Morning Preview: September 19, 2018

Terrie AmengualDaily Market Report

Early Look

Wednesday, September 19, 2018

Stock futures are flat across the board, little changed most of the night as markets still ponder the potential impact of new tariffs announce by both the U.S. and China on the global economies. The dollar slid against major currencies while the yuan rose along with Chinese stocks, as the MSCI Asia equities gauge headed for its biggest gain since August. The pound surged after U.K. inflation accelerated. In Asian markets, The Nikkei Index rose 251 points to close at 23,672, the Shanghai Index jumped 30 points to finish at 2,730 (bouncing the last few days off near 4-year lows) and the Hang Seng Index gained 322 points to settle at 27,407. In Europe, the German DAX is up about 20 points at 12,180, while the FTSE 100 is flat around the 7,300 level. Bank of Japan Governor Haruhiko Kuroda on Wednesday stressed that he won’t pull the plug on monetary easing until inflation hits his 2% target.

U.S. stocks posted strong returns on Tuesday, erasing Monday losses as the Dow Jones Industrial Average closed up about 185 points (after rising as much as 240 points), or 0.7%, at 26,247, marking its best day since late August and moved within about 1.4% of its Jan. 26 record at 26,616.71. The S&P 500 index powered by strength in consumer-discretionary, industrials, materials and tech, while defensive sectors such as utilities, staples and REITs lagged. Stocks gained after China retaliated against the U.S. with plans for tariffs on an additional $60 billion of U.S. goods, following the Trump administration’s announcement of $200 billion in tariffs on Chinese imports overnight (both sets of duties will take effect on Sept. 24), but markets enjoyed the less-than-stringent retaliation by Beijing and the 10% start of duties from the U.S., which will escalate to 25% by year-end.

Market Closing Prices Yesterday

· The S&P 500 Index jumped 15.51 points, or 0.54%, to 2,904.31

· The Dow Jones Industrial Average rose 184.84 points, or 0.71%, to 26,246.96

· The Nasdaq Composite gained 60.32 points, or 0.76%, to 7,956.11

· The Russell 2000 Index advanced 7.42 points, or 0.44% to 1,710.97

Events Calendar for Today

· 7:00 AM EST MBA Mortgage Applications Data

· 8:30 AM EST Current Account Balance for Q2…est. (-$103.4B)

· 8:30 AM EST Housing Starts MoM for August…est. up 5.7% to 1.238M

· 8:30 AM EST Building Permits MoM for August…est. up 0.5% to 1.31M

· 10:30 AM EST Weekly DOE Inventory Data

Earnings Calendar:

· Earnings Before the Open: CPRT

· Earnings After the Close: MLHR, RHT

World News

· North Korea agreed to allow outside inspectors to visit its missile test site and said it would be open to decommissioning its nuclear-enrichment facility. The announcement follows the second of three days of talks in Pyongyang, Kim and South Korean President Moon Jae-in

· U.S. Net Long-Term Portfolio Securities Inflow (TIC) $74.8B in July as U.S. total cross-border investment inflows at $52.2B in July. China holds $1.17T of U.S. Treasuries, a decrease of $7.7B from last month while Japan holds $1.04T, an increase of $5.1B from last month; foreign net buying of Treasuries at $18.9B and foreign net selling of equities at $14.1B

· Japan’s trade deficit in August almost doubled from the previous month, on a surge in imports of crude oil and U.S. liquefied natural gas, Japan posted a trade deficit of 444.6 billion yen ($4.0 billion) in August, in line with an expected Y447.7 billion in a Nikkei survey. Japan’s trade surplus with the U.S. fell 14.5% from a year ago, due to a 21.5% jump in imports

· Investor Intelligence Poll shows newsletter writers classified as bulls remains elevated, rising to 59.0% from 57.7%; had been at 60.0% the prior week; those expecting a correction retreats to 22.9%, while bearish sentiment returned to 18.1% from 18.3% last week

· China won’t devalue the yuan to make its exports more competitive, Premier Li Keqiang said, even as the trade war escalates.

· The Bank of Japan rejected a shift toward the normalization of policy underway at the Fed and ECB, Haruhiko Kuroda said after the bank maintained its asset-buying programs, yield target and forward guidance for rates.

· U.K. inflation unexpectedly accelerated in August to 2.7% from a prior 2.5%, with the core reading picking up to 2.1% from 1.9%.

Sector News Breakdown


· The SEC subpoenaed material from Goldman and Silver Lake on their interactions with Tesla (TSLA), the NYT reported

· Nestle (NSRGY), Unilever (UN) and Coca-Cola (KO) are among bidders for GlaxoSmithKline’s (GSK) Indian Horlicks nutrition business, expected to fetch more than $4 billion, four people familiar with the matter said

· Scientific Games Corporation (SGMS) announced that Washington’s Lottery has extended the Company’s contracts for instant games, licensed brands and services. The largest instant game provider in the world, Scientific Games will design and produce instant games for the Lottery for an additional four years through March 2024.

· Kingfisher PLC (KGF.LN) said first-half pretax profit declined 30% due to weaker sales at its French businesses; for the six months ended July 31, the home-improvement retailer made a profit of 281 million pounds ($369.8 million) compared with GBP402M the same period a year earlier.

· Ferrari NV (RACE) plans to launch a series of special-edition models and a larger car to rival sport-utility vehicles as part of the Italian luxury-car maker’s drive to increase volume and double profit by 2022

· Delta Apparel (DLA) increased share repurchase authorization by $10M

Energy, Materials and Industrials

· The American Petroleum Institute (API) reported that U.S. crude supplies increased by +1.249M barrels for the latest week (which follows last week’s decline of -8.6M barrels); also showed supplies of gasoline declined -1.485M barrels, while distillate stockpiles climbed by 1.536M

· Oil services sector was upgraded to attractive at Morgan Stanley with overweight ratings on BHGE and $40 tgt, RIG and $15 tgt, HAL and $50 tgt, WHD and $42 tgt

· Comex front-month copper prices jumped 3% to $2.712/lb. on Tuesday for its largest one-day increase since April after the U.S. and China announced fresh tariffs that were less severe than some investors had feared

· Babcock International Group PLC (BAB.LN) said it remains on track to meet its previously downgraded full-year expectations, as the company sells off a number of smaller businesses; said it continues to expect “low single-digit underlying revenue growth” for its year ending March 31, 2019. Babcock cut its revenue guidance in July due to restructuring of its U.K. defense division

· China’s HNA Group is in talks with banks to find a buyer for its CWT logistics unit, nine months after it acquired the Singaporean business in a $1 billion deal, several people familiar with the matter told Reuters

· SunPower (SPWR) upgraded to outperform at Credit Suisse with $10 tgt


· Danske Bank said it had examined more than $200 billion in transactions at a negligent branch in the country of Estonia and concluded it suspected a “large portion” of it was money laundering, often from Russia. The CEO stepped down as a result of the year-long investigation.

· KPMG and one of its partners have admitted to serious failings in compliance reports for Bank of New York Mellon (BK), Britain’s accountancy watchdog said

· BGC Partners (BGCP) files automatic mixed securities shelf


· Bayer (BAYRY) urged a California judge to set aside a $289 million jury verdict, claiming there’s insufficient evidence its Roundup weed killer causes cancer. It also proposed the San Francisco verdict be modified.

· Argenx (ARGX) 3.48M share Secondary priced at $86.50

Technology, Media & Telecom

· Microsoft Corp (MSFT) announced new AI and mixed-reality applications for its Dynamics 365 online business software, putting to use its augmented-reality goggles HoloLens for businesses.

· Microsoft Corp. (MSFT) boosted its quarterly dividend by nearly 10% to 46c from 42c

· SAP SE (SAP) and Chinese internet giant Alibaba Group Holding Ltd. (BABA) plan to expand their partnership in online platform services, the two companies said. The companies plan to offer SAP’s online business-process-management software SAP S/4HANA and SAP Cloud Platform to customers of Alibaba’s cloud-computing business in China.

· ITT Inc. (ITT) files automatic mixed securities shelf


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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