Morning Preview: September 18, 2018

Scott GreenDaily Market Report

Early Look

Tuesday, September 18, 2018

U.S. stock futures are moving higher, erasing overnight declines as President Donald Trump confirmed prior reports that the U.S. will impose additional tariffs on about $200B of Chinese imports at 10%, taking effect in about a week and will rise to around 25% by year’s end if an agreement can’t be reached. The talk of more tariffs yesterday sent stocks lower as the S&P 500 index fell -0.6% on Monday, snapping five consecutive days of gains while the Dow Industrials snapped a 4-day win streak. However, despite the confirmation overnight, markets are taking it all in stride thus far, as Asian markets bounced back with Japan’s Nikkei reopening (from holiday) to gains and posts the highest level in months, while the Shanghai index bounces off nearly 4-year low levels. In corporate news, shares of Fed-Ex and Oracle both slipped overnight following quarterly earnings results.

Last night it was confirmed that the Trump administration will impose tariffs on about $200 billion in Chinese goods as part of its campaign to pressure Beijing to change its commercial practices, further escalating trade tensions between the two. The 10% tax on Chinese imports will take effect on Sept. 24 and will rise to 25% at the end of the year, according to administration officials. The tariffs will affect thousands of goods, confirming prior reports on Monday. Once the new measures take effect, Trump will have imposed tariffs on nearly half of the Chinese goods imported to the U.S., which last year were valued at $505 billion. China said it has no choice but to retaliate against new U.S. trade tariffs, raising the risk that President Trump could soon impose duties on virtually all of the Chinese goods that America buys. In Asian markets, The Nikkei Index reopened for trading after holiday, rising 325 points to settle at 23,420, the Shanghai Index gained 48 points (or 1.8%) to settle at 2,699, bouncing off nearly 4-year lows, while the Hang Seng Index gained 151 points to close at 27,084. In Europe, the German DAX is up over 20 points at 12,125, while the FTSE 100 is up a few points holding above 7,300.

Market Closing Prices Yesterday

· The S&P 500 Index dropped -16.18 points, or 0.56%, to 2,888.80

· The Dow Jones Industrial Average fell -92.55 points, or 0.35%, to 26,062.12

· The Nasdaq Composite sunk -114.25 points, or 1.43%, to 7,895.79

· The Russell 2000 Index declined -18.17 points, or 1.06% to 1,703.55

Events Calendar for Today

· 7:45 AM EST ICSC Weekly Retail Sales

· 8:55 AM EST Johnson/Redbook Weekly Sales

· 10:00 AM EST NAHB Housing Market Index for Sept

· 4:00 PM EST Net Long-term TIC flows for July

· 4:30 PM EST API Weekly Inventory Data

Earnings Calendar:

· Earnings Before the Open: APOG, AZO, CBRL, GIS

· Earnings After the Close: None

World News

· The Trump administration will impose tariffs on about $200 billion in Chinese goods as the 10% tax on Chinese imports will take effect on Sept. 24 and will rise to 25% at the end of the year

· British Prime Minister Theresa May told the BBC that U.K. members of parliament must choose between her outline for a controversial deal with Brussels on exiting from the European Union or no deal at all. In an interview with the BBC’s Panorama program that aired Monday, May said that if parliament doesn’t ratify her plan, known as the Chequers plan, “I think that the alternative to that will be having no deal.

Sector News Breakdown

Consumer

· The European Union’s antitrust body said it opened an investigation into “possible collusion” between German car manufacturers BMW AG, Daimler AG (DDAIF) and Volkswagen AG (VLKAY) to limit the development of less-polluting technology.

· Nestlé (NSRGY) today announced that it agreed to sell the Gerber Life Insurance Company, to Western & Southern Financial Group for USD 1.55 billion in cash. https://reut.rs/2xkyG6Y

· Brazil’s Natura Cosmeticos SA recently approached Avon Products Inc. (AVP) about a takeover, according to people familiar with the matter. The companies aren’t in serious talks and Avon, which has received other expressions of interest, is focused on turning itself around and reviving its shares, one of the people said. https://on.mktw.net/2NhQ9am

· Ferrari (RACE) revises its 2022 adjusted Ebitda target to EU1.8B-EU2B, sending shares lower

· Danish jeweler Pandora (PANDY) jumped as much as 10% following a media report that private equity funds are studying a potential takeover bid. https://reut.rs/2pif7bm

· Apogee Enterprises (APOG) Q2 adjusted EPS 75c/$362.1M vs. est. 84c/$360M; lowers year EPS view to $3.13-$3.33 from $3.48-$3.68 vs. est. $3.53 and cuts FY19 revenue growth view to 8%-10% from approximately 10%

Energy, Materials and Industrials

· Fed-Ex (FDX) Q1 EPS $3.46/$17.1B vs. est. $3.80/$16.87B; said is unable to forecast the FY19 year-end mark-to-market (MTM) retirement plan accounting adjustments; has increased its fiscal 2019 EPS outlook and to $17.20-$17.80, up from prior $17.00-$17.60 while reaffirms its other financial targets for the year: of revenue growth of approximately 9%, Operating margin of approximately 7.9%; and operating margin of approximately 8.5% excluding TNT Express integration expenses; sees FY capital spending of $5.6 billion.

· Univar to buy Nexeo (NXEO) in cash and stock deal valued at about $2 billion, including the assumption of Nexeo’s debt, or $11.65 per share; deal to be accretive to Univar adj. EPS in full year after closing. Univar has hired an external advisor to evaluate strategic alternatives for Nexeo’s industry leading Plastics business, which may include a potential divestiture of the business https://on.mktw.net/2NJpm6n

· Steel Dynamics (STLD) said it sees Q3 EPS $1.64-$1.68 vs. est. $1.67 as profitability from the company’s steel operations is expected to continue to improve from the strong second quarter results, based on strong underlying demand and meaningful metal spread expansion

· Twin Disc (TWIN) files to sell $30M in common stock

Financials

· Visa (V), MasterCard (MA) and U.S. financial institution defendants have agreed to settle and resolve class claims in multi-district U.S. merchant interchange litigation with a proposed settlement amount of about $6.2 billion

· Marsh & McLennan Companies Inc (MMC) has agreed to buy Jardine Lloyd Thompson (JLT.LN) for about 4.3 billion pounds ($5.7 billion) as the U.S. financial services group looks to boost its specialty risk broking and global reinsurance business https://reut.rs/2PK4ysE

· On Deck Capital (ONDK) requests withdrawal of registration statement

Healthcare

· Paul Singer’s Elliott Management has backed away from its $160-a-share bid for Athenahealth (ATHN), The NY Post has learned. At the same time, other suitors — including some strategic companies that had made initial inquiries — have also gone quiet https://nyp.st/2D5jAYl

· Acceleron (XLRN) upgraded to Overweight from Neutral at Piper Jaffray and raise tgt to $75

· G1 Therapeutics (GTHX) files to sell 3M shares of common stock

· Universal Health (UHS) upgraded to buy from neutral at Bank America

· Express Scripts (ESRX) downgraded to Neutral from Outperform at Credit Suisse

Technology, Media & Telecom

· Oracle (ORCL) Q1 EPS 71c/$9.2B vs. est. 68c/$9.26B; Q1 short-term deferred revenues were up 2% to $10.3B; Q1 cloud revs $6.61B vs. some estimates around $6.68B, service revs $813 million and hardware revenue $904 million; 1Q adjusted operating margin +41%; raises share repurchase authorization by $12B

· Splunk (SPLK) to offer $1.7B of convertible senior notes in private placement

· Eros International (EROS) files to sell 3.11M A ordinary shares for

· Presidio (PSDO) files to sell 3M shares of common stock for Apollo affiliates

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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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