Morning Preview: January 15, 2019

Scott GreenDaily Market Report

Early Look

Tuesday, January 15, 19

Index

Up/Down

%

Last

DJ Industrials

118.00

0.49%

23,985

S&P 500

10.50

0.40%

2,590

Nasdaq

38.50

0.59%

6,583

 

 

Stock futures are edging higher ahead of a busy day of financial earnings (JPMorgan and Wells Fargo), a landmark vote in the UK regarding the UK divorce of the EU, and a busy day of economic data. Stock futures got a boost overnight after China’s PBOC cut the Reserve Requirement Ratio (RRR) rate, and plans to monetary policy more forward-looking, flexible and targeted, Reuters reported. Today also marks day-25 of the partial U.S. government shutdown. But the big story today is in the UK as politicians will conclude a five-day debate on the advantages and disadvantages of May’s preferred form of Brexit around 7:00 PM. Parliament will then be given an opportunity to vote on politicians’ proposed amendments to the deal. If it fails, UK PM Theresa May could suffer the worst defeat of any U.K prime minister in a parliamentary vote. British politicos estimate May’s Brexit withdrawal deal will be rejected by between 180 and 229 U.K. politicians. At least 70 of her lawmakers, as well as sometime allies, will join opposition parties in voting against her. That would trigger a defeat by a margin of 150 or more and probably hammer sterling, Bloomberg reported. The Pound and European markets are steady ahead of the vote. In Asian markets, The Nikkei Index gained 195 points to 20,555, the Shanghai Index rose 34 points (1.36%) to close at 2,570 and the Hang Seng Index jumped 531 points to settle at 26,830. In Europe, the German DAX is up a few points at 10,870, while the FTSE 100 is up 20 points at 6,875.

 

U.S. stocks ended modestly lower on Monday with amid concerns about global economic growth after a China trade data (imports/exports) disappointed and quarterly earnings season got underway. Citigroup rallied 4% after the bank reported that earnings bounced back in the fourth quarter from a loss a year earlier, while revenue fell, led by a decline in trading revenue (JPM and WFC report earnings today). Treasury yields inched higher as the 10-year rose 1 bps to 2.71% while the 30-yr yield hit a 3-week high, rising 2.5 bps to 3.061%.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -13.65 points, or 0.53%, to 2,582.61

·     The Dow Jones Industrial Average fell -86.11 points, or 0.36%, to 23,909.84

·     The Nasdaq Composite slumped -65.56 points, or 0.94%, to 6,905.92

·     The Russell 2000 Index declined -14.57 points, or 1.01% to 1,432.81

 

Events Calendar for Today

·     7:45 AM EST      ICSC Weekly Retail Sales

·     8:30 AM EST      Empire Manufacturing for January

·     8:30 AM EST      Producer Price Index (PPI) MoM for December

·     8:30 AM EST      PPI Ex: Food & Energy (core) MoM for December

·     8:30 AM EST      PPI Ex: Food & Energy (core) YoY for December

·     8:55 AM EST      Johnson/Redbook Weekly Sales

·     11:30 AM EST    Fed’s Kashkari speaks on Regional Economy in Minnesota

·     1:00 PM EST       Fed’s George speaks on Economy and Monetary Policy

·     1:00 PM EST       Fed’s Kaplan speaks in Plano, Texas

·     4:30 PM EST       API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: DAL, FRC, INFO, JPM, SNV, UNH, WFC

·     Earnings After the Close: UAL

 

 

Macro

Up/Down

Last

WTI Crude

0.76

51.27

Brent

0.93

59.92

Gold

-1.80

1,289.50

EUR/USD

-0.0043

1.1426

JPY/USD

0.33

108.49

10-Year Note

-0.018

2.693%

 

 

World News

·     China’s M2 money supply rose 8.1% in December from a year earlier, matching estimates and accelerating from November’s 8% gain. New yuan loans fell more than expected to 1.08 trillion yuan ($159.8 billion) – Bloomberg

 

Sector News Breakdown

Consumer

·     Dave & Buster’s (PLAY) raises FY18 net income to $112M-$114M from $106M-$113M and raises FY19 revenue view to $1.259B-$1.263B from $1.243B-$1.255B (vs. est. $1.25B); raises FY18 EBITDA view to $276M-$278M from $268M-$277M

·     Big 5 Sporting (BGFV) sees FY18 EPS (10c)-(8c) vs. est. loss (10c) on revs $987.6M vs. est. 982.85M; same store sales decreased 2.7% for the fiscal 2018 full year; merchandise margins decreased approximately 12 basis points for the FY18

·     Limoneira (LMNR) Q4 adjusted EPS (30c)/$14.7M vs. est. loss (31c)/$16.5M; said expect the positive pricing environment for lemons experienced in 2018 to continue throughout fiscal 2019, along with increased production and operating efficiencies in all areas of our business

·     Pier 1 Imports, Inc. (PIR) received notification from the NYSE on January 11, 2019 that the company is not in compliance with NYSE continued listing criteria

·     Wynn Resorts (WYNN), Melco (MLCO): Bernstein lowers its Macau gaming revenue forecast for Jan. to a decline of 8% to 12%, as last week’s casino revenue was weaker than expected given a visitation slowdown before Chinese New Year in early Feb. Macau gross gaming revenue through the first 13 days of Jan. was 10.1 billion patacas, which is about 777 million patacas on a daily basis, 8% lower than last year – Bloomberg

·     More Gaming: The U.S. Justice Department now says federal law bars all internet gambling, reversing its position from 2011 that only sports betting is prohibited under a law passed 50 years earlier. The reversal was prompted by the department’s criminal division, which prosecutes illegal gambling – Bloomberg

 

Energy, Industrials & Materials

·     Assemblyman Chris Holden, the chair of the assembly’s utilities and energy committee, said Monday he would no longer pursue a bill that would have let PG&E (PCG) issue bonds to cover billions of liabilities from Northern California’s Camp Fire – Bloomberg

·     Navistar (NAV) now sees 2019 revs $10.5B-$11B vs. prior $10.75B-$11.25B (est. $10.8B); now sees 2019 Ebitda $825M-$875M vs. $850M-$900M previously and vs. est. $865.1M

·     Hecla Mining (HL) Q4 and FY18. FY18 highlights include: silver production of 10.4M ounces, down 17% vs last year, and a company-record gold production of 262,103 ounces up 13%; silver equivalent production of 43.6M ounces and gold equivalent production of 540,174 ounces

 

Financials

·     JPMorgan (JPM) Q4 EPS $1.98 on revs $26.8B vs. est. $26.9B; Q4 provisions for credit losses $1.55B; ROSE 12%; Q4 sales and trading revs $1.32B in-line w ests while FICC sales and trading $1.86B below the $2.29B Bloomberg estimate; Q4 investment banking revs $1.72B

·     JPMorgan (JPM) reports December net credit losses 2.35% vs. 2.26% last month while reports December delinquencies 1.17% vs. 1.19% last month

·     Synchrony (SYF) reports December charge-off rate 4.86% vs. 4.64% last month and the 30-plus day delinquencies 2.87% vs. 2.91% last month

·     Synovus (SNV) Q4 EPS 92c vs. est. 93c; reports Q4 net charge-offs $13.0M, down $2.2M or 14.5% from the previous quarter

·     Discover Financial (DFS) December Charge-Offs (NCOs) rise to 3.41% vs. 3.24% MoM while December delinquencies 2.43%, unchanged from November; November total card loans $72.9 billion vs. $71.4 billion month over month

·     ARMOUR Residential (ARR) files to sell 5M shares of common stock

·     Washington Federal (WDFC) Q1 EPS 65c vs. estimate 61c; 1Q net interest margin 3.21% vs. Bloomberg estimate 3.24%

 

Healthcare

·     UnitedHealth (UNH) Q4 EPS $3.28/$58.4B vs. est. $3.21/$57.99B; reports 2018 medical care ratio of 81.6 percent decreased 50 basis points year-over-year; reaffirms FY19 EPS view of $14.40-$14.70

·     Tilray (TLRY) and Authentic Brands Group have signed a long-term revenue sharing agreement to market and distribute a portfolio of consumer cannabis products within ABG’s brand portfolio. Tilray will initially pay to ABG US$100M and up to US$250M in cash and stock

·     Medtronic (MDT) upgraded to Buy from Neutral at BTIG

·     Aimmune Therapeutics (AIMT) was notified that the U.S. FDA will not commence review of its biologics license application for AR101 due to the U.S. government shutdown and lapse in appropriations/Aimmune submitted its BLA for AR101 on Dec. 21, prior to the U.S. government shutdown

·     Array BioPharma (ARRY) results showed median overall survival of 15.3 months of the phase 3 trial evaluating the combination of Braftovi, Mektovi, and Erbitux

·     Exelixis Inc. (EXEL) said the FDA approved its Cabometix drug for patients with certain types of advanced liver cancer who have previously been treated with another drug.

·     Alnylam (ALNY) 5M share secondary priced at $77.50 per share

·     Acceleron (XLRN) files to sell $200M of common stock

 

Technology, Media & Telecom

·     Take-Two Interactive (TTWO) will pay the National Basketball Association and its players’ union up to $1.1b over 7 years in a licensing deal, the Wall Street Journal reports https://on.wsj.com/2SXI6hQ

·     TTM Technologies (TTMI) lowers Q4 revenue guidance to $705M-$715M from $720M-$760M (est. $736.95M); raises lower end of Q4 EPS guidance to 46c-50c from 44c-50c (est. 47c) – due in part to year-over-year declines in the cellular and automotive end markets

·     Everbridge (EVBG) files to sell $125M of common stock; guides Q4 revs $41.6M-$41.8M vs. est. $40.9M

·     Micron (MU) announced the company is exercising its right to purchase Intel’s (INTC) interest in the parties’ joint venture, IM Flash Technologies

·     Zix Corp. (ZIXI) enters into a definitive pact to acquire AppRiver for $275M in a move to create cloud-based email security provider to small and midsize business market

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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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