Monday, October 1, 2018
U.S. stock futures are surging, with the S&P 500 and Dow Industrials on track to open near or above all-time closing highs as investors cheer news on trade. The U.S. and Canada have agreed on a new trade deal with Mexico that replaces the North American Free Trade Agreement (NAFTA) but remains a trilateral bloc. The agreement was struck at the last minute – just before a deadline was set to arrive at midnight local time Sunday. The trade pact, which will be known as the US-Mexico-Canada Agreement (USMCA), was hailed by Canadian Prime Minister Justin Trudeau on Twitter as “a good day for Canada & our closest trading partners.” The Canadian dollar firmed to a four-month high after Canada reached the agreement. The news has rallied Dow futures more than 200 points as a deal with one trading partners is ironed out, though issues with China remain. In corporate news, Tesla (TSLA) shares rebound over 15% after the SEC reached a settlement of fraud charges with Elon Musk, CEO and chairman of Tesla Inc. (TSLA) over the weekend. In Asian markets, The Nikkei Index gained 125 points to settle at 24,245, the Shanghai Index and Hang Seng Index were closed for holiday. In Europe, the German DAX is up 70 points at 12,320, while the FTSE 100 is up a few points at 7,515. The Stoxx Europe 600 Index rising for the fourth day in five while Italian government bonds reverse last Friday’s slide. Stocks close out September mixed as the Nasdaq Composite dipped -0.8% for the month, but the S&P 500 logged a 0.4% monthly rise and the Dow Industrials up 1.9% in September. For the quarter, the S&P recorded a 7.19% increase, the Dow Industrials added over 9% and the Nasdaq Composite gained 7.14%.
· 9:00 AM EST Fed’s Bostic speaks on economic development
· 9:45 AM EST Markit US Manufacturing PMI, Sept-F
· 10:00 AM EST Construction Spending MoM for Aug
· 10:00 AM EST ISM Manufacturing for Sept
· 11:00 AM EST Fed’s Kashkari speaks in Minnesota
· 12:15 PM EST Fed’s Rosengren speaks on the US outlook and monetary policy
· Earnings Before the Open: CALM
· Earnings After the Close: SFIX
Other Key Events:
· Monthly auto sales for September
· Cantor Global Healthcare Conference, 10/1-10/3 in New York
· Wells Fargo 7th Annual London LNG and Shipping field trip, 10/1-10/5, in London
Market Closing Prices Yesterday
· The S&P 500 Index slipped a mere -0.02 points, or 0.00%, to 2,913.98
· The Dow Jones Industrial Average rose 18.38 points, or 0.07%, to 26,458.31
· The Nasdaq Composite gained 4.38 points, or 0.05%, to 8,046.35
· The Russell 2000 Index advanced 6.04 points, or 0.36% to 1,696.57
· Eurozone Sept. Manufacturing PMI 53.2 vs, Flash Reading 53.3; the index falls to 53.2 from 54.6 in August (vs. year ago 58.1) and marks the lowest reading since Sept. 2016; new Orders fall to 51.5 vs 53 in Aug. the lowest reading since Aug. 2016
· Business sentiment at Japan’s top manufacturers fell unexpectedly for the third straight quarter in the three months through September
· Iran’s elite Revolutionary Guards said on Monday they had hit Islamic militant strongholds in Syria with mid-range ballistic missiles, in revenge for a recent terrorist attack in southern Iran – Bloomberg
Sector News Breakdown
· Tesla (TSLA) rises 15%; the SEC reached a settlement of fraud charges with Elon Musk, CEO and chairman of Tesla Inc. (TSLA), and with the company that forces Musk’s removal as chairman of the Tesla board for three years and the payment of $40M in penalties, $20M by Musk personally and $20M by Tesla. The SEC filed a complaint against Musk alleging when he tweeted on Aug. 7 that he could take Tesla private at $420 per share —the potential transaction was uncertain
· Ryanair (RYAAY) cut its profit guidance for the year due to rising oil prices, strikes and staff compensation costs; cuts full year profit view to EU1.10B-EU1.2B from prior forecast FY19 profit of EU1.25B – EU1.35B
· Cal-Maine (CALM) Q2 EPS 26c/$340.6M vs. est. 49c/$350.5M
· Toys stocks mentioned in Barron’s noting while the Toys ‘R’ Us liquidation has interrupted Hasbro’s (HAS) growth streak, it is expected to resume in 2019, as Hasbro is gradually transforming into a diversified toy, movie, and videogame company, and has gained market share for years thanks in part to missteps by rival Mattel (MAT).
· U.S. Justice Dept is formally proposing to ban bump stocks – a firearms accessory that increases the rate of fire for semi-automatic rifles – by categorizing them as machine guns, Republican Sen. Dean Heller of Nevada said
· Husky Energy Inc. (HSE) said it has made an unsolicited bid to acquire oil sands oil producer MEG Energy Corp. (MEGEF) in what would be a combination of Canadian petroleum companies. Husky offered $3.3 billion Canadian dollars ($2.6 billion U.S. dollars) in a cash-and-stock deal.
· Saudi Arabia has shelved a $200 billion plan with SoftBank Group Corp to build the world’s biggest solar-power-generation project, the Wall Street journal reported on Sunday, citing Saudi government officials.
· NorthWestern Energy (NWE) filed a general electric rate review request with the Montana Public Service Commission, the first such request since 2009. For a typical residential customer, the proposed increase would mean an average monthly bill increase of about 7.4%.
· Trupanion (TRUP) mentioned cautiously in Barron’s saying while shares are down to $35.73 from $46 in midsummer, they remain up by more than 270% from March 2016 levels, and appear overvalued. A closer look at regulatory filings, however, suggests that the business model and industry outlook do not support the nosebleed stock valuation
· Cowen (COWN) mentioned positively in Barron’s saying the low-profile investment bank making bets on marijuana, trade at a relatively low valuation and are appealing in view of the company’s competitive position
· Pfizer (PFE) announced CEO Ian Read to step down at year end
· California’s governor Jerry Brown vetoed a state bill that would have curbed premium assistance to dialysis patients to steer them toward more costly insurance (watch shares of DVA)
· Tilray’s (TLRY) High Park Farms gets sales license from Health Canada to sell cannabis under the Access to Cannabis for Medical Purposes Regulations
· Momenta Pharmaceuticals (MNTA) completes its strategic review to refocus operations on the pipeline of drug candidates for immune-mediated diseases and cut investments in biosimilars by focusing on two later-stage assets; to cut 50% of workforce
· Barron’s said potential electoral results could favor the outlook for policies beneficial to a wide range of hospital, pharmaceutical, and other healthcare-related companies, as policy experts favor Centene (CNC), WellCare Health (WCG), Molina Healthcare (MOH), HCA Healthcare (HCA), Tenet (THC), Encompass Health (EHC), Becton Dickinson (BDX), Cerner (CERN), Dentsply Sirona (XRAY) and Teladoc Health (TDOC) as beneficiaries of Medicaid expansion under the Affordable Care Act, adding that is especially likely if Democrats win more state elections
· Regeneron Pharmaceuticals Inc. (REGN) and Sanofi (SNY) won U.S. FDA approval for their first immuno-oncology drug, a therapy that the companies hope will jump-start their cancer joint venture.
· Insmed (INSM) said the FDA has granted accelerated approval of ARIKAYCE (amikacin liposome inhalation suspension) for the treatment of Mycobacterium avium complex lung disease as part of a combination antibacterial drug regimen for adult patients who have limited or no alternative treatment options
Industrials & Materials
· Linde AG (LING.DE) said on Sunday that it had received approval for its proposed $83 billion merger with Praxair (PX) from the Chinese antitrust authorities
· Rio Tinto PLC (RIO) and two Japanese partners have agreed to invest $1.55 billion in two joint venture iron ore projects to sustain production at in the remote Pilbara region of Western Australia.
· McDermott (MDR) files automatic mixed securities shelf
· Sunoco (SUN) files automatic mixed securities shelf
Technology, Media & Telecom
· Intel (INTC) downgraded to Underweight at Barclays and lowered target to $38 from $53
· Lam Research (LRCX) and Western Digital (WDC) both downgraded to Neutral from Buy at Mizuho (LRCX tgt to $165 from $225 and WDC to $65 from $100) as believes NAND average selling prices will continue to decline at a low-double digit rate through Q1 of 2019 and at a high-single digit rate through 2019
· Infinera (INFN) downgraded to Sell from Neutral at MKM Partners and cut tgt to $5 from $10
· Tencent Holdings Ltd. (TCEHY) announced its first restructuring in six years Sunday, including creating a new division to focus on business services such as cloud computing
· A European Union privacy watchdog, Ireland’s Data Protection Commission, could fine Facebook Inc. (FB) as much as $1.63 billion for a data breach announced Friday in which hackers compromised the accounts of more than 50 million users
· Facebook (FB) is being sued in California by its own users over allegations that it negligently let hackers compromise as many as 50M accounts, Bloomberg reports