Morning Preview: August 23, 2018

Terrie AmengualDaily Market Report

Early Look

Thursday, August 23, 2018

Stock futures are flat, as markets await details from the central bank meeting in Jackson Hole the next two-days (Fed Chair Powell speaks tomorrow), while trade talks and tariffs remain a key topic. The United States and China escalated their trade war on Thursday, implementing punitive 25% tariffs on $16 billion worth of each other’s goods, even as mid-level officials from both sides resumed talks in Washington. Meanwhile, the U.S. dollar is higher, looking to snap its 6-day losing streak, moving specifically against both the British pound and the South African rand. Note the U.K. government on Thursday is expected to release the first round of documents detailing the expected impact of a “no-deal” Brexit — and parts of the big reveal already were featured in news reports. The rand fell against the dollar after U.S. President Donald Trump, in a tweet that quoted Fox News host Tucker Carlson, wrote that he had asked Secretary of State Mike Pompeo to “closely study the South Africa land and farm seizures and expropriations and the large scale killing of farmers.” Commodity prices are giving back recent gains, with gold back under $1,200 an ounce amid the dollar rebound. In Asian markets, The Nikkei Index rose 48 points to close at 22,410, the Shanghai Index gained 10 points to settle at 2,724 and the Hang Seng Index fell -137 points to settle at 27,790. In Europe, the German DAX is down around -15 points at 12,365, while the FTSE 100 is up a few points around 7,580.

Stocks ended mixed, as the Dow and S&P 500 snapped their recent 4-day win streaks, but still ended not far off their best levels in weeks as concerns about White House drama and a look at the FOMC minutes from the August meeting led the day’s action. The S&P 500 index finished the day mostly flat at 2,861, about 10 points of its all-time intraday high the day prior (last closing high was in January). Meanwhile, the Russell 2000 index posted its second consecutive record close. The moves came after the Fed indicated that it planned on hiking rates at least once more in 2018 and as soon as September, but acknowledged risks from normalizing post-crisis monetary policy. Fed members also said they were mindful of the potential economic impacts from tariff battles between the U.S. and global partners. All of that action came against the backdrop of former Trump campaign chairman Paul Manafort being found guilty on eight charges including tax fraud late Tuesday, and the president’s former lawyer Michael Cohen saying that he violated campaign-finance law at President Donald Trump’s direction.

Market Closing Prices Yesterday

· The S&P 500 Index slipped -1.14 points, or 0.04%, to 2,861.82

· The Dow Jones Industrial Average fell -88.69 points, or 0.34%, to 25,733.60

· The Nasdaq Composite gained 29.92 points, or 0.38%, to 7,889.10

· The Russell 2000 Index advanced 4.50 points, or 0.26% to 1,722.54

Events Calendar for Today

· 8:30 AM EST Weekly Jobless Claims…est. 215K

· 8:30 AM EST Continuing Claims…est. 1.73M

· 9:00 AM EST FHFA House Price Index for June…est. 0.3%

· 9:45 AM EST Markit US Manufacturing PMI, Aug-P…est. 55.0

· 9:45 AM EST Bloomberg Consumer Comfort Index…prior 58.9

· 10:00 AM EST New Home Sales MoM for July…est. 645K

· 10:30 AM EST Weekly EIA Natural Gas Inventory Data

· 11:00 AM EST Kansas City Fed Manufacturing Activity for Aug…est. 23

Earnings Calendar:

· Earnings Before the Open: BABA, CTRN, HRL, PLCE, SAFM, SPWH, SSI, TTC

· Earnings After the Close: ADSK, GPS, HPQ, INTU, ROST, SNPS, SPLK, VEEV, VMW

World News

· Bitcoin will likely be active as the SEC once again rejected applications for nine separate bitcoin-based exchange-traded funds on Wednesday, stopping an attempt to build an ETF product. The commission’s Division of Trading and Markets issued three orders late Wednesday, one for each of the applications, from the firms ProShares, Direxion and GraniteShares.

· The South African rand fell against the dollar after U.S. President Donald Trump, in a tweet that quoted Fox News host Tucker Carlson, wrote that he had asked Secretary of State Mike Pompeo to “closely study the South Africa land and farm seizures and expropriations and the large scale killing of farmers.”

Sector News Breakdown


· William Sonoma (WSM) shares rose 7%; Q2 EPS 77c/$1.28B vs. est. 68c/$1.26B; Q1 comp sales 4.6% vs. est. 4.1%; 2Q Pottery Barn comparable sales +2% vs. est.+1.5%, Q2 Williams-Sonoma comp sales +1.6% vs. est. +4.7%; raises FY18 EPS view to $4.26-$4.36 from $4.15-$4.25 (est. $4.24), raises FY18 revenue view to $5.565B-$5.665B from $5.495B-$5.655B (est. $5.62B) and raises FY18 comparable brand revenue growth view to 3%-5% from 2%-5%

· L Brands Inc. (LB) Q2 EPS 36c/$2.98B vs. est. 34c/$2.98B; Q2 comparable-store sales rose 3% in the quarter but the retailer cut its full-year 2018 profit guidance to between $2.45-$2.70 a share, down from $2.70-$3.00 a share previously; said that Denise Landman, CEO of Victoria’s Secret Pink brand, will retire at the end of the year. Amy Hauk, an executive at Bath & Body Works, will replace Landman as CEO of Pink

· Hormel (HRL) Q3 EPS 39c/$2.4B vs. est. 39c/$2.39B; backs FY18 EPS view $1.81-$1.95 (est. $1.86) and lowers FY18 revenue view to $9.4B-$9.6B from $9.7B-$10.1B (est. $9.71B)

· China Lodging (HTHT) Q2 EPS 28c/$381M vs. est. 25c/$362.51M; the average daily rate for all hotels in operation was RMB226 in Q2 vs. RMB199 in 2Q17 and RMB207 in the previous quarter

· Stein Mart (SMRT) Q2 EPS loss (2c) on sales $310.9M; Q2 Gross profit was $79.4M, or 25.5% of sales; sees fy18 Ebitda in excess of $45M

· Nordstrom Inc. (JWN) said it has authorized a share buyback program of up to $1.5 billion

Energy, Industrials and Materials

· Berry Petroleum (BRY) Q2 net income $9.2M and Q2 revenue $137.4M vs. est. $133.34M; production for the second quarter of 2018 averaged 26,500 Boe/d compared to 26,180 Boe/d in the first quarter

· Ryanair (RYAAY) and its Irish pilots’ union announced they had reached an agreement on a contested labor contract, potentially bringing an end to a protracted series of strikes

· Qantas Airways is mulling a larger version of the Airbus (EADSY) A350 as the jet maker and Boeing (BA) vie to connect Sydney and London in a non-stop 20-hour flight by 2022, Reuters reports


· Raymond James (RJF) said total securities commissions and fees of $376 million increased 13% over July 2017 and were flat compared to June 2018. The increase over July 2017 was driven by growth of Private Client Group assets in fee-based accounts. Record client assets under administration of $772.6 billion increased 14% over July 2017 and 2% over June 2018. Record financial assets under management of $138.5 billion increased 49% over July 2017


· Aduro Biotech, Inc. (ADRO) announced that the United States Patent and Trademark Office has issued a new composition of matter patent related to altered APRIL-binding antibodies. Granted claims cover BION-1301, Aduro’s first-in-class anti-APRIL antibody being evaluated in a Phase 1/2 dose escalation trial for the treatment of multiple myeloma

· AstraZeneca PLC (AZN) said that a phase IIIb clinical trial of its Bevespi Aerosphere drug combination for lung disease didn’t show it to be superior to an existing inhaler treatment.

· Novartis (NVS) said a phase 3 trial evaluating alpelisib has met the primary endpoint in improving progression-free survival for advanced breast cancer patients; the trial, called SOLAR-1, is evaluating BYL719, or alpelisib, in combination with fulvestrant

· Aetna (AET) downgraded to Neutral from Overweight at Cantor Fitzgerald

· Bluebird Bio (BLUE) and Gritstone Oncology enter a pact to research, develop and commercialize products for the treatment of cancer using cell therapy

· Medpace (MEDP) 5.225M share Spot Secondary priced at $55.50

Technology, Media & Telecom

· Synopsys (SNPS) Q3 EPS 95c/$779.7M vs. est. 92c/$773.61M; sees Q4 EPS 76c-80c on revs $774M-$804M vs. est. 71c/$764.05M; sees FY18 EPS $3.89-$3.93 on revs $3.1B-$3.13B vs. est. $3.81/$3.08B; sees cash flow from operations: $460M-$500M

· Zayo Group (ZAYO) Q4 EPS 18c/$657.6M vs. est. 9c/$655.94M

· Facebook Inc. (FB) said about 4 million users may have had their personal data misused by a third-party app. Facebook said it has banned myPersonality, an app that was mostly active prior to 2012, for failing to agree to an audit and for sharing data with researchers and companies

· Playtech PLC (PTEC.LN) said pretax profit increased in 1H’18, boosted by a credit from an investment which was slightly offset by higher costs; for the six months ended June 30, the gambling-software company made a pretax profit of 124.2 million euros ($143.6 million) compared with EUR91.4 million in the same period a year earlier


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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