Morning Preview: August 31, 2018

Terrie AmengualDaily Market Report

Early Look

Friday, August 31, 2018

U.S. stock futures are indicated lower on this final day of the month and week, as summer officially comes to an end with the S&P 500 and Nasdaq on track for fifth straight positive month. For the week, the Dow is up 0.8%, the S&P is up 0.9%, and the Nasdaq is up 1.8%. Looking at all of August, the Dow has gained 2.3%, the S&P has risen 3%, and the Nasdaq has climbed 5.4%. Both the Dow and the S&P are on track for their third straight weekly gain, while the Nasdaq is poised for its second straight positive week. In Asian markets, The Nikkei Index dipped -4 points to close at 22,865, the Shanghai Index fell-12 points to settle at 2,725 and the Hang Seng Index dropped -275 points to finish at 27,888. In Europe, the German DAX is down over -130 points at 12,360, while the FTSE 100 is down around -40 points at 7,475. Until yesterday, stocks had surged recently, propelled by stronger corporate earnings and a positive outlook on the U.S. economy. Recent gains had come on a belief that disagreements between the U.S. and its major trading partners may be easing (Mexico and Canada).

However, U.S. stocks sunk on Thursday, with the S&P 500 Index and Nasdaq Composite both snapping their 4-day winning streaks of record highs following a handful of global concerns weighing on the light volume session. The Nasdaq Composite managed an intraday record high above 8,133 before settling below the 8,100 level, while the Dow Industrial Average tucked back below the psychologically significant level of 26,000 for the first time this week. One key headline dragging markets late day came from a Bloomberg report indicating that President Donald Trump plans to impose $200 billion worth of tariffs on Chinese imports next week. The report said the import levies on Beijing could come once the deadline for public comment on the tariffs passes on Sept. 6, but that the president has yet to complete his decision. Those headlines caused a further decline in material and industrial stocks. Emerging markets also weighed on sentiment as the Turkish lira and Argentine peso tumbled vs. the US dollar raising fresh concerns on emerging economies.

Market Closing Prices Yesterday

· The S&P 500 Index dropped -12.91 points, or 0.44%, to 2,901.13

· The Dow Jones Industrial Average fell -137.65 points, or 0.53%, to 25,986.92

· The Nasdaq Composite slumped -21.32 points, or 0.26%, to 8,088.36

· The Russell 2000 Index declined -2.40 points, or 0.14% to 1,732.35

Events Calendar for Today

· 9:45 AM EST Chicago PMI for August…est. 63.0

· 10:00 AM EST University of Michigan Sentiment, Aug-F…est. 95.5

· 1:00 PM EST Baker Hughes Weekly Rig Count

World News

· Japan’s industrial production decreased in July, marking the third consecutive month it has declined, as industrial output fell 0.1% from a month earlier, following June’s 1.8% fall, and missing estimates for a 0.3% gain

· China’s factory activity rebounded slightly in August, as the official manufacturing purchasing managers’ index edged up to 51.3 in August from July’s 51.2, and was slightly above a median forecast of 51.1

Sector News Breakdown


· Lululemon (LULU) shares rose 10%; Q2 EPS 71c/$724M vs. est. 49c/$667.94M; Q2 total comparable sales increased 20%, or increased 19% on a constant dollar basis; sees Q3 EPS 65c-67c on revs $720M-$730M vs. est. 63c/$707.19M; sees Q3 SSS growth in the low teens; raises FY18 EPS view to $3.45-$3.53 from $3.10-$3.18 (est. $3.25 and ups revenue view to $3.185B-$3.235B from $3.04B-$3.075B (est. $3.09B); sees year total comp sales up in the low teens on constant dollar basis

· Ulta Beauty (ULTA) Q2 EPS $2.46/$1.488B vs. est. $2.41/$1.49B; Q2 comparable sales increased 6.5% vs. est. 6.9% and compared to an increase of 11.7% YoY; 6.5% comparable sales increase was driven by 3.1% transaction growth and 3.4% growth in average ticket; backs FY18 EPS growth view of low 20s range and backs FY18 revenue growth of low teens percentage range; guides Q3 EPS $2.11-$2.16 vs. est. $2.31

· American Outdoor Brands (AOBC) shares up +28%; Q1 EPS 21c/$138.8M vs. est. 12c/$134.53M; sees Q2 EPS 11c-15c on revs $150M-$160M above est. 8c/$143.26M; also raises FY19 adjusted EPS view to 62c-66c from 40c-50c and ups year revs to $620M-$630M from $570M-$600M

· Crocs (CROX) backs Q3 revenue view of $240M-$250M (est. $246.4M); says continues to expect Q3 Gross margin to be approximately 50 basis points above last year’s 50.8% rate

· Coca-Cola Co. (KO) said it would buy British coffee-shop chain Costa for $5.1 billion from London-listed Whitbread PLC, giving it a strong position in coffee across parts of Europe, Asia and the Middle East

· Big Lots (BIG) shares fall -5%; Q2 EPS 59c/$1.22B vs. est. 67c/$1.23B; Q2 comp sales up 1.6%; lowers FY18 EPS view to $4.40-$4.50 from $4.50-$4.70 (est. $4.57) while backs FY18 comparable store sales increase of approximately 1%; sees Q3 EPS (6c)-4c vs. est. 1c and sees Q3 comparable store sales up 2%-4%

Energy, Materials and Industrials

· PotlatchDeltic (PCH) authorizes special dividend of $3.54 per share

· Sanchez (Energy (SN) files to sell up to 10.46M shares

· Lumber futures fell as much as 2.8% yesterday to an 11-month low of $400

· Evonik Industries AG Friday it is selling its U.S. Jayhawk site in Galena, Kansas, as the company is focusing its business on specialty chemicals


· AstraZeneca PLC (AZN) and MedImmune, its global biologics research and development business, said Friday that a phase 3 trial for anifrolumab, which targets systemic lupus erythematosus, didn’t meet its primary endpoint of a statistically significant reduction in disease activity in patients with systemic lupus erythematosus.

· Cooper Companies (COO) Q3 EPS $3.00/$660M vs. est. $3.07/$653M; sees year EPS $2.90-$3.00 vs. est. $3.09; sees FY18 EPS $11.55-$11.65 on revs $2.515B-$2.530B vs. est. $11.81/$2.53B; sees Q4 EPS $2.90-$3.00 on revs $634M-$649M, below est. $3.09/$654.59M

· Veracyte (VCYT) announced that it has received a draft Medicare local coverage determination for the Envisia Genomic Classifier through the MolDx program. WPS Health Solutions posted a draft policy today, and the three other MACs that participate in the Palmetto GBA-administered MolDx program are expected to issue similar LCDs

· Merck & Co. Inc. (MRK) said the FDA has approved two new HIV-1 medicines, Delstrigo and Pifeltro. Delstrigo is a once-daily fixed-dose combination tablet of doravirine, lamivudine and tenofovir disoproxil fumarate, and Pifeltro is a new non-nucleoside reverse transcriptase inhibitor which is to be administered in combination with other antiretroviral medicines.

Technology, Media & Telecom

· Nutanix (NTNX) Q4 EPS loss (11c)/$303.7M vs. est. loss (21c)/$300.57M; sees Q1 EPS loss (28c)-(26c) on revs $295M-$310M vs. est. loss (22c)/$311.8M; Q4 billings $395.1M, up 37% YoY; sees Q1 Billings between $370M-$390M, implying software and support billings growth of 50-55% YoY; Bill-to-revenue ratio of approximately 1.26x; non-GAAP gross margin between 78% and 79%

· Ambarella (AMBA) shares fall -12% to new 52-week lows; Q2 EPS 25c/$62.5M vs. est. 13c/$62.14M; sees Q3 revenue $55.5M-$58.5M well below the est. $73.45M; firm said “while we are disappointed with our near term outlook, we remain confident that our decision to focus on computer vision applications in the IP security, automotive and robotics AI markets is the correct strategy and is already bearing fruit”

· Yext (YEXT) Q2 EPS loss (10c)/$55.1M vs. est. loss (11c)/$53.75M; raises FY19 adj. EPS view to (43c)-(41c) from (45c)-(43c) and ups its rev outlook to $226M-$228M from $225M-$227M (est. $226.49M); sees Q3 EPS loss (14c-12c) vs. est. loss (11c)

· A10 Networks (ATEN) Q2 adjusted EPS 2c/$60.7M vs. est. loss (2c)/$55.91M; co said they have made steady progress across our key initiatives including strengthening our team, increasing our pace of innovation, and targeting our R&D investments in cloud, security and 5G

· Zuora (ZUO) Q2 EPS loss (13c)/$57.8M vs. est. loss (16c)/$54.12M; sees Q3 EPS loss (14c)-(13c) on revs $58.3M-$59.3M vs. est. loss (12c)/$56.1M

· Ubisoft and Tencent (TCEHY) among names in video game space that declined overnight after plans by China’s regulators to curtail the number of online games and discourage play-time


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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