Morning Preview: December 14, 2018

Terrie AmengualDaily Market Report

Early Look

Friday, December 14, 2018

U.S. stock futures are under pressure following a round of weaker than expected data overseas, as business activity in China mostly slowed in November, industrial production and retail sales showed renewed weakness, while investment improved slightly, official data showed. Meanwhile in Europe, both French, and German PMI data underwhelmed markets, with France data showing a contraction in growth. Following the data, the Nikkei Index fell -441 points (2%) to settle at 21,374, the Shanghai Index fell over -40 points (1.53%) to close at 2,593 and the Hang Seng Index dropped -429 points (1.6%) to end at 26,094. In Europe, the German DAX is down about -100 points holding above 10,800, while the FTSE 100 is down around -50 points at 6,825. Coming into today’s trading action, the Dow is looking at a weekly gain of 0.9%, with the S&P 500 up 0.7% and the Nasdaq Composite up 1.5%. Markets are still focused on several macro factors including the trade talks between China and the U.S., Brexit concerns in the UK and the FOMC meeting next week where rates are still expected to rise 25 bps points (but now expectations are for the Fed to slow hikes in 2019. Regarding trade, China will suspend additional tariffs on U.S.-made vehicles and auto parts for three months starting Jan. 1, 2019, the country’s finance ministry said on Friday, following a truce in a trade war. Regarding Brexit, U.K. Prime Minister Theresa May will not give British politicians a chance to vote on her preferred Brexit deal until 2019, saying she does not expect an “immediate breakthrough” in her talks with European counterparts. As for yesterday, U.S. stocks closed mostly lower after making small moves in and out of positive territory Thursday as investors continued to fret over the lack of clarity and progress in U.S.-China trade talks. Trump also said in an interview with Fox News that he hopes the Fed “won’t be raising interest rates anymore.” It was Trump’s latest criticism of the central bank, which is scheduled to meet next week to determine its interest rate policy

Market Closing Prices Yesterday

· The S&P 500 Index slipped -0.53 points, or 0.02%, to 2,650.54

· The Dow Jones Industrial Average rose 70.11 points, or 0.29%, to 24,597.38

· The Nasdaq Composite dropped -27.98 points, or 0.39%, to 7,070.33

· The Russell 2000 Index declined -22.62 points, or 1.55% to 1,432.70

Events Calendar for Today

· 8:30 AM EST Retail Sales MoM for November…est. 0.1%

· 8:30 AM EST Retail Sales Less Autos for November…est. 0.2%

· 9:15 AM EST Industrial Production MoM for November…est. 0.3%

· 9:15 AM EST Capacity utilization for November…est. 78.6%

· 9:45 AM EST Markit US Manufacturing PMI, Dec-P…est. 55.0

· 10:00 AM EST Business Inventories for October

· 1:00 PM EST Baker Hughes Weekly Rig Count

World News

· Germany Purchasing Managers’ Index fell to 52.2 from 52.3 in November, reaching its lowest level in four years while French private sector survey of 750 businesses operating in the manufacturing and services sectors fell to 49.3 in December from 54.2 in November

· China’s business activity mostly slowed in November, as industrial production and retail sales showed renewed weakness, while investment improved slightly, official data showed.

· China value-added industrial output rose 5.4% in November from a year earlier, slowing from a 5.9% on-year increase in October, and missed the median forecast for 5.9% growth.

· Retail sales in China rose 8.1% in November from a year earlier, slowing from an 8.6% on-year gain in October and missing economists’ median forecast for 8.8% growth

· Russia’s central bank raised the key interest rate by 0.25 bps to 7.75% on Friday, citing short-term inflationary risks and the threat of US sanctions

Sector News Breakdown


· Luxury goods maker LVMH has agreed to buy Belmond (BEL), the owner of hotels including Venice’s landmark Cipriani, for $3.2 billion including debt to increase its presence in upmarket hospitality.

· Costco (COST) Q1 EPS $1.73/$35.07B vs. est. $1.62/$34.8B; reports Q1 comparable sales increase of 8.8%; total company comparable sales for Q1 were up 8.8% and e-commerce comparable sales for Q1 were up 32.3%

· Starbucks (SBUX) reaffirmed its FY19 targets, and said it sees consolidated revenue growth of 7% to 9% and non-GAAP earnings per share growth of at least 10% in the longer term

· Leggett & Platt (LEG) sees Q4 2018 and 2019 pretax restructuring charges about 16 million related to its Fashion Bed and Home Furniture businesses; sees charges to impact 4Q EPS 19c

· EU new car registrations, a reflection of sales, fell 8.0% in the EU compared with a year earlier to 1.12 million vehicles, the European Automobile Manufacturers’ Association said Friday.

· Dollar Tree (DLTR) upgraded to Outperform from Market Perform at Bernstein


· Pioneer Natural (PXD) announces $2B common share repurchase program

· Suncor Energy (SU) said it sees its 2019 capital program between C$4.9 billion and C$5.6 billion, compared to estimates of C$5.25 billion. The midpoint of the range represents a flat capital spend compared to 2018; sees 2019 average upstream production 780,000 to 820,000 boe/d, compared to estimates of 824,157 boe/d

· Alliant Energy (LNT) 7.23M share Spot Secondary priced at $44.85

· Mistras (MG) buys Onstream Pipeline Inspection for $143M and now sees year revs of $740M exclusive of the impact from Onstream; expands existing credit facility to $400 million total committed capacity


· AGNC Investment (AGNC) and Annaly Capital (NLY) both upgraded to Overweight at Barclay’s

· 360 Finance (QFIN) 3.1M share IPO priced at $16.50

· Manning & Napier (MN) reports preliminary AUM $21.4B as of November 30 which compared with $21.3B at October 31, 2018 and $23.1B at September 30, 2018

· Regional banks fell Thursday, as the KRE closed at fresh 52-week lows (FNB, TSC, BANC top decliners) as lower Treasury yields, softening tone by Fed on rates and slowing growth all meaningfully hurting banks

· BNY Mellon (BK) files automatic mixed securities shelf


· Centene (CNC) declares two-for-one common stock split; backs FY18 adjusted EPS view pre-split $6.90-$7.10 and backs FY18 revenue view $59.8B-$60.3B

· Civitas Solutions (CIVI) Q4 EPS loss (4c)/$409.5M vs. 40c last year; sees FY19 revenue $1.66B-$1.71B vs. est. $1.67B; sees FY19 adjusted EBITDA $179M-$184M

· CONMED (CNMD) announced a definitive agreement to acquire privately-held Buffalo Filter LLC for $365M on a cash-free, debt-free basis; reaffirms its FY18 EPS view of $2.15-$2.20

· Zymeworks (ZYME) files $250M mixed securities shelf

Industrial and Materials

· XPO Logistics (XPO) reports it board of directors has authorized the company to buy back up to $1 billion of its stock (shares fell yesterday after a negative short report sunk shares)

· Waste Management (WM) plans $1.5B buyback and announced that its board has approved a 10.2% increase in the planned quarterly dividend rate for 2019, from 46.5c to 51.25c per share

· Genesee & Wyoming (GWR) reported traffic volumes for November 2018. G&W’s total traffic in November 2018 was 259,900 carloads, a decrease of 12,012 carloads, or 4.4%, compared with November 2017. G&W’s same railroad traffic in November 2018 decreased 576 carloads, or 0.2%, compared with G&W’s traffic in November 2017

· Sealed Air (SEE) board approves a new three-year restructuring program to drive total annualized savings by the end of 2021 in the range of $215 to $235M. The total cash cost of the New Program is estimated to be in the range of $190 to $220M, which will be incurred primarily in 2019 and 2020

Technology, Media & Telecom

· Adobe (ADBE) Q4 EPS $1.90/$2.46B vs. est. $1.88/$2.43B; said achieved record revenue of greater than $9 billion and delivered outstanding earnings performance in fiscal 2018; sees FY19 adjusted EPS roughly $7.75 vs. est. $7.98 and sees FY19 total revenue roughly $11.15B (est. $10.8B); sees FY19 digital media revenue growth roughly 20%; sees Q1 revs about $2.54B vs. est. $2.52B

· Apple Inc. (AAPL), facing a court ban in China on some of its iPhone models over alleged infringement of Qualcomm Inc (QCOM) patents, said on Friday it will push software updates to users in a bid to resolve potential issues.

· Cisco (CSCO) downgraded to Neutral from Buy at Nomura Instinet


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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