Morning Preview: December 27, 2018

Scott GreenDaily Market Report

Early Look

Thursday, December 27, 2018

U.S. stock futures are lower, paring back some of yesterday’s historic rally that saw the Dow climb more than 1,000-points after Monday’s record-breaking Christmas Eve decline. Stocks are failing to rally on reports that he U.S. will hold mid-level trade talks with China in early January, Bloomberg News reported. The American delegation, led by Deputy U.S. Trade Representative Jeffrey Gerrish, will travel to Beijing on Jan. 7, Bloomberg said. While investors also got assurances that Federal Reserve Chairman Jerome Powell’s job is safe, there remains no resolution to other big issues, such a continuing government shutdown as Washington battle over funding for Trump’s proposed border wall. In Asian markets, The Nikkei Index gained 750points (3.88%) to close back above 20K at 20,077.62, the Shanghai Index dropped -15 points to 2,483 and the Hang Seng Index dropped -172 points to settle at 25,478. In Europe, the German DAX is down about -150 points at 10,475, while the FTSE 100 is down around -50 points at 6,640. Oil pares its gains, while the dollar is mixed.

Stock prices jumped by a record the day after Christmas, including a more-than-1,000-point gain for the Dow industrials and a near 6% increase in the tech heavy Nasdaq Composite. On a percentage basis, all three major indexes saw the strongest one-day gains since March 23, 2009. Crude-oil futures snapped back by some 8% yesterday, snapping a string of three straight declines, after closing the pre-Christmas session at their lowest since July 2017, helped after Russian Energy Minister Alexander Novak said Tuesday that oil prices would become more stable in the first half of 2019. Despite the strong gains yesterday, stock remain down sharply for December, with all three major indexes down more than 10% for the month to date and the Nasdaq in bear-market territory. The jump occurred after the S&P 500 had fallen over 1.5% or more for 4-days in a row (a feat that has occurred only five times during the Great Depression and twice since – 10/19/87 and 7/23/02 according to Bespoke last Monday).

Market Closing Prices Yesterday

· The S&P 500 Index surged 116.60 points, or 4.96%, to 2,467.70

· The Dow Jones Industrial Average rose 1,086.25 points, or 4.98%, to 22,878.45

· The Nasdaq Composite spiked 361.44 points, or 5.84%, to 6,554.36

· The Russell 2000 Index advanced 62.89 points, or 4.96% to 1,329.81

Events Calendar for Today

· 8:30 AM EST Weekly Jobless Claims…est. 216K

· 8:30 AM EST Continuing Claims…est. 1.675M

· 9:00 AM EST FHFA House Price Index for October…est. 0.3%

· 9:45 AM EST Bloomberg Consumer Comfort Index…prior 58.8

· 10:00 AM EST Consumer Confidence for December…est. 133.7

World News

· China’s industrial profit dropped for the first time in almost three years in November, slipping -1.8% from a year earlier in November, compared with a 3.6% increase in October. Last time China’s industrial companies recorded a drop-in profit was in December 2015 when industrial profit declined 4.7% from a year earlier

· Japan’s housing starts swung to a 0.6% decline year on year in November, worse than the expected 0.1% loss.

· The bull-bear spread in the American Association of Individual Investors (AAII) weekly survey was -18.8 vs -22.4 last week

Sector News Breakdown

Consumer

· GOL Linhas (GOL) announced a further acceleration of its fleet renewal and modernization plan and the execution of sale and leaseback agreements, with Castlelake and Apollo Aviation, for 13 Boeing (BA) 737 next generation, or NG, aircraft in the GOL fleet that will be replaced with Boeing 737 MAX-8 aircraft over the next few year

Energy, Industrials & Materials

· ExxonMobil (XOM) said Wednesday that drilling and development operations offshore Guyana are unaffected by an incident involving seismic acquisition vessels on Saturday

· Oceaneering (OII), Huntington Ingalls (HII) and General Dynamics (GD) have been awarded cost-plus-fixed-fee, indefinite-delivery/indefinite quantity multiple award contracts with firm-fixed-priced ordering provisions for Submarine Safety, or SUBSAFE, and Level I engineering and technical services in the amounts of $827.67M, $874.34M and $1.11B, respectively

· JinkoSolar Holding (JKS) announced that it is working with SchneiTec Group, a Cambodian real estate developer to build a 60-megawatt solar farm in Kampong Speu province, Cambodia

· Ashland (ASH) upgraded to Overweight from Neutral at JPMorgan

Financials

· JPMorgan Chase & Co. (JPM) agreed to pay $135 million to settle claims that it improperly handled thousands of transactions involving foreign companies’ shares (ADR’s) that weren’t in the bank’s custody

· Visa Inc (V) is paying 198 million pounds ($250.6 million) to buy Earthport Plc (EPO.L), a British firm that facilitates international transactions for banks and businesses, the U.S.-based payments group said https://reut.rs/2AgS5ra

Healthcare

· TRACON Pharmaceuticals (TCON) announced positive top-line clinical results from a Phase 1 study of TRC105 and Opdivo for the treatment of non-small cell lung cancer. The combination of TRC105 and Opdivo was well-tolerated without the development of dose limiting toxicity in six patients who were treated as part of dose escalation

· Henry Schein (HSIC) announced that HS SpinCo has filed a registration statement on Form S-4/S-1 with the SEC relating to the planned spinoff of the Henry Schein Animal Health business and the subsequent merger with Vets First Choice

Technology, Media & Telecom

· Apple (AAPL) will begin assembling its top-end iPhones in India via a local unit of Foxconn as early as 2019, Reuters reports https://reut.rs/2rZ7tDQ

· Donald Trump is considering an executive order in the new year effectively barring U.S. companies from using Huawei or ZTE equipment, Reuters reported. China responded by saying a “certain country” should produce facts to justify cybersecurity concerns https://on.mktw.net/2EUyIbt

· Plantronics Inc. (PLT) settled U.S. allegations of foreign-bribery violations at its Polycom unit, agreeing to pay $36 million in penalties while authorities declined to bring charges

 

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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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