Morning Preview: February 11, 2019

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Early Look

Monday, February 11, 2019

Futures

Up/Down

%

Last

DJ Industrials

59.00

0.24%

25,140

S&P 500

6.75

0.25%

2,713

Nasdaq

22.50

0.33%

6,939

 

 

Stock futures point to a higher open ahead of one more busy week of corporate quarterly earnings and high-level trade talks between Chinese Vice Premier Liu He, Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer in Beijing on Thursday. Lower-level negotiations are set to begin Monday, but a resolution isn’t expected before a truce on tariffs expires in early March. In Asian markets, The Nikkei Index was closed, the Shanghai Index reopened after its week-long Golden Week holiday, rising 35 points to settle at 2,653 and the Hang Seng Index gained 197 points to settle at 28,143. In Europe, the German DAX is higher by around 100-points trading back above the 11,000 level, while the FTSE 100 is up over 50 points at 7,125. The other market x-factor remains the February 15th deadline by President Trump to Congress on a new bill that includes spending for his border wall.

 

U.S. stocks closed mixed on Friday, weighed down by global growth and trade worries with China ahead of key trade negotiations next week and overshadowing strong quarterly earnings that is more than 50% complete. Also adding to geopolitical tensions was news President Donald Trump is expected to sign an executive order next week banning Chinese wireless equipment from U.S. networks. Treasury prices rose Friday, extending the weekly decline in yields to around 6 bps at 2.632%a as investors rotated into safe haven investments. The 2-year note yield fell 1.6 bps to 2.463%, adding to a 4.5 basis-point weekly decline. Oil futures ended higher on Friday but suffered a weekly loss of nearly 5%. As for last week, the Dow extended its winning streak for a seventh week, while the S&P 500 and Nasdaq also logged gains.

 

Market Closing Prices Yesterday

·     The S&P 500 Index gained 1.83 points, or 0.07%, to 2,707.88

·     The Dow Jones Industrial Average fell -63.20 points, or 0.25%, to 25,106.33

·     The Nasdaq Composite climbed 9.85 points, or 0.14%, to 7,298.20

·     The Russell 2000 Index advanced 0.77 points, or 0.05% to 1,506.39

 

Events Calendar for Today

·     No Major Economic Data Released

 

Earnings Calendar:

·     Earnings Before the Open: GPRE, L, MCY, MPAA, NGL

·     Earnings After the Close: AMKR, BHF, BRKR, CMP, CAN, FMC, LTHM, MGI, MOH, OHI, RNG, VECO, VNO, VRNS

 

Other Key Events:

·     Credit Suisse 20th annual Financial Services Forum, 2/11-2/13, in Miami, FL

·     Credit Suisse 24th annual Energy Summit, 2/11-2/13, in Vail, CO

·     Healthcare Information Info & Management Systems Conference, 2/11-2/15, in Orlando, FL

 

 

Macro

Up/Down

Last

WTI Crude

-0.44

52.28

Brent

-0.18

61.92

Gold

-7.60

1,310.90

EUR/USD

-0.0009

1.1314

JPY/USD

0.43

110.16

10-Year Note

+0.013

2.645%

 

 

World News

·     U.K. Prime Minister Theresa May will ask Parliament this week to give her more time to renegotiate her Brexit deal with the European Union, promising lawmakers a further chance to take control of the process before the clock runs out, according to reports – Bloomberg. With a vote due on Feb. 14, May will ask Parliament to reaffirm its desire to remove the contentious Irish backstop clause from the Withdrawal Agreement, according to an official.

·     U.K.’s GDP was 1.4% higher in 2018 than in 2017, the weakest expansion since 2012. The economy slowed more sharply as the year drew to a close, with GDP rising at an annualized pace of 0.7% in the three months through December, down from 2.5% in the third quarter

·     Moody’s Investors Service on Friday raised Russia’s sovereign rating to investment grade of Baa3 from junk status of Ba1, citing policies which have boosted the country’s public finance and strengthened its economy against external shock

 

Sector News Breakdown

Consumer

·     Restaurant Brands (QSR) Q4 EPS 68c/$1.39B vs. est. 67c/$1.39B; Q4 comp sales for Tim Horton’s up 1.9% and Burger King 1.7%

·     Tesla Inc. (TSLA) was upgraded to buy from hold at Canaccord Genuity and tgt raised to $450 from $330

·     Barron’s ranked Best Buy (BBY) — dubbed the last man standing in consumer-electronics retailing — No. 1 for sustainability among publicly traded U.S. companies. Said Barron’s of Best Buy’s bona fides: “It helps customers recycle old appliances and electronics, to recover rare earths, gold, copper, and plastic. Its Geek Squad helps extend the lives of old devices and appliances.”

 

Energy

·     S&P MidCap 400 constituent Atmos Energy Corp. (ATO) will replace Newfield Exploration Co. (NFX) in the S&P 500, S&P SmallCap 600 constituent Spire Inc. (SR) will replace Atmos Energy in the S&P MidCap 400, and NorthStar Realty Europe Corp. (NRE) will replace Spire in the S&P SmallCap 600 effective prior to the open of trading on Friday, February 15. EnCana Corp. (ECA) is acquiring Newfield around February 14 pending final conditions

·     Diamond Offshore (DO) Q4 adj. EPS loss (42c)/$232.52M vs. est. loss (40c)/$252.27M

·     Key Energy (KEG) sees Q4 revenue $115M-$120M vs. est. $125.8M

·     Transocean (RIG) added approximately $907 million in contract backlog since its last report, bringing the company’s backlog to $12.2 billion

·     The Board of Directors of PG&E Corporation (PCG) provided an update on its previously announced Board refreshment process. The Board currently expects that no more than five of the company’s current directors will stand for election at the 2019 Annual Meeting of Shareholders.

·     Real Goods Solar (RGSE) shares fell late Friday after the company said it was told by Nasdaq that the stock will be suspended effective Feb. 15, due to a failure to regain compliance with the $1 per share minimum bid requirement.

 

Healthcare

·     Smith & Nephew (SNN) has held talks to acquire NuVasive (NUVA) in a deal that would be worth more than $3B and mark the largest acquisition by the British medical devices group, Financial Times reported late Friday, citing people with direct knowledge of the talks. https://yhoo.it/2WRzlbv

·     Cardinal Health (CAH), CVS Health (CVS), Medtronic (MDT) and Quest Diagnostics (DGX) are four healthcare stocks that have decent yields and solid cash flow, with yields above 2% according to Barron’s.

·     Myriad Genetics (MYGN) mentioned favorably in Barron’s noting a trial of the company’s GeneSight test yielded mixed results and hasn’t lifted the stock. If consensus shifts in favor of GeneSight, Myriad’s growth could be revived and its shares may get a boost

 

Industrials & Materials

·     Wabtec (WAB) mentioned positively in Barron’s saying shares looks cheap, attractive to some investors. Last May, Wabtec said it was merging with GE Transportation (GE), sending the former’s stock higher on the $11B deal but then headed south. Now Wabtec looks cheap and attractive to some investors, adding that Wabtec trades more than 35% below its 52-week high

·     Ingersoll-Rand (IR) announced it has made a binding offer to acquire Precision Flow Systems from funds advised by BC Partners Advisors L.P. and The Carlyle Group (CG) for $1.45B

·     The National Aeronautics and Space Administration has awarded Leidos Inc. (LDOS) a $2.9 billion, ten-year, contract for end-user information technology services

 

Technology, Media & Telecom

·     Toshiba (TOSBF) is preparing to slash its operating profit forecast for the year through March to between $182M-$273M, about half the projection made in November, with growing costs in sectors like energy dragging down earnings from core operations, Nikkei Asian Review’s said

·     Nvidia Corp. (NVDA) was downgraded to market perform from outperform at Bernstein and cut tgt to $175 from $250

·     Analog Devices (ADI) upgraded to buy from neutral at Bank America and raise tgt to $125 from $96

_________________________________________________________________

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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