Morning Preview: July 20, 2018

Terrie AmengualDaily Market Report

Early Look

Friday, July 20, 2018

U.S. futures just recently turned negative as President Trump says he’s “ready” to put tariffs on all $505 billion of Chinese goods imported to the U.S., renewing the ongoing concerns with trading partners. It probably doesn’t help trade sentiment that Angela Merkel says the EU is ready to retaliate against any auto tariffs as well. Prior to the comments by Trump, markets were little changed ahead of a few key earnings results. Last night, Dow component MSFT reported quarterly results and guidance that topped views, sending shares to new all-time highs and helping lift the Nasdaq Composite, while footwear retailer SKX plunged over 25% after its miss and lower guidance. In Asian markets, The Nikkei Index slipped -66 points to settle at 22,697, the Shanghai Index jumped 56 points to settle at 2,829 and the Hang Seng Index gained 213 points to finish at 28,224. In Europe, the German DAX is down -100 points at 12,580, while the FTSE 100 is down around -20 points at 7,660.

Stocks ended mixed on Thursday as the Dow Jones Industrial Average snapped its 5-day win streak, booking its worst daily drop in more than a week, while the small Cap Russell 2000 index outperformed, closing above the 1,700 level, while the S&P SmallCap 600 index hit a record intraday high. A combination of lackluster corporate results and fresh concerns about global trade tensions weighed on market sentiment, with weakness in financials and telecom, while defensive sectors such as real estate and utilities, finished in the green. The dollar fell along with Treasury yields after President Donald Trump criticized the Federal Reserve’s monetary policy, complaining that the central bank may be undermining the Trump administration’s fiscal stimulus efforts. Markets also on edge after Trump reiterated his tariff threats against European auto makers.

Market Closing Prices Yesterday

· The S&P 500 Index dropped -11.13 points, or 0.37%, to 2,804.49

· The Dow Jones Industrial Average fell -134.79 points, or 0.53%, to 25,064.50

· The Nasdaq Composite slumped -29.15 points, or 0.37%, to 7,825.30

· The Russell 2000 Index advanced 9.44 points, or 0.56% to 1,701.31

Events Calendar for Today

· 8:00 AM EST Fed’s Bullard speaks on Economy and Monetary Policy

· 1:00 PM EST Baker Hughes Weekly Rig Count

Earnings Calendar:

· Earnings Before the Open: BHGE, CFG, CLF, GE, GNTX, HON, KSU, MAN, RF, SLB, STI, STT, SWK, VFC

World News

· Italian government bonds and equities underperformed on Friday, as tensions within the country’s ruling coalition came back into focus.

· In the UK, Prime Minister Theresa May will urge the European Union to “evolve” its position in Brexit talks to resolve the outstanding issues around Britain’s withdrawal.

Sector News Breakdown


· Cintas (CTAS) Q4 EPS $1.68/$1.67B vs. est. $1.67/$1.64B; posted adjusted operating margin of 16.8% in Q4; sees FY19 EPS $7.00-$7.15 on revs $6.75B-$6.82B vs. est. $7.06/$6.8B

· FTD Companies, Inc. (FTD) reviewing options as CEO Walden steps down; says its options review includes but isn’t limited to a sale or merger of the company; retains Moelis & Co. as financial adviser; 2Q prelim revs $299M vs. est. $321.5M; sees 2018 revs $1.03B-$1.04B vs. est. $1.07B

· Skechers (SKX) shares fell over -20%; Q2 EPS 29c/$1.134B vs. est. 41c/$1.13B; Q2 international wholesale sales increased 24.9%; sees Q3 EPS 50c-55c on revs $1.2B-$1.225B below 68c/$1.26B est.; 2Q total comparable sales +4.5%, vs. estimate +5.2%


· E*TRADE Financial (ETFC) Q2 EPS 95c/$710M vs. est. 88c/$707.2M; 2Q net interest income $453M, 2Q provision for loan losses $19M; Q2 DARTs 258.8K vs. 208.2K last year; Q2 trading days 64.0 vs. 63.0 last year. Q2 total trades 16.6M vs. 13.1M last year. Q2 average commission per trade $7.31 vs. $8.02 last year. Q2 net new brokerage account growth rate 20.3% vs. 4.7% last year. Q2 total customer assets $440.7B vs. $348.2B last year

· Capital One (COF) Q2 EPS $3.22/$7.2B vs. est. $2.63/$6.95B; Q2 net charge offs $1.5B and provision for credit losses decreased 24% to $1.3B

· Discover Financial (DFS) raises quarterly dividend to 40c from 35c and approves new $3B share buyback plan

· State Street (STT) Q2 adjusted EPS $2.05 vs. est. $2.01

· Associated Banc-Corp (ASB) Q2 EPS 53c ex-items vs. est. 48c; YoY net interest margin of 3.02% improved 19 bps from 2.83%, and provision for credit losses was $4M, down from $12M

· Brandywine Realty (BDN) Q2 FFO 35c/$133.8M vs. est. 34c/$136.7M; sees FY FFO per share $1.35-$1.41 vs. estimate $1.36

· Everest Re (RE) said it expects to report 2Q net income, despite seeing 2Q charge for net reserve adjustments of about $250M, after tax, primarily due to hurricanes in 2017, and 2Q charge of about $25M, after tax, due to this year’s weather-related events

· First Financial (FFBC) Q2 EPS 37c vs. est. 52c; 2Q NIM on taxable-equivalent basis 4.15%

· Independent Bank (INDB) Q2 operating EPS $1.14 vs. est. $1.09; 2Q tangible book value per share $26.78; 2Q net interest income $73.2M and 2Q provision for loan losses $2M

· People’s United (PBCT) Q2 operating EPS 32c (in-line with ests.); Q2 net interest margin of 3.1%, expanded five basis points linked quarter and benefited from an increase in loan yields that continue to outpace the rise in deposit costs; acquires Vend Lease Company

· SEI Investments (SEIC) Q2 EPS 75c/$404.83M vs. est. 76c/$405.58M

· 1st Source (SRCE) Q2 EPS 84c vs. est. 84c; 2Q net interest margin 3.69% and 2Q return on average assets 1.43%

· Hartford Financial (HIG) raises quarterly dividend to 30c from 25c per share


· Intuitive Surgical (ISRG) Q2 EPS $2.76/$909M vs. est. $2.50/$877.56M; said shipped 220 da Vinci Surgical Systems compared with 166 in the second quarter of 2017

· PTC Therapeutics (PTCT) announced that it has entered into an agreement to acquire Agilis Biotherapeutics; will pay upfront consideration of $50M in cash and about $150M in PTC shares and potential future consideration includes $60M in development milestones

· Eli Lilly (LLY) and Incyte (INCY) announced that results of a global systemic lupus erythematosus, or SLE, Phase 2 study for baricitinib were published by The Lancet. The study, the first completed Phase 2 study of a JAK inhibitor in SLE, showed that a statistically significant proportion of patients treated with 4 mg of baricitinib achieved resolution of their SLE-related arthritis or rash compared to placebo at week 24, the primary endpoint for the trial

Industrials & Materials

· General Electric (GE) Q2 EPS 19c/$30.1B vs. est. 18c/$29.31B; still sees FY adjusted EPS $1.00-$1.07 vs. est. 95c and sees FY adjusted GE Industrial free cash flows of about $6B (from prior $6B-$7B)

· Honeywell (HON) Q2 EPS $2.12/$10.92B vs. est. $2.01/$10.8B; sees FY sales $43.1B-$43.6B up from prior view $42.7B-$43.5B (est. $43.11B) and sees FY adjusted EPS $8.05-$8.15, up from prior $7.85-$8.05 (est. $8.03)

· Celanese (CE) Q2 adjusted EPS $2.90/$1.84B vs. est. $2.45/$1.81B; sees FY18 adjusted EPS $10.50-$10.75 vs. est. $9.64; sees FY18 free cash flow greater than $1B; 2Q operating Ebitda $573M vs. Bloomberg est. $489.4M

· Exponent (EXPO) Q2 EPS 34c/$95.6M vs. est. 31c/$92.75M; tax rate decreased to 26.1% in Q2, as compared to 38.3% in same period last year

Technology, Media & Telecom

· Microsoft (MSFT) Q4 EPS $1.13/$30.1B vs. est. $1.08/$29.21B; Revenue in Productivity and Business Processes was $9.7B and increased 13%, or 10% in constant currency; Office commercial products and cloud services revenue increased 10%, up 8% in constant currency, driven by Office 365 commercial revenue growth of 38%, up 35% in constant currency said it sees 1Q Intelligent Cloud Rev. $8.15B-$8.35B, est. $7.95B and sees 1Q Productivity and Business Processes revs $9.25B-$9.45B, est. $9.27B

· Skyworks (SWKS) Q2 EPS $1.64/$894.3M vs. est. $1.60/$889.05M; raises quarterly dividend by 19% to 38c per share; sees Q4 EPS $1.91 on revs up 11%-13% or $992.7M-$1.01B vs. est. $1.87 and $996.13M; Q3 gross margins 50.9%

· Limelight Networks (LLNW) Q2 adjusted EPS 4c/$50.2M vs. est. 3c/$49.63M; backs FY18 adjusted EPS view 13c-17c vs. est. 15c and raises FY18 revenue view to $200M-$203M from $198M-$202M (est. $202.98M)

· comScore (SCOR) files to sell 24.82M shares of common stock for holders


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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