Morning Preview: December 10, 2018

Scott GreenDaily Market Report

Early Look

Monday, December 10, 2018

Global stocks drop, extending last week’s declines after China asked the U.S. ambassador to protest the arrest of Huawei’s CFO while Chinese manufacturing data disappointed. The pound stayed near its intra-day low (below $1.27) as Prime Minister Theresa May was said to pull vote on her Brexit deal according to reports. Her spokeswoman said earlier May was confident of winning parliamentary vote on the Brexit deal, insisting it’s the best and the right deal. The dollar erased early losses and Treasury yields halted a slide while commodities oil, gold and most industrial metals slipped. Stocks are coming off a crazy and bizarre week: S&P 500: -4.6%, Dow: -4.5%, Nasdaq 100: -4.8%, Russell 2000: -5.6% and Dow component and tech giant Apple (AAPL): -5.7%. In other markets: Gold: +2.2%, Long Bond (30-Yr): +2.5%, Yen/Dollar: +1%, Utilities: +1.6% and the CBOE Volatility Index (VIX spiked +29%.

In Asian markets, The Nikkei Index dropped -459 points (2.12%) to 21,219, the Shanghai Index slipped -21 points to 2,584 and the Hang Seng Index declined -311 points (1.19%) to settle at 25,752. China’s export growth sank in November as global demand weakened, adding to pressure on Beijing ahead of trade talks with Washington. Exports rose 5.4% over a year ago to $227.4 billion, a marked decline from the previous month’s 12.6% increase. In Europe, the German DAX is off about -40 points at 10,740, while the FTSE 100 is down slightly at 6,770.

Market Closing Prices Yesterday

· The S&P 500 Index dropped -62.87 points, or 2.33%, to 2,633.08

· The Dow Jones Industrial Average fell -558.72 points, or 2.24%, to 24,388.95

· The Nasdaq Composite plunged -219.01 points, or 3.05%, to 6,969.25

· The Russell 2000 Index declined -29.32 points, or 1.98% to 1,448.09

Events Calendar for Today

· 10:00 AM EST JOLTs Job Openings for October…est. 7100

World News

· China warned Canada that there would be severe consequences if it did not immediately release Huawei Technologies chief financial officer, calling the case “extremely nasty,” according to Reuters. Meng Wanzhou was arrested in Canada on December 1 and faces extradition to the U.S., which alleges that she covered up her company’s links to a firm that tried to sell equipment to Iran despite sanctions

· China November exports only rose 5.4% from a year earlier, Chinese customs data showed on Saturday, the weakest performance since a 3% contraction in March. Exports to the United States rose 9.8% in November from a year earlier, compared with 13.2% in October.

· French President Emmanuel Macron will address the country on Monday as he seeks to placate “yellow vest” anti-government protesters who wreaked havoc in Paris this weekend in a protest against Macron’s economic policies

· French GDP will rise 0.2% in Q4 compared with the prior quarter, according to the Bank of France’s monthly survey of business activity – compares to prior survey, conducted in October, down from when the bank had projected 0.4% growth

Sector News Breakdown


· Tivity Health Inc. (TVTY) is buying diet plan company Nutrisystem Inc. (NTRI) in a $1.3 billion cash and stock deal; the transaction values Nutrisystem at about $47 a share; Expect double digit accretion to Tivity Health’s adjusted EPS in 2020 and beyond; significant potential for value creation with expected annual cost synergies of ~$30-35 million

· Travelport (TVPT) to be acquired by affiliates of Siris Capital Group and Evergreen Coast Capital in deal valued at about $4.4 billion with Travelport holders to get $15.75 per share in cash; Travelport reaffirms 2018 financial guidance ranges

· Lennar (LEN) has tumbled this year to just 6.2x next year’s expected earnings according to Barron’s, yet has substantial growth prospects even in a soft market. Ivy Zelman of Zelman & Associates says Lennar “is still a compelling opportunity” even as builders go through a rocky patch as firm has a $61.50 fair value for the stock

· Bunge Limited (BG) reports CEO Soren Schroder will step down, but will continue in his current role until a successor is named.

Energy, Industrials and Materials

· Two of the brothers who sold Rice Energy Inc. to EQT Corp. (EQT) last year say the $4.7 billion oil-and-gas company is mismanaging its assets, and they want to take over running the company.

· The CEO of China’s Tianqi Lithium Corp said she believes investing in Chile’s lithium miner SQM will bring “long-term benefits” for both companies. Last week, Tianqi bought a 23.77% share in SQM from Canadian fertilizer company Nutrien for $4.1 billion.

· Caterpillar (CAT) mentioned positively in Barron’s saying shares are due for a rally after a 22% drop this year, adding that the macroeconomic concerns weighing it down, like rising interest rates and trade tensions, are overblown. The company has become more efficient, which will protect profit margins, and several divisions, especially mining, have plenty of growth left.

· Barron’s said silver prices could turn higher because it’s used as both an investment and for industrial applications, including in solar energy. Plus, a lot of the metal’s investors turned to Bitcoin and other cryptocurrencies in recent years and may come back with the downturn

· Volkswagen has denied allegations that Chairman Hans Dieter Poetsch knew about the carmaker’s emissions test cheating almost three months before U.S. authorities made it public in September 2015, according to Reuters. Citing internal documents from investigators, German weekly Bild am Sonntag reported that Poetsch learned about the violations in late June 2015

· Wabco (WBC) announces new $600M share repurchase program


· Regional banks KeyCorp (KEY) and Regions (RF) both downgraded to reduce from neutral at Nomura/Instinet

· BNP Paribas China has received a license from China’s NAFMII which allows it to act as a lead underwriter on Panda bonds, the lender said in a statement. BNP Paribas is the third international bank to receive such a license, it said – Bloomberg


· Amgen (AMGN) raises quarterly dividend 10% to $1.45 per share

· Gilead Sciences Inc. (GILD) named Roche Holding AG (RHHBY) veteran Daniel O’Day as chairman and chief executive officer, to take over from CEO John Milligan and Chairman John Martin, effective March 1 who had both said in July they would step down

· MacroGenics (MGNX) received a letter from the U.S. FDA indicating that a partial clinical hold had been placed on its Phase 1 monotherapy study of MGD009, a B7-H3 × CD3 bispecific DART molecule, and on a combination study of MGD009 and MGA012

· Zymeworks (ZYME) presented IND-enabling data for ZW49, a novel biparatopic HER2-targeted ADC, at the San Antonio Breast Cancer Symposium

Technology, Media & Telecom

· Facebook Inc (FB) will buy back an additional $9 billion of its shares; the new program is in addition to a share buyback plan of up to $15 billion announced by the company last year

· Barron’s said the new Dell stock to emerge within days from Dell Technologies’ (DVMT) effort to buy out holders of its tracking stock for VMware “looks cheap” at its current implied price of $47 a share. Investors can get in on the new Dell by buying the tracking stock

· Disney’s (DIS) “Ralph Breaks the Internet” remained No. 1 for the third straight week, after no new wide releases opened in North American theaters for a second week; the movie led domestic ticket sales with $16.1 million

· SoftBank has priced the initial public offering of its mobile business at ¥1,500 per share and will raise ¥2.65tn ($23.5bn), the company said

· TSMC (TSM) announced its net revenues for November 2018: On a consolidated basis, revenues for November 2018 were approximately NT$98.39B, a decrease of 3.1% from October 2018 and an increase of 5.6% from November 2017

· SecureWorks Corp. (SCWX) was downgraded to equal-weight from overweight at Morgan Stanley


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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