Morning Preview: July 12, 2018

Terrie AmengualDaily Market Report

Early Look

Thursday, July 12, 2018

U.S. stock futures are trading higher, looking to rebound after yesterday’s sharp declines following increasing trade tensions between the U.S. and China, as the market turns its attention to key inflation data (CPI at 8:30 AM EST) and commentary out of NATO this morning from world leaders. President Trump noted this morning that everyone has agreed to “substantially up their commitment” in regards to NATO regarding defense spending. Markets also focus on the semiconductor space after Broadcom made an $18B purchase of CA overnight. The trading mood appears to have improved after Bloomberg reported late yesterday that the U.S. and China are willing to resume trade talks, which could end up in a bilateral agreement. In Asian markets, The Nikkei Index gained 255 points to settle at 22,187, the Shanghai Index rose 59 points to end at 2,837 and the Hang Seng Index climbed 169 points to settle at 28,480. In Europe, the German DAX is up about 40 points at 12,450, while the FTSE 100 is up around 50 points at 7,640. Oil prices also trending higher after sliding over 5% yesterday.

U.S. stocks fell broadly on Wednesday amid escalating trade tensions between the U.S. and China after the Trump administration announced new tariffs on Chinese goods. All three major averages (Dow, S&P and Nasdaq) posted their first negative session of the past five, with the losses widespread as 10 of the 11 primary S&P 500 sectors ending lower on the day. The energy sector was hit hard as oil prices tanked over 5% for WTI crude as Libya’s state oil company said it would reopen four export terminals. The industrial and material industries, both of which have a high correlation to trade issues, were among the biggest decliners as well.

Market Closing Prices Yesterday

· The S&P 500 Index dropped -19.82 points, or 0.71%, to 2,774.02

· The Dow Jones Industrial Average fell -219.21 points, or 0.88%, to 24,700.45

· The Nasdaq Composite sunk -42.59 points, or 0.55%, to 7,716.61

· The Russell 2000 Index declined -11.96 points, or 0.71% to 1,683.66

Events Calendar for Today

· 8:30 AM EST Weekly Jobless Claims…est. 225K

· 8:30 AM EST Continuing Claims…est. 1.73M

· 8:30 AM EST Consumer Price Index (CPI) MoM for June…est. 0.2%

· 8:30 AM EST CPI Ex: Food & Energy MoM for June…est. 0.2%

· 8:30 AM EST CPI Ex: Food & Energy YoY for June…est. 2.3%

· 8:30 AM EST Fed’s Kashkari speaks on panel discussing immigration

· 9:45 AM EST Bloomberg Consumer Comfort Index… prior 57.6

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

· 12:15 PM EST Fed’s Harker speaks at Rocky Mountain Economic Summit

· 2:00 PM EST Monthly Budget Statement for June…est. (-$80.0B)

World News

· The European Commission cut its growth forecast for Germany’s economy, citing global trade tensions. The Commission now predicts real gross domestic product to increase by 1.9% in both 2018 and 2019 compared with a previous forecast of 2.3% for this year and 2.1% for next year.

· Germany consumer prices rose 0.1% from May and increased 2.1% on year when measured according to national statistics.

Sector News Breakdown


· Costco (COST) June comp store sales up 6.9%; reported net sales of $13.55B for the retail month of June, the five weeks ended July 8, an increase of 11.7% from $12.13B last year

· Papa John’s (PZZA) founder John Schnatter resigned as the company’s chairman on Wednesday night after fallout over his use of the n-word during a conference call

· Spirit Airlines (SAVE) total revenue for Q2 2018 came in more than $10 million higher than the mid-point of our implied guidance. Total revenue per available seat mile (TRASM) for the second quarter 2018 is estimated to be approximately 8.95c, down 6.8% YoY

· Zumiez (ZUMZ) June comp sales increase 2.7%; total net sales for the five-week period ended July 7, 2018 increased 6.0% to $76.5M, compared to $72.2M for the five-week period YoY


· Invesco Ltd. (IVZ) preliminary month-end assets under management (AUM) of $963.3 billion, a decrease of 1.4% month over month. The decrease was driven by net long-term outflows, unfavorable market returns, lower money market AUM, foreign exchange, and non-management fee earning AUM outflows; partially offset by reinvested distributions

· AllianceBernstein L.P. (AB) said preliminary assets under management decreased to $540 billion during June 2018 from $541 billion at the end of May. The 0.2% decrease was due to market depreciation

· Artisan Partners Asset Management Inc. (APAM) reported that its assets under management as of June 30, 2018 totaled $114.2 billion. Separate accounts1 accounted for $56.8 billion of total firm AUM, while Artisan Funds and Artisan Global Funds accounted for $57.4 billion.

· Bank of the Ozarks (OZRK) Q2 EPS 89c, in-line with estimates; annualized returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the second quarter of 2018 were 2.10%, 12.90% and 16.08%, respectively, compared to 1.90%, 12.05% and 15.81%, respectively, for the second quarter of 2017

· BNY Mellon (BK) downgraded to Market Perform from Outperform at Raymond James

· Commerce Bancshares (CBSH) Q2 EPS $1.01 vs. est. 90c; reports Q2 loan loss provision $10.04M vs. $10.76M a year ago


· Johnson & Johnson (JNJ) upgraded to Neutral from Sell at Goldman Sachs

· Perrigo (PRGO) downgraded to Sell from Neutral at Goldman Sachs

· Assembly Biosciences (ASMB) 4M share Secondary priced at $36.00

· Galmed (GLMD) initiated with an Overweight at Cantor Fitzgerald with $59 price target

Industrials & Materials

· Farmland Partners Inc. (FPI) responded to accusations Wednesday afternoon from a short seller that sent shares to all-time lows in the regular trading session, saying the “allegations are false.” An admitted short seller posted an article on Seeking Alpha that claimed Farmland Partners was giving loans to related tenants that created a risk of insolvency for the company, but Farmland Partners said that the loans in question were about 1% of its revenue and proclaimed “None of the borrowers under the program as of March 31, 2018 were related parties, or have other business relationships with the Company, other than as borrowers and, in some cases, tenants.”

· Airbus (EADSY) faces a delay in A330 deliveries valued at more than $1 billion for airlines affiliated with China’s HNA Group, according to Reuters

· Cactus (WHD) 10M share Secondary priced at $33.25

Technology, Media & Telecom

· Broadcom (AVGO) confirmed prior reports from the WSJ that it had agreed to acquire CA Inc. (CA) for $44.50 per share, in a deal valued at $18.9B saying the transaction represents an important building block as we create one of the world’s leading infrastructure technology companies

· Comcast (CMCSA) raised its offer for Sky to GBP14.75 per share, valuing the company at $34 billion. That is a 5% premium to an offer Fox (FOXA) announced earlier Wednesday and 18% above Comcast’s earlier bid.

· GoPro (GPRO) reports the company passed 30 million HERO cameras sold since the debut of the first HD model in November 2009; says the GoPro has been the best-selling camera of any type for the past 17 quarters in a row in North America; said sold over four million HERO5 Black cameras, which launched in 4Q 2016

· Netflix (NFLX) downgraded to Neutral from Buy at UBS

· Panasonic Corp. said it’s open to teaming up with Tesla Inc. (TSLA) on the U.S. carmaker’s plan to build a factory in Shanghai


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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