Morning Preview: January 2, 2019

Scott GreenDaily Market Report

Early Look

Wednesday, January 2, 2019

Global stock markets open the New Year on a sour note, falling across the board as U.S. futures point to losses between 1% and 2% following weak Chinese economic data, which dragged most Asian markets lower. The Caixin manufacturing purchasing managers index fell to 49.7 in December, marking the weakest reading since 2017 and suggests the sector is contracting for the first time in 2½ years. In Asian markets, The Nikkei Index was closed, the Shanghai Index fell -28 points to 2,465 and the Hang Seng Index plunged -715 points to settle at 25,130. In Europe, the German DAX is down slightly at 10,550, while the FTSE 100 is down around 50 points at 6,675. Market participants also are watching a partial U.S. government shutdown that is nearing its second week, with President Donald Trump inviting top lawmakers to sit down Wednesday and discuss reopening the government.

U.S. stocks rose in the final trading day of the year on Monday as the S&P 500 gained 0.9%, reducing the annual decline to 6.2%, its worst year since 2008. The benchmark fell more than 9% in its worst performance for any December since 1931. For the year, Dow down 5.6%, S&P 500 off 6.2%, Nasdaq down 3.9%. For the month, Dow down 8.7%, S&P 500 off 9.2%, Nasdaq down 9.5%. The 2-year Treasury note yield fell 3.8 bps to 2.496%, its lowest since June 8. The short-dated maturity fell 32 bps this month, its largest such move since Nov. 2008. The 10-year note yield slipped 5.5 bps to 2.684%, its lowest finish since Jan. 26, extending its recent decline to 33 bps, its largest such move since June 2016. The 30-year bond yield was down 2.8 bps to 3.019%, adding to a decline of 29 bps in December, its largest such move since June 2016.

Market Closing Prices Yesterday

· The S&P 500 Index jumped 21.11 points, or 0.85%, to 2,506.85

· The Dow Jones Industrial Average rose 265.06 points, or 1.15%, to 23,327.46

· The Nasdaq Composite spiked 50.76 points, or 0.77%, to 6,635.28

· The Russell 2000 Index advanced 10.64 points, or 0.79% to 1,348.56

Events Calendar for Today

· 9:45 AM EST Markit US Manufacturing PMI, Dec-F

· 10:30 AM EST Weekly DOE Inventory Data

World News

· Mitt Romney ripped into Trump in a Washington Post op-ed, calling his character shortfalls “glaring” and claiming he hasn’t “risen to the mantle of the office

· Trump said Kim Jong Un promised not to make or test nuclear weapons and is ready to meet. Kim had warned North Korea may take a “new path” in nuclear talks if economic sanctions aren’t eased

Sector News Breakdown


· Macau gross gaming revenue increased 16.6% in December to 26.5B patacas, according to data from the Gaming Inspection and Coordination Bureau. The consensus estimate from analysts was for December gross gaming revenue growth of ~11% (watch shares of WYNN, MLCO, LVS, MGM)

· RCI Hospitality (RICK) Q4 adjusted EPS 41c vs. 36c last year and Q4 revenue $40.7M vs. $39.2M last year; FY19 is expected to benefit from, in addition to other factors, recent nightclub acquisitions

· Shoe Carnival (SCVL) upgraded to positive from neutral at Susquehanna

Energy, Industrials & Materials

· Oil prices are lower to start the new year, with WTI crude under $45 per barrel after settling 2018 with a near 25% annual loss

· Weyerhaeuser (WY) and Louisiana-Pacific (LPX) downgraded to Neutral from Buy at Bank America


· Citizens Financial (CFG) upgraded to Outperform from Sector Perform at RBC Capital

· Wells Fargo (WFC) upgraded to Sector Perform from Underperform at RBC Capital


· Pharmaceutical companies are ringing in the new year by raising the price of hundreds of drugs, with Allergan PLC (AGN) setting the pace with increases of nearly 10% on more than two dozen products, according to reports

· Adamis Pharmaceuticals (ADMP) announced the submission of a New Drug Application to the U.S. FDA for its naloxone pre-filled single dose syringe product candidate

· Novavax (NVAX) files to sell $100M of common stock

· Proteostasis Therapeutics (PTI) said its Phase 1 clinical trial evaluating PTI-428 in cystic fibrosis patients on background Kalydeco (ivacaftor) therapy; said the study met the primary (safety and tolerability) and secondary endpoints (pharmacokinetics) but it did not perform exploratory analyses on other measures

· Tenet Healthcare (THC) signs a new multiyear agreement with Cigna Corp. (CI) under which Cigna members covered under its commercial health plans get uninterrupted in-network access to Tenet providers, including hospital, outpatient centers, and employed physicians

Technology, Media & Telecom

· Activision Blizzard, Inc. (ATVI) notified Spencer Neumann, the company’s current CFO, that the company intends to terminate Neumann’s employment for cause unrelated to the company’s financial reporting or disclosure controls and procedures

· Reuters reported Netflix (NFLX) is expected to announce in the next few days that Spencer Neumann is its new Chief Financial Officer (formerly of ATVI), Kenneth Li of Reuters reported last night, citing a source familiar with the matter

· Akamai (AKAM) downgraded to Market Perform from Outperform at Cowen


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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