual Strategic Decisions Conference, 5/30-6/1 in New York

· Cowen Tech, Media & telecom Conference, 5/30-5/31, in New York

· KeyBanc Industrials Conference, 5/30-5/31, in Boston

· KBW Inc. Mortgage Finance and Asset Management Conference, 5/31, in New York


World News

· China’s official nonmanufacturing purchasing managers index, a measure of activity outside factory gates, rose to 54.9 in May from 54.8 in April, the National Bureau of Statistics said. The sub-index measuring business activities for the service sector climbed to 54.0 from 53.8.

· China’s factory activity rose to an eight-month high in May, due to robust production and demand. The official manufacturing purchasing managers’ index climbed to 51.9 from 51.4 in April, topping the forecast of 51.4

· Japan Industrial output rose 0.3% in April from a month earlier, following March’s 1.4% gain, according to the Ministry of Economy, Trade and Industry. The rise was smaller than a 1.3% gain expected.

· The amount U.K. consumers borrowed in April jumped to GBP1.8 billion after falling to GBP400 million in March, which was the lowest in more than five years, the Bank of England said. The increase was driven by both credit-card spending and loan uptakes

· French inflation jumped 2.3% in May, the first time since 2012 that the rate exceeded the ECB’s inflation target of 2%. For the eurozone, inflation in April rose to 1.9%, closer to that target.

· Former Acting FBI Director Andrew McCabe wrote a confidential memo last spring recounting a conversation that provided “significant behind-the-scenes” details on the firing of former FBI director James Comey, the New York Times


Sector News Breakdown


· PVH Corp. (PVH) Q1 adjusted EPS $2.36/$2.31B vs. est. $2.25/$2.28B; sees Q2 adjusted EPS $2.05-$2.10 vs. est. $2.02 and sees Q2 revenue growth roughly 10%; said Q2 Calvin Klein business projected to increase approximately 15% and for the Tommy Hilfiger business expected up 13%; Q1 N.A. Calvin Klein comparable sales +5% and 1Q N.A. Tommy Hilfiger comparable sales +9%; raises year view

· Tilly’s (TLYS) Q1 EPS 4c/$123.6M vs. est. 1c/$121.86M; Q1 comparable store sales, which includes e-commerce sales, increased 0.1% in total; sees Q2 EPS 24c-28c on revs $153M-$157M vs. est. 12c/$141.84M

· Guess (GES) Q1 adjusted EPS loss (23c)/$521.3M vs. est. loss (23c)/$508.02M; Q1 comp sales 2% vs. est. 2.1%; sees Q2 adjusted EPS 27c-30c vs. est. 30c and sees Q2 revenue growth in USD up 14%-15.5% and revenue growth in constant currency up 11%-12.5%; raises year EPS and rev growth views

· U.S. President Donald Trump last month told French President Emmanuel Macron that he plans to bar German premium car manufacturers like Daimler AG (DAI.XE) and BMW AG (BMW.XE) from the U.S. market, reports German business weekly Wirtschaftswoche, citing European and U.S. diplomats

· Kirkland’s (KIRK) Q1 EPS loss (6c)/$142.5M vs. est. loss (10c)/$140M; 1Q comparable sales +1.4%



· The American Petroleum Institute (API) reported that U.S. crude supplies rose by 1M barrels for the week ended May 25, showed a fall of -1.7M barrels in gasoline stockpiles, while inventories of distillates climbed by 1.5M barrels

· EnerSys (ENS) Q4 EPS $1.24/$683M vs. est. $1.24/$672.7M; sees 1Q adjusted EPS $1.15-$1.19 vs. est. $1.17



· Deutsche Bank (DB) CEO of Deutsche Bank, says the bank is committed to the U.S., Bloomberg reported late yesterday. While Deutsche Bank may retreat from “a couple of small business areas,” Sewing said that “fundamentally the U.S. is the most important market for us.”

· Houlihan Lokey (HLI) 3M share Spot Secondary priced at $49.15

· Cherry Hill Mortgage (CHMI) files to sell 2.75M shares of common stock



· Crispr Therapeutics (CRSP) and Vertex Pharmaceuticals Inc. (VRTX) said the U.S. FDA has put a hold on a new-drug application for a drug used for the treatment of sickle-cell disease, “pending the resolution of certain questions that will be provided by the FDA as part of its review.” The application was filed in April ahead of trials in adult patients

· Gilead (GILD) and Galapagos (GLPG) say the randomized, placebo-controlled Phase 2 EQUATOR study of filgotinib, an investigational, selective JAK1 inhibitor, in 131 adults with moderate to severe psoriatic arthritis, achieved its primary endpoint of improvement in the signs and symptoms of psoriatic arthritis at Week 16.

· The Virginia Senate approved expansion of Medicaid, the state-federal program for the low-income, and the bill now heads to the House of Delegates, where it is widely expected to pass

· Syndax Pharmaceuticals (SNDX) and Nektar Therapeutics (NKTR) will collaborate on a Phase 1b/2 clinical trial assessing the combination of Entinostat and NKTR-214 in patients with metastatic melanoma who have progressed after receiving a PD-1 inhibitor

· Sesen Bio (SESN) 22.222M share Spot Secondary priced at $1.80


Industrials & Materials

· The Trump administration, unable to win concessions from European Union counterparts ahead of a Friday deadline, is planning to make good on a threat to apply tariffs on European steel and aluminum, according to reports

· Paccar (PCAR) downgraded to neutral from buy at Goldman Sachs

· Amerco (UHAL) Q4 adjusted EPS loss (28c) vs. 49c a year ago


Technology, Media & Telecom

· Warren Buffett had proposed to invest $3 billion in Uber Technologies Inc earlier this year, but the talks failed following disagreements over the deal’s terms, Bloomberg reported

· Box Inc. (BOX) Q1 EPS loss (7c)/$140.5M vs. est. loss (8c)/$139.9M; sees FY revenue $603M-$608 M vs. est. $606.8M; sees FY adjusted loss per share (16c-19c) vs. est. loss (19c); 1Q billings growth +17%

· Keysight Technologies (KEYS) Q2 adjusted EPS 83c/$990M vs. est. 83c/$960.61M; sees Q3 EPS 72c-82c on revs $942M-$972M vs. est. 74c/$916.7M

· Semtech (SMTC) Q1 EPS 47c/$151.9M vs. est. 46c/$150.3M; sees Q2 EPS 50c-58c on revs $155M-$167M vs. est. 53c/$160.32M

· Tech Data (TECD) Q1 EPS $1.84/$8.55B vs. est. $1.46/$8.13B; sees Q2 EPS $1.95-$2.25 on revs $8.6B-$8.9B vs. est. $2.09/$8.58B


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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