Friday, October 5, 2018
U.S. stock futures are trading flat as markets await the monthly nonfarm payroll report expected at 8:30 AM EST, with estimates for a gain of 185K jobs and the unemployment rate to hold at 3.8%. Economic data has been very strong this week after a solid ADP private payroll beat on Wednesday and an ISM services index that touched 21-year highs. The better data has led to a surge in borrowing costs, which rose on Thursday to 3.19%, extending its highest level since 2011 and coming after it posted the largest yield advance in more than a year on Wednesday (3.23%). The 10-year yield is currently above 3.20%, while stocks futures look to bounce after yesterday’s declines. In Asian markets, The Nikkei Index dropped another -191 points to settle at 23,783, the Shanghai Index remained closed as it wraps up its week-long holiday and the Hang Seng Index slipped -51 points to end at 26,572. In Europe, the German DAX is down -80 points at 12,160, while the FTSE 100 is down over -40 points at 7,370.
Stocks slumped on Thursday as the Dow Industrial Average ended off its worst levels (was down over 357 points) to settle down -200 points (snapping its 5-day losing streak), while the Nasdaq Composite tumbled -1.8%, its worst daily drop since June 25th led by weakness in semiconductors, biotech and large cap tech. The S&P 500 index also clawed back from the lows, managing to close back above the 2,900 level, narrowly avoided ending a streak of 71 sessions without a swing of at least 1%.
· 8:30 AM EST Change in Non-Farm Payrolls for September…est. 185K
· 8:30 AM EST Change in Private-Payrolls for September…est. 180K
· 8:30 AM EST Change in Manufacturing Payrolls for Sept …est. 15K
· 8:30 AM EST Unemployment Rate for September…est. 3.8%
· 8:30 AM EST Average Hourly Earnings for Sept…est. 0.3%
· 8:30 AM EST Trade Balance for August…est. (-$53.6B)
· 1:00 PM EST Baker Hughes Weekly Rig Count
· 3:00 PM EST Consumer Credit for August…est. $15.0B
Market Closing Prices Yesterday
· The S&P 500 Index dropped -23.90 points, or 0.82%, to 2,901.61
· The Dow Jones Industrial Average fell -200.91 points, or 0.75%, to 26,627.48
· The Nasdaq Composite plunged -145.58 points, or 1.81%, to 7,879.51
· The Russell 2000 Index declined -24.38 points, or 1.46% to 1,646.91
· German manufacturing orders bounced back in August, as total manufacturing orders rose 2% on the month, after falling by 0.9% on the month in July (ests were for 0.4% increase)
· House prices in the UK fell by 1.4% in September from the previous month
· The Reserve Bank of India surprised markets by opting not to raise its benchmark interest rate, a decision that sent the rupee tumbling
Sector News Breakdown
· Costco (COST) Q4 EPS $2.36/$44.41B vs. est. $2.36/$44.34B; Q4 total comp sales including gas 9.5%; Q4 comp sales ex fuel rose 7.2% (both were in-line with estimates)
· Tesla (TSLA) shares fell after the close after tweeting “The Shortseller Enrichment Commission is doing incredible work. And the name change is so on point!”
· Penn National Gaming (PENN) will replace Convergys (CVG) in the S&P MidCap 400, and The Chefs’ Warehouse (CHEF) will replace Penn National Gaming in the S&P SmallCap 600 effective prior to the open of trading on Wednesday, October 10
· Toyota (TM) is conducting a safety recall involving certain 2010-2014 model year Toyota Prius and 2012-2014 Prius v vehicles. Approximately 807,000 vehicles in the United States will be involved in this recall. Of a total of about 2.43 million vehicles affected, 94 percent are the Prius and its derivatives
· Havertys Furniture (HVT) Q3 revenue $210.5M vs. est. $212.43M and on a comparable store basis, sales for the quarter increased 2.6%
· Southwest Airlines (LUV) September traffic rose 5.3%, capacity 6.8%; load factor 80.5% vs. 81.7% a year ago
· Grupo Aeroportuario del Sureste (ASR)announced that total passenger traffic for September 2018 increased 15.4% when compared to September 2017. Passenger traffic rose 8.3% in Mexico, 56.6% in Puerto Rico and 15.8% in Colombia
· Unilever PLC (UN) has decided to withdraw its proposal to consolidate its dual structure, after the company faced mounting opposition from U.K. shareholders worried over its likely eviction from the FTSE 100.
Energy, Materials and Industrials
· Precision Drilling (PDS) to merge with Trinidad Drilling in deal that values Trinidad at about $1.028B; Precision Drilling is offering 0.445 shares to Trinidad Drilling shareholder for each issued & outstanding share; both boards agree on strategic combination https://yhoo.it/2CshHUB
· European material stocks fall to the lowest in about two weeks, led down by copper-exposed companies and miners
· Myers Industries (MYE) Q3 adjusted EPS 14c-16c, below est. 21c and reports preliminary Q3 revenue $135M vs. est. $140.67M; cuts FY18 revenue view to “flat to up low single digits” down from prior view “up low-to-mid single digits”
· LendingTree (TREE) to buy QuoteWizard; says equity purchase has a possible total consideration of $370.2M, consisting of $300M in cash at close and contingent payments of as much as $70.2M
· Avalon Bay (AVB) entered into an agreement to contribute its fee ownership of Avalon Morningside Park, Avalon Bowery Place I, and Avalon Bowery Place II, as well as its leasehold interest in Avalon West Chelsea and AVA High Line, for approximately $760 million and is expected to close before the end of 2018.
· Cutera, Inc. (CUTR) shares fell -17%; lowers guidance; sees Q3 revs to be about $40M (vs. est. $45.8M), or mid-single digit percentage growth YoY; lowers year revs outlook to $165M-$170M from prior view of $178M-$181M
· Eli Lilly (LLY) upgraded to outperform and tgt raised to $130 at BMO Capital
· Akcea Therapeutics (AKCA) and Ionis (IONS)say TEGSEDI (inotersen injection) is now approved in Canada for the treatment of stage 1 or stage 2 polyneuropathy in adult patients with hereditary transthyretin amyloidosis.
· AtriCure (ATRC) 2.5M share Secondary priced at $30.75
· LeMaitre (LMAT) shares fell -16%; Q3 EPS 21c/$24.2M vs. est. 21c/$26.01M; cuts FY18 EPS view to $1.01-$1.03 from $1.04-$1.11 (est. $1.07) and cuts FY18 revenue view to $102.8M-$103.6M (est. $107.15M)
· KemPharm (KMPH) files to sell common stock, no amount given
· Tilray (TLRY) increases convertible senior notes offering to $450M from $400M
Technology, Media & Telecom
· Smart Global (SGH) shares rose 15%; Q4 EPS $1.72/$374.0M vs. est. $1.66/$369.22M; Q4 gross margin 22.4% vs 21.6% last year; sees Q1 EPS $1.74-$1.79 on revs $375M-$390M vs. est. $1.69/$384.96M and sees Q1 gross margin 22%-23%
· Samsung reports preliminary Q3 operating profit KRW 17.5T vs. consensus KRW 17.2T and reports preliminary Q3 revenue KRW 65T (in-line); projected fresh record earnings in the third quarter on the back of strong sales of memory chips and display panels
· Elastic (ESTC) 7M share IPO priced at $36.00
· Fortinet (FTNT) will replace Envision Healthcare (EVHC) in the S&P 500, S&P SmallCap 600 constituent ASGN (ASGN) will replace Fortinet in the S&P MidCap 400, and Veritex Holdings (VBTX) will replace ASGN in the S&P SmallCap 600 prior to the open of trading on Thursday, October 11.
· GoPro (GPRO) announced that HERO7 Black has achieved the highest week-one retail unit sell-thru of any new camera in the company’s history. In addition to HERO7 Black’s week-one unit sell-thru performance, social media engagement jumped 80% from last year’s launch
· Emcore (EMKR) raises Q4 revenue view to $24.2M-$25.2M from $21M-$23M (est. $21.96M); says certain principal factors that contributed to the higher than expected revenues in the quarter ended September 30, 2018 include higher levels of L-EML transmitter sales resulted in higher than expected revenues in the quarter