Morning Preview: October 22, 2018

Terrie AmengualDaily Market Report

Early Look

Monday, October 22, 2018

U.S. futures are moving higher, propelled by strength in Asia as China’s Shanghai index jumped over 4%, its biggest one-day gain in over 3-years after President Xi Jinping emphasized China’s support for the private sector, according to the Xinhua News Agency. Beijing also released new details on proposed personal income tax cuts, according to the reports. The headlines helped push Asian stocks higher, led by gains in materials and metal shares. China’s rally comes after last week’s report on weaker-than-expected third-quarter GDP growth. In Asian markets, The Nikkei Index rose 82 points to 22,614, the Shanghai Index jumped 104 points (over 4%) to settle at 2,654 and the Hang Seng Index surged 591 points to end at 26,153. In Europe, the German DAX is higher by 30 points at 11,600, while the FTSE 100 is up around 30 points at 7,080. Markets are generally higher as investors prepare for a full blast of corporate earnings over the next three weeks. U.S. stocks ended mixed on Friday, as the S&P rose more than 1% during the day on strong corporate results but pared gains as investors grew concerned about the impact tariffs could have on earnings, while posted small losses for major averages on the week. Gains were led by defensive stocks as consumer staples rallied more than 2% and utilities were higher by more than 1.5%.

Market Closing Prices Yesterday

· The S&P 500 Index slipped -1.00 points, or 0.04%, to 2,767.78

· The Dow Jones Industrial Average rose 64.89 points, or 0.26%, to 25,444.34

· The Nasdaq Composite dropped -36.11 points, or 0.48%, to 7,449.03

· The Russell 2000 Index declined -18.71 points, or 1.20% to 1,542.04

Events Calendar for Today

· 8:30 AM EST Chicago Fed Nat Activity Index for Sept

Earnings Calendar:

· Earnings Before the Open: BOH, CADE, HAL, HAS, KMB, LII

· Earnings After the Close: AMTD, BRO, CR, MC, SLM, ZION

Other Key Events:

· European Society for Medical Oncology (ESMO) meeting 10/19-10/23, in Germany

· Oracle OpenWorld Conference, 10/22-10/25, in San Francisco

World News

· China may yet be branded an FX manipulator. Steven Mnuchin said he’s open to changing how the U.S. decides which nations game their currencies, which may allow the president to keep a campaign pledge.

· Italy’s deputy prime minister Luigi Di Maio has insisted that his government has no plans to change its budget blueprint in remarks that took some of the steam out of a rally China may yet be branded an FX manipulator. Steven Mnuchin said he’s open to changing how the U.S. decides which nations game their currencies, which may allow the president to keep a campaign pledge.

Sector News Breakdown

Consumer

· An auto parts maker owned by American buyout firm KKR & Co. said it is acquiring Fiat Chrysler Automobiles NV’s (FCAU) auto parts arm, Magneti Marelli, for EUR6.2 billion ($7.1 billion). The combination of KKR-owned Calsonic Kansei, will create a company with EUR15.2 billion in annual revenue https://on.mktw.net/2q2Lj2C

· Leoni AG (LEO.XE) became the latest auto supplier to cut its guidance this year, citing rising global trade tensions, stricter emissions rules and stagnating demand; lowered its 2018 earnings and revenue forecasts

· Polaris Industries (PII) Q3 EPS $1.86/$1.653B vs. est. $1.57/$1.64B; backs FY18 adjusted EPS view $6.48-$6.58 and backs FY18 adjusted sales growth in the range of 11%-12% over the prior year

· Papa John’s (PZZA) board member John Schnatter writes in a letter urging the board to change the Poison Pill adopted at the company’s meeting to remove or render inapplicable the “Acting in Concert” provisions.

· Under Armour (UAA) positive mention in Barron’s saying the stock has had a bumpy ride the last couple of years, but has recovered some of the losses amid significant management changes, and it could be a good time to take a fresh look at the stock as a contrarian bet, before margins improve and Wall Street warms to the turnaround plan

· Hasbro (HAS) Q3 EPS $1.93/$1.57B vs. est. $2.24/$1.71B missing estimates on the top and bottom line (watch shares of Mattel -MAT); Q3 Ebitda $370M vs. est. $417M

· Ryanair Holdings PLC (RYAAY) said Q2 net profit fell 6%, three weeks after the company cut its full-year guidance; said net profit for July through September was EUR841.5 million ($967 million) compared with EUR895.4 million a year earlier.

Energy, Materials and Industrials

· Halliburton (HAL) Q3 EPS 50c/$6.2B vs. est. 49c/$6.11B

· Jacobs Engineering Group Inc (JEC) has agreed to sell its energy, chemicals and resources business to WorleyParsons for $3.3 billion https://reut.rs/2AkVyFB

· Saudi Arabia’s energy minister said the country is likely to raise oil production close to 11m barrels a day, signaling it has “no intention” of using its status as a top producer as leverage in Khashoggi case

· EnLink Midstream, LLC (ENLC) will buy all outstanding common units of EnLink Midstream Partners, LP (ENLK) not already owned in a unit-for-unit exchange transaction to simplify its corporate structure; ENLK common unitholders to receive 1.15 common units of PF ENLC for each unit owned

· Hi-Crush Partners (HCLP) cuts quarterly cash distribution to 22.5c per unit from 75c

· BASF SE (BASFY) said Monday that it will partner with Norilsk Nickel Mining & Metallurgical Co. to produce batteries for the European market.

Financials

· Citizens Financial (CFG) positive mention in Barron’s saying it has one of the hottest lending niches in the world and it is the exclusive financing partner for iPhones bought directly from Apple (AAPL). Initiatives like that are helping the bank post steady growth in its total book of loans at a time when many rivals are struggling for any growth at all

· Blackstone Group (BX) has agreed a deal to acquire Ulterra Drilling Technologies, a manufacturer of drill bits and downhole tools for the oil and gas industry, for around $700 million, Reuters reported https://reut.rs/2S73Es4

· Asset managers BlackRock (BLK), Fidelity, Invesco (IVZ) and T. Rowe Price (TROW) are battling class-action suits related to fund selection and oversight of their 401k plans, and they are not alone as more than 128 cases have been filed since 2016, including Charles Schwab (SCHW), M&T Bank (MTB), Morgan Stanley (MS), Neuberger Berman, and JPMorgan (JPM)

· Old National Bancorp (ONB) Q3 EPS 34c/$179.3M vs. est. 32c/$179.68M

Healthcare

· Dynavax’s (DVAX) experimental therapy for advanced melanoma, SD-101, when used in combination with Merck & Co’s Keytruda maintained a 70 percent response rate even as new people were added to a study in a small number of patients.

· ImmunoGen’s (IMGN) lead product candidate, mirvetuximab soravtansine, when combined with Merck & Co.’s Keytruda showed a confirmed overall response rate of 30%, according to preliminary results from a study in women with heavily pre-treated ovarian cancer

· Novartis’s (NVS) experimental drug alpelisib improves locally assessed progression free survival (PFS) in HR+/HER2- advanced breast cancer patients with PI3K mutations, according to data presented at the European Society for Medical Oncology

· Pfizer (PFE) and Merck KGaA’s immune therapy Bavencio (avelumab), together with Inlyta (axitinib), cut the likelihood of advanced kidney tumors getting worse or death by 31% compared with the standard therapy Sutent (sunitinib) when given as an initial treatment in a large late-stage study

· Roche’s (RHHBY) Tecentriq plus Abraxane chemotherapy improved survival over chemotherapy alone in metastatic triple-negative breast cancer patients with PD-L1 positive tumors, according to Roche data presented at the European Society for Medical Oncology Congress 2018

· Mirati Therapeutics (MRTX) said data from its ongoing Phase 2 of Sitravatinib in combination with OPDIVO in non-small cell lung cancer showed tumor reductions in 45 out of 56 evaluable patients.

Technology, Media & Telecom

· CBS Corp (CBS) interim chairman Richard Parsons has resigned from the board for reasons of ill health about a month after joining, the company said in a statement

· Alibaba (BABA), Tencent (TCEHY) and Baidu (BIDU) have sold off sharply this year but Barron’s roundtable experts – Laura Geritz, Justin Leverenz, Ruchir Sharma, and Richard Sneller – say the market is “unfairly” discounting the growth potential of these internet stocks

· Intel (INTC) upgraded to Buy from Neutral at Nomura Instinet with $50 target

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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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