Morning Preview: February 25, 2019

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Early Look

Monday, February 25, 2019

Futures

Up/Down

%

Last

DJ Industrials

166.00

0.64%

26,168

S&P 500

13.50

0.48%

2,804

Nasdaq

47.50

0.66%

7,135

 

 

U.S. stock futures are jumping, getting a boost after President Donald Trump said overnight that, “I am pleased to report that the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues. As a result of these very… productive talks, I will be delaying the U.S. increase in tariffs now scheduled for March 1. Chinese stocks have since surged into bull market territory after US President Donald Trump announced he would delay new tariffs on $200B of Chinese imports. The Nikkei Index rose 102 points to settle at 21,528, the Shanghai Index surged 157 points (or 5.6%) to settle at the highs of 2,961 and the Hang Seng Index gained 143 points to settle at 28,959. In Europe, the German DAX is up around 50 points above 11,500, while the FTSE 100 is up a few points around 7,190. The week starting off strong for US stocks after ending last week with good gains as the Dow rose 0.6% for its ninth straight week of gains, the longest such run since May 1995. The S&P 500 climbed 0.6%, up for a fourth straight week, and the Nasdaq moved up 0.7%, for its ninth weekly gain, its longest since May 2009. Outside of trade, there were two M&A deals announced in the healthcare space overnight, while markets also focus on a busy week of economic data this week.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 17.79 points, or 0.64%, to 2,792.67

·     The Dow Jones Industrial Average rose 181.18 points, or 0.70%, to 26,031.81

·     The Nasdaq Composite spiked 67.84 points, or 0.91%, to 7,527.54

·     The Russell 2000 Index advanced 14.51 points, or 0.92% to 1,590.06

 

Events Calendar for Today

·     8:30 AM EST      Chicago Fed Nat Activity Index for January

·     10:00 AM EST    Wholesale Inventories MoM, Dec-f

·     10:30 AM EST    Dallas Fed Manufacturing Activity

 

Earnings Calendar:

·     Earnings Before the Open: AWI, CLDT, CRI, KOS, MDR, PLAN, STAR, TEN

·     Earnings After the Close: AERI, APLE, CRZO, DPLO, DRH, ELGX, ETSY, FRAC, HNI, HSII, HTZ, JBT, LSI, MOS, NLS, OKE, PBPB, PLOW, PODD, RCII, RCKY, RRC, SHAK, TEX, THC, XNCR

 

Other Key Events:

·     BMO Capital 28th annual Global Metals and Mining Conference, 2/24-2/27, in Florida

·     JMP Securities Technology Conference, 2/25-2/26, in San Francisco

·     JPMorgan Global High Yield & Leveraged Finance Conference, 2/25-2/27, in Florida

·     Mobile World Congress 2019, 2/25-2/29, in Barcelona Spain

·     Morgan Stanley Technology, Media, Telecom Conference, 2/25-2/28, in San Francisco

 

 

Macro

Up/Down

Last

WTI Crude

0.21

57.47

Brent

0.07

67.20

Gold

-0.80

1,332.00

EUR/USD

0.0026

1.1361

JPY/USD

0.07

110.76

10-Year Note

+0.022

2.675%

 

 

World News

·     UK Prime Minister Theresa May put off a vote in parliament on her Brexit deal until as late as March 12 – just 17 days before Britain is due to leave the EU – setting up a showdown this week with MPs. Both May’s Conservatives and the main opposition Labour Party are formally committed to exiting the EU in line with a 2016 referendum vote but are divided how to do so.

·     UK and US markets regulators have finalized a sweeping long-term agreement to jointly oversee each other’s derivatives markets after Brexit – Financial Times

 

Sector News Breakdown

Consumer

·     Altria (MO) mentioned positively in Barron’s calling it is a bargain noting the company recently bought big stakes in cannabis company Cronos Group (CRON) and e-cigarette maker Juul, so it has exposure to whichever direction smoking turns. It also pays a hefty 6.2% dividend yield.

·     Caesars Entertainment Corp. (CZR) may give activist investor Carl Icahn a role in selecting its next CEO, Reuters reported Sunday. Icahn, who the Wall Street Journal recently reported has taken a 10% stake in Caesars, could also be granted board representation, Reuters said https://on.mktw.net/2SpCefZ

·     Carter’s (CRI) Q4 EPS $2.84/$1.1B vs. est. $2.56/$1.07B; sees2019 EPS up 4%-6% and sales up 1%-2% and boosts quarterly dividend to 50c from 45c

 

Energy

·     PG&E (PCG) board and senior management team have decided not to pay out short-term incentive payments to workers for 2018, according to an email statement

·     Abu Dhabi National Oil Co. enters into a $4 billion midstream pipeline infrastructure partnership with KKR (KKR) and BlackRock (BLK)

 

Financials

·     Berkshire Hathaway (BRK/A) Q4 EPS ($15,467) vs. $19,790 last year; reports Q4 net loss $25.39B vs. a gain of $32.55B in the year ago period. At December 31, 2018, Berkshire’s book value per Class A equivalent share was $212,503. Insurance float was approximately $123B at December 31, 2018, an increase of $8B since year-end 2017

·     Cboe Global Markets (CBOE) upgraded to Overweight from Neutral at JPMorgan

 

Healthcare

·     Roche Holding AG (RHHBY) entered a definitive merger agreement to acquire Spark Therapeutics Inc. (ONCE) for $114.50 per share and that the deal is expected to close in the second quarter. https://on.mktw.net/2EvUMHK

·     Ipsen (IPN.FR) said it has agreed to buy Clementia Pharmaceuticals Inc. (CMTA) in a deal valued at up to $1.31 billion. Ipsen said it would initially pay $25 a share in cash for Clementia, and a further $6 a share contingent on Clementia’s palovarotene drug receiving FDA approval for the treatment of a rare bone disorder. https://on.mktw.net/2IDADUi

·     AstraZeneca PLC (AZN) said that its heart drug Brilinta met primary endpoint at a phase 3 clinical trial. The drug, taken in conjunction with aspirin, showed a statistically significant reduction in major adverse cardiovascular events compared to aspirin alone

·     WellCare (WCG) mentioned favorably by Barron’s saying investors looking for a company whose market is sure to grow should consider WellCare Health Plans, which manages Medicare and Medicaid plans for families and individuals, as both are certain to keep expanding

·     Sabra Healthcare (SBRA) Q4 normalized FFO 50c/$139.2M vs. est. 47c/$144.7M; sees2019 FFO $2.02-$2.10 vs. est. $2.02

 

Industrials & Materials

·     Bayer (BAYRY) is set to face a second U.S. jury over allegations that its popular glyphosate-based weed killer Roundup causes cancer – Reuters

·     Terex (TEX) Q4 EPS 51c/$1.23B vs. est. 47c/$1.20B; sees year EPS $3.6-$4.20 on sales about $4.7B vs. estimates $3.41/$5.25B

·     Terex Corp. (TEX) agreed to sell its Demag Mobile Cranes business to Tadano Ltd. for an enterprise value of about $215 million; the sale is targeted to close in mid-2019

 

Technology, Media & Telecom

·     Huawei Technologies unveiled a $2,600 folding smartphone which it said was primed for next generation 5G mobile connections, even as the U.S. campaigns to bar the Chinese company from such networks over security concerns – Reuters

·     Semiconductors mentioned in Barron’s noting President Donald Trump tweeted about 5G on last week as the White House contemplates a ban of equipment from Chinese companies like Huawei. Qualcomm (QCOM), Micron Technology (MU) and Marvell (MRVL) all have more than 50% revenue exposure to China, Barron’s says. Cisco (CSCO), Nokia (NOK), Ericsson (ERIC), Ciena (CIEN) and Juniper Networks (JNPR) are competitors to Huawei

·     Barron’s noted Entegris (ENTG) announced plans to merge with rival chip supplier Versum (VSM), and Barron’s sees shares of the combined company approaching $50 over the next few months, vs. Friday’s close of $36.35

·     Barron’s noted Aurelius Capital’s triumph in a bitterly fought battle over debt did collateral damage to both Windstream (WIN) and Uniti Group’s (UNIT) stocks this past week and now threatens Windstream’s viability, serving also as sobering illustration of what can happen when a company’s stakeholders are misaligned

·     Comcast (CMCSA), Twenty-First Century Fox (FOXA): Universal’s “How to Train Your Dragon: The Hidden World” topped the weekend box office with a $55.5 million debut. Fox’s “Alita: Battle Angel” earned $12 million in its second week

·     Twitter (TWTR) said Evan Williams has decided to step down from the board at the end of the month after 13 years.

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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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