Morning Preview: September 11, 2018

Scott GreenDaily Market Report

Early Look

Tuesday, September 11, 2018

Stock futures are pointing to a lower open, tracking both European and Asian markets lower, as investors attention focused on trade deals between the U.S. and its counterparts, as well as the potential impact of several storms along the east coast that could cause severe damage and disrupt businesses. Trade continues to be a key topic after top trade officials from the U.S. and the EU reached no breakthrough Monday in Brussels on laying out a pact that would deliver on earlier agreement to avert an economic fight by slashing tariffs and boosting commerce. U.S. Trade Representative Robert Lighthizer and European Trade Commissioner Cecilia Malmström said they had a “constructive” and “forward-looking” encounter, but provided no details. In currency markets, the Australian dollar dips to 29-month low, greenback strengthens. The pound climbed to its highest level in more than a month on Tuesday, a day after markets welcomed comments from Michel Barnier that a Brexit deal could be struck within six to eight weeks. European equities opened little changed as mining shares slumped with metals and as investors eyed further trade conflict developments between the U.S. and China.

Stocks ended mostly higher Monday, with the S&P 500 and Nasdaq Composite snapping a four-day string of losses though the Dow industrials were unable to hold early gains, edging lower to post a second consecutive losing session. Treasury yields struggled for direction on Monday as traders awaited the latest in the U.S.-China trade battle. The 2-year Treasury note yield rose 0.8 bps to 2.715%, its highest since July 2008 while the 30-year bond yield fell 1.6 bps to 3.087%, and the 10-year note yield slipped to 2.935%. In Asian markets, The Nikkei Index gained 291 points to close at 22,664, the Shanghai Index slipped -4 points to settle at 2,664 and the Hang Seng Index lost -190 points to finish at 26,422. In Europe, the German DAX is off about -50 points at 11,930, while the FTSE 100is down around -40 points at 7,230.

Market Closing Prices Yesterday

· The S&P 500 Index climbed 5.45 points, or 0.19%, to 2,877.13

· The Dow Jones Industrial Average fell -59.47 points, or 0.23%, to 25,857.07

· The Nasdaq Composite gained 21.62 points, or 0.27%, to 7,924.16

· The Russell 2000 Index advanced 4.29 points, or 0.25% to 1,717.47

Events Calendar for Today

· 6:00 AM EST NFIB Small Business Optimism for Aug

· 7:45 AM EST ICSC Weekly Retail Sales

· 8:55 AM EST Johnson/Redbook Weekly Sales

· 10:00 AM EST JOLTS Job openings for July

· 10:00 AM EST Wholesale Inventories MoM for July

· 4:30 PM EST API Weekly Inventory Data

Earnings Calendar:

· Earnings Before the Open: FRAN, SKIS

· Earnings After the Close: FARM, STRM

Other Key Events:

· CLSA Investors Forum, 9/11-9/14 in Hong Kong

· Credit Suisse 31st Annual Basic Materials Conference, 9/11-9/13 in New York

World News

· Small-business sentiment climbed to a new record in August, the National Federation of Independent Business (NFIB) said Tuesday. The NFIB said its small-business optimism index rose 0.9 points to a seasonally adjusted level of 108.8, with advances in six of ten of the major components. The previous record was set 35 years ago

· The U.S. is working with France and the U.K. on plans for a coordinated military strike in Syria if the regime uses chemical weapons in an expected offensive against the country’s last major rebel haven, President Donald Trump’s national security adviser said

· Fed’s Bostic said once we get to neutral let’s stay there, see; trade tariffs could start to bind for businesses; inflation could start to pick up due to tariff impact; trade dispute causing uncertainty about future rules; businesses pausing investment until trade picture clear

Sector News Breakdown

Consumer

· Casey’s General Stores (CASY) Q1 EPS $1.90/$2.59B vs. est. $1.66/$2.58B; Q1 comps rose 0.5% vs. est. 2%; Fuel same-store gallons sold were up 0.5% with an average margin of 20.5c per gallon; Q1 grocery/Other Merchandise same-store sales were up 3.2% with an average margin of 32.4%; sees FY19 Fuel comps up 1.5%-3.0%

· Limoneira (LMNR) shares fell -15%; Q3 EPS 50c/$40M vs. est. 55c/$37.27M; narrows FY18 EPS view to 65c-70c from 65c-75c (est. 69c) and anticipates approximately 14c-18c per share fiscal year 2019 accretion from the recent acquisitions

· A Chinese consortium including Hillhouse Capital is planning to drop its pursuit of a takeover of Yum China Holdings Inc., (YUM) according to Bloomberg. The investor group, which also included KKR & Co. and China’s sovereign wealth fund, has decided not to continue pursuing a deal after its initial proposal was rejected. https://bloom.bg/2p4APiZ

· Unilever (UN) has detailed its plans to scrap its dual-listed structure, setting up a shareholder vote next month that will determine whether the consumer goods giant will move its headquarters

· Tesla (TSLA) was downgraded to neutral from buy at Nomura and tgt cut to $300 from $400 citing erratic behavior of CEO Elon Musk and says concerned it’s tainting the Tesla brand

· Nike (NKE) upgraded to Buy from Hold at Canaccord

· FirstCash (FCFS) announced two third quarter asset acquisitions for a total of 154 full-service pawn stores in Mexico

Energy, Materials and Industrials

· ArcelorMittal (MT) has raised its offer for India’s Essar Steel India Ltd. to about 420 billion rupees ($5.8 billion), reports Bloomberg, citing unnamed sources. https://on.mktw.net/2N4qm5b

· Hawaiian Airlines (HA) Aug. traffic rose 7.6%, load factor fell 1.8 points to 84.4% and August capacity rose 9.9%

· United Airlines (UAL) today reported August 2018 consolidated traffic (revenue passenger miles) increased 7.8% and consolidated capacity (available seat miles) increased 5.4% versus August 2017; August 2018 consolidated load factor increased 2.0 points compared to August 2017

· Matrix Service (MTXS) Q4 EPS 3c/$293.1M; sees FY EPS 85c-$1.15 on revs $1.25B-$1.35B vs. est. 94c/$1.25B

· NN, Inc. (NNBR) files to sell 12.5M shares of common stock

· ONEOK (OKE) to invest about $295 million to expand its West Texas LPG Limited Partnership pipeline system, which provides natural gas liquids takeaway capacity for Permian Basin producers

· Suncor (SU) downgraded to Neutral from Overweight at JPMorgan

Healthcare

· Avid Bioservices (CDMO) Q1 EPS loss (6c)/$12.59M vs. est. loss (9c)/$8.96M; reported $37.5M in cash and cash equivalents as of July 31, compared to $42.3M on April 30; sees FY19 revenue $51M-$55M vs. est. $54.2M

· A six-week review by the FDA of Akorn’s (AKRX) Somerset, New Jersey, facility found some of the same data integrity issues that were cited by Fresenius SE in its cancellation of the $4.3B buyout of the generic drugmaker, Bloomberg reports

· Endo (ENDP) upgraded to Neutral from Sell at Goldman Sachs

· Mallinckrodt (MNK) downgraded to Sell from Neutral at Goldman Sachs

· Endocyte (ECYT) announces $175M common stock offering

· Cross Country Healthcare, Inc. (CCRN) said that William J. Grubbs intends to retire as President and CEO when his contract expires at the end of March 2019 or, earlier if the board names a new CEO

· Insulet’s (PODD) Chief Operating Officer Shacey Petrovic will succeed Patrick Sullivan as CEO, effective January 1, 2019, the company announced in a statement. She will continue to serve as Insulet’s President

Technology, Media & Telecom

· Renesas Electronics Corp. will buy Integrated Device Technology Inc. (IDTI)for $6.7B, paying $49 a share, a 29.5% premium over yesterday’s closing price https://on.mktw.net/2Qr63NE

· Sonos (SONO) shares fell -13%; Q3 EPS loss (45c) on revs $208.4M vs. est. $207.8M; Q3 adjusted Ebitda loss $1.54M; sees FY18 revs $1.109B-$1.114B vs. est. $1.11B and sees FY18 adjusted Ebitda $59M-$62M

· Nutanix Inc. (NTNX) announced that it has closed the largest deal in its history. The deal with a Department of Defense agency is valued at more than $20 million. The agency will use Nutanix’s software to operate remote sites running two different networks

· Western Digital (WDC) downgraded to Sector Perform at RBC Capital on NAND pressure

· Snap Inc. (SNAP) upgraded to outperform from neutral at Wedbush

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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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