Morning Preview: November 12, 2018

Scott GreenDaily Market Report

Early Look

Monday, November 12, 2018

U.S. stock futures are pointing to a mixed open, as major U.S. averages look to add to last week’s gains. WTI crude is higher for the first time in 11 days, while Brent rallied above $71 a barrel after this weekend’s OPEC gathering in Abu Dhabi. Crude producers need to cut output by 1 million barrels a day to counter the rout in prices, Saudi Arabia said. The kingdom will do its part to help by curbing its exports by 500,000 a day next month on concern over surging U.S. output and slowing global demand. The euro slumped to a 16-month low (June 2017) and the pound slid on concern over Brexit and Italy’s budget, while the rising dollar pressures gold prices for a 7th day. There were a few M&A deals announced over the weekend (see below), while reports indicate the most destructive series of wildfires in California history may cost the state, insurers and homeowners at least $19 billion. The blazes have killed almost three dozen people, torched more than 6,700 structures and forced around 250,000 evacuations. Trade concerns with China, the UK Brexit and earnings will once again drive markets this week. In Asian markets, The Nikkei Index rose 19 points to 22,269, the Shanghai Index gained 31 points to close at 2,630 and the Hang Seng Index gained 31 points to 25,633. In Europe, the German DAX is down around -70 points at 11,450, while the FTSE 100 is up a few points at 7,120. U.S. Treasury markets are closed today in observance of Veteran’s Day holiday.

U.S. stocks closed lower on Friday, falling for a second straight day amid a fresh round of selling in the tech sector, with the Nasdaq Composite falling over 1.6%, but major averages still finished the week closing higher. For the week, the Dow Industrial Average gained 2.8% (halting a 4-day win streak) while the S&P 500 advanced 2.1%. Declining oil prices (WTI crude dropped a 10th straight session) and a weakening Chinese economy helped affirm the bearish narrative of slower global growth. Inflation data was “hot” as wholesale prices in October surged 0.6%, well above the 0.2% expected.

Market Closing Prices Yesterday

· The S&P 500 Index dropped -25.82 points, or 0.92%, to 2,781.01

· The Dow Jones Industrial Average fell -201.92 points, or 0.77%, to 25,989.30

· The Nasdaq Composite plunged -123.98 points, or 1.65%, to 7,406.90

· The Russell 2000 Index declined -28.72 points, or 1.82% to 1,549.49

Events Calendar for Today

· No major economic data today

Sector News Breakdown


· Nascar offered to acquire International Speedway Corp. (ISCA)in a deal that values the owner of the Daytona International Speedway at $1.85B, or $42 and would combine the companies into a privately held group owned by Nascar’s controlling family

· Dollar Tree (DLTR) mentioned favorably in Barron’s saying the company has successfully dangled deals in front of consumers for years, but its “magic touch” has faded this year, putting the company’s stock in the bargain bin

· Del Frisco’s (DFRG) Q3 EPS loss ($1.49)/$105.3M vs. est. $118.3M

· GNC (GNC) Q3 EPS 2c/$580.2M vs. est. 9c/$580.5M; Q3 comparable sales -2.1%

· Kroger (KR) mentioned cautiously in Barron’s saying now may be time to take profits, as Kroger has delivered adding that while the outlook for the company continues to look bright the price is closer to 11.5 times earnings than today’s 14.2

· E-cigarette startup Juul Labs Inc., faced with a regulatory crackdown and criticism that its marketing has attracted underage users, plans to stop selling most of its flavored nicotine liquids at bricks-and-mortar stores, according to reports. The move comes as the FDA prepares to announce sharp restrictions as soon as next week on the sale of such products.

Energy, Industrials & Materials

· Saudi representatives said Sunday that the kingdom would slash its exports unilaterally next month, as a broader OPEC alliance debated, but didn’t agree to a collective production cut Meanwhile, Russia sent mixed signals on whether it would pull back on supply — after moving in lockstep on such matters with OPEC for more than two years.

· Cheniere Energy (LNG) awards $2.02B LNG contract to Bechtel Oil, Gas and Chemicals for Stage 4 gas liquefaction facility at the Sabine Pass LNG terminal in Louisiana; facility to have expected nominal production capacity of ~4.5m metric tons per year

· Defense stocks such as Boeing (BA), Lockheed Martin (LMT)and General Dynamics (GD) have plenty of room to rally after the midterm elections, Barron’s noted according to Bank America; said Democrats taking control of the House is the best scenario for defense spending

· The US Treasury again extended a deadline for customers of Rusal, the aluminum empire of Russian oligarch Oleg Deripaska, to wind down their contracts and business

· United Parcel Service Inc.’s (UPS) freight workers ratified a final contract offer, averting a work stoppage that prompted the carrier to clear its network ahead of the vote. The final offer cleared with 77% of votes cast approving the five-year contract, covering 11,600 workers


· Private equity firm Veritas Capital and hedge fund Elliott Management have agreed to acquire U.S. healthcare software maker Athenahealth Inc (ATHN) for $5.5 billion in cash, people familiar with the matter said on Sunday.

· Tesaro Inc. (TSRO) shares plunged 19% late Friday after early-stage data for one of its cancer combinations underwhelmed at a medical conference in Washington. The results from its trial of TSR-022 in combination with TSR-042 in lung cancer showed lackluster responses with just 13% of patients showing a partial response to the drug cocktail

· Opko Health (OPK) Q3 EPS loss (5d)/$249.8M vs. est. loss (8c)/$264M; 3Q cash and other securities $43.7 million

· Sanofi (SNY) says Praulent was associated with fewer deaths from any cause in a new analysis on mortality from the 18,924-patient Odyssey outcomes trial.

Technology, Media & Telecom

· SAP SE (SAP) has agreed to purchase Qualtrics International Inc. for $8 billion in cash, the companies announced Sunday. Qualtrics had filed for an initial public offering in October hoping to raise about $200 million.

· Vista Equity Partners struck a deal to take software company Apptio Inc. (APTI) private for $1.94 billion. Under the agreement, Apptio shareholders will get $38 a share, representing a 53% premium to Friday’s closing price of $24.85

· Alibaba Group Holding Ltd. (BABA) said its annual “Singles Day” generated sales of $30.8 billion in the 24-hour span that began at 12 a.m. Sunday. Alibaba easily past the previous year’s record of $25.3 billion by about 5:30 p.m.


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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