Morning Preview: March 11, 2019

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Early Look

Monday, March 11, 2019

Futures

Up/Down

%

Last

DJ Industrials

-171.00

0.67%

25,357

S&P 500

1.50

0.06%

2,753

Nasdaq

13.50

0.19%

7,067

 

 

Dow Industrial futures start the week sharply lower, dragged down by weakness in shares of Boeing (BA), falling over 9% after one of the company’s 737 Max 8 planes operated by Ethiopian Airlines crashed shortly after takeoff from Ethiopia on Sunday, killing all 157 people on board. The crash comes months after a crash of the same plane flown by Indonesia’s Lion Air killed 189 people. Reports indicate that China has grounded all 96 of its 737 Max 8 planes, and Ethiopia Airlines has also done the same. U.S. stocks start the week off riding a 5-day losing streak for the Dow (longest since June), S&P 500 (longest streak since November) and Nasdaq Comp (longest since April) as a lackluster jobs report on Friday and a sharp drop in Chinese exports heightened worries around the global economy’s health. For the week, the S&P was down 2.2%, the Dow was down 2.2%, and the Nasdaq fell 2.4%. The Dow Transport index logged its 11th straight drop on Friday as well, representing its longest skid since 1972. In Asian markets, The Nikkei Index rose 99 points to 21,125, the Shanghai Index gained 57 points, settling at 3,026 and the Hang Seng Index gained 274 points to settle at 28,503. In Europe, the German DAX is up about 20 points to 11,480, while the FTSE 100 is higher by over 60 points at 7,175. On the calendar today, monthly retail sales as well as business inventories while earnings today (and for the week) very slow as market attention remains macro focused (Brexit, trade, Fed).

Market Closing Prices Yesterday

·     The S&P 500 Index slipped -5.86 points, or 0.21%, to 2,743.07

·     The Dow Jones Industrial Average fell -22.99 points, or 0.09%, to 25,450.24

·     The Nasdaq Composite dropped -13.32 points, or 0.18%, to 7,408.14

·     The Russell 2000 Index declined -1.74 points, or 0.11% to 1,521.88

 

Events Calendar for Today

·     8:30 AM EST      Retail Sales MoM for January…est. 0.0%

·     8:30 AM EST      Retail Sales Ex: Autos MoM for January…est. 0.3%

·     10:00 AM EST    Business Inventories for December…est. 0.6%

 

Earnings Calendar:

·     Earnings Before the Open: ATNX, SBPH

·     Earnings After the Close: ADT, COUP, DRNA, FRTA, MG, PETQ, SFIX, ZFGN

 

Other Key Events:

·     Cowen 39th Annual Healthcare Conference, 3/11-3/13, in Boston, MA

·     Deutsche Bank 2019 Media & Telecom Conference, 3/11-3/13, in Palm Beach, FL

 

 

Macro

Up/Down

Last

WTI Crude

0.51

56.58

Brent

0.58

66.32

Gold

-3.60

1,295.70

EUR/USD

0.0004

1.1239

JPY/USD

0.03

111.20

10-Year Note

+0.015

2.648%

 

 

World News

·     German industrial production dropped in January, missing forecasts, and exports were flat. Total industrial output declined 0.8% from the month before, missing the forecast of a 0.4% gain. But revised data for December now show a 0.8% month-to-month rise in industrial production, compared with a 0.4% drop previously reported.

·     President Trump plans to request $8.6B for additional barriers along the southern U.S. border as part of his budget proposal to be released Monday, WSJ reports. The White House budget document will propose $2.7T in cuts to nondefense discretionary spending over the next decade, in part by reducing such spending by 5% next year below current federal spending caps

 

Sector News Breakdown

Consumer

·     Auto sales in China continued declined for the eighth consecutive month in February as vehicle sales in January and February–a period that includes China’s movable Lunar New Year holiday–totaled 3.85 million, down 15% from a year earlier,

·     Cott (COT) mentioned positively in Barron’s saying the company used to make soda under its own name and the store brand of Sam’s Club. Now the Ontario, Canada-based company is out of soda and into coffee, tea and water. BMO analyst Amit Sharma’s $20 price target implies a 30% upside from recent levels, Barron’s says

·     Renault (RNLSY), Nissan Motor (NSANY) and Mitsubishi Motors (MSBHY) plan to set up a joint board meeting structure to discuss issues related to their alliance in a step toward integration of operations, according to Reuters

·     Tesla (TSLA) said it had spent the last two weeks evaluating the decision of store closures and decided more stores will remain open. “As a result of keeping significantly more stores open, Tesla will need to raise vehicle prices by about 3% on average worldwide they said in a blog

·     Tesla (TSLA) employees are being told the company is freezing store closures, any change from the transition to online sales only and layoffs until at least the end of the month, Electrek reports

 

Energy

·     Saudi Arabia will extend deeper-than-agreed oil output cuts for a second month in April, a person familiar said. The kingdom plans to produce well below 10 million barrels a day, a similar pace to March and compared with its output cap of 10.31 million. It will export less than 7 million. – Bloomberg

·     Barron’s said the offshore drilling business has suffered its deepest downturn in 30 years, as investment capital has rushed to land, chasing shale, but there are early signs of a return to the sea and investors who dive in now could profit nicely, and says stocks like Transocean (RIG), Diamond Offshore Drilling (DO), Ensco (ESV) and Rowan (RDC) appear potential energy bargains

 

Financials

·     Deutsche Bank AG’s (DB) top executives have agreed to hold discussions with rival Commerzbank AG about a potential merger, as Germany’s two biggest banks explore strategic options after suffering prolonged performance and share-price declines https://on.mktw.net/2ERTSnU

 

Healthcare

·     Medtronic PLC (MDT) said late Friday its board authorized a new plan to buy back up to $6 billion

·     Integra Life Sciences’ (IART) unit received an FDA warning letter dated March 6 relating to quality systems issues at its plant located in Boston, which manufactures extracellular bovine matrix products

 

Industrials & Materials

·     A Boeing Co. (BA) 737 Max operated by Ethiopian Airlines crashed shortly after takeoff Sunday, killing all 157 people on board, as the second deadly accident in five months raises fresh concerns about the U.S. manufacturer’s best-selling jet.

·     China has ordered all of the country’s airlines to ground the Boeing 737 MAX 8 aircraft following this weekend’s crash of an Ethiopian Airlines plane that killed 157 people

·     Delta (DAL) is the best-managed U.S. airline and its stock trades cheaply, according to Barron’s saying at about $50, Delta fetches less than eight times projected 2019 earnings of $6.51 a share, while its dividend yield of 2.8% is the highest among its peers

·     Southwest Airlines Co. (LUV) expressed confidence in its Boeing Co. aircraft and said has no plans to change operations in the wake of a deadly crash involving a 737 Max 8 aircraft in Ethiopia

·     XPO Logistics (XPO) and Colfax (CFX) will replace Diamond Offshore Drilling (DO) and Big Lots (BIG) respectively in the S&P MidCap 400, and Diamond Offshore Drilling and Big Lots will replace Maiden Holding (MHLD) and Quorum Health (QHC) respectively in the S&P SmallCap 600.

 

Technology, Media & Telecom

·     Nvidia Corp. (NVDA) is nearing an agreement to buy Israeli chipmaker Mellanox Technologies (MLNX), which would help it gain technology used to speed the flow of information around data centers, according to various reports. The sale of Mellanox, which has a market value of about $5.9 billion, could be announced as soon as Monday. Nvidia is the leading bidder ahead of rivals including Intel Corp. (INTC) https://bloom.bg/2F0gtA8

·     Apple (AAPL) was upgraded to buy from neutral at Bank America and raised tgt to $210 from $180

·     Facebook (FB) upgraded to Buy from Neutral at Nomura Instinet and raised his price target for the shares to $215 from $172

·     Oracle (ORCL) downgraded to Reduce from Buy at Nomura Instinet

·     FireEye (FEYE) upgraded to Overweight from Neutral at JPMorgan

_________________________________________________________________

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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