Morning Preview: October 23, 2018

Terrie AmengualDaily Market Report

Early Look

Tuesday, October 23, 2018

U.S. equity futures tumble, as a two-day rally for China’s stock market unraveled, with Asian stocks spiraling lower and European stocks also dropping sharply as US investors prepare for a busy day of earnings including results from five Dow components (MMM, VZ, CAT, MCD, UTX). In Asian markets, The Nikkei Index dropped -604 points (2.67%) to settle at 22,010, the Shanghai Index gave back more than half of its gains the prior day, falling 2.26% or 60 points to finish at 2,494, and the Hang Seng Index plunged over 800 points (3.08%) to end at 25,346. In Europe, the German DAX is down over -200 points to 11,300, while the FTSE 100 is down about -50 points trading under 7,000. Macro concerns remain a massive overhang for global markets as U.S. -China trade tensions a lingering factor for investors, along with the back-and-forth between Italy and the EU related to its revised budget and fears over the impact of soaring global borrowing costs. Defensive assets surging to start the day as investors continue to rotate into safe-haven assets with gold prices up more than $10, bonds prices advancing and palladium prices climbing to a record $1,139.77 an ounce in London according to Bloomberg. Yesterday the S&P 500 index made it a 4th straight day of declines, and falling for the 11th time last 13-sessions, as a slump in financial and energy shares offset gains in tech and consumer discretionary. Markets erased gains early Monday despite a surge in Chinese stock markets the night prior.

Market Closing Prices Yesterday

· The S&P 500 Index slumped -11.90 points, or 0.43%, to 2,755.88

· The Dow Jones Industrial Average fell -126.93 points, or 0.50%, to 25,317.41

· The Nasdaq Composite gained 19.60 points, or 0.26%, to 7,468.63

· The Russell 2000 Index slipped -2.54 points, or 0.16% to 1,539.50

Events Calendar for Today

· 7:45 AM EST ICSC Weekly Retail Sales

· 8:55 AM EST Johnson/Redbook Weekly Sales

· 10:00 AM EST Richmond Fed Index…est. 24

· 4:30 PM EST API Weekly Inventory Data

Earnings Calendar:

· Earnings Before the Open: ATI, AVY, BIIB, CAT, CIT, CNC, DGX, FBC, FITB, GLW, HBAN, HOG, HUBB, JBLU, LMT, MCD, MMM, NEE, PCAR, PHM, PNR, RF, SNV, TRU, UTX, VZ, WAT.

· Earnings After the Close: AMP, CB, CNI, COF, CSGP, EW, IEX, ILMN, IRBT, JNPR, MANH, MKSI, NAVI, RRC, TSS, TXN, VAR, VMI

World News

· US Cyber Command has begun operations against Russians trying to influence midterm elections. The so-called direct messaging campaign to deter Russian propaganda efforts is first cyber operations to defend US vote – NY Times

· New manufacturing orders in the UK fell at their fastest pace for three years as fears over a disorderly Brexit quashed confidence in the sector

· Saudi Arabia’s Foreign Minister Adel al-Jubeir said the kingdom was committed to a thorough and complete investigation to get to the truth behind the killing of journalist Jamal Khashoggi in Turkey

· A package containing what appeared to be an explosive device was found in a mail box outside the New York residence of billionaire financier George Soroson Monday, police said.

Sector News Breakdown

Consumer

· HNI Corporation (HNI) Q3 EPS 90c/$611.1M vs. est. 86c/$618.27M; sees Q4 adjusted EPS 91c-$1.01 vs. est. $1.04 and sees Q4 organic sales up 5%-8%; narrows FY18 EPS view to $2.35-$2.45 from $2.35-$2.55 (est. $2.45) saying the impact of lower Q4 contract office furniture volume is the primary driver of the narrowed earnings outlook

· Auto suppliers Borg Warner (BWA) and Delphi (DLPH) both upgraded to neutral from underperform at Bank America

· Pulte Homes (PHM) Q3 EPS $1.01/$2.65B vs. est. 95c/$2.62B; Net new orders for the third quarter increased 1% to 5,350 homes; unit backlog for the quarter was up 3% over the third quarter of last year to 11,164 homes, with backlog value increasing 5% to $4.9B

Energy

· U.S. Silica (SLCA) Q3 EPS 44c/$423.2M vs. est. 59c/$467.89M

· Superior Energy (SPN) Q3 EPS loss 914c)/$573.1M vs. est. loss (12c)/$563.7M

Financials

· TD Ameritrade (AMTD) Q$ EPS 92c/$1.40B vs. est. 88c/$1.39B; 4Q net interest margin 2.05%, 4Q operating margin 45.4%, 4Q number of trades 49.7 million, 4Q pretax profit margin +43.6%; Q4 net new client assets $23.9 billion, 4Q average client trades per day 795,104 and4Q average commissions and transaction fees per trade $7.35; sees low end of $5.75B (est. $5.88B) and a range of $2.9B-$3.0B of operating expense in 2019

· Regions Financial (RF) Q3 EPS 32c/$1.46B vs. est. 36c/$1.46B; Q3 net interest margin 3.5%, up 1 bps sequentially; says that average loans and leases increased 1% to $81.0 billion

· Fifth Third (FITB) Q3 EPS adjusted 64 vs. est. 63c; Q3 provision for loan and lease losses $86M, compared to $67M last year; Q3 net losses charged-off totaled $72M vs. $68M last year

· Synovus (SNV) Q3 EPS 95c vs. est. 92c; Q3 NIM 3.89%

· Moelis (MC) Q3 EPS 62c/$207.7M vs. est. 64c/$230.3M

· Zions Bancorporation, N.A. (ZION) Q3 EPS $1.04 vs. est. 96c; 3Q net interest margin 3.63%, vs. est. 3.58%; 3Q provision for credit losses $11 million; 3Q effective tax rate 23.6%; 3Q non-interest income $136 million

· Park National (PRK) Q3 EPS $1.56 vs. est. $1.76 and said Q3 loans were $5.63 billion, 3Q net interest margin 3.81%

· American Campus (ACC) Q3 FFO 44c/$213.5M vs. est. 44c/$204.2M; sees year FFO $2.29-$2.33 vs. est. $2.31

· Agree Realty (ADC) raises FY18 acquisition volume view to $425M-$475M range of high-quality retail net lease properties

· Washington Trust (WASH) Q3 EPS $1.01 vs. est. 98c; Q3 net interest margin 2.99%

Healthcare

· Biogen (BIIB) Q3 EPS $7.50/$3.44B vs. est. $6.78/$3.32B; Q3 Tecfidera revs $1.09B

· Centene (CNC) Q3 EPS $1.79/$16.18B vs. est. $1.77/$16.02B; sees FY18 EPS $6.90-$7.10 on revs $59.8B-$60.3B vs. est. $7.07/$59.83B

· Johnson & Johnson (JNJ) said it will buy all outstanding shares of Japanese skincare firm Ci:z Holdings Co Ltd (4924.T) that it does not already own for 230 billion yen ($2.05 billion) in cash https://reut.rs/2CAEJYv

· HealthStream (HSTM) Q3 EPS 9c/$59.9M vs. est. 8c/$58.3M

· Proteostasis (PTI) files to sell 9M shares of common stock

· Tilray (TLRY) said it issued an additional $25M aggregate principal amount of its 5.00% convertible senior notes due 2023

Industrials & Materials

· Bayer (BAYRY) shares slumped over 8% after the company failed to persuade a California state judge to set aside a jury’s verdict in the first trial over allegations that its Roundup weed killer causes cancer; though the judge on Monday said damages should be slashed to $78.6 million from $289 million.

· Arconic (ARNC) is said to have received an $11B acquisition offer from Apollo Global on Friday, Reuters reports, citing people familiar with the matter. The offer of $23-$24 per share is only a slight premium to the company’s last close – Reuters https://reut.rs/2O0qPkv

· Crane (CR) Q2 EPS $1.62/$856M vs. est. $1.46/$855.9M; raises year EPS to $5.80-$5.90 above estimate $5.75 and raises quarterly dividend

· Hexcel (HXL) Q3 EPS 80c/$540.5M vs. est. 78c/$547.21M; narrows FY18 adjusted EPS view to $2.99-$3.07 from $2.96-$3.10 (est. $3.03); raises FY18 revenue guidance to $2.14B-$2.2B from $2.1B-$2.2B (est. $2.19B)

Technology, Media & Telecom

· Cadence Design (CDNS) Q3 EPS 49c/$532M vs. est. 41c/$516.45M; sees Q4 adjusted EPS 46c-48c on revs $545M-$555M vs. est. 42c/$529.63M; raises FY18 adj. EPS view to $1.80-$1.82 from $1.64-$1.70 (est. $1.68) and raises FY18 revenue view to $2.113B-$2.123B from $2.07B-$2.09B (est. $2.08B)

· SS&C (SSNC) sees Q3 adjusted EPS 78c-79c on revs $1.0008B-$1.0028B vs. est. 66c/$1B; to update 4Q outlook on Oct. 31 in 3Q earnings release

· French IT company Atos (ATO.FP) has cut its full-year revenue growth forecast citing disappointing results in Germany and North America and an uncertain and challenging global outlook

· Xerox (XRX) Q3 EPS 85c/$2.35B vs. est. 78c/$2.42B; raises FY18 operating cash flow view to $1.0B-$1.1B from $900M-$1.1B and raises FY18 free cash flow view to $900M-$1.0B from $750M-$950M

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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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