Morning Preview: June 20, 2018

Terrie AmengualDaily Market Report

Early Look

Wednesday, June 20, 2018

Stock futures are pointing to a higher open, looking to rebound after trade fears sunk stocks yesterday, with the Dow Industrial Average declining for the 6th straight session Monday, its longest losing streak in 15-months. Speaking of the Dow, after more than 100+ years in the index, General Electric will be removed from the Dow Jones Industrial Average and replaced by Walgreens next week. Markets will be looking ahead to comments by Federal Reserve Chairman Jerome Powell and existing home sales data later today. Worries that rising trade tensions could develop into a major headwind for global growth going forward intensified yesterday after President Donald Trump threatened to slap tariffs on up to $400 billion worth of China goods, Monday’s decline in the Dow Industrials was enough to completely erase its 2018 gains, now down 0.1% for the year. Attention turns to energy as OPEC holds its semi-annual meeting in Vienna this week, though many oil ministers have weighed in on their outlook thus far, with embers wanting large output such as Russia, moderate output like Saudi Arabia, and no output increase like Iran. There were a few earnings and outlooks yesterday as SBUX lowered its global comp sales view, while ORCL slipped as well after results and FDX reported mostly higher earnings. In Asian markets, The Nikkei Index bounced 276 points to settle at 22,555, the Shanghai Index rose 7 points to end at 2,915 and the Hang Seng Index gained 228 points (after falling over -800 points yesterday) to close at 29,696. In Europe, the German DAX is higher by around 50 points at 12,730, while the FTSE 100 is up around 90 points trading under 7,700.

Market Closing Prices Yesterday

· The S&P 500 Index dropped -11.18 points, or 0.40%, to 2,762.57

· The Dow Jones Industrial Average fell -287.26 points, or 1.15%, to 24,700.21

· The Nasdaq Composite slumped -21.44 points, or 0.28%, to 7,725.59

· The Russell 2000 Index inched higher 0.99 points, or 0.06% to 1,693.45

Events Calendar for Today

· 7:00 AM EST MBA Mortgage Applications Data

· 8:30 AM EST Current Account Balance for Q1…est. (-$129.0B)

· 9:30 AM EST Draghi, Powell, Kuroda speak in Portugal

· 10:00 AM EST Existing Home Sales MoM for May…est. 5.52M

· 10:30 AM EST Weekly DOE Inventory Data

Earnings Calendar:

· Earnings Before the Open: ATU, WGO

· Earnings After the Close: AOBC, BNED, MU, SCS

Other Key Events:

· JPMorgan Energy Equity Conference, 6/18-6/20, in New York

· Jefferies Global Consumer Conference, 6/19-6/20, in Nantucket

· Oppenheimer 18th Annual Consumer Conference, 6/19-6/20 in Boston

· JMP Securities Life Sciences Conference, 6/20-6/21, in New York

World News

· German producer inflation climbed in May at the quickest pace since October 2017 on the back of sharp jumps in petroleum and electricity prices, according to data

Sector News Breakdown


· Starbucks (SBUX) shares fall -4%; said it sees Q3 global comp sales up 1% vs. est. 2.9%; also plans to close about 150 company-operated stores in densely penetrated U.S. markets next fiscal year, three times the number it historically shuts down annually

· La-Z-Boy (LZB) Q4 EPS 72c/$420M vs. est. 64c/$427.4M; reports same-store written sales for the La-Z-Boy Furniture Galleries network increased 3.9%


· The American Petroleum Institute (API) reported that U.S. crude supplies fell by -3M barrels for the week ended June 15, though posted a climb of 2.1M barrels in gasoline stockpiles, while inventories of distillates rose by 750,000 barrels

· Carl Icahn won a majority of seats on SandRidge Energy Inc.’s (SD) board, the company said Tuesday. The activist investor won four board seats in a shareholder vote

· Iran’s oil minister will resist a Saudi Arabia-led push to raise crude output

· Xcel Energy (XEL) downgraded to Neutral from Buy at Bank America


· PayPal (PYPL) is close to a deal to purchase FinTech company Hyperwallet Systems for roughly $400M, the WSJ reports, citing people familiar with the matter

· Fifth Third (FITB) raises quarterly dividend 13% to 18c per share

· Redwood Trust (RWT) announces offering of $200M of convertible senior notes


· Anika Therapeutics (ANIK) said Cingal 16-02 study did not achieve primary endpoint; while CINGAL achieved greater pain reduction numerically at every time point in the study, the difference at 26-weeks did not reach statistical significance, co. says

· Bristol-Myers (BMY) said the FDA designated its drug as orphan treatment for gastric cancer (GC) and gastro-esophageal junction cancer (GEJ); awarded designation to the treatment, which has generic name Fixed Dose Combination of Relatlimab And Nivolumab, on Jun 18

· Kala Pharmaceuticals (KALA) to submit NDA for KPI-121 to FDA in H2, which if approved could be the first FDA-approved product for the short-term treatment of dry eye disease; announced that it plans to submit a New Drug Application to the U.S. FDA during the 2H

· Eidos (EIDX) 6.25M share IPO priced at $17.00

· Galmed (GLMD) 5M share Secondary priced at $15.00

· ObsEva (OBSV) 4.75M share Secondary priced at $15.39

Industrials & Materials

· FedEx (FDX) Q4 EPS $5.91/$17.3B vs. est. $5.69/$17.24B; sees FY19 EPS $17.00-$17.60 vs. est. $17.42 and sees revenue growth of 9%, which implies ~$71.4B vs. consensus $69.3B; 4Q adjusted operating margin +11.5% and 4Q Ground segment operating margin 17.3%; said new pension accounting rules will be in effect starting in fiscal 2019 that will impact operating margin but not net income or earnings per share; sees FY19 operating margin of approximately 7.9% (compared to a recast fiscal 2018 operating margin of 6.5%);

· General Electric Co. (GE) is being removed from the Dow Jones Industrial Average and will be replaced by Walgreens Boots Alliance Inc. (WBA). GE was a part of the blue-chip index when it was introduced in 1896 and had been part of the index continuously since 1907.

· Japan’s Taiyo Nippon Sanso Corp. and Carlyle Group (CG) are among the likely candidates to buy around $8 billion in assets that Lindeand Praxair (PX) have to sell to gain approval for their planned merger, Reuters reports

· Air Lease (AL) announced long-term lease agreements with SAS for two new CFM LEAP-1A26-powered Airbus A320-200neo aircraft scheduled for delivery in November 2019 and April 2020

Technology, Media & Telecom

· Oracle (ORCL) shares fall -4%; Q4 adjusted EPS 99c/$11.26B vs. est. 94c/$11.19B; Q4 short-term deferred revenues up 2% to $8.4B, while Operating Cash Flow on a trailing twelve-month basis was up 9%, or $1.3B, to a record $15.4B; sees double-digit adjusted EPS growth in FY19

· Dialog Semiconductor PLC and Synaptics Inc. (SYNA) confirmed they are discussing a merger. U.K.-based Dialog said that its board is performing due diligence on an acquisition of Synaptics, while Synaptics separately announced that it is “engaged in discussions” with Dialog.

· Verizon Communications Inc. (VZ), AT&T Inc. (T) and Sprint Corp. (S) pledged to stop sharing customer locations with two data brokers after at least one company revealed individuals’ whereabouts without their consent.

· AT&T Inc. (T) is in talks to acquire advertising technology company AppNexus, according to people familiar with the matter. AT&T is expected to pay around $1.6B

· Rupert Murdoch’s 21st Century Fox Inc. (FOXA) is leaning toward starting negotiations with Comcast Corp. (CMCSA), paving the way for a bidding war over its entertainment assets, according to reports (Bloomberg)

· May NPD video game software sales were up 15% year-over-year, driven by Sony (SNE) and Nintendo (NTDOY) launches of first-party titles, according to Piper


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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