Morning Preview: December 20, 2018

Terrie AmengualDaily Market Report

Early Look

Thursday, December 20, 2018

Stock futures are higher, trying to recover from the carnage in markets yesterday as investors reacted negatively to Fed Chairman Powell’s press conference. On a positive note, Reuters reported that China is poised to buy another round of soybeans from the United States, according to sources amid a truce in a trade war. Oil prices fell on Thursday, wiping out the previous session’s gains and edging back to levels seen earlier in the week as concerns over global growth rattled markets. In central bank news, the Bank of Japan keeps stimulus unchanged at last policy meeting of year while later this morning the Bank of England is set to keep policy on hold. In currencies, the euro rose to its strongest level in a month and the pound gained as the dollar pullback form recent 18-month highs continues for a third session. In Washington, the Senate passed a temporary spending bill aimed at averting a partial government shutdown by extending current funding through Feb. 8. The bill, which will delay the fight over the border wall, goes to the House, where both parties have signaled support. Trump hasn’t indicated if he’ll sign it. Markets looking for a little normalcy heading into the upcoming holiday week.

The madness for U.S. stocks continued on Wednesday, as the FOMC and Chairman Powell disappointed markets by raising interest rates for a 4th time this year by 25 bps, though lowered its projections to only two rate hikes for 2019 compared to its prior outlook of three hikes. The question investors are likely asking (after the Dow reversed 900-points off its afternoon highs) is if the Fed said it didn’t see inflation as an issue, and noted other factors (trade, volatility) to be watchful of, why wouldn’t they at least pause its rate hike cycle in a “wait and see” approach at least until the next meeting? It appears the Fed painted itself into a corner and stayed steadfast despite market conditions changing, but with Fed Chairman Powell saying the central bank saw little threat to the economy from the recent turmoil in financial markets – the markets in turn revolted. Bespoke Investment noted the S&P 500 has now declined on a record 7 straight Fed days which is a streak that began when Powell became the Chair. The 10-year Treasury note yield fell 4.3 basis points to 2.782%, its lowest since May 29, while the 2-year note yield was mostly unchanged at 2.646%, near its lowest levels since Sep. 6. The 30-year bond yield slipped 6.1 basis points to 3.01%, its lowest since late August. Transports plunged led by shares of FedEx Corp. (FDX) down more than 11% after it lowered its earnings guidance for the current fiscal year.

In Asian markets, after the U.S. dropped sharply on Wednesday following the Fed rate hike, the Nikkei Index dropped nearly -600 points (2.84%) to 20,392, the Shanghai Index fell -13 points to 2,536 and the Hang Seng Index fell -241 points to 25,623. In Europe, the German DAX is down nearly -100 points at 10,670, while the FTSE 100 is down over 20 points at 6,740.

Market Closing Prices Yesterday

· The S&P 500 Index dropped -39.20 points, or 1.54%, to 2,506.96

· The Dow Jones Industrial Average fell -351.98 points, or 1.49%, to 23,323.66

· The Nasdaq Composite sunk -147.08 points, or 2.17%, to 6,636.83

· The Russell 2000 Index declined -27.95 points, or 2.03% to 1,349.23

Events Calendar for Today

· 8:30 AM EST Weekly Jobless Claims…est. 215K

· 8:30 AM EST Continuing Claims…est. 1.663M

· 8:30 AM EST Philly Fed Business Outlook for December…est. 15.0

· 9:45 AM EST Bloomberg Consumer Comfort Index…prior 59.4

· 10:00 AM EST Leading Index for November…est. 0.0%

· 10:30 AM EST Weekly EIA Natural Gas Inventory Data

Earnings Calendar:

· Earnings Before the Open: APOG, ATU, CAG, NEOG, SAFM, SCHL, WBA

· Earnings After the Close: CAMP, CTAS, NKE

Sector News Breakdown

Consumer

· Herman Miller (MLHR) Q2 EPS 75c/$652.6M vs. est. 72c/$647M; sees 3Q sales $615M-$630M vs. est. $602.5M and EPS 59c-63c vs. est. 58c

· AB InBev is dipping into the pot market, pairing up with Tilray (TLRY) to research non-alcoholic, cannabis-infused drinks. It’s the third alcohol giant to invest in a Canadian marijuana producer since October. InBev and Tilray will each contribute up to $50 million

· Apogee Enterprises (APOG) Q3 EPS 80c vs. est. 78c; lowers year rev outlook to up 6%-7% from prior view 8%-10% and sees year EPS $3.13, below the prior range of $3.13-$3.33

· Pier One Imports (PIR) reported a Q3 EPS loss (62c) vs. est. loss (6c) and comp sales decline of (-10.5%) vs. est. loss (-2.9%); announced interim CEO and evaluating strategic alternatives

· Rite Aid (RAD) Q3 EPS 1c/$5.5B vs. est. 0c/$5.45B; Q3 same store sales from Retail Pharmacy continuing operations for the quarter increased 1.6% compared to the prior year, consisting of a 3.1% increase in pharmacy sales and 1.5% percent decrease in front-end sales; narrows FY19 EPS view to (3c)-(1c) from (3c)-1c/narrows FY19 revenue view to $21.8B-$21.95B from $21.7B-$22.1B

· Rite Aid Corporation (RAD) and McKesson Corporation (MCK) announced an agreement to key terms that will continue the companies’ pharmaceutical sourcing and distribution partnership for an additional 10 years

Energy, Industrials and Materials

· Parsley Energy (PE) said it sees 2019 capital expenditures of $1.35B-$1.55B and sees 2019 oil production of 80-85 MBoe per day; for 2018, sees 2018 capital expenditures at or near the top of the full-year guidance range of $1.65B-$1.75B and 2018 net oil production at or slightly above the midpoints of full-year guidance ranges of 68.0-70.5 MBoe per day

· Comstock Resources (CRK) announced that it has entered into an agreement with Shelby Shale to acquire an 88% interest in 6,124 gross acres limited to Shelby’s Haynesville shale rights in Harrison and Panola counties, Texas for $20.5M

· Teledyne (TDY) agrees to acquire the Scientific Imaging units of Roper (ROP) for $225M in cash

· Embraer SA (ERJ) is planning to distribute $1.6 billion to $1.7 billion in extraordinary dividends to shareholders, using proceeds from its recent deal withBoeing Co (BA) https://reut.rs/2SefMHE

· REV Group (REVG) Q4 EPS 28c/$659.8M vs. est. 52c/$710.09M; sees FY19 revenue $2.4B-$2.6B vs. est. $2.54B; sees FY19 adjusted EBITDA $150M-$170M, capital expenditure $150M-$170M, effective tax rate of 25%-27%

Financials

· Raymond James (RJF) reported assets under administration of $764.0 billion; assets under management $764 billion and financial assets under management $134.8B

Healthcare

· Nearly 30 drugmakers that have taken steps to raise the U.S. prices of their medicines in January, ending a self-declared halt to increases made by a pharma industry under pressure from the Trump administration, according to documents seen by Reuters. Some of the drugmakers lifting prices include NVS, AGN, GSK, AMGN, BIIB and AZN https://reut.rs/2rJO5uw

· AstraZeneca PLC’s (AZN), which is developing in collaboration with Merck (MRK) its Lynparza drug, met its primary goal in a clinical trial for treatment of relapsed ovarian cancer

· Benefitfocus (BNFT) announces $200M convertible note offering

· Spectrum Pharmaceuticals (SPPI) shares fell after saying the FDA did not grant Breakthrough Therapy Designation to poziotinib for the treatment of patients with metastatic non-small cell lung cancer/FDA’s decision was based on a subset of data from MD Anderson’s ongoing Phase 2 study

· G1 Therapeutics (GTHX) said randomized Phase 2 trial evaluating trilaciclib in combination with topotecan achieved both primary endpoints; safety profile consistent with previously reported trials

· Amgen (AMGN) submitted a Supplemental Biologics License Application to the U.S. FDA for Nplate to treat adults who have had immune thrombocytopenia for up to 12 months.

· MannKind (MNKD) 26.7M share Spot Secondary priced at $1.50

Technology, Media & Telecom

· Facebook (FB) said it allowed Netflix (NFLX) and Spotify (SPOT) access to users’ private messages in order to allow users of those apps to share messages with each other via Facebook Messenger, like music recommendations on Spotify and movies on Netflix

· Apple (AAPL) tgt lowered to $200 from $260 at Needham, maintains buy

___________________________

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.

Live Trading

Open an Account

Paper Trading

Register