Morning Preview: November 13, 2018

Scott GreenDaily Market Report

Early Look

Tuesday, November 13, 2018

U.S. stock futures are paring some of yesterday’s declines after reports Treasury Secretary Steven Mnuchin and China’s Vice Premier Liu He resumed talks before a meeting between Presidents Trump and Xi at the G-20 this month. The two officials spoke by phone Friday, though no concrete results emerged according to Bloomberg. Oil prices also resume their downward plunge, on track for a 12th straight of declines, and headed to its lowest levels of 2018 (after hitting 4 ½ year highs just a month ago). The move was prompted midday yesterday after a tweet by President Donald Trump on Monday added to oil’s woes, as he voiced disapproval over a potential production cut by Saudi Arabia and OPEC, and said prices “should be much lower based on supply!” Also not helping oil prices, Opec lowers oil demand forecast and warns of oversupply in 2019 in assessment this morning. In Asian markets, The Nikkei Index dropped 459 points to 21,810, the Shanghai Index gained 24 points to end at 2,654 and the Hang Seng Index gained 159 points to settle at 25,792. In Europe, the German DAX is up around 70 points at 11,400, while the FTSE 100 is up a few points at 7,060. Dow component Home Depot reports better than expected results this morning, helping shares early.

Stocks sunk on Monday as the Dow Jones Industrial Average closed near session lows, the S&P 50 index dropped for a third straight session and the Nasdaq underperformed amid weakness in the Apple supply chain following a profit warning from one of its suppliers. The U.S. dollar ended near an 18-month high, sinking commodity prices as oil closed lower for a record 11th straight session. A stronger dollar can hurt sales of multinational companies, making goods relatively more expensive to customers purchasing abroad, which could have been part of yesterday’s stock market decline. A sharp decline in shares of Dow component Goldman Sachs (GS) also delivered a 112-point blow to the Dow.

Market Closing Prices Yesterday

· The S&P 500 Index plunged -54.79 points, or 1.97%, to 2,726.22

· The Dow Jones Industrial Average sunk -602.12 points, or 2.32%, to 25,387.18

· The Nasdaq Composite plummeted -206.03 points, or 2.78%, to 7,200.87

· The Russell 2000 Index declined -30.70 points, or 1.98% to 1,518.79

Events Calendar for Today

· 6:00 AM EST NFIB Small Business Optimism for Oct…est. 108.0

· 7:45 AM EST ICSC Weekly Retail Sales

· 8:55 AM EST Johnson/Redbook Weekly Sales

· 2:00 PM EST Monthly Budget Statement, for Oct…est. (-$100.0B)

· 4:30 PM EST API Weekly Inventory Data

Earnings Calendar:

· Earnings Before the Open: AAP, ARMK, BAYRY, BZH, EPC, GDS, HD, TSN, VOD

· Earnings After the Close: CDLX, SWCH, MTSI, VREX, WIX

Other Key Events:

· UBS Global Technology Conference, 11/12-11/14, in San Francisco

· Credit Suisse 27th Annual Healthcare Conference, 11/12-11/15, in Arizona

· Morgan Stanley Global Chemicals & Agriculture Conference, 11/13-11/14, in Boston

· Morgan Stanley Global Consumer & Retail Conference, 11/14-11/15, in New York

· RBC Capital Technology, Internet and Media Conference, 11/13-11/14, in New York

· Stifel 2018 Healthcare Conference, 11/13-11/14, in New York

World News

· The National Federation of Independent Business (NFIB)small-business optimism index declined 0.5 point to a seasonally adjusted 107.4 in October, a four-month low. The biggest declines of the 10 components that make up the index came from questions on expansion and earnings trends, while the only gain came from plans to increase inventories.

· Kyrsten Sinema became Arizona’s first Democratic Senator in three decades, after an extended vote count delivered an upset victory. The Senate is now 51-47 in favor of Republicans, with Florida and Mississippi still undecided

· UK Prime Minister Theresa May is facing a fresh Parliamentary setback after a group of pro-EU Tory MPs signed up to a cross-party plan to force the government to publish a more detailed assessment – Financial Times

· The German Federal Statistical Office said final data for October showed CPI climbed 0.2% on month and 2.5% on year, confirming that prices rose to their highest level since September 2008

Sector News Breakdown

Consumer

· Home Depot (HD) Q3 EPS $2.51/$26.3B vs. est. $2.26/$26.26B; Q3 comp sales up 4.8% vs. est. 4.7% and US comp sales 5.4% vs. est. 4.8%; sees FY18 EPS $9.75 up from prior view $9.42 (est. $9.55) and sees FY18 revenue up approximately 7.2% up from prior 7%

· Wal-Mart (WMT) said Binny Bansal announced his resignation as CEO of Flipkart Group, effective immediately. Binny has been an important part of Flipkart since co-founding the company, but recent events risked becoming a distraction and Binny has made a decision to step down

· Advance Auto Parts (AAP) Q3 EPS $1.89/$2.27B vs. est. $1.75/$2.23B; Q3 comp sales 4.6% tops the 2.2% est.; raises FY18 revenue view to $9.55B-$9.6B from $9.3B-$9.5B (est. $9.49B) and raises FY18 SSS growth view to 2%-2.5% from 0%-1.5%.

· Beazer Homes (BZH) Q4 EPS $1.83/$767.9M vs. est. $747.5M;

· Kellogg (K) said beginning in January 2019, its North American (KNA) organizational structure will be redesigned to better enable the company to win in the marketplace and deliver top-line growth. Second, Kellogg is exploring the sale of its cookies and fruit snacks businesses to enable the company to bring a sharper focus to its core businesses.

Energy, Industrials

· In its annual World Energy Outlook report, the IEA said its main projection scenario through to 2040 foresees the U.S. accounting for nearly 75% and 40% of global oil and gas growth, respectively, over the next six years. Growth is expected to be driven primarily by shale fracking, which should lead U.S. shale oil supply to more than double, reaching 9.2 million barrels a day by the mid-2020s

· Natural gas prices surge to its highest level since 2014 in New York, topping the $4 per mln btu level amid colder weather forecasts and IEA report that it will surpass coal for the number 2 energy source after 2020.

· Chevron (CVX) and Exxon (XOM) are considering first-round bids this month for closely held oil producer Endeavor Energy Resources. They may be joined by ConocoPhillips in the auction, expected to value the target at about $15 billion, including debt – Bloomberg reported

· Boeing (BA) didn’t disclose a possible fault in a flight safety feature suspected of playing a role in last month’s fatal Lion Air crash, The Wall Street Journal reports

Financials

· AllianceBernstein L.P. (AB) preliminary assets under management decreased to $530 billion during October 2018 from $550 billion at the end of September. The 3.6% decline was due to market depreciation, partially offset by total firm wide net inflows.

· Invesco Ltd. (IVZ) preliminary month-end assets under management (AUM) of $926.1 billion, a decrease of 5.6%. The decrease was driven by unfavorable market returns, net long-term outflows, foreign exchange, and non-management fee earning AUM outflows; partially offset by higher money market AUM and reinvested distributions. FX decreased AUM by $3.9 billion.

· Focus Financial (FOCS) Q3 EPS 46c/$235.7M vs. est. 46c/$240.0M; 3Q adjusted Ebitda $42.4M vs. est. $52.9M

· A U.K. appeals court said it has jurisdiction to hear a class-action case over allegations that MasterCard (MA) unfairly billed 46 million British consumers for processing fees for cross-border transactions.

· Customers Bancorp (CUBI) said in a filing it requires additional time to complete its financial statements to be filed as part of the Q3 Form 10Q, citing needs to restate results for certain prior periods to reclassify commercial mortgage warehouse loans and cash flow

Healthcare

· AstraZeneca (AZN) sold U.S. rights for respiratory drug Synagis to Swedish Orphan Biovitrum for $1.5 billion and agreed to share profits and losses on a potential new medicine it’s developing with Sanofi (SNY)

· Roche Holding AG’s (RHHBY) Tecentriq has been granted U.S. FDA priority review status in combination with Abraxane for the treatment of a type of breast cancer,

· Neon Therapeutics (NTGN) Q3 EPS loss (67c) vs. est. loss (79c); as of September 30, cash, cash equivalents and marketable securities for Neon Therapeutics were $121.7M, as compared to cash, cash equivalents and marketable securities of $79.7M YoY

Technology, Media & Telecom

· Hon Hai Precision Industry Co. reported quarterly earnings that fell short of analysts’ estimates, reflecting how waning demand for iPhones is hurting Apple Inc.’s largest global suppliers. Hon Hai reported net income of NT$24.9 billion ($806 million) in the September quarter compared with expectations for NT$28.2 billion. – Bloomberg

· Vodafone Group PLC (VOD) said that organic earnings rose in the first half and it set out new cost-savings targets, but it froze the interim dividend while it works to reduce debt.

· Telecom Italia’s (TI) board has revoked all powers from CEO Amos Genish with immediate effect, the company said. The move follows a month’s long tug of war between main shareholders Vivendi SA (VIVHY) and Elliott Management Corp.

· Eventbrite (EB) Q3 EPS ($1.24) vs. (61c) last year and revs $73.6M; sees Q4 revenue $72M-$74M vs. est. $71.53M

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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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