Morning Preview: March 22, 2019

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Early Look

Friday, March 22, 2019

Futures

Up/Down

%

Last

DJ Industrials

-115.00

0.44%

25,896

S&P 500

-11.50

0.41%

2,850

Nasdaq

-26.50

0.36%

7,507

 

 

U.S. equity-index futures extended losses (Dow futures down over 100 points) while European markets are firmly lower after weaker-than-expected German manufacturing data renewed worries about global growth. Safe haven assets such as Treasuries, gold and the yen rallied. EU leaders handed Theresa May a two-week grace period to avert a no-deal Brexit. But they warned that if U.K. lawmakers don’t back her plan next week, she must decide by April 12 whether to crash out without an agreement or seek a much longer extension. Dow component Nike (NKE) shares slide 4% after mixed results overnight.

 

In Asian markets, The Nikkei Index rose 18 points to 21,627, the Shanghai Index rose 2 points to 3,104 and the Hang Seng Index advanced 41points to settle at 29,113. In Europe, markets are broadly lower the German DAX is down around 60 points back under 11,500, while the FTSE 100 is also off about 60 points under the 7,300 level. The yield on the 10-year German government bond dips below 0% after downbeat economic news as data firm IHS Market said its composite purchasing managers index for the eurozone fell to 51.3 in March from 51.9 in February, versus expectations for a decline to 51.8. The euro drops over -0.5% following the weaker data as well.

 

U.S. stocks surged on Thursday following a rally in the technology sector, while shares of Apple Inc. jumped nearly 4% to help propel the Dow and Nasdaq Composite. The upside momentum comes a day after the Federal Reserve signaled that it was unlikely to raise interest rates this year amid worries over slowing economic growth which differs significantly from the stance, they shared just three months ago. Whether it was the weaker economic data, stock market tantrum in December or perhaps the ongoing criticism of President Trump of the Fed and its rate hikes, the market got what it wanted (for now), an easier Fed and lower rates for longer.

Market Closing Prices Yesterday

·     The S&P 500 Index climbed 30.65 points, or 1.09%, to 2,854.88

·     The Dow Jones Industrial Average rose 216.84 points, or 0.84%, to 25,962.51

·     The Nasdaq Composite gained 109.99 points, or 1.42%, to 7,838.96

·     The Russell 2000 Index advanced 19.25 points, or 1.25% to 1,562.41

 

Events Calendar for Today

·     9:45 AM EST      Markit US Manufacturing PMI, Mar-P…est. 53.5

·     9:45 AM EST      Markit US Service PMI, Mar-P…est. 55.5

·     10:00 AM EST    Wholesale Inventories MoM for January…est. 0.1%

·     10:00 AM EST    Existing Home Sales for February…est. +3.2% to 5.1M

·     1:00 PM EST       Baker Hughes Weekly Rig Count

·     2:00 PM EST       Monthly Budget Statement for February…est. (-$227.0B)

 

 

Macro

Up/Down

Last

WTI Crude

-0.57

59.41

Brent

-0.74

67.12

Gold

4.00

1,317.60

EUR/USD

-0.0056

1.1318

JPY/USD

-0.37

110.45

10-Year Note

-0.034

2.549%

 

 

World News

·     IHS Market said its composite purchasing managers index for the eurozone fell to 51.3 in March from 51.9 in February, versus expectations for a decline to 51.8.

·     The composite PMI for Germany fell to 51.5 in March from 52.8 a month earlier, a 69-month low, with the country’s manufacturing PMI dropping from 47.6 to 44.7, the lowest in 6 1/2 years

·     US officials identified two Chinese shipping companies as having attempted to evade sanctions on North Korea, in the first escalation of such measures since last month’s failed summit between the two leaders – Financial Times

 

Sector News Breakdown

Consumer

·     Nike (NKE) Q3 EPS 68c/$9.6B vs. est. 65c/$9.61B; Q3 gross margin increased 130 basis points to 45.1% primarily driven by higher average selling prices, favorable changes in forex; Q3 North America revs $3.81B vs. Bloomberg est. $3.85B and Q3 Greater China revs $1.59B vs. est. $1.53B

·     Caleres (CAL) Q4 adjusted EPS 38c/$720.3M vs. est. 45c/$738.12M; Q4 Famous Footwear same-store-sales were up 1.1% vs. est. 1.3%; sees FY19 adjusted EPS $2.45-$2.55 vs. est. $2.49 and sees FY19 revenue $3B-$3.05B vs. est. $3.02B; sees FY19 Brand Portfolio sales up low-to-mid-teens

·     Cintas (CTAS) Q3 adjusted EPS $1.84/$1.68B vs. est. $1.71/$1.69B; sees FY adjusted EPS from continuing operations $7.42-$7.48 on revs $6.87B-$6.89B vs. est. $7.36/$6.89B

·     GameStop Corp. (GME) announced that its board has appointed George Sherman as CEO and member of the board, effective April 15. Sherman succeeds Shane Kim, who has served as interim CEO since May 2018

·     Hibbett Sports (HIBB) Q4 adjusted EPS 57c/$306M vs. est. 39c/$282.85M; sees FY20 adjusted EPS $1.80-$2.00 vs. est. $1.75 and sees FY20 comparable store sales in the range of -1.0%-1.0%; announces CEO transition plan as well as plan to close underperforming stores; to close about 95 Hibbett stores in FY, while opening 10 to 15 new Hibbett and City Gear stores

·     Scholastic (SCHL) Q3 EPS loss (32c) on revs $360.1M and believes it is on course to achieve its 2019 fiscal year revenue goal in the range $1.65B-$1.70B

·     Tiffany (TIF) Q4 total comp sales ex-FX 0% vs. est. 0.1%; sees a decline in net EPS in 1H fiscal year; sees 2019 EPS increasing by a mid-single digit %

 

Energy, Industrials & Materials

·     Greenbriar (GBX) guides Q2 EPS 7c-9c, well below the 42c estimate and sees revs about $650M, topping last year $629M and above est. $574M driven by “solid overall” railcar order demand, while blamed the disappointing earnings on poor manufacturing execution in Romania, compounded by supplier delivery failures and railcar loss contingencies/increased labor costs

·     Macquarie upgraded Commercial Metals (CMC) to Outperform from Neutral and raised its price target to $21 from $17

·     JinkoSolar (JKS) Q4 ADS 40c/$1.12B vs. est. 43c/$1.22B; sees 1Q solar module shipments 2.8 to 3.0 gw after Q4 solar module shipments 3,618 mw; sees 2019 solar module shipments 14.0 to 15.0 gw; 4Q gross margin 14.7%

·     An explosion at a chemicals plant in China’s Jiangsu province on Thursday killed 44 people and injured 640, according to state media Xinhua news agency

 

Financials

·     Deutsche Bank AG (DB) said it expects group revenue to be slightly higher this year than in 2018 as revenue at its key corporate and investment-bank division should grow slightly. Revenue at the corporate and investment-bank division are seen improving, with fixed-income and equities sales and trading revenue expected to increase. DB confirmed its profitability target for 2019 in its annual report and said it will propose a dividend of EUR0.11 per share

·     BlackRock Inc. (BLK) is in advanced talks to buy French software firm eFront, according to people familiar with the matter, as the firm could pay between $1B-$1.5B https://on.mktw.net/2HBMQY7

·     Horizon Technology (HRZN) files to sell 2M shares of common stock

 

Healthcare

·     Conatus Pharmaceuticals (CNAT) shares fell -50% after reporting results from the company’s Phase 2b ENCORE-NF clinical trial in patients with biopsy-confirmed nonalcoholic steatohepatitis and liver fibrosis

·     PerkinElmer (PKI) files automatic mixed securities shelf

 

Technology, Media & Telecom

·     Uber (UBER) has picked the NYSE for its upcoming initial public offering, Bloomberg’s reports, citing a person familiar with the matter. The company is expected to publicly file for its IPO in April, kicking off a listing that could value the ride-hailing giant at as much as $120B

·     Zuora (ZUO) shares fell -10%; Q4 adjusted EPS loss (11c)/$64.1M vs. est. loss (11c)/$62.87M; sees Q1 EPS loss (14c) to (13c) on revs $63.5M-$64.5M vs. est. loss (13c)/$65.57M; sees 2020 adjusted loss per share (40c-44c) vs. est. loss (45c); 4Q negative free cash flow $9.78M; adopted new rev recognition standard, ASC 606, effective Feb. 2019

·     Samsung Electronics Co. audited its U.S. marketing operation to investigate whether employees violated company policies in their dealings with business partners, resulting in layoffs of a number of staffers – WSJ reported

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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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