Morning Preview: June 22, 2018

Terrie AmengualDaily Market Report

Early Look

Friday, June 22, 2018

U.S. stock futures are pointing to a higher open, with the Dow Industrial futures up around 100 points, on track to snap its 8-day losing streak. The Dow Industrial Average index fell 0.8% on Thursday, its eighth straight daily decline and matches a stretch of losses that ended in March 2017. Should the index extend its losses to nine straight days today, it would mark the longest such stretch in just over 40 years (February 1978). Losses in the Dow have been largely driven by rising trade tensions between the U.S. and China. For the week, the Dow is down 2.5% as of Thursday’s close, while the S&P and Nasdaq have lost 1.1% and 0.4%, respectively. The Fed announced last night that all of the banks tested by the Federal Reserve met the regulatory minimums for capital after being tested for the impact of a severe recession (was expected). Oil prices remain active as the OPEC meeting in Vienna officially gets underway today.

In Asian markets, The Nikkei Index dropped -176 points to settle at 22,516, the Shanghai Index rose 13 points to end at 2,889 and the Hang Seng Index rose 42 points to end the week at 29,338. In Europe, the German DAX is up around 30 points at 12,550, while the FTSE 100 is up around 50 points above 7,600. Greece’s major index led the way higher after the eurozone agreed a debt-relief plan for after the country’s bailout ends. Positive PMI data for the month also helping the EuroZone.

Market Closing Prices Yesterday

· The S&P 500 Index declined -17.56 points, or 0.63%, to 2,749.76

· The Dow Jones Industrial Average fell -196.10 points, or 0.80%, to 24,461.70

· The Nasdaq Composite dropped -68.56 points, or 0.88%, to 7,712.95

· The Russell 2000 Index declined -18.04 points, or 1.06% to 1,688.95

Events Calendar for Today

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

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

· 9:45 AM EST Markit US Composite PMI, June-P

· 1:00 PM EST Baker Hughes Weekly Rig Count

World News

· EuroZone data firm IHS Markit said its composite Purchasing Managers Index for the currency area-based on survey responses from 5,000 businesses-rose to 54.8 in June from 54.1 in May

· France’s economy grew at a slower pace in the first three months of 2018 on sluggish household spending and a fall in exports

· Some officials in the Trump administration are trying to restart high level talks with China, ahead of the imposition of $34 billion of new tariffs on the country’s goods on July 6, three people familiar with the matter said – Bloomberg late Thursday

Sector News Breakdown

Consumer

· Darden (DRI) upgraded to neutral from underperform at Bank America

· Olli (OLLI) downgraded to underperform from neutral at Bank America

· Dollar General (DG) upgraded to Strong Buy from Outperform at Raymond James

· As part of the 9% staff reduction that was announced last week, Tesla (TSLA) intends to “sharply downsize” its residential solar business that it acquired for $2.6B in 2016, Reuters reports

· Container Store (TCS) files to sell 32.49M shares of common stock for holders

Energy

· Iran said late Thursday it was still opposed to a deal to lift oil output, a reverse after signals throughout the day that Iran was warming to an agreement.

Financials

· All of the banks tested by the Federal Reserve met the regulatory minimums for capital after being tested for the impact of a severe recession, the central bank announced. The Fed said banks met the minimums after a “severely adverse” stress test that would cause $578 billion in losses for 35 lenders. The Fed said the aggregate common equity tier 1 capital ratio would fall from an actual level of 12.3% in the fourth quarter of 2017 to 7.9% under the stress-test scenario.

· The bank with the highest level of capital was the U.S. unit of Credit Suisse (CS) with a common equity tier 1 ratio of 17.6%, and Deutsche Bank USA (DB) was 12.2%. State Street (STT) had the lowest at 5.3%, with Goldman Sachs Group (GS) at 5.6%. The minimum level is 4.5%.

· The Fed did not report the results from banks with less than $100 billion in assets — CIT Group Inc. (CIT), Comerica Inc. (CMA) and Zions Bancorporation (ZION) because of the recently passed bank reform law

· PayPal Holdings (PYPL) announced that it has agreed to acquire Simility, a fraud prevention and risk management platform, for a purchase price of $120M in cash, subject to certain adjustments

Healthcare

· Tandem Diabetes Care, Inc. (TNDM) said the FDA approved its t:slim X2™ Insulin Pump with Basal-IQ™ technology

· ElectroCore (ECOR) 5.2M share IPO priced at $15.00

· Ironwood Pharmaceuticals (IRWD) announced the initiation of two Phase III clinical trials evaluating the safety and efficacy of IW-3718 in patients with persistent gastroesophageal reflux disease

· Medtronic (MDT) boosts its quarterly dividend to 50c from 46c

· Cidara Therapeutics (CDTX) files to sell 12.5M shares of common stock for holders

Industrials & Materials

· Emerson (EMR) trailing three-month orders increased in the range of 5-10%. Underlying orders growth, including the Valves & Controls acquisition, remained in the 5%-10% range communicated at our annual Investor Conference in February

· Airbus (EADSY) is threatening to leave Britain if the country leaves the European Union without an agreement on future trading relations. The company, which employs about 14,000 people at 25 sites in the UK, said it will “reconsider its long-term footprint in the country” if there is no deal.

Technology, Media & Telecom

· Red Hat (RHT) shares fell -10%; Q1 adjusted EPS 72c/$813.5M vs. est. 69c/$807.6M; sees Q2 revs $822M-$830M below the $855M estimate; lowers year revenue outlook to $3.38B-$3.41B from prior $3.43B-$3.46B (est. $3.45B); announces $1B stock buyback plan; Q1 infrastructure subscription revenue up 14% to $522M; Q1 subscription revenue from Application Development-related and other emerging technology offerings for the quarter was $189M up 37% YoY

· Smart Global (SGH) Q3 EPS $1.84/$335.5M vs. est. $1.77/$332.28M; sees Q4 EPS $1.62-$1.71 on revs $360M-$380M vs. est. $1.67/$353M

· Pegasystems (PEGA) has authorized an expansion of the company’s current share repurchase program to $50M from $23.5M

· Walt Disney Co. (DIS) is prepared to sell off businesses generating as much as $1 billion in cash flow to win regulatory approval of its $71 billion bid to buy 21st Century Fox Inc.’s (FOXA) entertainment assets, it said in a filing

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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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