Morning Preview: August 22, 2018

Terrie AmengualDaily Market Report

Early Look

Wednesday, August 22, 2018

U.S. stock futures move lower, pulling back from record highs yesterday after former Trump campaign chairman Paul Manafort late Tuesday was found guilty on eight charges including tax fraud, and the president’s former lawyer Michael Cohen said he violated campaign-finance law at President Donald Trump’s direction. Helping pare overnight losses are reports that the U.S. and Mexico moved closer toward a consensus on how to forge a new North American Free Trade Agreement (NAFTA) even though key hurdles remain, according to various reports, which helps clear the way for Canada to rejoin negotiations. Progress has been made during five weeks of discussions between the U.S. and Mexico on issues including rules for cars, but there’s no broader agreement on reshaping Nafta, two U.S. administration officials said Tuesday night. Oil prices are moving higher following bullish weekly inventory overnight, as the API reported a drawdown of over -5M barrels in the latest week (ahead of EIA data later this morning). Looking ahead, investors will be awaiting minutes from the Federal Open Market Committee’s most recent gathering for a quick read of monetary policy due at 2:00 PM EST today as well as the Jackson Hole gathering of central bankers later this week, highlighted by Fed Chairman Powell speaking on Friday.

As for yesterday, stocks advanced for a fourth day, sending the S&P 500 index, Russell 2000 Index, and Dow Transports to record intraday all-time highs, led by gains in consumer discretionary and industrials. Homebuilders paced gains as Toll Brothers reported an increase in contract signings and backlog that the company says set it up for further revenue and earnings growth into fiscal 2019. Discount online brokers (SCHW, AMTD, ETFC) were among the biggest decliners as JPM plans to roll out a mobile brokerage platform next week that includes free research and some free trading to its millions of retail customers. Positive corporate quarterly results, economic data and receding, at least for the moment, concerns about tariff disputes between the U.S. and major counterparts all helped to buoy stocks.

In Asian markets, The Nikkei Index gained 142 points to settle at 22,362, the Shanghai Index slipped -19 points to settle at 2,714 and the Hang Seng Index rose 174 points to close at 27,927. In Europe, the German DAX is up a few points holding under 12,400, while the FTSE 100 is up about 20 points at 7,590.

Market Closing Prices Yesterday

· The S&P 500 Index gained 5.91 points, or 0.21%, to 2,862.96

· The Dow Jones Industrial Average rose 63.60 points, or 0.25%, to 25,822.29

· The Nasdaq Composite jumped 38.17 points, or 0.49%, to 7,859.17

· The Russell 2000 Index advanced 19.35 points, or 1.14% to 1,718.05

Events Calendar for Today

· 7:00 AM EST MBA Mortgage Applications Data

· 10:00 AM EST Existing Home Sales MoM for July…est. 5.4M

· 10:30 AM EST Weekly DOE Inventory Data

· 2:00 PM EST FOMC Meeting Minutes

Earnings Calendar:

· Earnings Before the Open: ADI, BNED, LOW, PLAB, RBC, TGT

· Earnings After the Close: LB, SMRT, SNPS, ZAYO

Other Key Events:

· EnerCom Oil & Gas Conference, 8/19-8/22, in Denver, CO

· Piper’s 11th Annual MedTech & Diagnostics California Bus Tour, 8/21-8/22

World News

· Former Trump campaign chairman Paul Manafort was found guilty on eight charges including tax fraud. The charges against Manafort never directly touched the central issue that Mueller has been investigating, which is whether Donald Trump’s presidential campaign colluded with Russia

· President Trump’s former lawyer Michael Cohen said he violated campaign law at the direction of a candidate for federal office. Cohen also pleaded guilty to bank and tax fraud relating to loans he obtained for his taxi business

Sector News Breakdown


· Target Corp (TGT) shares rose 4%; Q2 EPS $1.47/$17.8B vs. est. $1.40/$17.31B; Q2 comp sales rose 6.5% vs. est. 3.9%; now expects higher year EPS and comp sales; sees year EPS $5.30-$5.50 vs. est. $5.29

· Lowe’s (LOW) shares fall -3%; Q2 EPS $2.07/$20.9B vs. est. $2.02/$20.78B; Q2 comp sales rose 5.2% vs. est. 5%; cuts FY18 EPS view to $4.50-$4.60 from $5.40-$5.50 (est. $5.45), cuts FY18 revenue view to up approximately 4.5% from about 5% and cuts its FY18 comp sales view to up approximately 3% vs. prior view of up about 3.5%; is also developing plans to aggressively rationalize store inventory

· Urban Outfitters (URBN) Q2 EPS 84c/$992.45M vs. est. 77c/$979.94M; Q2 comparable retail segment net sales increased 13%; by brand, comparable retail segment net sales increased 17% at Free People, 15% at Urban Outfitters and 11% at the Anthropologie Group in Q2.

· La-Z-Boy (LZB) shares rose 19%; Q1 EPS 39c/$384.7M vs. est. 25c/$370.5M; Written same-store sales for the entire La-Z-Boy Furniture Galleries® network increased 3.1%; delivered same-store sales for the company-owned retail segment increased 4.6%

· Red Robin (RRGB) Q2 EPS 46c/$315.4M vs. est. 49c/$317.4M; Q2 comparable restaurant revenue decreased (-2.6%) and comparable restaurant guest counts decreased 0.7%; backs FY18 EPS view of $1.80-$2.20 (est. $1.99) and backs FY18 revenue view $1.35B-$1.365B (est. $1.36B); said FY18 comparable restaurant revenue is projected to decrease 1.0% to 2.0% and expects comparable restaurant revenue to be in the lower end of this range in Q3

· Jack Henry (JKHY) Q4 EPS $1.10/$417.2M vs. est. 94c/$405.9M

· Continental AG (CON.XE) cut its 2018 sales and margin guidance due to currency effects, cost increases and warranty claims hitting results in the third quarter and the German auto supplier said these factors will also affect its Q4


· The American Petroleum Institute (API) reported that U.S. crude supplies fell by -5.2M barrels for the week ended Aug. 17, showed supplies of gasoline down -930,000 barrels, while distillate stockpiles rose 1.8 million barrels


· The Hartford Financial Services Group (HIG) agrees to buy Navigators Group (NAVG) for about $2.1 billion in cash to expand product offerings and geographic reach; NAVG holders to receive $70 per share, about a 9% premium to yesterday’s closing price

· LPL Financial LLC, a wholly owned subsidiary of LPL Financial Holdings (LPLA) released its monthly activity report for July 2018.Total brokerage and advisory assets served at the end of July were approximately $669B, a 1.5%increase compared to the end of June 2018. Total net new assets for July were an inflow of $0.4B

· M&T Bank (MTB) raises quarterly dividend 25% to $1.00 from 80c per share


· Myriad Genetics (MYGN) Q4 EPS 38c/$200.9M vs. est. 33c/$195.76M; sees Q1 adjusted EPS 28c-30c on revs $200M-$202M vs. est. 31c/$191.64M; sees FY19 adjusted EPS $1.70-$1.75 on revs $880M-$890M vs. est. $1.40/$781.46M

· Zoetis (ZTS) downgraded to hold from buy at Stifel

Industrials & Materials

· American Airlines Group (AAL) is planning to eliminate international flights from Chicago to Shanghai, Philadelphia to Munich and Los Angeles to Toronto among 11 total routes that will be cut later this year and early in 2019 as they are unsustainable amid increased fuel prices – WSJ

· The U.S. Commerce Department issues preliminary anti-dumping duties on large-diameter welded pipes from Canada, China, Greece, India, South Korea and Turkey, the department says in emailed statement; duties range from 3.5% to 132.6%

· Ferroglobe (GSM) Q2 EPS 14c/$583.0M vs. est. 19c/$608.91M; Q2 adjusted EBITDA $86.3M vs. $89.6M in Q1; reports share buyback of up to $20M

Technology, Media & Telecom

· Analog Devices (ADI) boosts stock buyback authorization by $2B (reports later this morning)

· Facebook Inc. (FB) removed 652 pages, groups and accounts engaged in a coordinated influence campaign ahead of the 2018 U.S. midterm elections; Facebook said the 652 pages and accounts originated in Iran, and that they had been flagged for “coordinated inauthentic behavior.”

· Pure Storage (PSTG) Q2 EPS 1c/$308.9M vs. est. loss (6c)/$301.3M; sees Q3 revenue $361M-$369M vs. est. $363M and sees Q3 non-GAAP gross margin in the range of 64.5% to 67.5%; raises FY19 revenue view to $1.35B-$1.38B from $1.32B-$1.37B (est. $1.36B) and sees FY19 Non-GAAP gross margin in the range of 65.5% to 67.5%; acquires StorReduce for undisclosed terms

· Keysight Technologies (KEYS) Q3 EPS 89c/$1.00B vs. est. 80c/$963.73M; sees Q4 EPS 85c-91c on revs $1.00B-$1.02B vs. est. 85c/$983.2M

· Super Micro Computer (SMCI) sees prelim Q4 EPS 75c-79c on revs $986M-$996M and reports preliminary Q4 gross margin 12.8%-13%

· Samsung Electronics unveiled its new CJG5 curved gaming monitor at Gamescom 2018, held from August 21 to 25

· Flex (FLEX) announced that it received shareholder approval to purchase up to 20% of its outstanding shares during its Annual General Meeting held on August 16.

· ScanSource (SCSC) announced the acquisition of Canpango, a longstanding Salesforce implementation and consulting partner; terms of the agreement were not disclosed

· Zynga (ZNGA) announced that it had inked a deal with Walt Disney Co. (DIS) for the rights to develop and publish a new “Star Wars” mobile game under its NaturalMotion studio


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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