Morning Preview: August 15, 2018

Terrie AmengualDaily Market Report

***This will be the final Early Look note of the week. Early Look will return on Monday August 20th***

Early Look

Wednesday, August 15, 2018

 

U.S. stock futures are pointing to a sharply lower open, ahead of a busy morning of economic data reports and as markets continue to monitor the ongoing crisis in Turkey that has sent the Lira to all-time record lows and raised fears of contagion to some ECB banks. U.S. stocks closed Tuesday’s session solidly in the green, halting a multiday tumble for the three main equity benchmarks (and snapping the 4-day losing streak for the S&P 500 and Dow Industrials), as Turkey’s currency slide abated, allowing investors to focus instead on a healthy domestic economy and strong corporate results. In Asian markets, The Nikkei Index declined -151 points to settle at 22,204, the Shanghai Index plunged -57 points (over 2%) to close at 2,723, and the Hang Seng Index dropped -429 points to end at 27,323. In Europe, the German DAX is down about -20 points at 12,340, while the FTSE 100 is down over -40 points at 7,560, trying to snap its 4-day losing streak. Switching back to the U.S., markets will get a report on retail sales for July, the NY empire manufacturing report and both productivity and unit labor costs for Q2 at 8:30 AM EST, followed by an industrial production report at 9:15 AM EST and business inventories at 10:00 AM. There is also a weekly inventory report at 10:30 AM EST from the EIA, as oil prices slip overnight following a bearish inventory report from API. There are also a handful of notable earnings results, including Macy’s in retail and Dow component CSCO tonight.

Market Closing Prices Yesterday

· The S&P 500 Index jumped 18.03 points, or 0.64%, to 2,839.96

· The Dow Jones Industrial Average rose 112.22 points, or 0.45%, to 25,299.92

· The Nasdaq Composite spiked 51.19 points, or 0.65%, to 7,870.89

· The Russell 2000 Index advanced 17.26 points, or 1.03% to 1,692.58

 

Events Calendar for Today

· 7:00 AM EST MBA Mortgage Applications Data

· 8:30 AM EST Empire Manufacturing Index for August…est. 20.0

· 8:30 AM EST Nonfarm Productivity for Q2-P…est. 2.4%

· 8:30 AM EST Unit Labor Costs for Q2-P…est. 0.0%

· 8:30 AM EST Retail Sales MoM for July…est. 0.1%

· 8:30 AM EST Retail Sales ex-autos MoM for July…est. 0.3%

· 9:15 AM EST Industrial Production MoM for July…est. 0.3%

· 9:15 AM EST Capacity Utilization for July…est. 78.2%

· 10:00 AM EST Business Inventories for June…est. 0.1%

· 10:00 AM EST NAHB Housing Market Index for August…est. 67

· 10:30 AM EST Weekly DOE Inventory Data

· 4:00 PM EST Net Long term TIC flows for June

 

Earnings Calendar:

· Earnings Before the Open: LXFT, M, MSGN

· Earnings After the Close: CACI, CSCO, NTAP

 

Other Key Events:

· Wedbush PacGrow Healthcare Conference, 8/14-8/15, in New York

· Stephens Mid-Atlantic Bank trip 8/14, 8/15, in Washington DC

· Eurozone Trade Balance for June

 

Recap of some notable 13F filings released yesterday:

· Warren Buffett’s Berkshire exited VRSK from its investments and boosted stakes in AAPL, USB, TEVA, BK, DAL, GM, GS, LUV, AXTA, while cutting stakes in AAL, PSX, CHTR, UAL, WFC

· Bill Ackman’s Pershing Square Capital Management cut its position in ADP to 4.2 million shares at the end of June from 8.8 million shares at the end of March. Pershing has built a position in UTX of 4.5 million shares at the end of June and also upped its stake in MDLZ to 16.4 million shares versus 13.9 million shares previously, and built up a position in LOW of 7.7M shares

· Bridgewater Associates, added 84,629 shares of BABA to its holdings, as well as added to stakes in AMZN and BIDU while reducing stakes in BIIB, GME and PCG

· Carl Icahn started a few new positions over the last quarter and added to his stakes in Icahn IEP and HLF as well as NWL. Started new positions in AFSI, CI, EGN and DVMT and trimmed his stakes in LNG and XRX

· Marcato added IMAX Corp. to its investments along with CPLG, boosted stakes in TEX, THRM and cut stakes in IAC, ITRI, DXC, BLDR, AIR, TPHS, VRTS

· Maverick added DIS, AAOI, GPK, SPOT, ALNY, PRSP, COMM, CASY, GPS, TGT to its holdings in recent quarter, while exiting positions in TAP, SNAP, MGM, PM, LVS, CAR, WING, DPZ, ETSY, EAT; boosted stakes in DLTR, MA, CNC, TMUS, MHK, CIEN, BUD, MSFT, KORS, SCHW and reduced stakes in V, UHS, EVHC, DWDP, AMRX, ADBE, WTW, VFC, TIF, TPR

· Soros Fund Management LLC added FB and TWTR in latest quarter, but trimmed stakes in GOOGL and AMZN. Soros also bought stakes in T, CVX and TMUS while divested stakes in EBAY, NVDA, SNAP and PYPL. Other notable adjustments include paring stakes in NFLX, C, and WFC and boosting shares of P and CRM

 

Sector News Breakdown

Consumer

· Constellation Brands (STZ) will increase its ownership interest in Canopy Growth (WEED.CN) by acquiring 104.5 million shares for C$5.0B directly from Canopy Growth, thereby achieving 38% ownership when assuming exercise of the existing Constellation warrants

· Edward Lampert, the chief executive of Sears Holdings Corp. (SHLD) has offered to buy the company’s Kenmore brand for $400 million in cash, according to a letter Lampert sent to Sears’s board. https://on.mktw.net/2MOxxuq

· Destination Maternity (DEST) announced that David Stern, executive VP & CFO, has departed the company, effective August 10

· PetIQ (PETQ) Q2 EPS 16c on revs $171.1M; adjusted EBITDA of $15.8 million compared to $7.6 million in year-ago quarter

· Limbach Holding (LMB) Q2 EPS 9c/$139.5M vs. est. 30c/$130M; raises FY18 revenue view to $530-$550M from $520M-$540M and now sees FY18 adjusted EBITDA $20M-$24M

· YogaWorks (YOGA) shares fell -15%; Q2 adjusted net loss ($3.6M) vs. loss ($3.1M) last year, reports Q2 revenue $14.9M and adjusted EBITDA was ($1.4) million

 

Energy

· Diamondback Energy, Inc. (FANG) will acquire Energen (EGN) in an all-stock transaction valued at approximately $9.2 billion, including Energen’s net debt of $830M as of June 30, 2018.; deal for $94.95 per share, and will consist of 0.6442 shares of FANG shares https://bloom.bg/2nBbhsG

· Devon Energy (DVN) announced it has entered into a definitive agreement to sell 9,600 net acres of non-core Delaware Basin acreage in Ward and Reeves County to Carrizo Oil (CRZO) and Gas for $215M; CRZO also files to sell 9.5M shares of common stock

· Carrizo Oil & Gas (CRZO) 9.5M share Spot Secondary priced at $23.00

· The American Petroleum Institute (API) reported that U.S. crude supplies rose by 3.66 million barrels for the week ended Aug. 10, showed supplies of gasoline dropped 1.56 million barrels, while distillate stockpiles rose 1.94 million barrels

 

Financials

· Genworth Financial (GNW) and China Oceanwide Holdings Group to extend the previous deadline of August 15, 2018 to December 1, 2018 to allow additional time to complete the regulatory review process

· Capital One (COF) July credit card net-charge-offs 4.39% vs. 4.40% MoM, while July credit card delinquencies 3.46% vs. 3.32% in June and auto credit card charge-offs 1.64% vs. 1.59%

 

Healthcare

· Agilent (A) Q3 EPS 67c/$1.2B vs. est. 63c/$1.2B; raises FY18 adj. EPS view to $2.69-$2.71 from $2.63-$2.67 (est. $2.67) and raises FY18 revenue view to $4.86B-$4.88B from $4.85B-$4.87B (est. $4.88B)

· Endo International (ENDP) reports it’s lifting a temporary stay of litigation against the FDA following the launch of a bulk-compounded vasopressin product by Section 503B outsourcing facility.

· ViewRay (VRAY) 16.216M share Spot Secondary priced at $9.25

· Incyte Corp. (INCY) upgraded to outperform with $79 tgt at RBC Capital

· Mersana Therapeutics (MRSN) Q2 EPS loss (54c)/$4.19M vs. est. loss (58c)/$3.87M

· Strongbridge Biopharma (SBBP) files to sell 9M ordinary shares

 

Industrials & Materials

· Union Pacific (UNP) downgraded to Hold from Buy at Deutsche Bank and cut tgt to $162

· Norfolk Southern (NSC) upgraded to Buy from Hold at Deutsche Bank and upped tgt to $205

· Copper prices fell to their lowest level in over a year yesterday as the emerging market sell-off boosted the dollar and raised concerns about a hit to global economic growth

 

Technology, Media & Telecom

· Tencent (TCEHY) shares fell after Q2 net income 17.9 billion yuan missed the estimate 19.3 billion yuan as China regulatory uncertainties hurt the company’s ability to make money off its most popular gaming titles; note shares of Chinese ADRs HUYA, YY, fell yesterday after missed results; watch shares of BABA, JD (reports tomorrow) and BIDA on Tencent miss

· GoDaddy (GDDY) 10.399M share Spot Secondary priced at $75.75

· Cree (CREE) Q4 EPS 11c/$409M vs. est. 8c/$399.7M; sees Q1 EPS 10c-14c on revs $395M-$415M vs. est. 12c/$414.62M

· Viavi (VIAV) Q4 EPS 14c/$264M vs. est. 11c/$255.11M; sees Q1 adjusted EPS 12c-15c on revs $257M-$277M vs. est. 13c/$254.39M; CEO said looking ahead to fiscal 2019, we are optimistic on several macro industry trends that is expected to further drive revenue and profitability growth for VIAVI through increased Fiber-to-the-Home deployment, 5G wireless deployment and further adoption of 3D Sensing on mobile devices

· Casa Systems (CASA) shares fell -28%; lowers FY18 EPS view to 80c-88c from $1.08-$1.19 (est. $1.14) and sees FY18 revenue $330M-$350M vs. est. $390.57M

· InnerWorkings (INWK) Q2 EPS 1c/$281.97M vs. est. 3c/$285.18M; backs FY18 revenue view $1.155B-$1.19B and backs FY18 revenue view $1.155B-$1.19B

· IntriCon (IIC) files to sell 1.5M shares of common stock

 

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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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