Morning Preview: July 2, 2018

Scott GreenDaily Market Report

Early Look

Monday, July 2, 18

Stocks on track to start the week under pressure, with Dow futures down over -150 points, tracking both Asian and European markets lower as U.S. President Donald Trump signaled his resolve to target exports from the European Union. Trump, in a Fox News interview on Sunday, once again claimed European officials haven’t acted fairly in its trade relationship with the U.S. “The European Union is possibly as bad as China, just smaller. It’s terrible what they do to us,” said Trump. Trade and tariff news has dominated the market place, raising fears on the potential impact it could have on materials, autos, industrials and consumer goods. The U.S. has already imposed tariffs on steel and aluminum imports from the EU, which has issued levies in response. In Asian markets, The Nikkei Index declined -492 points to settle at 21,811, the Shanghai Index plunged -71 points to settle at 2,775 and the Hang Seng Index was closed. In Europe, the German DAX is down around -70 points at 12,235, while the FTSE 100 is also down around -70 points at 7,560. Note by the end of this week, Washington is expected to formally impose tariffs on a round of Chinese goods, and Beijing is expected to retaliate.

U.S. stocks closed higher on Friday, as a broad rally ended the week, the month of June, and the second quarter on a positive note. Among the biggest gainers were energy stocks, which rose 0.7% alongside a jump in crude-oil prices to fresh 4 ½ year highs. Financials were also in focus after major banks indicated that they would return capital to shareholders after passing the Federal Reserve’s stress tests. Among notable stocks. The positive tone on the day, however, wasn’t enough to erase weakness from earlier this week, which largely came on uncertainty pertaining to trade policy. With a late day slide in U.S. equities, the Dow fell -1.2% for the week while the S&P 500 lost -1.3% and the Nasdaq fell -2.4%. For the month, the Dow slipped -0.6% while the S&P rose 0.5% and the Nasdaq gained 0.9%. For Q2, all three ended in the green, with the Dow up 0.7%, the S&P up 2.9%, and the Nasdaq climbing 6.3%. For the first half of the year, the Dow is down 1.8% and the S&P is up 1.7%. The Nasdaq is up 8.8%.

Market Closing Prices Yesterday

· The S&P 500 Index inched higher 2.06 points, or 0.08%, to 2,718.37

· The Dow Jones Industrial Average rose 55.36 points, or 0.23%, to 24,271.41

· The Nasdaq Composite gained 6.62 points, or 0.09%, to 7,510.30

· The Russell 2000 Index slipped -1.95 points, or 0.12% to 1,643.07

Events Calendar for Today

· 9:45 AM EST Markit US Manufacturing PMI, Jun-F…est. 54.8

· 10:00 AM EST Construction Spending for May…est. 0.5%

· 10:00 AM EST ISM Manufacturing for June…est. 58.2

World News

· Chinas official manufacturing purchasing managers’ index dropped to 51.5 in June from 51.9 in May, data released by the National Bureau of Statistics showed on Saturday

· China’s official nonmanufacturing purchasing managers index, a measure of activity outside factory gates, rose slightly to 55.0 in June from 54.9 in May, the National Bureau of Statistics said on Saturday

· The Bank of Japan’s quarterly “tankan” survey out on Monday showed the headline index for big manufacturers’ sentiment at plus 21 in June, versus plus 24 three months ago and down for a second straight quarter.

· Japanese manufacturing activity grew at a slightly faster pace in June, but export orders fell more than initially reported. The final Markit/Nikkei survey for Japan on Monday showed the manufacturing Purchasing Managers Index (PMI) was a seasonally adjusted 53.0, lower than the flash reading of 53.1 but still above a final 52.8 in May.

· Manufacturing activity in the eurozone slowed in June, and by slightly more than previously reported, data firm IHS Markit said. Its Purchasing Managers Index for the eurozone manufacturing sector declined to a one-and-a-half-year low of 54.9 in June from 55.5 in May

· White House national security adviser John Bolton said on Sunday he believed the bulk of North Korea’s weapons programs could be dismantled within a year, although some experts say the complete process could take far longer

· Mexicans voted overwhelmingly for anti-establishment outsider Andres Manuel Lopez Obrador in Sunday’s presidential election, exit polls showed

Sector News Breakdown

Consumer

· BMW and Hyundai Motor urged the U.S. not to impose tariffs on auto imports, joining General Motors (GM) in pressing their case to the Commerce Department, according to Bloomberg

· Dunkin’ Brands Group (DNKN) is favored by co-managers of Jackson Square SMID-Cap Growth Fund, thanks to the lucrative margins of its franchisee model and upside from its move beyond drip coffee into espresso-based drinks – Barron’s

· Harley-Davidson (HOG) got cheaper this week according to Barron’s noting shares skidded as much as 9% early in the week as Harley got caught in the trade war between the U.S. and the EU; noted shares have rarely been this cheap and they will probably get cheaper

· Target (TGT) plans to add automatic cash-counting machines to its nearly 2,000 stores starting this summer, following other retailers who are automating more store jobs as labor costs rise – WSJ

· Tesla (TSLA) nearly produced 5,000 Model 3 cars in the last week of its second quarter, with the final car rolling off the assembly line on morning of July 1, just a few hours after the midnight goal set by CEO Elon Musk, Reuters reported

· Wynn Casino (WYNN) and Melco (MLCO): Macau June Casino revs rise 12.5% YoY to 22.5B patacas, below the Bloomberg 18% est. rise

· Nissan (NSANY) has discontinued its planning of a potential $1B sale of its battery division to China’s GSR Capital, Reuters reports

· Nelson Peltz’s hedge fund Trian Partners ended 1H down almost 2%, after its stakes in GE, Procter & Gamble (PG) declined sharply in value – Financial Times

· Randa Accessories is preparing a $28-a-share competing bid for Perry Ellis International (PERY), slightly higher than one from the apparel brand firm’s founder George Feldenkreis, the WSJ said. Feldenkreis has a proposed $27.50-a-share buyout to take it private https://reut.rs/2lMnHx2

· Tesco PLC (TSCDY) said Monday that it has entered into a long-term, strategic alliance with Carrefour SA that will cover relationships with global suppliers, the joint purchasing of own brand products and goods not for resale.

Healthcare

· AbbVie Inc. (ABBV) was ordered by a federal judge to pay back illegal profits it earned by blocking generic-drug companies from competing against its testosterone-replacement drug, leading to higher prices for consumers; the company plans to appeal

· Jazz Pharma (JAZZ) will sell its rights to Prialt intrathecal infusion to TerSera Therapeutics for $80M in cash

· Savara (SVRA) files $250M mixed securities shelf

Industrials & Materials

· Barron’s notes that General Electric’s (GE) sweeping restructuring plan drew cheers on Wall Street last week, despite the likelihood that the dividend will be lower after it spins off the health-care business in 12 to 18 months

· Chinese state-owned Sinochem Group and ChemChina will merge to create a new company, and Sinochem Chairman Ning Gaoning will become the chairman of ChemChina, financial publication Caixin reported https://reut.rs/2KmNw5N

Technology, Media & Telecom

· Dell Inc. (DVMT) said it will buy out the holders of shares that track the performance of VMWare Inc. (VMW); Dell said it will propose to exchange each share of VMware tracking stock for 1.3665 shares of Dell Technologies Class C common stock, or at the holder’s election, $109 in cash, subject to the total amount of cash consideration not above $9 billion

· Acxiom Corp (ACXM) is nearing a deal to sell its marketing solutions division to Interpublic Group of Companies Inc (IPG) for around $2.2 billion, a person familiar with the matter said https://reut.rs/2KDEK2r

· The technology sector’s dominance of the stock market is about to face a big test. Facebook Inc. (FB) and Google parent Alphabet Inc. (GOOGL) are expected to say goodbye in September to the highflying tech sector of the S&P 500. They will join a new communications-services group that will also house media giants such as Netflix Inc. (NFLX) and Comcast Corp. (CMCSA) that now reside in the consumer-discretionary group https://on.wsj.com/2KDwbEP

· Facebook (FB) disclosed it gave dozens of companies special access to user data, detailing for the first time a spate of deals that contrasted with the social network’s previous public statements that it restricted personal information to outsiders in 2015 – WSJ

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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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