Morning Preview: July 23, 2018

Scott GreenDaily Market Report

Early Look

Monday, July 23, 2018

Stock futures are down slightly to start the week as markets once again must digest political uncertainties (strong warning to Iran) and prepare for the busiest week of quarterly earnings, with around 180 of the 500 S&P companies expected to report this week. Overnight, President Donald Trump lashed an all-caps tirade against Iranian President Hassan Rouhani on Sunday night, warning him never to threaten the U.S. — or else. “NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!” Trump tweeted. Trump’s tweet came hours after Rouhani warned Trump not to pursue a hostile policy toward Iran, saying that “war with Iran is the mother of all wars.” The comments are lifting crude oil prices with WTI crude back above $69 per barrel, while sending stocks lower. Meanwhile, finance ministers and central bankers from the Group of 20 made little progress on trade tensions at a weekend meeting in Buenos Aires.

As for last week, stocks ended little changed despite the first week of quarterly earnings and renewed fears of trade wars with counterparts. The Nasdaq and S&P were mostly unchanged for the week, while the Dow Industrials booked a small 0.1% gain for the week, up for a third straight week. The 10-year Treasury note yield ended near the highs of the week on Friday, closing at 2.886%, up nearly 4 bps while the 2-year note yield slipped to 2.591%, and the 30-year bond yield climbed 5.6 basis points to 3.023%, marking its highest level this month.

In Asian markets, The Nikkei Index dropped-300 points to settle at 22,396, the Shanghai Index rose 30 points to close at 2,859 and the Hang Seng Index gained 31 points to end at 28,256. In Europe, the German DAX is down about -20 points at 12.540, while the FTSE 100is down around -30 points at 7,650.

Market Closing Prices Yesterday

· The S&P 500 Index slipped -2.66 points, or 0.09%, to 2,801.83

· The Dow Jones Industrial Average fell -6.38 points, or 0.03%, to 25,058.12

· The Nasdaq Composite dipped -5.10 points, or 0.07%, to 7,820.20

· The Russell 2000 Index declined -4.50 points, or 0.26% to 1,696.81

Events Calendar for Today

· 8:30 AM EST Chicago Fed Nat Activity Index for June

· 10:00 AM EST Existing Home Sales for June MoM

Earnings Calendar:

· Earnings Before the Open: BOH, D, HAL, ITW, LII, NTGR, OPB

· Earnings After the Close: AMTD, BRO, CDNS, CR, GOOGL, HXL, KALU, MC, SANM, STLD, WHR, ZION

World News

· Russian and Syrian jets stepped up their bombing of an Islamic State bastion along the Jordan-Israel border in southwestern Syria, as the militants pushed into areas abandoned by other rebel groups, diplomatic and opposition sources said – Reuters

· Prominent Republican U.S. senators Marco Rubio and Lindsey Graham said on Sunday that the United States needs to prepare new sanctions against Russia to discourage interference in upcoming elections.

· The People’s Bank of China injected Rmb502B ($74B) of cash into the banking system on Monday morning through loans to commercial banks

Sector News Breakdown


· Cal-Maine Foods (CALM) Q4 EPS $1.48/$443.1M vs. est. $1.47/$455.77M

· Hasbro (HAS) Q2 EPS 48c/$904.05M vs. est. 30c/$838.09M; Q2 operating profit margin of 9.7%; says Q2 revenues negatively impacted by the liquidation of Toys “R” Us; 2Q Franchise Brands rev. -8%, 2Q Partner Brands rev. -10%, 2Q Hasbro Gaming rev. 0%, 2Q Emerging Brands rev. -1%

· Walgreens Boots Alliance (WBA) downgraded to Market Perform from Outperform at Cowen

· Papa John’s International Inc.’s (PZZA) board members voted to adopt a “poison pill” on Sunday to prevent its controversial founder from gaining a controlling interest in the pizza chain, according to people familiar with the matter.

· Automotive spinoffs offer exposure to autonomous, electric future according to Barron’s noting last month, Autoliv (ALV) completed a spinoff of Veoneer (VNE), which will make active safety systems that use lasers, cameras, and artificial intelligence to prevent accidents. In December, Delphi Automotive did the reverse, spinning off its out-of-fashion engine components into Delphi Technologies (DLPH), while keeping advanced electronics and active safety operations, and changing its name to Aptiv (APTV).

· The Board of Directors of Ferrari (RACE) said it has learned during its meeting today that Chairman and CEO Sergio Marchionne will be unable to return to work. The Board has named John Elkann as Chairman and will propose to shareholders, at a meeting to be called in the coming days, that Louis Camilleri be named as CEO

· Tesla Inc. (TSLA) has asked some suppliers to refund a portion of what the electric-car company has spent previously, an appeal that reflects the auto maker’s urgency to sustain operations during a critical production period. Tesla said it is asking its suppliers for cash back to help it become profitable, according to a memo reviewed by the WSJ


· Asset managers BlackRock (BLK), T. Rowe Price (TROW) look like bargains according to Barron’s saying with shares of many investment managers showing double-digit percentage losses so far this year, it might be time to reconsider as valuations are depressed across industry, and the stocks offer attractive dividend yields

· Old National Bancorp (ONB) Q2 adjusted EPS 29c vs. est. 26c; Q2 Net interest margin on a fully taxable equivalent basis was 3.55% compared to 3.45% a year ago; return on average equity was 8.06% and return on average tangible common equity was 14.28%


· LifePoint Health Inc. (LFPT) shares surged more than 35% in after-hours trading Friday after a report that private-equity firm Apollo Global Management LLC is in talks to buy the firm. Reuters reported that Apollo “is in advanced talks” to buy the firm at a valuation that could hit $6 billion, including debt, citing unnamed sources

Industrials & Materials

· China’s Commerce Ministry said on Monday it has launched an anti-dumping probe into imports of stainless steel billet and hot-rolled stainless-steel sheet and plate from the European Union, Japan, South Korea and Indonesia.

· Cleveland-Cliffs (CLF) upgraded to Overweight from Neutral at JPMorgan

· Shares in Russian aluminum producer Rusal jumped to a three-month high on Monday after US Treasury secretary Steven Mnuchin suggested the US was open to finding a solution to sanctions placed on the company

Technology, Media & Telecom

· Atos SE of France has struck a $3.4 billion deal to buy Syntel Inc. (SYNT)saying it plans to pay $41 a share in cash for the company; including assumed net debt, the deal values Syntel at $3.57B

· Alibaba (BABA) and Tencent (TCEHY) are involved in talks to buy a minority stake in WPP’s (WPP) Chinese unit, according to Reuters, citing Sky News. Companies are said to be in early stage discussions about buying about 20% of WPP China in a deal that would value the business between $2B-$2.5B

· Discussions regarding a $1B merger between Verint Systems’ (VRNT)security division and Israeli cyber-surveillance company NSA Group have fallen apart, Reuters reports, citing a source familiar with negotiations

· Netgear (NTGR) Q2 non-GAAP EPS 57c/$366.8M vs. est. 51c/$350.6M; Netgear sees Q3 revenue $380M-$395M vs. est. $396.81M; says Q3 GAAP operating margin is expected to be in the range of (2.2)%-(1.2)%

· Arista Networks (ANET) announced its Any Cloud hybrid cloud networking platform, which reduces operational costs and complexity for enterprises migrating workloads to the public cloud from their on-premises datacenters, is now available on Google Cloud Platform

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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