Morning Preview: January 22, 2019

Scott GreenDaily Market Report

Early Look

Tuesday, January 22, 19

Futures

Up/Down

%

Last

DJ Industrials

-188.00

0.76%

24,499

S&P 500

-21.50

0.80%

2,650

Nasdaq

-66.50

0.98%

6,726

 

 

U.S. stock futures slip in overnight action following weaker Asian markets the last few days as the weakest Chinese growth data in three decades weighed on investor sentiment, and the International Monetary Fund cut its outlook for global expansion citing trade issues. The IMF said that it expects global growth this year of 3.5%, down from 3.7% in 2018 and from the 3.7% it had forecast for 2019 back in October. Regular trading for U.S. markets were closed Monday in honor of Martin Luther King Jr. Day as they reopen today. Stocks had rallied on Friday, with major US averages rising for a fourth-straight session amid reports that raised hopes for progress in trade talks between the U.S. and China (Bloomberg that Chinese officials have offered to increase imports from the U.S. by $1 trillion over the next six years). For the week, all the benchmarks are up more than 2% with the S&P up 2.9%, the Dow 3% and the NASDAQ 2.7%. Meanwhile, the government shutdown is now moving into month number two as President Trump and Congress remain far apart on funding for the border wall to Mexico. In Asian markets, The Nikkei Index fell -96 points to 20,622, the Shanghai Index dropped -30 points to 2,579 and the Hang Seng Index dropped -191 points to 27,005. In Europe, the German DAX is down about -50 points under 11,100, while the FTSE 100 is down around -40 points at 6,925.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 34.75 points, or 1.32%, to 2,670.71

·     The Dow Jones Industrial Average rose 336.25 points, or 1.38%, to 24,706.35

·     The Nasdaq Composite gained 72.76 points, or 1.03%, to 7,157.23

·     The Russell 2000 Index advanced 15.25 points, or 1.04% to 1,482.50

 

Events Calendar for Today

·     7:45 AM EST      ICSC Weekly Retail Sales

·     8:55 AM EST      Johnson/Redbook Weekly Sales

·     10:00 AM EST    Existing Home Sales MoM for December…est. 5.24M

 

Earnings Calendar:

·     Earnings Before the Open: ATI, FITB, FNB, HAL, JNJ, LOGI, MBFI, PLD, STLD, SWK, TRV, UBS, UBSH

·     Earnings After the Close: AMTD, COF, IBKR, IBM, NAVI, ZION, WTFC

 

 

Macro

Up/Down

Last

WTI Crude

-1.09

52.71

Brent

-1.21

61.53

Gold

0.30

1,282.90

EUR/USD

-0.0004

1.1361

JPY/USD

-0.27

109.40

10-Year Note

+0.02

2.786%

 

 

World News

·     The International Monetary Fund (IMF) cut its forecast for world economic growth this year, citing heightened trade tensions and rising U.S. interest rates. The IMF said that it expects global growth this year of 3.5%, down from 3.7% in 2018 and from the 3.7% it had forecast for 2019 back in October. The IMF left its prediction for U.S. growth this year unchanged at 2.5%, but trimmed the growth outlook for the 19 countries that use the euro currency to 1.6% from 1.8%.

·     China’s posted its slowest pace of growth (GDP) in nearly three decades last year, amid a trade fight with the U.S. The 6.6% growth rate for 2018 reported Monday is the slowest annual pace that China has recorded since 1990.

·     A new report has identified a secret headquarters for North Korea’s ballistic missile force, complicating ongoing denuclearization talks with the U.S

 

Sector News Breakdown

Consumer

·     Henkel AG & Co. KGaA (HEN.XE) shares fell after the German consumer-goods and chemical company posted weaker-than-expected financial guidance alongside its preliminary results for 2018; said it expects a challenging 2019 amid uncertainty and volatility, with mixed market dynamics and continued headwinds from currencies and commodities.

·     William Hill PLC (WMH.LN) said that it expects 2018 adjusted operating profit to fall 15% on year, but to be in line with previous guidance; the betting company said adjusted operating profit from continuing operations estimated to be 234 million pounds ($301.2 million) vs. prior guidance of between GBP225 million and GBP245 million

·     Casino Guichard-Perrachon SA (CO.FR) said that it has agreed to sell 26 hypermarkets and supermarkets worth 501 million euros ($569.2 million) to Fortress Investment Group, and that it has reached its asset-disposal target of EUR1.5 billion.

·     Hugo Boss AG (BOSS.XE) said its Q4 sales growth accelerated, driven by a robust performance in the Asia-Pacific region; said Q4 sales came to 783 million euros ($890.3 million), up from EUR735 million in the same period a year earlier.

·     Tesla (TSLA) was cleared to begin delivering its Model 3 sedans across Europe, according to Dutch vehicle authority RDW. Deliveries should start in February

 

Energy, Industrials & Materials

·     Apollo in advanced talks to buy RPC Group (RPC.LN) for more than $3.8b, the WSJ reported, citing unidentified people with knowledge of the matter. https://on.wsj.com/2Hq3pHg

·     BHP Group Ltd. (BHP) recorded weaker quarterly production of commodities including iron ore and petroleum and forecast a first-half productivity hit totaling US$600 million because of disruptions to operations that included a train derailment in a remote part of Australia; also raised its full-year forecast for copper production

·     Pan American Silver (PAAS) forecast silver production for the full year of 26.5 million to 27.5 million oz.; sees FY gold production 162,500 to 172,500 oz; 4Q silver production 6.1 million oz; 4Q gold production 37,200 oz

·     FedEx (FDX) is starting an employee buyout program that will cost as much as $575M before taxes, as the courier seeks to pare expenses amid a sudden decline in international business

·     Linde PLC (LIN.XE) will buy back up to $6 billion of its ordinary shares as part of a new share-repurchase program

 

Financials

·     Chubb (CB) announced net catastrophe loss estimates for the fourth quarter of 2018 of approximately $585M pre-tax, or $505M after tax. These estimates include the previously reported loss estimates related to the California wildfires and Hurricane Michael

·     MasterCard Inc. (MA) was fined EU570.6M by the EU for curbing retailers’ access to payment services outside each EU country.

·     UBS Corp. (UBS) Q4 EPS 25c vs. est. 26c; reports Q4 book value per share $14.45, Q4 CET1 capital ratio 13.1%; reported a weaker-than-expected 2% rise in pre-tax profit to $862M in the fourth quarter

·     Flagstar Bancorp (FBC) Q4 EPS 72c vs. est. 73c; Q4 net interest income $152 million

·     Old National (ONB) Q4 EPS 32c vs. est. 37c; 4Q common equity Tier 1 ratio 11.4%

·     Office REITs positively mentioned in Barron’s saying they have been perennial underperformers in recent years and now typically trade at a 20% or wider discounts to their net asset values. While investors may be tempted to hunt for bargains in the sector, they need to be selective as believes Kilroy Realty (KRC) and Vornado Realty Trust (VNO) have “solid” prospects

 

Healthcare

·     Johnson & Johnson (JNJ) Q4 EPS $1.97/$20.4B vs. est. $1.95/$20.2B; sees year EPS $8.50-$8.65 vs. est. $8.61

·     Lupin said it has received approval from the US health regulator to market Levothyroxine Sodium tablets used for treatment of hypothyroidism

·     AbbVie’s (ABBV) Phase III clinical trial, RESOLVE, evaluating its IMBRUVICA (ibrutinib) plus chemo in patients with metastatic pancreatic cancer failed to achieve the primary endpoint. Specifically, the combination did not sufficiency separate from chemo + placebo as determined by progression-free survival (PFS) or overall survival (OS) in a first-line setting

·     Barron’s said healthy funding and scientific innovation are lifting profits for Illumina (ILMN), Thermo Fisher Scientific (TMO), Danaher (DHR), Agilent Technologies (A), and Bio-Techne (TECH), as these five life-sciences tools and equipment firms are benefiting from rising demand in a variety of areas, from lab work to the consumer market. They are poised to capitalize on medical innovation and demand for health care in emerging markets

·     Boston Scientific (BSX) announced positive 12-month data demonstrating that patients who were treated with the Vici Venous Stent System for iliac and femoral vein obstructions exhibited a high rate of patent, or open, target lesions

 

Technology, Media & Telecom

·     Palo Alto (PANW) upgraded to buy from neutral at UBS

·     Barron’s noted Fortnite has stolen the gaming spotlight from Electronic Arts (EA) and Activision Blizzard (ATVI), which are both down nearly 40% from last year’s highs, and while the selloff might make them attractive for the long run, the two largest independent U.S. game publishers are likely to be dead money in the year ahead, given the companies’ underperforming pipeline

·     Comcast’s (CMCSA) Universal’s “Glass” won the long Martin Luther King Jr. holiday weekend at the box office with an estimated $47.1M, including $40.6M for the three days. Overseas, the superhero movie opened to $48.5M from 55 markets for a three-day global launch of $89.1M and $95.6M for the four day

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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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