Morning Preview: July 30, 2018

Scott GreenDaily Market Report

Early Look

Monday, July 30, 2018

Stocks futures are mixed as the S&P 500 index is on course for a third losing session in a row after stocks fell sharply late last week. On Friday, the Dow snapped its three-day winning streak, while the S&P and Nasdaq both fell for a second-straight session given weaker earnings results from energy giants and Dow component Chevron and Exxon, as well as disappointing revenue and user data from Twitter. The news in the social media space followed soft results from Facebook the night prior, sending shares down 20% along with delay concerns from Dow component Intel in its earnings report, making it a rough week for technology stocks. For the week, both the Dow, S&P 500 posed their fourth straight weekly rise, while the Nasdaq logs its second straight weekly fall, finishes the session down 1.5% on Friday. Markets prepare for another very busy week of corporate earnings including Dow component Caterpillar later this morning. With two days left in July, the three gauges are showing healthy gains for the month. The S&P is up 3.7% for the month to date, representing its largest such rise since January, while the Dow and Nasdaq are higher by 4.9% and 3%, respectively.

In macro news: President Donald Trump said he would allow the federal government to shut down if Democrats do not fund his border wall and back immigration law changes. Chinese Foreign Minister Wang Yi said his country would be willing to resume trade negotiations with the U.S. if the Trump administration took a less combative approach to talks. The Bank of Japan is expected to hold rates unchanged on Tuesday, but there is increasing speculation that it may change its policy on equity purchases. In Asian markets, The Nikkei Index dropped -167 points to settle at 22,544, the Shanghai Index dipped -4 points to close at 2,869 and the Hang Seng Index slipped -71 points to close at 28,733. In Europe, the German DAX is down about -30 points at 12,830, while the FTSE 100 is down about -20 points at 7,680.

Market Closing Prices Yesterday

· The S&P 500 Index dropped -18.62 points, or 0.66%, to 2,818.82

· The Dow Jones Industrial Average fell -76.01 points, or 0.30%, to 25,451.06

· The Nasdaq Composite plunged -114.77 points, or 1.46%, to 7,737.42

· The Russell 2000 Index declined -32.02 points, or 1.89% to 1,663.34

Events Calendar for Today

· 10:00 AM EST Pending Home Sales MoM for June…est.0.2%

· 10:30 AM EST Dallas Fed Manufacturing Activity for July…est. 31.0

Earnings Calendar:

· Earnings Before the Open: BAH, BLMN, CAT, CRCM, FDC, KBR, L, ON, SPG, STX

· Earnings After the Close: AEIS, AKS, ALSN, AVB, BKI, BLKB, CGNX, CHGG, EFII, IDTI, ILMN, KLAC, MX, OMF, RE, RIG, RMBS, RRC, SBAC, SPWR, TNDM, TNET, TXRH, UDR, UNM, VNO

World News

· President Donald Trump said he would allow the federal government to shut down if Democrats do not fund his border wall and back immigration law changes, betting that maintaining a hard line will work in Republicans’ favor in November elections, according to Reuters

· Mortgage approvals for house purchases hit a five-month high in June as the UK housing market recovers from a weak start to the year

· Wildfires spread across California on Sunday, forcing officials to extend the closure of the famed Yosemite Valley by another week and maintain evacuations for thousands of people further north around Redding where the death toll climbed to at least six.

Sector News Breakdown

Consumer

· Walmart (WMT) is exploring a subscription video streaming service that would seek to challenge Netflix (NFLX) and Amazon.com (AMZN) by offering programming that targets Middle America, the WSJ reported

· British betting group GVC Holdings Plc, which owns the Coral, Ladbrokes and Sportingbet brands, said on Saturday it was in advanced talks about a joint venture with U.S. hotel and casino operator MGM Resorts (MGM). Broadcaster Sky News reported that GVC and MGM Resorts – best known for Las Vegas brands such as the MGM Grand and Bellagio – would each put in an initial $100 million as part of a 50:50 joint venture https://reut.rs/2NSP9oY

· Fiat Chrysler (FCAU) positive mention in Barron’s saying Sergio Marchionne, who died last week due to illness, left Fiat Chrysler on road to “great prosperity,” noting it is expected to grow earnings faster than its U.S. rivals in coming years, traded at 4.5 times this year’s earnings forecast, making it 75% cheaper than the broad S&P 500 index

· German carmaker BMW said it will raise the prices of two U.S.-made crossover sport-utility vehicles in China to cope with the additional cost of tariffs on U.S. car imports – Reuters

· Eagle Materials (EXP) Q2 EPS$1.38/$393.8M vs. est. $1.56/$403M

Energy

· Diamond Offshore (DO) Q2 EPS loss (33c)/$268.86M vs. est. loss (38c)/$279.63M

· Vermilion Energy (VET) Q2 EPS loss (45c), Q2 FFO $1.43. Q2 production increased by 15% from the prior quarter to 80,625 boe/d; raises FY18 CapEx view to $500M from $430M and backs FY18 production 86,000 to 90,000 boe/d

· U.S. Energy (USEG) files $100M mixed securities shelf

Financials

· Visa (V) files automatic mixed securities shelf

· Loews (L) Q2 EPS 72c vs. est. 73c; Q2 book value per share increased to $59.72 at June 30 from $57.83 at December 31, 2017; Q2 book value per share excluding accumulated other comprehensive income increased to $61.69 at June 30 from $57.91 at December 31, 2017

· American Express’ (AXP) foreign-exchange international payments department routinely raised conversion rates without notifying customers in an effort to increase revenue and employee commission since at least 2004 – WSJ

· Synchrony Financial (SYF) downgraded to Equal Weight at Barclays and lower price target for the shares to $32 from $53

Healthcare

· Eli Lilly (LLY) positive mention in Barron’s saying it commands one of the pricier valuations among its large-cap pharmaceutical peers, bolstering its case for a premium valuation with a strong second-quarter earnings report

· Dova Pharmaceuticals (DOVA) files $300M mixed securities shelf

· Galectin Therapeutics (GALT) files to sell 7.45M shares of common stock for holders

· Cooper Companies (COO) upgraded to Overweight from Sector Weight at KeyBanc

Industrials & Materials

· EuroChem Group AG, a maker of nitrogen and phosphate fertilizers, is getting into the potash-mining business, in a move that could shake up a market dominated by a handful of producers in North America and the former Soviet Union (watch NTR, CF, MOS) https://on.wsj.com/2NV5469

· Norfolk Southern (NSC) increases quarterly dividend 11% to 80c from 72c

· Triton International (TRTN) mentioned positively in Barron’s saying an 18% drop this year provides a buying opportunity for the largest shipping container-leasing company with steady cash flows and earnings expected to climb 52% percent this year

· KBR (KBR) reports revenue growth of 16% in Q2, driven by strong organic growth of 11% in GS business segment, the consolidation of acquired entities in the Aspire Defense program and acquisition of SGT; raises FY18 adj. EPS view to $1.40-$1.50 from $1.35-$1.45 (est. $1.39)

Technology, Media & Telecom

· Facebook (FB) positive mention in Barron’s saying shares looks like a bargain after its recent tumble given its rarity and the company’s strong balance sheet; notes the bearish argument is that Facebook is peaking, as user growth slows and expense growth outpaces revenue gains, but it remains a powerful platform, with 1.5B daily users and no major competitor

· ON Semiconductor (ON) Q2 adjusted EPS 46c/$1.46B vs. est. 45c/$1.43B; sees Q3 revenue $1.49B-$1.54B vs. est. $1.48B; sees Q3 adjusted gross margin 38.1%-39.1%

· AT&T (T) upgraded to Buy from Neutral at Bank America

· Juniper (JNPR) upgraded to Buy from Hold at Deutsche Bank

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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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