Morning Preview: October 9, 2018

Scott GreenDaily Market Report

Early Look

Tuesday, October 9, 18

Stock futures in the U.S. are lower, with Dow futures pointing to a decline of more than 100-points, once again tracking weakness in Europe and Asia as the IMF lowered its global forecast for the first time in more than two years as escalating trade tensions cut into growth. After being closed yesterday for the Columbus Day holiday, Treasury markets reopen as the yield on the 10-year Treasury note rose over 2 bps topping the 3.25% threshold for the first time since late April 2011. In addition to rising borrowing costs in the U.S., rising bond yields in Italy amid budget concerns is weighing on European markets. Worries over global growth and emerging-market worries as U.S.-China trade tensions also continue to overhang markets. Stocks ended mixed on Monday as the Dow Jones Industrial Average managed an intraday reversal to eke out a modest gain, but technology shares declined for a third straight session, with the Nasdaq Composite underperforming again. In Asian markets, The Nikkei Index declined -314 points to settle at 23,469, the Shanghai Index ended higher by about 4 points to 2,721 (follows its worst single day decline in several months), the Hang Seng Index slipped -29 points to finish at 26,172. In Europe, the German DAX is holding below the 12,000 level, down about 50 points at 11,900 (the March lows are around 11,750), while the FTSE 100 is down around -20 points at 7,200.

Market Closing Prices Yesterday

· The S&P 500 Index slipped -1.14 points, or 0.04%, to 2,884.43

· The Dow Jones Industrial Average rose 39.73 points, or 0.15%, to 26,486.78

· The Nasdaq Composite dropped -52.50 points, or 0.67%, to 7,735.95

· The Russell 2000 Index declined -2.60 points, or 0.16% to 1,629.51

Events Calendar for Today

· 6:00 AM EST NFIB Small Business Optimism for Sept

· 7:45 AM EST ICSC Weekly Retail Sales

· 8:55 AM EST Johnson/Redbook Weekly Sales

· 4:30 PM EST API Weekly Inventory Data

· 7:15 PM EST Fed’s Williams speaks on recent Monetary Policy developments

Earnings Calendar:

· Earnings Before the Open: AZZ, HELE

· Earnings After the Close: IDT

Other Key Events:

· Chardan Annual Genetic Medicines Conference in New York

· Cowen 21st Annual Therapeutics Conference, 10/9-10/10, in New York

· Global Gaming Expo: G2E 2018, 10/8-10/10, in Las Vegas

World News

· The IMF lowered its global forecast for the first time in more than two years as escalating trade tensions cut into growth and the outlook weakened for emerging markets from Brazil to Turkey, Fund says in latest World Economic Outlook. World economy will grow 3.7% this year and next, down from the IMF’s forecast of 3.9% in July

· The National Federation of Independent Business (NFIB) small-business optimism index fell 0.9 point in September to a seasonally adjusted level of 108.8. In September, six index components declined, three gained, and one was unchanged. Job creation, capital spending, and actual sales all rose in September. “This is the longest streak of small business optimism in history, evidence that tax cuts and regulatory rollbacks are paying off for the economy as a whole,” NFIB President Juanita Duggan said

· German exports slipped for the second-straight month in August, as the Federal Statistical Office said that total exports of goods fell 0.1% in August from the month before, taking account of seasonal swings and calendar effects. Imports of goods dropped 2.7% in the period.

Sector News Breakdown

Consumer

· Papa John’s International Inc. (PZZA) shares rose after hours following a report that hedge fund Trian Fund Management was exploring a takeover bid. Trian recently contacted the pizza chain for information as it considers a bid, according to the WSJ https://on.mktw.net/2PoEx2g

· Walmart (WMT) upgraded to Buy from Hold at Deutsche Bank

· Pinnacle Foods’ (PF) adjusted Q3 EPS are expected to be in the range of $93-$95M, or 77c-79c per share, as profitability was driven by continued execution of productivity and cost management programs as well as a favorable tax rate versus the prior year period

· Hawaiian Airlines (HA) revises Q3 ASM view to down 1.5%-down 2.5% from prior view of flat to down 2%; also narrows Q3 CASM-ex fuel view to up 1%-2% from up 0.5%-3.5% and sees Q3 gallons of jet fuel consumed up 7%-8% vs. prior view of up 5%-7%

· SkyWest (SKYW) reported 138,900 block hours in September 2018, compared to 145,200 block hours in September 2017, a decrease of 6,300 or 4.4%

· Play AGS Inc. (AGS) announced that it was awarded a slot machine manufacturer license and table games manufacturer license by the Pennsylvania Gaming Control Board and will now be able to place product in the Commonwealth’s 12 casinos. The company expects to begin placing product in Pennsylvania in early 2019

· Green Brick (GRBK) announces up to $30M share repurchase program

Energy, Materials and Industrials

· PPG Corp. (PPG) sees Q3 adjusted EPS $1.41-$1.45 on revs $3.8B, below the $1.59/$3.88B est.; sees Q4 adjusted EPS $1.03-$1.13 vs. est. $1.35; said improving segment operating margins remains a priority, and expect margins to be comparable vs. Q4’17 in aggregate

· Hurricane Michael was expected to strengthen in the Gulf of Mexico, taking aim at the Florida panhandle

· Exelon (EXC) downgraded to Neutral from Overweight at JPMorgan

· Scana (SCG) upgraded to Buy from Neutral at Mizuho

· AZZ Inc. (AZZ) Q2 EPS 43c/$222.8M vs. est. 47c/$227.99M; sees FY EPS $1.90-$2.25 vs. est. $2.23 and year revs $930M-$970M vs. est. $962.5M

· Volkswagen’s namesake brand delivered 485,000 vehicles globally in September, 18.3% less than a year earlier.

Financials

· Franklin Resources, Inc. (BEN) preliminary month-end assets under management of $717.1 billion at September 30, 2018, compared to $722.4 billion at August 31, 2018. The decrease in assets under management was attributable to net outflows and net market change and other.

· Cohen & Steers, Inc. (CNS) preliminary assets under management of $60.1 billion as of September 30, 2018, a decrease of $1.2 billion from August 31, 2018 due to market depreciation of $806 million, distributions of $333 million, and net outflows of $75 million

· Pzena Investment (PZN) reports preliminary AUM $38.9B at September 30 vs. $38.9B as of August 31, 2018 and $35.4B as of September 30, 2017

Healthcare

· Affimed N.V. (AFMD) announced that it has placed AFM11 (CD19/CD3-targeting T cell engager) on clinical hold, and has notified the global health authorities of its decision. AFM11 is being evaluated in two Phase 1 clinical studies for the treatment of patients with relapsed or refractory CD19 positive B-cell non-Hodgkin lymphoma (NHL) and acute lymphoblastic leukemia (ALL). The clinical hold was initiated after the occurrence of Serious Adverse Events (SAEs) in three patients, which included a death in the ALL study and two life-threatening events in the NHL study

· Perrigo Co. PLC (PRGO) said it had appointed Murray Kessler as president and chief executive. Kessler has 30 years of experience in leadership positions and most recently served as CEO of Lorillard Tobacco Co.

· Celgene Corporation (CELG) announced results from the phase 3 STYLE study, which showed that Otezla 30 mg twice daily achieved a highly statistically significant improvement in the primary endpoint of the Scalp Physician’s Global Assessment response

· Aerie Pharmaceuticals (AERI) reported that the EMA has accepted for review the MAA for Rhokiinsa, or netarsudil ophthalmic solution, 0.02%. Rhokiinsa is currently marketed as Rhopressa in the U.S

Technology, Media & Telecom

· Blackbaud (BLKB) shares fell -13%; cuts year revenue outlook to $844M-$854M from prior view $870M-$890M (est. $874.3M); cuts year adj. operating margin 19.3%-19.6%, vs. prior 20.6%-21%; cuts FY18 EPS view to $2.46-$2.52 from $2.75-$2.88 (est. $2.77)

· Alphabet Inc.’s (GOOGL) Google has withdrawn from consideration for a massive Pentagon cloud-computing contract, citing conflicts with the company’s principles, Bloomberg News reported Monday. https://on.mktw.net/2C7DPmq

· ChipMOS (IMOS) reports September revenue was $55.7M, a decrease of 2.2% from the month of August and an increase of 10.5% from the same period in 2017

 

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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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