Morning Preview: June 8, 2018

Terrie AmengualDaily Market Report

Early Look

Friday, June 8, 2018

U.S. stock futures are pointing to a weaker open after sharp responses and heated words by several world leaders heading into the G7 meeting this weekend. In the run-up to the Quebec summit, Macron suggested Trump’s trade moves against allies could turn the club of developed nations into G-6 — Canada, Italy, Germany, France, Japan and U.K. — plus 1. President Trump responded suggesting Canada and France are using unfair trade practices against U.S. producers. “Please tell Prime Minister Trudeau and President Macron that they are charging the U.S. massive tariffs and create non-monetary barriers. Trump then hit out at Canada in particular, describing Trudeau as “indignant” and accusing his country’s neighbor of “killing our Agriculture.” The comments back and forth not having a positive effect on global futures to end the week. In Asian markets, The Nikkei Index fell -128 points to close at 22,694, the Shanghai Index dropped -42 points to settle at 3,067 and the Hang Seng Index dropped -554 points to settle at 30,958. In Europe, the German DAX is down over -100 points below 12,700, while the FTSE 100 is down over -60 points below 7,650.

Technology shares dropped sharply on Thursday, with the Nasdaq falling over 50 points off its record closing high on Wednesday in a bout of profit taking for Internet, semiconductors and software stocks yesterday. Today, tech shares starting lower after a report in the Nikkei that Apple (AAPL) has warned its supply chain of a drop of around 20% in new iPhone component orders debuting in the latter part of this year. The report has European based iPhone suppliers lower and will likely pressure US based names today (AVGO, SWKS, CRUS, QRVO).

As for yesterday, The Dow Jones Industrial Average finished modestly higher Thursday, but a surge in crude-oil prices failed to offset a retreat in the technology sector, driving the broader markets lower. The Dow closed at its highest level since March 9, while the Nasdaq Composite Index snapped a four-session win streak. The bond market rallied in the afternoon, with traders attributing the decline to a flight-to-quality move on the back of weakness in Brazilian stocks and the country’s currency. The 10-year yield fell over 4 bps to 2.933% and the 2-yr yield slipped to 2.504%.

Market Closing Prices Yesterday

· The S&P 500 Index slipped -1.98 points, or 0.07%, to 2,770.37

· The Dow Jones Industrial Average rose 95.02 points, or 0.38%, to 25,241.41

· The Nasdaq Composite dropped -54.17 points, or 0.70%, to 7,635.07

· The Russell 2000 Index declined -8.17 points, or 0.49% to 1,667.77

Events Calendar for Today

· 10:00 AM EST Wholesale Inventories MoM, Apr-F…est. 0.0%

· 1:00 PM EST Baker Hughes Weekly Rig Count

World News

· Japan’s economy shrank at an annualized pace of 0.6% in the January-March quarter, the same pace as initially estimated, as stronger-than-expected capital expenditures failed to offset weakness in private consumption. In non-annualized terms, the economy contracted 0.2% from the previous quarter, unchanged from the preliminary figure.

· China’s trade surplus narrowed in May on strong imports, through the gap with the U.S. widened. China reported a trade surplus of $24.92 billion last month, narrower than April’s $28.78 billion and the $32.6 billion forecast in a poll of economists.

· The watchdog report that is expected to criticize the Justice Department’s handling of the 2016 investigation into Hillary Clinton’s private email server will be released next Thursday, according to a letter to Congress from Inspector General Michael Horowitz

Sector News Breakdown


· Lululemon Athletica Inc. (LULU) said it has agreed to buy back 3.3 million of its shares in a private transaction with funds affiliated with Advent International Corp. The shares will be repurchased under the company’s recently increased $600 million share buyback program

· Zumiez (ZUMZ) Q1 EPS loss (10c)/$206.3M vs. est. loss (12c)/$199.34M; comparable sales for the thirteen weeks ended May 5 increased 8.3% compared to a comparable sales increase of 1.8% for the thirteen weeks ended April 29; sees Q2 EPS 4c-9c vs. est. 0c and Q2 comp sales 3%-5%

· At Home Group (HOME) Q1 adjusted EPS 31c/$256.2M vs. est. 27c/$256.47M; Q1 results include a net addition of 27 stores since 1Q18 and a comparable store sales increase of 0.9% vs. est. 2.1%; sees Q2 EPS 32c-33c vs. est. 28c and year $1.25-$1.30 vs. est. $1.23


· Deutsche Bank AG’s (DB) Chairman Paul Achleitner is considering a merger with rival Commerzbank AG and is speaking with top investors and government officials about the potential tie-up, Bloomberg reported late Thursday.

· PayPal (PYPL) added to Wedbush best ideas list and raise tgt to $100 from $90

· Pzena Investment (PZN) reports May AUM $37.1B vs. $38.9B in April


· Cooper Companies (COO) Q2 EPS $2.86/$631.3M vs. est. $2.84/$627.11M; sees FY18 EPS $11.70-$11.90 on revs $2.52B-$2.55B vs. est. $11.80/$2.53B

· Ironwood (IRWD) confirms FDA approval of orphan drug designation to olinciguat for treatment of patients with sickle cell disease

· Exact Sciences Corporation (EXAS) announced an underwritten public offering of $150M aggregate principal amount of its 1.0% convertible senior notes due 2025

· Aduro Biotech (ADRO) announced the recent initiation of a Phase 1b study of ADU-214 in combination with nivolumab for the treatment of advanced lung cancer. ADU-214 is an immunotherapy based on Aduro’s live, attenuated double-deleted Listeria, or LADD, technology platform in development for the treatment of advanced or metastatic non-small cell lung cancer

· Corium (CORI) files $150M mixed securities shelf

Industrials & Materials

· Deutsche Post AG (DPW.XE) lowered its 2018 guidance as it aims improving declining profits at its post, ecommerce and parcel division; said it sees 2018 Ebitda about 3.2 billion euros ($3.78 billion) compared with an earlier estimate of EUR4.15 billion; said it expects to book a EUR500 million charge in 2018 related to the restructuring

· Amerco (UHAL) announces special cash dividend of 50c per share

Technology, Media & Telecom

· Broadcom (AVGO) Q2 EPS $4.88/$5.01B vs. est. $4.76/$5.0B; 2Q adjusted gross margin +66.6%; reaffirms 3Q rev guidance of $5.05B +/- $75M vs. est. $5.06B

· Apple (AAPL) shares weaken shares along with Europe-based suppliers after a report in the Nikkei that the company has warned its supply chain of a drop of around 20% in new iPhone component orders. In Europe, shares of AMS AG, Dialog Semiconductor Plc, STMicroelectronics NV and Infineon Technologies AG all slipped – watch shares of SWKS, CRUS, QRVO, AVGO

· Carbon Black (CBLK) Q1 EPS loss (98c)/$48.4M vs. est. loss ($1.27)/$47.99M; reports Q1 cloud revenue $11.7M; sees FY18 EPS loss ($1.35) – ($1.32) on revs $203M-$204.5M vs. est. ($1.38)/$201.96M

· DocuSign (DOCU) Q1 adjusted EPS 1c/$155.8M vs. est. loss (7c)/$145.8M; Q1 subscription revenue $148.2M, up 39% YoY and Q1 Professional services and other revenue was $7.6M, an increase of 14% YoY; 1Q billings were $168.9M, an increase of 33% YoY; sees Q2, FY19 adjusted gross margin 78%-81%; sees Q2 billings $160M-$170M and FY19 billings $680M-$700M

· Stitch Fix (SFIX) Q3 EPS 9c/$316.7M vs. est. 3c/$306.35M; sees Q4 revs $310M-$320M vs. est. $314.8M; Q3 Ebitda $12.4M

· Lumentum Holdings (LITE) said Executive Vice President and Chief Financial Officer Aaron Tachibana to resign to pursue other interests; will remain through Aug. 31


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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