Morning Preview: September 17, 2018

Scott GreenDaily Market Report

Early Look

Monday, September 17, 2018


Stock futures are edging lower, with Asian markets battered, led by a decline in the Hang Seng after a devastating typhoon hit Hong Kong, while the Shanghai index tumbled to its lowest levels since 2014. Reports that President Trump plans to announce new tariffs of about $200B on Chinese imports, according to the WSJ again pressures stocks. The tariff level will likely be set at about 10%, sources told the Journal, which is below the administration’s statements earlier this year of a 25% rate. Chinese officials were hoping a final decision on the new round of tariffs would be delayed until after the next round of high-level meetings. The WSJ also reported that the Chinese government may decline to participate in proposed trade talks with the United States later this month if the Trump administration moves forward with additional tariffs on imported Chinese goods. In Asian markets, The Nikkei Index was closed, the Shanghai Index dropped -29 points to settle at 2,651 and the Hang Seng Index fell -353 points to close at 26,932. In Europe, the German DAX is down around -50 points at 12,075, while the FTSE 100 is down around -20 points at 7,285. In the U.S. all mostly quiet over the weekend for stock markets outside of the rising trade tension news with China. Emerging-market stocks weakened and their currencies were led lower by led by a slide in India’s rupee (to a record low), Turkey’s lira and South Korea’s won. U.S. equities staged a late-day rally on Friday to close little changed after earlier sinking on reports President Trump instructed aides to proceed with tariffs on about $200 billion more in Chinese products. The dollar strengthened for the first time in three days and U.S. 10-year note yields briefly climbed past 3%. Silver led precious metals lower, falling to lowest level since January 2016. For the week the Nasdaq logged a 1.3% weekly advance, the Dow rose by 0.9% and the S&P 500 booked a weekly gain of 1.2%.

Market Closing Prices Yesterday

· The S&P 500 Index inched higher 0.80 points, or 0.03%, to 2,904.98

· The Dow Jones Industrial Average rose 8.68 points, or 0.03%, to 26,154.67

· The Nasdaq Composite dropped -3.67 points, or 0.05%, to 8,010.04

· The Russell 2000 Index advanced 7.40 points, or 0.43% to 1,721.72

Events Calendar for Today

· 8:30 AM EST Empire Manufacturing index for Sept…est. 23.0

World News

· China’s central bank said on Monday that it lent 265 billion yuan ($38.58 billion) to financial institutions via its one-year medium-term lending facility (MLF) with rates unchanged.

· UBS estimates there’s a 60% chance the Democrats take the House in November while Republicans maintain control in the Senate, “the most likely result of which will be gridlock,” Barron’s reported

· According to estimates from the Congressional Budget Office, debt held by Americans could swell to 96% of GDP from 78% now. To maintain the current ratio, $400 billion needs to be saved in the next year, rising to $690 billion annually over the next three decades

· A vote on Supreme Court nominee Brett Kavanaugh’s confirmation was thrown into doubt Sunday after Sen. Jeff Flake said he’s currently “not comfortable voting yes” following accusations from a California professor that Kavanaugh sexually assaulted her

Sector News Breakdown

Consumer

· Casino stock could be active (WYNN, LVS, MLCO, MGM) as Hong Kong was on lockdown and gambling was halted in Macau as Typhoon Mangkhut bared down on China’s Guangdong province. The storm killed at least 55 people in the Philippines. Almost 900 Hong Kong flights were canceled. Economic losses in Hong Kong and China could reach $50 billion

· H&M Hennes & Mauritz said a drive to revamp its business in the face of deteriorating profits and an inventory backlog had bolstered sales in the third quarter of the year

Energy, Materials and Industrials

· Cement and rock stocks should rise according to Barron’s as cities shore up infrastructure. Some such as Summit Materials (SUM) have slumped due to bad weather and political gridlock, but Summit would be worth 25% more, based on its average forward P/E multiple. Martin Marietta Materials (MLM) and Vulcan Materials (VMC) have also been able to acquire competitors

· Russian aluminum producer Rusal rallied after the US Treasury said it would allow customers to negotiate some new contracts with the company

· DowDuPont Inc. (DWDP) CEO Edward Breen will assume the top executive position at the specialty-products company that will be created next year as part of the conglomerate’s years long plan to split into three entities

· NiSource (NI): The series of deadly gas explosions and fires in three communities north of Boston last week occurred after too much natural gas was pumped into a section of pipe owned by Columbia Gas, causing the combustible fuel to leak into homes, authorities said Sunday.

· Emerson (EMR) received notification of an unsolicited “mini-tender” offer by Baker Mills, a Delaware limited liability company, to purchase 50,000 shares, or approximately .008%, of the outstanding common stock of Emerson at $61 per share. Baker Mills’ price is approximately 20.5% below Emerson’s NYSE closing price on August 31, the last trading day prior to the offer

Financials

· Insurers like Allstate (ALL), AIG (AIG) and Travelers (TRV) have declined more than 2% since Hurricane Florence began gathering strength in the past week, but the insured losses should be covered by industry earnings, Barron’s reported

· MasterCard (MA) added to conviction buy list at Goldman Sachs

Healthcare

· AstraZeneca PLC (AZN) said that a phase 3 trial of a three-drug combination for the treatment of chronic obstructive pulmonary disease met eight out of its main objectives.

· Pfizer (PFE) announced results from its Phase 2a study of PF-06651600 in patients with moderate to severe alopecia areata, an autoimmune disease characterized by hair loss and often associated with profound psychological consequences. Both JAK inhibitors met the primary efficacy endpoint in improving hair regrowth on the scalp

· ObsEva (OBSV) mentioned positively in Barron’s saying shares could be double its current price, at $30 per share; that’s factoring in a 50% jump from positive reactions to data trials and another 50% rise in the event of a takeover

· Regeneron Pharmaceuticals (REGN) and Sanofi (SNY) presented detailed results from a pivotal Phase 3 trial showing Dupixent monotherapy demonstrated a “significant improvement” in signs and symptoms of atopic dermatitis and certain quality of life measures in adolescent patients with moderate-to-severe atopic dermatitis

· Adamas Pharmaceuticals, Inc. (ADMS) announced that on September 13, 2018, Richard A. King, Chief Operating Officer of Adamas, informed Adamas that effective September 15, 2018, he will depart from his position as Chief Operating Officer for personal reasons

· VIVUS (VVUS) files $200M mixed securities shelf

Technology, Media & Telecom

· Amazon.com (AMZN) is investigating internal leaks as it fends off fake reviews and other seller scams, the Wall Street Journal reports, citing sellers who have been offered and purchased the data, brokers who provide it and people familiar with the company’s internal investigations

· Meredith Corp (MDP) said it entered into a definitive agreement to sell the Time media brand to Salesforce.com (CRM) CEO Co-Chairman Marc and Lynne Benioff for $190 million in cash. https://reut.rs/2xgieoj

· Indian e-commerce firm Flipkart Online Services Pvt Ltd is in early talks with Star India to buy a stake in Star’s video streaming service Hotstar, to expand into video content, the Mint daily reported https://reut.rs/2xjvGry

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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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