Morning Preview: January 3, 2019

Scott GreenDaily Market Report

Early Look

Thursday, January 3, 2019

Stock futures are lower, led by a decline in technology after Dow component and tech giant Apple (AAPL) lowered its quarterly sales view for the upcoming quarter largely due to slowing iPhone sales and pressure in China. CEO Tim Cook said “In fact, most of our revenue shortfall to our guidance, and over 100% of our YoY world-wide revenue decline, occurred in Greater China across iPhone, Mac and iPad.” The news sent shares of AAPL lower by over 8% but also took a toll on the supply chain globally for the company, with several semi and optical related stocks falling in sympathy (SWKS, AVGO, CRUS, TSM). In Asian markets, The Nikkei Index remained closed for holiday, the Shanghai Index was little changed at 2,464 and the Hang Seng Index fell -65 points to 25,064. In Europe, the German DAX is down over -130 points or 1.3% at 10,440, while the FTSE 100 is down around 20 points at 6,710. Later today, monthly auto sales data from December is expected out as well as private payroll data for December, weekly jobless claims, and ISM manufacturing. The partial U.S. government shutdown moves into day 13 with no deal in sight as the two sides continue to argue over the funding of the $5B border wall. Safe haven assets are rising given the drop in stocks globally, as Treasuries and gold rises, while the yen surges more than 1.2% to its best level vs. the dollar since March 2018.

Yesterday, stocks posted gains in a choppy session after overcoming early losses of ~1.5% in each of the three major equity indexes on continued anxiety about global economic growth. The Dow had dropped close to 400 points in intra-day trading before recovering. Stocks well following weak manufacturing data from China, reminding investors that a slowing Chinese economy could hurt global growth. Energy stocks reversed course to top the S&P industry groups after oil prices swung into positive territory, as WTI crude oil settled 2.5% higher to $46.54 per barrel after reports that Saudi Arabia decreased its crude exports in December by ~500K bbl/day.

Market Closing Prices Yesterday

· The S&P 500 Index gained 3.18 points, or 0.13%, to 2,510.03

· The Dow Jones Industrial Average rose 18.78 points, or 0.08%, to 23,346.24

· The Nasdaq Composite climbed 30.66 points, or 0.46%, to 6,665.94

· The Russell 2000 Index advanced 7.35 points, or 0.54% to 1,355.91

Events Calendar for Today

· 7:00 AM EST MBA Mortgage Applications Data

· 7:30 AM EST Challenger Job Cuts YoY for December

· 8:15 AM EST ADP Employment Change for December…est. 180K

· 8:30 AM EST Weekly Jobless Claims…est. 220K

· 8:30 AM EST Continuing Claims…est. 1.689M

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

· 10:00 AM EST ISM Manufacturing Index for December…est. 57.5

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

· N/A Monthly auto sales data for December

World News

· The new Congress gets sworn in today, with Nancy Pelosi poised to retake her position as House speaker as Democrats claim control of the chamber

· The yen surged against every currency tracked by Bloomberg in seven wild minutes that left traders struggling to cover short positions. The volatility, sparked by a flood of orders to sell Aussie dollars and lira, saw the yen jump almost 8% against AUD, 10% versus the lira and at least 1% against its G-10 peers – Bloomberg

Sector News Breakdown

Consumer

· Lord & Taylor’s flagship store on Fifth Avenue shuts its doors after 104 years

· Nordstrom (JWN) said co-President Blake Nordstrom died in Seattle early on Wednesday morning at the age of 58, Nordstrom said in a filing

Energy, Industrials & Materials

· Sempra Energy (SRE) subsidiary agrees to sell its non-utility U.S. natural gas storage facilities to an affiliate of ArcLight Capital partners for $332M in cash, subject to working capital adjustments.

· Solar stocks First Solar (FSLR) and Canadian Solar (CSIQ) both upgraded to Buy from Neutral at Goldman Sachs

· Kayne Anderson MLP (KYN) reports net assets of $1.8B as of Dec. 31st; as of December 31, 2018, the company’s net assets were $1.8 billion, and its net asset value per share was $14.27

· Emerson (EMR) and Honeywell (HON) both upgraded to Outperform from Neutral at Credit Suisse

Healthcare

· Humana (HUM) estimates net membership for individual Medicare Advantage products increased by 375,000 to 400,000 members for 2019, based on final annual enrollment period results (prior estimate was for an increase of 350,000 to 400,000 members); estimates a net membership decline of 700,000 to 750,000 members for 2019 Prescription Drug Plans

· Bristol-Myers Squibb (BMY) said the FDA has expanded the indication for Sprycel (dasatinib) tablets to include the treatment of pediatric patients.

· Aevi Genomic (GNMX) shares fell around -70% overnight after saying its Ascend trial of AEVI-001 did meet its primary endpoint of cutting ADHD-RS after six weeks of treatment; company expects to reduce the scope of its operations to preserve net working capital, which was about $5M

· Puma Biotechnology (PBYI) downgraded to Neutral from Buy at Guggenheim

· Incyte (INCY) upgraded to Buy from Neutral at Guggenheim

· Gilead (GILD) upgraded to Outperform from Perform at Oppenheimer

Technology, Media & Telecom

· Apple Inc. (AAPL) cuts Q1 revenue view to about $84B below consensus $91.49B and said now sees gross margin of roughly 38%, operating expenses of approximately $8.7B, other income/(expense) of approximately $550M, and a tax rate of approximately 16.5% before discrete items – said “when we discussed our Q1 guidance with you about 60 days ago, we knew the first quarter would be impacted by both macroeconomic and Apple-specific factors” (note AAPL shares have dropped 31.1% in the past three months with the broader market decline)

· Apple Inc. suppliers tumbled in post-market trading after the iPhone maker cut its first-quarter revenue forecast with shares of Skyworks Solutions (SWKS), Broadcom (AVGO), Qorvo (QRVO), and Cirrus Logic (CRUS)falling

· Cubic (CUB) acquires video detection company GRIDSMART for $87M in cash

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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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