Tuesday, October 2, 2018
U.S. stock futures are moving lower, as Dow futures are giving back part of yesterday’s gains, while small caps remain weak and oil prices dip after surging to 4 ½ year highs on Monday. Asian markets were mostly lower as the Nikkei Index rose 24 points to settle at 24,270, the Shanghai Index remained closed for a week-long holiday and the Hang Seng Index reopened from holiday, falling -662 points or 2.38% to settle at 27,126. In Europe, the German DAX is lower by about -80 points at 12,250, while the FTSE 100 is down around -40 points at 7,450. International Monetary Fund chief Christine Lagarde delivered a warning on global growth, saying there are signs major economies such as the U.S. have “plateaued.” Lagarde, in part, blamed global trade woes for the slowdown. In currencies, the British Pound falls to overnight lows down -0.65% at 1.2945, while the euro sinks (for a 5th day) over -0.5% to around 1.15 vs. the dollar as Brexit fears in Europe and budget issues in Italy weigh on those currencies. Fed Chairman Jerome Powell leads today’s Fed speakers, with Boston Fed chief Eric Rosengren and Governor Randall Quarles also on the agenda.
The S&P 500 and Dow Industrial Average rose on Monday, led by gains in energy (as oil traded to 4-year highs), industrials and materials as President Trump signed a successor to the North American Free Trade Agreement with Canada and Mexico, eliminating trading issues with neighbors to the North and South. The deal, known now as the U.S. Mexico Canada Agreement, or USMCA, must still be approved by Congress. However, small-cap stocks slumped, with a 1.4% decline in the Russell 2000 Index as improved prospects for trade deals reduced the allure of domestically-focused stocks. The Nasdaq Composite also sat out the rally, ending the day lower. Defensive/safe haven assets declined, led by a drop-in utility and REITs in the equity market, along with weakness in gold and Treasury prices as yields edged higher. The Dow Jones Industrial Average rose 193 points, or 0.7%, to reach 26,651, powered by shares of Boeing Co. (BA), which delivered a nearly 70-point jolt to the price-weighted blue-chip index.
Market Closing Prices Yesterday
· The S&P 500 Index gained 10.61 points, or 0.36%, to 2,924.59
· The Dow Jones Industrial Average rose 192.90 points, or 0.73%, to 26,651.21
· The Nasdaq Composite slipped -9.05 points, or 0.11%, to 8,037.30
· The Russell 2000 Index declined -23.58 points, or 1.39% to 1,672.99
· 7:45 AM EST ICSC Weekly Retail Sales
· 8:55 AM EST Johnson/Redbook Weekly Sales
· 10:00 AM EST Fed’s Quarles testifies to Senate Banking Committee
· 12:00 PM EST Fed’s Chairman Powell speaks at NABE Conference in Boston
· 4:30 PM EST API Weekly Inventory Data
· Earnings Before the Open: LW, PAYX, PEP
· Earnings After the Close: LNDC
Other Key Events:
· 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
Sector News Breakdown
· PepsiCo (PEP) Q3 Core EPS $1.59/$16.49B vs. est.$1.57/$16.36B; lowers FY18 Core EPS to $5.65 below prior view of $5.70 and consensus $5.69; sees full-year organic revenue growth at least 3%, had seen at least in line with 2017 growth rate of 2.3%
· SeaWorld Entertainment, Inc. (SEAS) reports attendance and preliminary revenue through Sept. 30; says total revenue is expected to increase by approximately $41 million, or 9%; says total attendance increased by approximately 0.7 million guests, or 10%
· FTD Companies (FTD) lowers FY18 revenue to $1.02B-$1.03B from $1.03B-$1.04B; backs FY18 adjusted EBITDA view of $37M-$41M; narrows capital expenditure outlook to $35M-$38M from $35M-$40M
· Activist investor Legion Partners has built up a stake in Papa John’s International Inc. (PZZA), saying it owns 5.46% of shares in the company through various affiliates
· Perry Ellis International, Inc. (PERY) says that independent proxy advisory firms, Institutional Shareholder Services and Glass Lewis & Co. recommend that Perry Ellis shareholders vote for the proposed acquisition by the entity controlled by George Feldenkreis.
Energy, Materials and Industrials
· ConocoPhillips (COP) downgraded to neutral from buy at Goldman Sachs
· Kayne Anderson MLP (KYN) reports net assets as of September 30th were $2.4 billion, and its net asset value per share was $18.86
· Tortoise Energy Infrastructure (TYG) announced that as of Sept. 30, 2018, the company’s unaudited total assets were approximately $2.4 billion and its unaudited net asset value was $1.5 billion, or $27.31 per share
· KMG Chemicals (KMG) Q4 EPS $1.26/$122.4M vs. est. 98c/$122.67M; Q4 adjusted Ebitda $31.1M
· Royal Dutch Shell PLC (RDSA) said that affiliate Shell Canada Energy has given the green light to invest in LNG Canada, a major liquefied natural-gas project in British Columbia in which the Anglo-Dutch oil company has a 40% working interest.
· Aduro Biotech (ADRO) received written notices of termination from Janssen Biotech for its research and license pacts pertaining to the company’s proprietary attenuated strains of Listeria for treatment of lung and prostate cancers, the company said
· GW Pharmaceuticals (GWPH) files to sell $300M in ADSs
· Merit Medical Systems (MMSI) announced that it has signed a definitive merger agreement to acquire Cianna Medical for $135M upfront plus earn outs; the transaction has been approved by the boards of both companies
· Chiasma (CHMA) announced that it has completed enrollment of its international Phase 3 clinical trial, referred to as CHIASMA OPTIMAL
· Eli Lilly (LLY) comments in two readouts from two phase 3 clinical trials on Ultra Rapid Lispro meeting the primary endpoint of non-inferior A1C reduction from baseline compared to Humalog
Technology, Media & Telecom
· Stitch Fix (SFIX) shares fell -22%; Q4 EPS 18c/$318.3M vs. est. 4c/$318M; Q4 adj. Ebitda $11.1M; sees upcoming expansion into the U.K. “by the end of fiscal year 2019”; grew our active client count 25% year over year and delivered $318.3 million in net revenue and $11.1 million in adjusted EBITDA; sees Q1 revenue $354M-$360M vs. est. $359.16M and sees Q1 adjusted EBITDA $5M-$9M
· Monthly global chip sales cracked a record $40 billion in August, according to trade group Semiconductor Industry Association late Monday. SIA reported that August chip sales rose 14.9% worldwide to $40.16 billion from a year ago, topping July’s record sales of $39.49 billion.
· Microsoft Corp. (MSFT) co-founder Paul Allen said a cancer he successfully received treatment for several years ago has returned
· Amazon (AMZN) raises minimum wage to $15 for all U.S. employees