Monday, January 14, 2019
U.S. stock futures are lower, tumbling on weaker-than-expected trade data out of China that has sparked fresh concerns over a global economic slowdown. China exports rose 7.1%, customs data showed Monday, down from the 7.9% reported earlier for 2017, while import growth declined to 12.9% from the previous year’s 15.9%. The headline data weighed heavily on European and Asian markets as well as the Nikkei Index was closed, the Shanghai Index dropped -18 points to 2,535 and the Hang Seng Index dropped -368 points to settle at 26,298. In Europe, the German DAX is down around -100 points just below 10,800, while the FTSE 100 is down around -70 points at 6,850. We are also into day 24 of the partial government shutdown today with still no resolution in sight between the two sides.
This morning Citigroup is expected to report quarterly earnings, kicking off the reporting season for the quarter, with many high-profile banks expected out this week. Also, Brexit concerns rise as U.K. lawmakers get ready to vote on Prime Minister Theresa May’s exit deal with the European Union Tuesday. U.K. opposition leader Jeremy Corbyn said Sunday the Labour Party will push for a general election if Parliament rejects May’s deal, and that he might force a vote of no-confidence “soon.” In corporate news, there was a tie up in the gold mining sector with Newmont (NEM) buying Goldcorp (GG) in a $10B deal, while California utility PG&E (PCG) plunges over 50% as it files for bankruptcy.
As for Friday, stocks ended little changed, U.S. stocks climbed throughout Friday’s session to end the day little changed, as declines in energy and utilities offset gains in health care and consumer staples. The S&P 500 capped its third straight week of gains, the longest weekly winning streak since August.
S&P 500 little changed. For the week, the Dow rose 2.4%, the S&P 500 gained 2.5%, and the Nasdaq rallied 3.5%
Market Closing Prices Yesterday
· The S&P 500 Index slipped -0.38 points, or 0.01%, to 2,596.26
· The Dow Jones Industrial Average fell -5.97 points, or 0.02%, to 23,995.95
· The Nasdaq Composite dropped -14.59 points, or 0.21%, to 6,971.48
· The Russell 2000 Index advanced 1.95 points, or 0.14% to 1,447.38
· China exports rose 7.1%, customs data showed, down from the 7.9% reported earlier for 2017, while import growth declined to 12.9% from the previous year’s 15.9%. The deceleration of exports adds to pressure on Beijing to resolve its costly tariff battle with Washington
· The European Union’s statistics agency said industrial production was down 1.7% in November–the largest month-to-month fall since February 2016 and larger than the (-1.3%) est. drop
· The U.S. and many other large economies are set for a further slowdown this year, although there are signs of stabilization in China, according to leading indicators released Monday by the Organization for Economic Cooperation and Development (OECD)
Sector News Breakdown
· Boot Barn (BOOT) guided Q3 adjusted EPS 66c on revs $254M vs. est. 61c/$251.07M; Q3 comp store sales increased 9.2%
· Stein Mart, Inc. (SMRT) reported that its comparable stores sales for the nine-week period ended January 5, 2019 decreased 3.3% on a shifted basis, which compares to the nine-week period ended January 6, 2018. Results reflect lower store traffic partially offset by higher average unit retail and digital sales growth of 20%.
· German automotive supplier Continental AG (CON.XE) said that its earnings fell in the fourth quarter, and it forecast profitability would decline in the current year.
· Tilly’s (TLYS) says comparable store net sales, including e-commerce, increased by 5.8% for the holiday period compared to an increase of 0.4% for last year’s holiday period; reports total net sales of $142.4 million increased by 8.3% for the holiday period from $131.5 million for last year’s comparable nine-week holiday
· Wingstop (WING) posted prelim Q4 results; 4Q domestic same store sales increased 6.0%; 4Q company-owned restaurant same store sales increased 4.6%; 4Q system-wide sales increased 15.0%
· PG&E Corp. (PCG) shares lose more than half of its value, falling over 50% after the gas and electric company said it plans to file for bankruptcy on or about Jan. 29, given the potential liabilities resulting the 2017 and 2018 Northern California wildfires. The utility said it didn’t expect the bankruptcy to affect its electric or natural gas customers, and expects its employees to continue to be paid, as it expects to have $5.5 billion of committed debtor-in-possession financing. https://on.mktw.net/2SOuC7T
· U.S. Secretary of State Mike Pompeo said Sunday an ongoing boycott of Qatar by four of America’s allies in the Middle East “has dragged on too long,” though he gave no sign of any coming breakthrough in the dispute
· Citi (C) kicks off bank earnings this week for the quarter, with many financials reporting this week
· Genworth Financial (GNW) and China Oceanwide Holdings announced that the Virginia State Corporation Commission, Bureau of Insurance, reapproved the proposed acquisition of control by Oceanwide of Genworth’s Virginia-domiciled insurance companies. In addition to reapproval by the Virginia regulator, insurance regulators in North Carolina, South Carolina and Vermont also reapproved the proposed acquisition
· Gladstone (GOOD) files $500M mixed securities shelf
· Bristol-Myers Squibb (BMY) stock now looks inexpensive after Wall Street punished the company after its purchase of Celgene (CELG) to try and create the number 1 producer of cancer treatments and an earnings powerhouse. Barron’s also reheated speculation that BMY could attract a bid from AbbVie (ABBV), Amgen (AMGN) or Pfizer (PFE).
· The Nasdaq Biotechnology Index (IBB) has seen a 13% jump in 2019 posting a nine-day winning streak, the longest in five years and the best start to a year since the index was created in 1993, spurred by two M&A deals to start the year (LLY for LOXO and BMY for CELG)
Industrials & Materials
· Newmont Mining Corp. (NEM) agreed to buy rival Canadian gold producerGoldcorp Inc (GG) in an all-stock transaction the companies valued at $10 billion, Newmont said it would acquire each Goldcorp share for 0.3280 of their own stock https://on.mktw.net/2FtLrlw
· The U.S. Securities and Exchange Commission and the Commerce Department are investigating Boeing’s (BA) relationship with China-backed satellite startup Global IP, WSJ says, citing a letter from the SEC sent to Global IP
· A.O. Smith (AOS) mentioned positively in Barron’s saying it offers top quality at a discount, as it has grown faster than industrial peers and targets 7% top-line growth in the future. Further, A.O. Smith has no net debt and its stock has outperformed its industrial peers by about 14 percentage points annually for the last 10 years, Barron’s notes.
· Airline (AAL, DAL, UAL) appear to be priced like they are about to go out of business again, according to Barron’s and investors have some good reasons to be concerned. While consolidation has led to improved operating performance, airline stocks still cannot get any respects, the publication says, adding that the number of legacy hub and spoke carriers is down from six to three
Technology, Media & Telecom
· Viacom (VIAB) is in talks to sell a majority stake in some of its China operations after running into difficulties trying to scale its business there, WSJ reports, citing unidentified people familiar with the matter. Talks have involved potential sale of stake in Viacom’s channel brands, such as MTV and Nickelodeon, in China
· Gannett (GCI) rises 20% after MNG Enterprises, Inc., owner and operator of one of the largest newspaper businesses in the U.S., with approximately 200 publications, today announced that its board of directors has sent a letter proposing to acquire Gannett Co., Inc. (GCI)) for $12.00 per share in cash https://yhoo.it/2Ma0uBx
· Apple (AAPL) should think about buying Nintendo (NTDOY) for its next big move, writes Barron’s. Apple would get significant exposure to the gaming industry, while Nintendo (NTDOY) would be able to scale its Nintendo Switch Online paid subscription business.
· Yeti (YETI) Q4 revenue $241.2M vs. est. $226.45M; reports preliminary Q4 DTC net sales up 45% to $110.5M; raises FY18 adj. EPS view to 88c-90c from 79c-82c (est. 81c); sees FY18 revenue up 22% to $778.8M vs. est. $764.46M; raises FY18 adjusted EBITDA view to $147M-$149M from $141M-$144M