Morning Preview: January 23, 2019

Scott GreenDaily Market Report

Early Look

Wednesday, January 23, 19

Futures

Up/Down

%

Last

DJ Industrials

81.00

0.33%

24,471

S&P 500

7.50

0.28%

2,639

Nasdaq

20.50

0.31%

6,673

 

 

U.S. futures are pointing to a higher open, looking to rebound from the worst daily performance since January 3rd, as markets get a glimmer of hope on the government shutdown and attention turns to quarterly earnings. Technology in focus this morning as Dow component IBM reported better results and guidance, sending shares up over 6%, while chipmaker ASML slipped on a weaker Q1 sales warning. The partial U.S. government shutdown rolls into day-33 continuing to weigh on market sentiment as well but with some small hope. Late yesterday, the NY Times reported the Senate will vote Thursday on two separate bills – one backed by President Trump that includes $5.7 billion for his border wall and another that would simply extend funding for shuttered agencies. Overnight in trade, it was reported that the European Union is prepared to hit 20 billion euros ($22.7 billion) of U.S. goods with tariffs should President Donald Trump follow through on a threat to impose duties on EU cars and auto parts, said a senior trade official for the bloc. In Asian markets, The Nikkei Index slipped -29 points to 20,593, the Shanghai Index inched higher 1 point to settle at 2,581 and the Hang Seng Index gained 2 points to 27,008. In Europe, the German DAX is down around -10 points at 11,075, while the FTSE 100 is down a few points, holding under 6,900. U.K. Trade Secretary Liam Fox said that a no-deal Brexit is “a real possibility” at the World Economic Forum in Davos this morning, adding that the biggest danger for Britain was not abiding by the result of the 2016 referendum.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -37.81 points, or 1.42%, to 2,632.90

·     The Dow Jones Industrial Average fell -301.87 points, or 1.22%, to 24,404.48

·     The Nasdaq Composite plunged -136.87 points, or 1.91%, to 7,020.36

·     The Russell 2000 Index declined -25.05 points, or 1.69% to 1,457.45

 

Events Calendar for Today

·     7:00 AM EST      MBA Mortgage Applications Data

·     9:00 AM EST      FHFA House Price Index MoM for November…est. 0.3%

·     10:00 AM EST    Richmond Fed Manufacturing Index for January…est. (-2)

·     4:30 PM EST       API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: ABT, APH, ASML, BKU, CMCSA, KMB, NTRS, PG, RES, ROL, TEL, UTX, WAT

·     Earnings After the Close: ADTN, AZPN, CCI, CNS, CP, CTXS, F, FFIV, HXL, LRCX, PTC, RJF, SLG, SLM, TCBI, TER, TXN, UMPQ, URI, VAR, XLNX

 

 

Macro

Up/Down

Last

WTI Crude

0.38

53.39

Brent

0.50

62.00

Gold

1.40

1,284.80

EUR/USD

0.0002

1.1362

JPY/USD

0.29

109.66

10-Year Note

+0.018

2.759%

 

 

World News

·     The Bank of Japan kept interest rates on hold on Wednesday but lowered its inflation expectations for the 2019 fiscal year

·     Governments around the world face a deteriorating financial position as rising interest rates combined with high levels of indebtedness put strain on their budgets, credit rating agency Fitch has warned

·     The Chinese government’s spending growth accelerated last year as the economy faced increased pressure while revenue growth slowed, citing a Finance Ministry briefing. The government’s fiscal expenditure rose 8.7% year over year to 22.09 trillion yuan ($3.26 trillion), the ministry said. That compares with 7.7% growth in 2017

·     New York Yankee Mariano Rivera has become baseball’s first unanimous Hall of Fame selection, elected along with Roy Halladay, Edgar Martinez and Mike Mussina

 

Sector News Breakdown

Consumer

·     Walgreens Boots Alliance Inc. (WBA) has agreed to pay more than $269 million to settle federal and state lawsuits that accused it of overbilling federal health-care programs.

·     Burberry Group PLC (BRBY.LN) Q3 revenue fell slightly but backed its full-year outlook, rebutting concerns of a slowdown in Chinese sales; retail revenue came to $918.3Mfin the quarter, down 2% at constant exchange rates, while comparable store sales rose 1%

·     Walmart (WMT) upgraded to Overweight from Equal Weight at Morgan Stanley

·     Lowe’s (LOW) downgraded to Hold from Buy at Loop Capital

·     Williams-Sonoma (WSM) downgraded to Underweight from Equal Weight at Morgan Stanley

·     Tesla (TSLA) downgraded to Underperform from Sector Perform at RBC Capital

 

Energy, Industrials and Materials

·     ProPetro (PUMP) preliminary Q4 revenue $421M-$426M vs. est. $414.77M and reports preliminary Q4 cost of services, exclusive of depreciation and amortization, of $299M-$304M

·     Trinseo (TSE) shares fell -15% as cuts Q4 EPS view to 20c-27c from $1.27-$1.46 (est. $1.23) and lowers year view to $7.21-$7.29 from $8.27-$8.46 (est. $8.25) saying rapidly declining feedstocks prices, particularly in the latter half of Q4, are expected to result in an unfavorable pre-tax net timing impact

·     RPC Group PLC (RPC.LN) said that it has accepted a takeover bid from private-equity giant Apollo Global Management LLC APO, -4.94% that values the U.K. packaging company at 3.32 billion pounds ($4.29 billion). https://on.mktw.net/2S5aEbY

·     Casella Waste (CWST) files to sell 3.1M of common stock

 

Financials

·     Capital One (COF) Q4 EPS $1.87/$7B vs. est. $2.39/$7.08B; Q4 net interest income of $5.82B rose 1% Q/Q, flat Y/Y; net interest margin of 6.96% vs. 8.43% in Q3 and 7.03% in Q4 2017; return on average common equity 10.05% vs. 12.40% in Q3

·     Capital One Financial Corp. (COF) said it will buy Synchrony Financials’ (SYF) $9 billion portfolio of loans left over from a partnership with Walmart Inc. (WMT), following months of negotiations

·     TD Ameritrade (AMTD) Q1 EPS $1.11/$1.52B vs. est. $1.01/$1.49B; 1Q net interest margin 2.18%, operating margin +52.5%; said Q1 number of trades 57.5 million with net new client assets $31.8 billion; 1Q average client trades per day 927,849 and 1Q average commissions and transaction fees per trade $7.09

·     Deutsche Bank AG’s (DB) is now being examined by the Federal Reserve over how it handled billions of dollars in suspicious transactions from Danske Bank A/S

·     Interactive Brokers (IBKR) Q4 EPS 56c/$492M vs. est. 62c/$511M; Q4 total DARTs increased 30% from the year-ago quarter to 951 thousand

·     Zions Bancorp (ZION) Q4 EPS $1.08 with tax benefit vs. est. $1.05; said credit quality was exceptional, with net credit recoveries of $8M and a 39% reduction in nonperforming assets from last year’s Q4

·     Navient (NAVI) Q4 EPS 58c vs. est. 48c; Q4 net income was $72M, or 28c diluted earnings per common share, compared with net loss of $84M or 32c diluted loss per common share YoY

·     United Financial (UBNK) Q4 EPS 24c vs. est. 31c/Q4 net interest income $48.4M and net interest margin 2.90% vs. 2.98% last year

·     WSFS Financial (WSFS) Q4 EPS 94c vs. est. 90c; 4Q net interest income $64.7M

·     Wintrust Financial (WTFC) Q4 EPS $1.35/$329.4M vs. est. $1.57/$347.01M; Q4 net interest margin 3.61% vs. 3.45% last year and Q4 return on equity 12.48% vs. 11.65% last year

·     LegacyTexas Financial (LTXB) Q4 non-GAAP EPS 91c vs. est. 83c; reports Q4 Net charge-offs recoveries $1.074M

·     Comerica (CMA) raises quarterly dividend 12% to 67c from 60c per share; announces additional 15M share repurchase program

 

Healthcare

·     Marijuana producer Green Growth Brands Inc. (GGBXF) made a formal offer to acquire Aphria Inc. (APHA), according to reports. Previously Green Growth had said its bid valued Aphria at C$11 a share or roughly $2.1 billion https://on.mktw.net/2Dt9sXG

·     Merck KGaA (MRK.XE) said that it has signed a strategic collaboration agreement with Tencent Holdings Ltd. (TCEHY) to develop digital healthcare services in China.

·     Conmed (CNMD) Q4 EPS 73c/$242.4M vs. est. 72c/$228.8M; sees FY19 EPS $2.42-$2.47 vs. est. $2.42 and sees FY19 revenue growth of 5%-6%, which implies $902.6M-$911.2M vs. est. $888.69M

·     Biohaven Pharmaceutical Holding (BHVN) has received a letter from FDA that it may proceed with its clinical investigation of BHV-3241, a novel myeloperoxidase inhibitor, developed for treatment of multiple system atrophy (MSA).

·     eHealth (EHTH) sees Q4 revenue $133.5M-$135.5M above consensus $110.64M; sees Q4 adjusted EBITDA $51.7M-$52.7M; sees FY19 revenue $290M-$310M vs. est. $265.9M; announces sale of 2M shares of common stock

·     PTC Therapeutics (PTCT) files to sell $200M in common stock

·     UroGen Pharma (URGN) files to sell $150M in common stock

 

Technology, Media & Telecom

·     IBM Inc. (IBM) Q4 EPS $4.87/$21.76B vs. est. $4.84/$21.75B; sees FY19 operating EPS ‘at least’ $13.90 vs. est. $13.84 and sees FY19 free cash flow about $12B vs. $11.9B in FY18; Q4 cognitive solutions revenue flat from last year at $5.5B, Q4 Global Business Services revenues of $4.3B, up 4% and Technology Services & Cloud Platforms revenues of $8.9B, down 3%

·     ASML Holding NV (ASML) warned that delayed orders and swelling inventories would hit Q1 sales; posted Q4 sales of around EU3.1B, resulting in net income of around EU788M and beating the EU752M est.; said it sees Q1 revenues slowing to around EU2.1B, notably weaker than the EU2.78B consensus, as customer demand for its extreme ultraviolet lithography systems, or EUV, machines eases

·     TE Connectivity (TEL) Q1 EPS $1.29/$3.35B vs. est. $1.28/$3.38B; sees Q2 EPS $1.25-$1.29 on revs $3.3B-$3.4B vs. est. $1.38/$3.53B; lowers FY19 adj. EPS view to $5.35-$5.55 from $5.60-$5.80 (est. $5.68) and lowers FY19 revenue view to $13.45B-$13.85B from $13.9B-$14.3B (est. $14.12B)

·     Liberty Latin America, the LatAm telecoms group spun out from media billionaire John Malone’s Liberty Global, has abandoned its approach for Millicom International Cellular (TIGO)

·     Quotient (QUOT) lowers Q4 revenue view to $106.5M-$107.5M from $115.0M-$120.0 (est. $117.67M) also lowered FY18 revenue view to $386.5M-$387.5M, from $395.0M-$400.0M (est. $397.57M)

·     Applied Optoelectronics (AAOI) announced customer sample availability of 400G optical modules based on silicon-photonics technology.

·     Viacom Inc. (VIAB) said it bought the ad-supported video-streaming service Pluto TV for $340 million in cash, a move that gives the pay-television giant another entrée to the realm of online video.

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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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