Morning Preview: October 16, 2018

Scott GreenDaily Market Report

Early Look

Tuesday, October 16, 2018

U.S. futures are tracking higher, looking to rebound after yesterday’s rally petered out in the final hour of trading, as major averages ended near their lows and back below key technical levels. A fresh batch of corporate earnings and further developments in global tensions, surrounding Brexit, Saudi Arabia and Italy’s budget, remain a focus. Financials will be in focus today as Goldman and Morgan Stanley round out big bank earnings when they report later this morning. U.S. Secretary of State Michael Pompeo arrived in Saudi Arabia this morning as the kingdom remains under pressure to explain the disappearance of writer Jamal Khashoggi after entering its embassy in Turkey. In Europe, leaders gather as hopes of a breakthrough on Brexit negotiations this week remain very low after disagreements on key topics (Ireland border) arose this weekend. In Asian markets, The Nikkei Index gained 277 points ending at 22,549, the Shanghai Index dipped -21 points to finish at 2,546 and the Hang Seng Index inched higher by 17 points to 25,462. In Europe, the German DAX is up over 20 points at 11,640, while the FTSE 100 is down around -20 points but holding above 7,000. Stocks will try and rebound as the S&P 500 has declined in seven of the past eight sessions, while the Dow has declined in four of the past five.

Stocks ended a choppy session lower Monday, with weakness in the tech sector extending last week sharp losses. The benchmark S&P 500 ended 0.6% lower near 2,750.79, dropping back below its 200-day moving averages after briefly trading above it (2,766) while the Dow Jones Industrial Average sank to a session low just ahead of the closing bell, declining nearly 90 points, after rising by more than 140 points at its session high. A combination of geopolitical concerns and concern ahead of a busy week of corporate earnings weighed on sentiment. Treasury yields rose on Monday as investors take their cue from the continued weakness in stocks and geopolitical jitters.

Market Closing Prices Yesterday

· The S&P 500 Index dropped -16.34 points, or 0.59%, to 2,750.79

· The Dow Jones Industrial Average fell -89.44 points, or 0.35%, to 25,250.55

· The Nasdaq Composite slipped -66.15 points, or 0.88%, to 7,430.74

· The Russell 2000 Index advanced 6.42 points, or 0.42% to 1,553.12

Events Calendar for Today

· 7:45 AM EST ICSC Weekly Retail Sales

· 8:55 AM EST Johnson/Redbook Weekly Sales

· 9:15 AM EST Industrial Production MoM for September…est. 0.2%

· 9:15 AM EST Capacity Utilization for Sept…est. 78.2%

· 10:00 AM EST NAHB Housing Market Index for Oct…est. 66

· 10:00 AM EST JOLTs Job Openings for Aug…est. 6900

· 4:00 PM EST Net Long-term TIC Flows…est.

· 4:30 PM EST API Weekly Inventory Data

Earnings Calendar:

· Earnings Before the Open: BLK, CMA, DPZ, FHN, GS, GWW, JNJ, NS, PGR, PLD, UNH

· Earnings After the Close: ADTN, CREE, CSX, FULT, HOPE, IBM, LRCX, LYXB, MRTN, NFLX, TACO, UAL

World News

· China’s consumer inflation accelerated to a seven-month high in September, as the consumer-price index rose 2.5% in September from a year earlier, following a 2.3% gain in August and accelerating for the fourth straight month. Food prices rose 3.6% from a year earlier after climbing 1.7% in August

· German investor confidence slumped this month. The expectations component of the ZEW survey fell to -24.7 from -10.6 because of the trade war, Brexit and domestic political woes. The current situation component slipped to 70.1 from 76.

· EuroZone reported a 2.1% rebound in goods exports during August. With imports flat, the seasonally adjusted trade surplus widened to 16.6 billion euros from 12.6 billion euros

· Wage growth in the U.K. accelerated over the summer at the fastest pace in almost a decade, as the Office for National Statistics said that average weekly earnings in Britain, excluding bonuses, grew 3.1% in the three months through August, the fastest pace of growth since early 200

Sector News Breakdown

Consumer

· Wal-Mart (WMT) reaffirms FY sales growth; sees FY20 Ecommerce net sales growth about 35% vs. expected e-commerce growth of ~40% in FY19; sees year EPS $4.65-$4.80 including Flipkart; sees FY20 comp sales ex-fuel 2.5%-3% vs. est. 2.2%

· Jeld-Wen (JELD) shares fell -18%; preliminary Q3 revenue $1.13B-$1.14B below consensus $1.16B; reports preliminary Q3 adjusted EBITDA $130M-$135M, improved compared to $128.2M in the same period a year ago, but below the company’s previous outlook of $143M-$153M; cuts FY18 revenue growth view to 15%-17% from 16%-18% and cuts FY18 adjusted EBITDA view to $455M-$470M from $500M-$520M

Energy

· Range Resources (RRC) agrees to sell a proportionately reduced 1% overriding royalty in its Washington County, Pa., leases for $300M; says the overriding royalty applies to existing and future Marcellus, Utica and Upper Devonian development on the subject leases, while excluding shallower and deeper formations

Financials

· BlackRock (BLK) Q3 adjusted EPS $7.52/$3.58B vs. est. $6.84/$3.54B; 3Q iShares net inflows $33.67 billion vs. $17.81 billion q/q; 3Q long-term inflows $10.61 billion vs. $14.50 billion q/q; 3Q net outflows $3.11 billion vs. profit $20.02 billion q/q

· Comerica (CMA) Q3 EPS $1.86 vs. est. $1.77; Q3 provision for credit losses $0 vs. Bloomberg est. $12.1M

· First Horizon (FHN) Q3 EPS 36c, in-line with estimates as Q3 interest income $305.7M; Q3 NIM 3.44% vs. Bloomberg est. 3.46%

· Mercantile Bank (MBWM) Q3 EPS 61c/$34.5M vs. est. 61c/$34.69M; reports Q3 book value per share $22.84

Healthcare

· UnitedHealth (UNH) Q3 EPS $3.41/$56.6B vs. est. $3.29/$56.34B; raises FY18 adj. EPS view to approaching $12.80 from $12.50-$12.75 (est. $12.70); 3Q medical care ratio 81%

· Johnson & Johnson (JNJ) Q3 EPS $2.05/$20.3B vs. est. $2.03/$20.05B; raises year EPS view to $8.13-$8.18 vs. est. $8.07-$8.17 and boosts sales view to $81B-$81.4B from prior $80.5B-$81.3B

· Regeneron Pharmaceuticals (REGN) and Sanofi (SNY)announced that both pivotal Phase 3 placebo-controlled trials evaluating Dupixent in adults with inadequately-controlled chronic rhinosinusitis with nasal polyps, met all their primary and secondary endpoints

· The pharmaceutical industry is pushing back against a Trump administration plan to require that the list price be included for most drugs in television advertisements, WSJ reports

· Aclaris Therapeutics, Inc. (ACRS) entered into a definitive asset purchase agreement with Allergan (AGN) Sales, LLC to acquire worldwide rights to RHOFADE® (oxymetazoline hydrochloride) cream, 1% and additional intellectual property

· Centers for Medicare & Medicaid Services (CMS) proposed to require that prescription drug manufacturers post the Wholesale Acquisition Cost for drugs covered in Medicare or Medicaid in direct-to-consumer television advertisements. The proposal is part of the agency’s ongoing efforts to empower patients and lower prescription drug prices, it said in a statement

· Merck KGaA (MRK.XE) said it expects to return to profitable growth as of next year, with its pharmaceuticals pipeline unfolding its full potential, the company acknowledged 2018 was a challenging year, and confirmed its outlook for 2018 and growth prospects

Industrials & Materials

· J.B. Hunt (JBHT) Q3 EPS $1.19/$2.21B vs. est. $1.39/$2.22B; 3Q Intermodal revenue $1.22B, Q3 Dedicated Contract Services revs $542.9M and Q3 Integrated Capacity Solutions revs $345.8M

· Genesee & Wyoming (GWR) total traffic in September 2018 was 257,723 carloads, a decrease of 1,793 carloads, or 0.7%, compared with September 2017. G&W’s same railroad traffic in September 2018 increased 8,293 carloads, or 3.3%

· Rio Tinto (RIO) followed Vale in confirming it’s on track for record annual iron ore shipments amid differing projections over the strength of demand in China. It lifted flows in the first nine months by 4% from the same period last year

· Kaiser Aluminum Corporation (KALU) authorized an additional $100M for share repurchases

Technology, Media & Telecom

· SendGrid Inc. (SEND) has agreed to be bought by Twilio (TWLO)for $2 billion in an all-stock deal; at the closing, expected for the first half of 2019, each share of SendGrid stock will be converted into the right to receive 0.485 shares of Twilio stock, representing a per-share price for SendGrid stock of $36.92 based https://on.mktw.net/2OowI05

· Adobe (ADBE) backs Q4 EPS view of roughly $1.87/$2.42B vs. est. $1.89/$2.42B; will host a financial analyst meeting with investors and financial analysts at its Adobe MAX Creativity Omnicom Conference; reaffirmed its 2018 sales and profit targets and said it expects revenue 20% higher for 2019

· Omnicom (OMC) Q3 EPS $1.32/$3.71B vs. est. $1.21/$3.69B

· Paul Allen, the co-founder of Microsoft Corp. (MSFT) died Monday from complications of non-Hodgkin’s lymphoma. He was 65

· Symantec (SYMC) upgraded to Market Perform from Underperform at Cowen

 

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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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