Morning Preview: October 3, 2018

Scott GreenDaily Market Report

Early Look

Wednesday, October 3, 2018

Stocks are pointing to a higher open, as tech rebounds and the Dow Industrials look to add to its record setting levels achieved yesterday as the euro held on to advances and Italian bonds rallied on deficit optimism, helping European markets. In Asian markets, The Nikkei Index fell -159 points to settle at 24,110, the Shanghai Index remained closed for a week-long holiday and the Hang Seng Index dipped -35 points to close at 27,091. In Europe, the German DAX is down about -50 points at 12,285, while the FTSE 100 is up a few points around 7,485. Treasuries were little changed while gold gave up earlier gains following yesterday’s more than 1% advance. Markets remain quiet outside of potentially larger macro moving events (drama out of Washington, trade news with China, Brexit in Europe, Italian budget concerns, surging oil), as investors will soon prepare for the start of quarterly earnings in a little more than a week. Until then, investors remain at the mercy of those macro headlines.

The Dow Jones Industrial Average outperformed other major averages on Tuesday, posting its 14th record close of 2018 even as the broader market slumped amid worries on China-U.S. trade relations and a continued concern in Europe amid Italy’s budget issue in the EU. However, the benchmark S&P 500 index ended little changed following a decline consumer-discretionary shares as news Amazon was raising its minimum wage to $15 per hour weighed heavily on other retailers. Tech weakened as the Nasdaq Composite Index dropped (-0.5%) under the 8,000 level while Small caps extended their recent decent, with the Russell 2000 Index falling more than 1% for the second consecutive session.

Market Closing Prices Yesterday

· The S&P 500 Index slipped -1.16 points, or 0.04%, to 2,923.43

· The Dow Jones Industrial Average rose 122.73 points, or 0.46%, to 26,773.94

· The Nasdaq Composite dropped -37.76 points, or 0.47%, to 7,999.55

· The Russell 2000 Index declined -16.95 points, or 1.01% to 1,656.04

Events Calendar for Today

· 7:00 AM EST MBA Mortgage Applications Data

· 8:05AM EST Fed’s Barkin speaks at Economic Conference

· 8:15 AM EST ADP Employment Change for September…est. 184K

· 9:45 AM EST Markit US Services PMI, Sept-F…est. 53.0

· 9:45 AM EST Markit US Composite PMI…

· 10:00 AM EST ISM Non-Manufacturing Index for Sept…est. 58.0

· 10:30 AM EST Weekly DOE Inventory Data

· 2:15 PM EST Fed’s Mester speaks at community banking conference

Earnings Calendar:

· Earnings Before the Open: AYI, LEN, RPM

· Earnings After the Close: PIR, RECN, SNX

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

World News

· European PMI Services (vs. estimates): Italy 53.3 vs. 52.8 est.; France final was 54.8 vs. 54.3 expected while small misses from Spain at 52.5 vs. 52.9 est. and Germany (final) 55.9 vs. 56.5 expected

· Investor Intelligence poll newsletter writers classified as bulls rises to 61.8% from 60.6% last week, remains at the highest since January when bullishness peaked at 66.7%, while those looking for a correction retreats to 6 1/2-year low of 19.6% vs 21.1% last week and those considered bears rise to 8-week high of 18.6% from 18.3% last week

· Italy’s Di Maio says further budget details to be defined Wednesday- Di Maio reiterated that the budget would include 10 billion euros ($11.5 billion) of welfare support for the poor, a watering down of an unpopular pension reform and a further one billion euros set aside to help savers hit by recent banking scandals – Reuters

· The state of New York on Tuesday launched an investigation into President Donald Trump following an explosive report alleging that he and his family cooked up fraudulent financial schemes to help their parents dodge millions in taxes

· The Pentagon said on Tuesday that it had received mail suspected of containing the deadly poison ricin, including an envelope that a U.S. official said was addressed to Defense Secretary Jim Mattis.

Sector News Breakdown

Consumer

· Mattress Firm preparing to file for bankruptcy as soon as this week, Reuters said, citing people familiar and the process is expected to completed within a couple of months once it files – watch shares of Tempur-Sealy (TPX) https://reut.rs/2NkMsvT

· Tesco Plc (TSCDY) shares fell as profit fell short of estimates amid weakness in Asia and eastern Europe which overshadowed accelerating sales gains in the U.K., where the company overhaul is building momentum

· Lennar (LEN) Q3 EPS $1.61/$5.67B vs. est. $1.19/$5.64B; Q3 deliveries up 66% to 12,613 homes; new orders up 62% with 12,319 homes; new order dollar value up 73% to $5.1B; backlog up 88% to 19,220 homes; backlog dollar value up 105% to $8.4B

· Aston Martin (AML.LN) shares fell in its debut after pricing its initial public offering at £19 a share, valuing the luxury carmaker’s equity at £4.33B

· Tempur Sealy (TPX) was upgraded to Neutral from Sell at UBS

· Ryanair Holdings (RYAAY) reports traffic rose 6% to 12.6M customers in September; load factor flat Y/Y at 97%

· J.C. Penney Co. Inc. (JCP) said its board of directors has appointed retail veteran Jill Soltau as chief executive officer and a board member, effective Oct. 15. Soltau is a 30-year retail professional who most recently served as president and CEO of Joann Stores.

· Toys “R” Us Inc. said it has canceled the much-anticipated bankruptcy auction for its brand name and other intellectual property assets and will instead look to revive business behind the Toys “R” Us and Babies “R” Us brand names

Energy, Materials and Industrials

· The American Petroleum Institute (API) reported that U.S. crude supplies rose by 907,000 barrels for the week ended Sept. 28, showed supplies of gasoline declined by -1.7M barrels and distillates fell by -1.2M

· U.S.-led sanctions on Iran are set to hit in a matter of weeks, and with it, anything up to 2 million barrels a day could be taken off the market, putting more upward pressure on Brent, which is already hovering at a four-year high

· Patterson-UTI (PTEN) reported that for the month of September, the company had an average of 179 drilling rigs operating

Financials

· Worldpay (WP) upgraded to Buy at Bank America on deal synergies and target raised to $118

· Kennedy Wilson (KW) and Partners acquire €113M, six-acre, mixed-use development site in Ireland

· Select Income REIT (SIR) files to sell 24.9M shares for Government Properties

Healthcare

· GW Pharmaceuticals (GWPH) 1.9M share Secondary priced at $158.00

· Epizyme (EPZM) 8.333M share Spot Secondary priced at $9.00

· Cigna (CI) upgraded to Conviction Buy from Buy at Goldman Sachs

· Endologix (ELGX) narrows higher FY18 revenue view to $150M-$155M from $145M-$155M (est. $149.76M)

· Kala Pharmaceuticals (KALA) files to sell 7.5M shares of common stock

· GenMark Diagnostics (GNMK) announced the submission of two additional ePlex Blood Culture Identification Panels – the Gram-Negative (BCID-GN) Panel and Fungal Pathogen (BCID-FP) Panel – to the U.S. Food and Drug Administration.

Materials and Industrials

· Ingersoll-Rand (IR) announces new $1.5B share repurchase program

· RPM International (RPM) Q1 EPS 76c/$1.46B vs. est. 86c/$1.42B

· Norsk Hydro (NHYDY) shares slid after the Norwegian metals company said it was preparing to halt operations at its giant alumina refinery in Brazil

· Landec (LNDC) Q1 EPS 1c/$124.7M vs. est. 0c/$123.94M; sees Q2 revs $125M-$129M vs. est. $131.7M and sees year revenue growth up 5%-7%

· Air Lease Corporation (AL) announced the delivery of one new Boeing 787-9 aircraft on long-term lease to EVA Air (Taiwan). This Dreamliner aircraft, powered by GEnx-1B74/75 engines, is from ALC’s order book with Boeing and adds to numerous Boeing aircraft already on lease to EVA Air

Technology, Media & Telecom

· Upwork Inc. (UPWK) priced its 12.48M share IPO at $15 per share, above its expected price range of $12-$14, as it will raise at least $187 million

· Facebook Inc.’s (FB) photo-sharing social network Instagram suffered a worldwide outage Wednesday but has since resumed service for most users, a glitch that comes just days after it named a new head of the app

 

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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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