Morning Preview: January 9, 2019

Terrie AmengualDaily Market Report

Early Look

Wednesday, January 9, 2019

 

U.S. stock futures advance as Asia markets soared and European markets also edge higher, as trade talks between the U.S. and China were extended to a third day Wednesday, Bloomberg News reported, and President Donald Trump is said to be eager to reach an agreement to help boost the sagging stock market. Citing White House sources, Bloomberg reported that Trump is more willing to cut a deal with China in hopes that it will fuel a rally on Wall Street. At conclusion, China and U.S. trade talks wrapped up, with reports indicating their positions were closer on softer issues like energy and agriculture but still gaping on testier ground. U.S. officials have warned that no agreement is expected to emerge from the current talks, but they could lead to more higher-level negotiations. Another bounce in oil prices, looking to extend its winning streak to eight straight days is helping lift energy stocks as well.

 

In Asian markets, The Nikkei Index jumped 223 points or 1.1% to finish at 20.427, the Shanghai Index rose 17 points to 2,544 and the Hang Seng Index spiked 586 points or 2.27% to 26,462. In Europe, the German DAX is higher by 100 points above 10,900, while the FTSE 100 is up around 70 points at 6,930. The partial government shutdown entered day 19 as a stalemate between President Donald Trump and congressional Democrats over a spending package to fund nine government agencies continues. Fitch said on Wednesday that the U.S. risks losing its pristine triple-A credit rating later this year if the government shutdown persists and negatively impacts the country’s debt ceiling.

 

Last night in a national televised address, President Donald Trump urged congressional Democrats to fund his long-promised border wall Tuesday night, blaming illegal immigration for the scourge of drugs and violence in the U.S. and framing the debate over the partial government shutdown in stark terms. “This is a choice between right and wrong,” he declared. Democrats in response accused Trump appealing to “fear, not facts” and manufacturing a border crisis for political gain. Trump however did not declare the border crisis a national emergency.

 

U.S. stocks advanced for a third straight session on Tuesday, led by broad sector gains amid the possibility of progress in the U.S.-China trade talks, rallying from a decline earlier in the day. The discussions in Beijing will now extend into Wednesday. All major indexes ended higher with the small-cap Russell 2000 Index leading the gains for a second day in a row. Treasury prices fell Tuesday, pushing yields higher, as the upbeat tone in stocks undercut the luster for haven assets. The 2-year note yield rose 6.1 bps to 2.585% (up about 20bps over the last 3 days) while the benchmark 10-year yield rose 3.2 bps to 2.716%.

Market Closing Prices Yesterday

· The S&P 500 Index climbed 24.72 points, or 0.97%, to 2,574.41

· The Dow Jones Industrial Average rose 256.10 points, or 1.09%, to 23,787.45

· The Nasdaq Composite spiked 73.53 points, or 1.08%, to 6,897.00

· The Russell 2000 Index advanced 21.19 points, or 1.51% to 1,426.55

 

Events Calendar for Today

· 7:00 AM EST MBA Mortgage Applications Data

· 8:20 AM EST Fed’s Bostic speaks on Economic outlook

· 9:00 AM EST Fed’s Evans speaks on the Economy and Monetary Policy

· 10:30 AM EST Weekly DOE Inventory Data

· 11:30 AM EST Fed’s Rosengren speaks on Economic outlook

· 2:00 PM EST FOMC Minutes from December meeting

 

Earnings Calendar:

· Earnings Before the Open: AYI, GBX, LEN, MSM, SCHN, STZ

· Earnings After the Close: BBBY, FC, KBH, PSMT, SAR, SLP, VOXX, WDFC

 

Other Key Events:

· Consumer Electronics Show (CES) 2019 in Las Vegas

· Bank of Canada rate decision at 10:00 AM EST

· JPMorgan 37th Annual Healthcare Conference, 1/7-1/10, in San Francisco, CA

· Citigroup Technology, Media and Telecom West Conference, 1/8-1/9, in Las Vegas

· Goldman Sachs Annual Energy Conference, 1/8-1/9, in Miami, FL

 

World News

· China will roll out measures to boost consumption of cars and household appliances, an official told CCTV. The steps were announced before data that showed the first annual drop in passenger vehicles in more than two decades – Bloomberg

· Fitch Ratings is warning of a potential cut to the triple-A rating the United States currently holds if the government shutdown continues, CNBC reports

· Equity newsletter writers classified as bulls by Investors Intelligence rises to 34.8% from 29.9% last week, while bearish sentiment declined to 29.4% from nearly three-year high of 34.6% last week and those expecting a correction holds steady at 35.8% versus 35.5% last week

· The World Bank cut its forecast for the global economy as slowing growth in trade and investment and rising interest rates sapped momentum, especially in emerging markets. The bank expects global growth of 2.9% this year, down from 3% in 2018 and a reduction of 0.1% from its forecast in June. The bank lowered its projection for growth in emerging markets by 0.5% to 4.2%, and slightly downgraded its outlook for expansion in the euro area

· German exports fell 0.4% on month to 110.6 billion euros ($126.6 billion) in November in calendar and seasonally adjusted terms, while imports dropped 1.6% to EUR91.6 billion from October. Germany’s adjusted trade surplus amounted to EUR19.0 billion in November

· The Trump administration said benefits under the Supplemental Nutrition Assistance Program, also known as food stamps, will be funded through February should the government shutdown continue

 

Sector News Breakdown

Consumer

· Lennar (LEN) Q4 EPS $1.96/$6.5B vs. est. $1.93/$6.55B; reports Q4 delivery 14,154 homes, new orders of 10,611 with a new order value of $4.2B and Q4 backlog 15,616 with a backlog dollar value of $6.6B

· J.C. Penney (JCP) announced that its comparable store sales for the combined nine-week period ending Jan. 5, 2018, decreased 3.5 % on a shifted basis. On an unshifted basis, comparable sales decreased 5.4 %. The Company also reaffirmed its expectations to generate positive free cash flow in fiscal 2018, reduce inventory in excess of $225 million or 8% and expects to end the year with liquidity in excess of $2 billion

· Herbalife Nutrition Ltd. (HLF) said that Executive Chairman Michael O. Johnson will replace Richard Goudis as the company’s chief executive officer, effective immediately. Goudis’ resignation “is not due to any issues regarding the company’s financial reporting,” but is related to comments, which recently came to light, made by Goudis before serving as CEO

· J Sainsbury PLC (SBRY.LN) said retail sales fell in Q3 as consumer caution and lower promotional activity weighed on its nonfood business; the U.K supermarket chain said like-for-like sales excluding fuel fell 1.1% in the 15 weeks to Jan. 5

 

Energy

· The American Petroleum Institute (API) reported that U.S. crude supplies fell by -6.1M barrels for the week ended Jan. 4, showed that gasoline stockpiles climbed by 5.5M barrels, while distillate inventories surged higher by 10.2M barrels

· Antero Resources Corp. (AR) announced its 2019 capital budget and production guidance; reduced its 2019 drilling and completion capital budget relative to 2018 to a range of $1.1B-$1.25B on a consolidated basis and a range of $1.3B-$1.45B on a Stand-alone basis. Full year 2019 production is expected to average 3,150 MMcfe/d to 3,250 MMcfe/d, a 17% to 20% increase over 2018 production guidance

· Carbon Engineering has received equity investment from two global energy companies: Oxy Low Carbon Ventures, a subsidiary of Occidental Petroleum Corporation (OXY); and Chevron Technology Ventures, the venture capital arm of Chevron Corporation (CVX).

 

Financials

· Virtu Financial (VIRT) sees Q4 revenue $424M-$447M, which may not compare w consensus $239.7M; sees Q4 net income between $100M-$129M and Adjusted EBITDA between $180M-$195M; said preliminary results reflect the strong market conditions that prevailed in the fourth quarter, as well as the continued integration of Virtu and KCG businesses

· Financials upgraded at UBS: raises ratings on MA, CIT, RF, BAC to buy and upgraded MTB to neutral

· Financials/Insurance also upgraded at Barclays: raised ratings on ACGL, AMP, TRV and PGR to overweight while downgraded RNR to underweight

· New York Mortgage (NYMT) 12.6M share Spot Secondary priced at $5.96

 

Healthcare

· Globus Medical, Inc. (GMED) Q4 sales $195.5M vs. est. $188.1M; targets 2019 sales $770M, vs. est. $764.2M; targets 2019 adj. eps $1.72 vs. est. $1.73

 

Industrials & Materials

· Compass Minerals (CMP) said Q4 highway deicing sales were below expectations due to timing of snow events; said winter-weather in Q4 was average throughout its North America served mkt

· Greenbrier (GBX) Q1 EPS 54c/$604.5M vs. est. 55c/$607.02M; Q1 new railcar backlog was 27,500 units with an estimated value of $2.7B; sees FY19 EPS $4.20-$4.40 vs. est. $4.30 and sees FY19 revenue over $3B vs. est. $2.97B

· MSC Industrial (MSM) Q1 EPS $1.33/$831.6M vs. est. $1.33/$830.5M; sees Q2 EPS $1.22-$1.28 on sales $817M-$833M vs. est. $1.35/$8323.5M

· WillScot (WSC) sees FY19 revenue $1.05B-$1.15B vs. est. $1.1B; sees FY18 adjusted EBITDA between $345M-$365M and sees FY19 net capital expenditures between $130M-$160M; reaffirms FY18 revenue guidance of $740M-$770M vs. est. $758.61M

 

Technology, Media & Telecom

· Skyworks (SWKS) cut its forecast; sees Q1 EPS $1.81-$1.84 on sales $970M, below consensus of $1.90 and $prior guidance $1.01B-$1.02Bciting unit weakness to Smartphone clients

· Smart Global (SGH) Q1 EPS $1.75/$393.9M vs. est. $1.77/$382.73M; sees Q2 EPS 73c-77c on revs $310M-$325M below est. $1.32/$328.13M; said looking ahead we remain optimistic about our overall business and seeing increased seasonality during our Q2 in our Brazil business, other lines of business expected to meet or exceed previous expectations for quarter

· Apple Inc. (AAPL) will cut production of its three new iPhone models by 10% in the January-March quarter, the Nikkei Asian Review reported

· Talend (TLND) lowers Q4 revenue view to $55.4M-$55.8M from $56.6M-$57.4M (est. $56.61M); subscription revenue is expected to be between $48.3M-$48.6M, representing year-over-year growth of 37% to 38% based on actual currency. The slightly lower than expected total revenue resulted from lower professional services revenue

· EXFO (EXFO) Q1 revenue $69.2M vs. est. $68.67M; sees Q2 revenue $70.0M-$75.0M, consensus $73.82M; sees Q2 IFRS net earnings 5c-9c per share

· Sirius XM (SIRI) sees 2019 total revenue approximately $6.1B vs. est. $6.07B; SiriusXM self-pay net additions approaching 1M, Total revenue of approximately $6.1B, Adjusted EBITDA of approximately $2.3B, and Free cash flow of approximately $1.6B. The company’s guidance does not give effect to the expected acquisition of Pandora Media in the first quarter

 

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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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