Morning Preview: September 20, 2018

Terrie AmengualDaily Market Report

Early Look

Thursday, September 20, 2018

Stocks futures are steadily higher while Treasury yields remain elevated as the 10-year holds around 3.07% though the dollar remains pressured. European and Asian shares advanced. The Nikkei Index finished little changed at 23,674, rising 2 points, the Shanghai Index slipped -1 point to 2,729 and the Hang Seng Index gained 70 points to close at 27,477. In Europe, the German DAX is up around 50 points at 12,260, while the FTSE 100 is up about 15 points at 7,350. The Stoxx 600 advanced for a fifth straight day, heading for its longest winning streak since July. Today on the economic agenda, weekly jobless claims, the Philly Fed Survey and Existing Home sales data, while oil prices climb further ahead of the oil minister meeting this weekend in Algeria.

U.S. stocks finished mixed on Wednesday with the Dow Jones Industrial Average and the S&P 500 index closing not far from its all-time record highs as markets continue to shake off the U.S.-China trade-war worries. The Nasdaq Composite Index lagged behind its peers, closing about 0.1% lower at 7,950. With the moves, the Dow ended the session within 0.8% of January record as 10-year government bond yields hit 4-month high. The 10-year yield moved to its highest level since May, up around 3.08%, helping lift shares of financial companies, which outperformed. Meanwhile interest rate sensitive stocks such as utilities underperformed broader markets amid the spike in yields. While volumes overall were lighter than normal given the holiday, shares of cannabis stocks were extremely active (taking over from the recent crypto fad) as recent IPO Tilray Inc. (TLRY) extended its recent euphoric run to highs of $300 (priced IPO in July at $17) before cratering late day to lows of $151 before closing back above $200. In the end, the stock was halted five-times after surging by 94% before ending up 38%.

Market Closing Prices Yesterday

· The S&P 500 Index gained 3.64 points, or 0.13%, to 2,907.95

· The Dow Jones Industrial Average rose 158.80 points, or 0.61%, to 26,405.76

· The Nasdaq Composite slipped -6.07 points, or 0.08%, to 7,950.04

· The Russell 2000 Index declined -8.04 points, or 0.47% to 1,702.93

Events Calendar for Today

· 8:30 AM EST Weekly Jobless Claims…est. 210K

· 8:30 AM EST Continuing Claims…est. 1.705M

· 8:30 AM EST Philly Fed Survey for Sept…est. 18.0

· 9:45 AM EST Bloomberg Consumer Comfort Index…prior 57.0

· 10:00 AM EST Leading Index for Aug…est. 0.5%

· 10:00 AM EST Existing Home Sales MoM for Aug…est. 5.36M

· 10:30 AM EST Weekly EIA Natural Gas Inventory Data

Earnings Calendar:

· Earnings Before the Open: DRI, THO

· Earnings After the Close: MU, SCS, UNFI

World News

· Canadian Prime Minister Justin Trudeau said on Wednesday he wanted to see flexibility from the United States if the two sides are to reach a deal on renewing NAFTA, which Washington insists must be finished by the end of the month.

· The Swiss National Bank held its key policy rate in deeply negative territory despite a recent pickup in economic growth. Switzerland’s central bank left its key rate at minus 0.75% and said it will intervene in foreign-exchange markets if needed to weaken the franc.

· Donald Trump’s escalating trade war will squeeze export volumes, crunch confidence, stall investment plans and threaten employment and living standards around the world, according to a cautionary assessment from Organization for Economic Cooperation and Development (OECD)

· Former Fed economist Nellie Liang is President Trump’s latest pick for the FOMC. She’s a senior fellow at the Brookings Institution after rising through the ranks at the Fed

· Norway’s central bank raised its main interest rate on Thursday for the first time since 2011

Sector News Breakdown


· Herman Miller (MLHR) Q1 EPS 69c/$624.6M vs. est. 65c/$620.73M; sees Q2 EPS 70c-74c on sales $635M-$655M vs. est. 72c/$638.37M; reports Q1 gross margin 36%; new orders of $630.6M in Q1, up 6% y/y

· Aston Martin has priced its IPO on the London Stock Exchange, valuing the luxury-car maker at between 4.02 billion pounds and 5.07 billion pounds ($5.29 billion and $6.66 billion

· Nestle SA (NSRGY) said it is exploring strategic options for its skin-health unit, as the Swiss company puts its focus on food, beverage and nutritional health products. Nestle the unit had sales of about 2.7 billion Swiss francs ($2.8 billion) in 2017

· Diageo (DEO) warned that its full-year profits will be dented by the recent sharp sell-off in in emerging-market currencies

· Ralph Lauren (RL) upgraded to Neutral from Underweight at Piper Jaffray

· Steelcase (SCS) announced it acquired Orangebox Group Limited, a UK-based designer and manufacturer of furniture for the changing workplace for $79M

· Avon Products, Inc. (AVP) says planned consolidation to include workforce cuts of about 100 jobs, consistent with its previous restructuring disclosures.

· Skyline (SKY) files to sell 6M shares of common stock for holders

· Volkswagen AG (VLKAY) will end almost of all its operations in Iran, Bloomberg reported on Wednesday, citing a U.S. official who led the discussions with the carmaker.

Energy, Materials and Industrials

· Russia’s pumping a record amount of crude ahead of talks with OPEC this weekend, a government official said. Output has climbed to as much as 11.36 million barrels a day from 11.21 million in August. – Bloomberg

· Dominion Energy (D) announced that it has made an offer to Dominion Energy Midstream Partners (DM) to acquire all outstanding common units not owned by Dominion Energy in exchange for Dominion Energy common shares. The fixed exchange ratio offer of 0.2468 Dominion Energy common shares per Dominion Energy Midstream common unit equates to a per-unit valuation of $17.75, based on closing prices as of Sept. 18, 2018.

· NiSource (NI) unit Columbia Gas of Massachusetts will withdraw its pending rate case and pending settlement following a natural gas incident in the Greater Lawrence area on Sept. 13.

· Air Lease (AL) announced the delivery of one new Boeing (BA) 787-9 aircraft on long-term lease to Air New Zealand from ALC’s order book with Boeing

· Rio Tinto (RIO) laid out the details of a share buyback program that will return $3.2B to shareholders following the Anglo-Australian miner’s disposal of coal assets


· Raymond James (RJF) August metrics showed total securities commissions and fees of $393 million increased 11% over August 2017 and 4% over July 2018. Record client assets under administration of $788.5 billion increased 16% over August 2017 and 2% over July 2018. Record financial assets under management of $141.4 billion increased 51% over August 2017 and 2% over July 2018. Record net loans at Raymond James Bank of $19.4 billion were up 14% over August 2017 and 1% compared to July 2018.

· Apple Hospitality (APLE) said preliminary reports from initial property inspections have indicated some minor wind- and water-related damage at the five hotels that were in the primary path of Hurricane Florence, however at this time the overall damage and impact does not appear to be material

· Bank of America’s (BAC) head of corporate and investment banking, is departing the role amid the bank’s recent loss of market share in the mergers and acquisitions market, the Financial Times reports

· Athene Holding (ATH) announced an agreement to amend the terms of certain investment management arrangements with Athene Asset Management, a subsidiary of Apollo Global Management (APO).


· Elanco Animal Health Inc. (ELAN) priced its IPO at $24.00 per share, above prior estimates of $20-$23 as the animal drug company, which is being spun off from Eli Lilly & Co. (LLY) hopes to raise up to $1.74 billion on an offering of 62.9 million shares

· Crispr Therapeutics (CRSP) files automatic mixed securities shelf; files to sell $200M in common stock

Technology, Media & Telecom

· Red Hat (RHT) Q2 EPS 85c/$822.7M vs. est. 82c/$829.49M; sees Q3 EPS 87c on revs $848M-$856M vs. est. 92c/$862.72M; Q3 GAAP operating margin is expected to be approximately 16.1% and non-GAAP operating margin is expected to be approximately 24.0%; sees FY revenue $3.36B-43.4B vs. est. $3.4B and EPS $3.45-$3.49 vs. est. $3.47; 2Q subscription revs $722.7M; Q2 deferred revenue $2.40B, up 17% y/y and up 19% in CC

· Live Nations (LYV) Ticketmaster is accused of colluding with scalpers, and collecting double fees in the process, in a weeks-long investigation published by CBC and the Toronto Star


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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