Morning Preview: October 30, 2018

Terrie AmengualDaily Market Report

Early Look

Tuesday, October 30, 2018

After a tumultuous day of trading yesterday, U.S. futures are edging higher, getting a lift after President Donald Trump said the U.S. will “make a great deal with China,” in an interview with Fox News. That comes after Monday’s session that left major indices lower, with the biggest intraday reversal for the Dow industrials in eight months and the largest turnaround from an opening gain for the Nasdaq Composite in over three years. Asian equities also moved higher on Tuesday as the Nikkei Index gained 307 points (1.45%) to close at 21,457, the Shanghai Index gained 25 points finishing at 2,568 and the Hang Seng Index fell -226 points to end at 24,585. On Tuesday, China’s central bank set the dollar’s reference rate at 6.9574 yuan, putting the Chinese currency at its weakest since May 2008. In Europe, the German DAX is down around -30 points at 11,300 area, while the FTSE 100 is little changed at 7,030. The MSCI Asia gauge halted five days of losses and S&P 500 futures pointed to a rebound. Haven demand faded as the yen, gold and Treasuries all dropped. Today is also another busy day for earnings with earnings expected from GE, KO and Facebook later.

Stocks were volatile Monday, as U.S. stocks ended lower, extending last week’s selloff, but managed to finish well off the session lows that took the Nasdaq Comp, S&P 500, Dow Industrials and Dow Transports further into correction territory. A late day report from Bloomberg saying the U.S. would impose additional tariffs on China’s remaining imports if talks between President Donald Trump and China’s leader Xi Jinping failed to yield progress, worsened the tensions between the countries and put more pressure on stocks that were already weak. The Nasdaq Comp dropped to lows of 6,922 (worst since May of this year) before ending at 7,050, the Dow Industrials dropped more than -900 points from its intraday highs of 25,040 before paring its losses in the final minutes and the benchmark S&P 500 index hit lows of 2603 before rallying 40 points in the final minutes.

Market Closing Prices Yesterday

· The S&P 500 Index dropped -17.44 points, or 0.66%, to 2,641.25

· The Dow Jones Industrial Average fell -245.39 points, or 0.99%, to 24,442.92

· The Nasdaq Composite sunk -116.92 points, or 1.63%, to 7,050.29

· The Russell 2000 Index declined -6.51 points, or 0.44% to 1,477.31


Events Calendar for Today

· 7:45 AM EST ICSC Weekly Retail Sales

· 8:55 AM EST Johnson/Redbook Weekly Sales

· 9:00 AM EST S&P CoreLogic CS 20-City for August…est. 0.1%

· 10:00 AM EST Consumer Confidence for Oct…est. 135.9

· 4:30 PM EST API Weekly Inventory Data

Earnings Calendar:

· Earnings Before the Open: AET, AGCO, AGN, AMT, AN, AOS, AWI, BHGE, BKI, BNP, CMI, CTSH, CVLT, EAT, ECL, ERJ, ESV, ETN, FCAU, FIS, FLOW, FUN, GE, GWR, HCA, HUN, I, INCY, IPGP, KBR, KO, LL, LYB, MA, MAS, MSM, PFE, SABR, TPR, UA, VMC, VNTR, VSH, VW, WDR, XYL

· Earnings After the Close: ACGL, AINV, AMGN, APC, ATEN, BXP, CAKE, CHRW, CVLS, CXO, DDD, EA, EBAY, ESIO, EVTC, EXAS, FB, FEYE, FLT, GNW, H, HLF, MGM, MOBL, MX, MXIM, MXL, NANO, NCR, NUVA, OI, PAYC, QLYS, RNR, SFLY, SIMO, TTMI, ULTI, VOYA, VRSK, WNC, YELP, YUMC, ZEN


World News

· Eurozone growth stumbled in Q3, rising only 0.2%, a far weaker pace than the 0.4% expectation. The miss in the first look at euro-area 3Q GDP data is dragging EUR/USD back to the session low.

· Italy’s economy stalled in Q3, putting pressure on the government’s spending plans. Growth was unchanged on a quarterly basis, down from 0.2% in the second quarter (consensus was for 0.2% again)

· German unemployment extended a five-year decline in October as the jobless rate stayed steady at 5.1%.


Sector News Breakdown

Consumer

· Chegg (CHGG) Q3 EPS loss (12c)/$74.2M vs. est. 3c/$69.24M; sees Q4 revenue $90M-$92.5M, vs. est. $89.28M; sees Q4 Chegg Services revenue $78M-$79.5M; gross margin between 75%-76%;

· Mondelez (MDLZ) Q3 EPS 62c/$6.59B vs. est. 60c/$6.32B; reports Q3 North America revenue down 1.1%; now expects full year 2018 Organic Net Revenue growth to be approximately 2%

· Texas Roadhouse (TXRH) Q3 EPS 40c/$594.59M vs. est. 54c/$594M; Q3 comparable restaurant sales increased 5.5% at company restaurants and 4.2% at domestic franchise; sees positive comparable restaurant sales growth for FY18; 3Q total domestic stores comp sales growth +6.3%, above estimate +4.1%

· Trex Company (TREX) Q3 EPS 57/$166.4M vs. est. 52c/$172.96M; sees Q4 revs $131M vs. est. $138.9M; forecast our full year 2018 incremental margin to remain at approximately 45% to 50%, and we project our capital spending requirements to be between $30 and $35M

· Wingstop (WING) Q3 EPS 21c/$38.2M vs. est. 20c/$38M; Q3 system-wide sales increased 15.1% to $315.3M; remains confident in its long-term guidance of low single digit domestic same store sales and 10%+ system-wide unit growth

· Heidrick & Struggles (HSII) Q3 EPS 85c/$187.6M vs. est. 48c/$175.74M; sees Q4 revenue $170M-$180M vs. consensus $175.68M

· Lumber Liquidators (LL) Q3 EPS ex-items 27c/$257.2M vs. est. 18c/$281.87M; now sees FY revenue growth in mid-single digits vs. prior view mid to upper single digits; now sees FY comp store sales growth 2.5%-3.5% vs. previous view of mid-single digits.


Energy

· Continental Resources (CLR) Q3 EPS 90c vs. est. 84c; sees FY production 290,000 to 300,000 boe/d; sees FY capital expenditure $2.7 billion; 3Q production 296,904 boe/d

· EnerSys (ENS) agreed to pay $750 million for assets owned by the Alpha Group, a private company that sells a range of power equipment used in broadband and telecom networks. https://on.mktw.net/2Ojs66I

· Transocean (RIG) Q3 adjusted EPS 6c vs. est. loss (12c); 3Q revenue efficiency 95.2% vs. 97.1% y/y, 3Q rig utilization 65% vs. 52% y/y; 3Q backlog $11.5 billion vs. $9.4 billion y/y

· Viper Energy (VNOM) Q3 EPS 5c vs. est. 46c; sees FY production 16,750 to 17,250 mboe/d

· BP PLC (BP) more than doubled its earnings in the third quarter from a year ago, boosted by higher oil prices and quicker project delivery


Financials

· Alexandria Real Estate (ARE) Q3 EPS $1.66/$341.8M vs. est. $1.67/$259.51M

· BNP Paribas posted steep declines for fixed-income trading in the Q3 citing Europe’s lackluster environment for its global markets business posting its second-worst quarterly revenue since early 2016

· Charles Schwab (SCHW) upgraded to Buy from Hold at Deutsche Bank

· Brixmor (BRX) Q3 FFO 42c/$306.48M vs. est. 50c/$302.15M; reports same property NOI up 1.2% from the comparable 2017 period; lowers FY18 FFO view to $1.89-$1.94 from $1.95-$2.04

· Credit Acceptance (CACC) Q3 EPS $7.56/$332M vs. est. $6.91/$326.6M; 3Q consumer loan unit volume +9.4%

· Everest Re (RE) Q3 EPS $4.09/$1.94B vs. est. $3.23/$1.78B; 3Q net investment income $161.4 million; 3Q combined ratio reported 100%

· UDR (ADR) Q3 AFFO 44c/$266.14M vs. est. 49c/$258.83M; narrows FY18 AFFO view $1.70-$1.80 from $1.78-$1.81

· Vornado (VNO) Q3 FFO 95c/$542.05M vs. est. 99c/$537.64M


Healthcare

· Aetna (AET) Q3 EPS $2.96/$15.39B vs. est. $2.83/$15.29B; Medical membership 22.1 million; 3Q adjusted pretax margin +9.2%

· Clementia Pharmaceuticals (CMTA) 5.3M share Spot Secondary priced at $13.25

· AstraZeneca PLC (AZN) said that it has agreed to sell certain rights to two drugs to Gruenenthal Group for an upfront payment of $815 million

· AxoGen (AXGN) reported that the FDA has granted the regenerative medicine advanced therapy, or RMAT, designation to Avance Nerve Graft

· Chemed (CHE) Q3 EPS $3.07/$444.2M vs. est. $2.80/$445.3M; sees FY adjusted EPS $11.80-$11.90 up from prior view $11.35-$11.55 (est. $11.47)

· Community Health (CYH) cuts FY18 EPS view to ($2.25) – ($2.10) from ($1.85) – ($1.70) while raises FY18 revenue view to $14B-$14.2B from $13.9B-$14.2B (est. $13.91B); Q3 EPS loss ($1.64) on revs $3.45B vs. est. loss ($1.04)/$3.36B

· Encompass Health (EHC) raises FY18 adj. EPS view to $3.55-$3.63 from $3.45-$3.58 (est. $3.53) and raises FY18 revenue view to $4.25B-$4.3B from $4.2B-$4.275B (est. $4.26B); raises FY18 adjusted EBITDA view to $880M-$890M from $865M-$880M

· Health Insurance Innovations (HIIQ) Q3 EPS 61c/$74M vs. est. 59c/$73.4M; sees FY18 EPS $2.47-$2.57 vs. est. $2.48 and raises FY18 revenue view to $294M- $304M, vs. $298.69M; sees adjusted EBITDA to be between $56M-$59M and reaffirms adjusted EPS

· Qiagen (QGEN) Q3 adjusted EPS 35c/$377.9M vs. est. 33c/$381.07M; raises FY18 adj. EPS view to $1.33-$1.34 from $1.31-$1.33 (est. $1.30) and backs FY18 revenue growth view of 6%-7%


Industrials & Materials

· General Electric (GE) Q3 EPS 14c/$29.57B vs. est. 20c/$30.25B; cuts its dividend to 1c per share and said to reorganize its GE Power division

· LyondellBasell (LYB) Q3 EPS $2.85/$10.15B vs. est. $2.68/$9.84B; integration activities related to the acquisition of A. Schulman are on schedule

· Allison Transmission (ALSN) Q3 EPS $1.27/$692M vs. est. $1.09/$656.86M; raises FY18 revenue growth view to up 18%-19% from 15%-18%; capital expenditures are expected to be in the range of $90M-$100M and cash income taxes are expected to be in the range of $100M-$110M; sees 4Q net sales up from the same period in 2017 and down sequentially

· Waste Connections (WCN) Q3 EPS 69c/$1.28B vs. est. 67c/$1.27B; raises dividend; says it’s on track to meet or exceed the outlook it gave in July


Technology, Media & Telecom

· Akamai (AKAM) shares rose 10%; Q3 adjusted EPS 94c/$670M vs. est. 83c/$664.17M; announces new $1.1B share repurchase program; sees Q4 revs $692M-$709M vs. est. $703.5M

· Sony (SNE) raised its earnings outlook for a second straight quarter, thanks to a series of hit video-game titles that have boosted its PlayStation business. Operating profit for the current fiscal year will be 870 billion yen ($7.7 billion). Operating income and revenue in the September quarter also beat estimates.

· Amkor Technology (AMKR) Q3 EPS 24c/$1.14B vs. est. 17c/$1.14B; sees Q4 EPS 2c-14c on revs $1.02B-$1.1B vs. est. 19c/$1.11B; sees full year capital expenditures of approximately $600M

· 8×8 (EGHT) Q2 adjusted EPS loss (4c)/$85.68M vs. est. loss (5c)/$84.43M; backs FY19 revenue view $347M-$352M vs. consensus $351.57M

· Cognex (CGNX) Q3 EPS 45c/$232.2M vs. est. 37c/$227.36M; authorizes new $200M buyback program; raises dividend 11% to 5c per share; sees Q4 revenue $180M-$190M under ASC 606, vs. consensus $200.09M

· Integrated Device (IDTI) Q3 EPS 47c/$235.5M vs. est. 45c/$233.75M

· KLA-Tencor (KLAC) Q1 EPS $2.46/$1.09B vs. est. $2.21/$1.07B; 1Q product revenue $829.2M and Q1 service revs. $264.0 million

· Rambus (RMBS) Q3 EPS 22c/$99.8M vs. est. 22c/$100.06M; sees Q4 EPS 23c-29c on revs $99M-$105M vs. est. 23c/$102.17M; Names Luc Seraphin as President & CEO

· Sanmina (SANM) Q4 EPS 67c/$1.88B vs. est. 66c/$1.85B; sees Q1 adjusted EPS 68c-74c on revs $1.875B-$1.925B vs. est. 64c/$1.81B

· A state judge in Albany dealt a blow to New York’s fantasy sports businesses FanDuel and DraftKings by ruling their daily contests were a form of gambling that the state constitution prohibits. The decision knocked down a 2016 state law signed by Gov. Andrew Cuomo that said the offerings of sites like DraftKings and FanDuel were permitted games of skill

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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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