Morning Preview: March 26, 2019

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Early Look

Tuesday, March 26, 2019

Futures

Up/Down

%

Last

DJ Industrials

125.00

0.49%

25,702

S&P 500

12.50

0.45%

2,819

Nasdaq

29.50

0.40%

7,384

 

 

Stock futures are pointing to a rebound following selling pressure the last two days, helped by optimism over trade after Bloomberg reported China could increase U.S. pork imports to the highest ever this year as part of its commitment to bolster purchases of American farm goods to resolve the trade war between the two countries (said China may buy as much as 300,000 metric tons of pork in 2019…which would be 80% more than in 2017). In the tech space, Samsung Electronics Co. warned that Q1 results will miss consensus views because of weakened sales of its display panels and memory chips. In the UK, Parliament took the Brexit process from Theresa May and will now try to decide how to exit the EU. Bloomberg noted lawmakers defeated the government and will schedule votes on a series of strategies, potentially including another referendum or staying in the customs union. On the data front, later this morning data is expected to show that U.S. housing starts in February probably dropped 1.6% to an annualized 1.21 million, while building permits are seen declining 0.9%.

 

U.S. stocks finished lower yesterday, extending Friday losses after recent data showed weakness on the global economic front, triggering heavy losses as investors remain concerned over the inversion of the yield curve (and raising recession fears). Markets showed little reaction to the end of Special Counsel Robert Mueller’s probe into Russian meddling in the 2016 presidential election. Losses were led by technology, healthcare and financial stocks while defensive, interest rate sensitive sectors rallied.

 

In Asian markets, The Nikkei Index jumped 451 points or 2.15% to settle at 21,428, the Shanghai Index dropped sharply, falling -45 points or 1.5% to end the session back below the 3,000 level. the Hang Seng Index gained 43 points to 28,566. In Europe, the German DAX is up a few points at 11,350, while the FTSE 100 is up around 20 points at 7,200.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -2.35 points, or 0.08%, to 2,798.36

·     The Dow Jones Industrial Average rose 14.51 points, or 0.06%, to 25,516.83

·     The Nasdaq Composite dipped -5.13 points, or 0.07%, to 7,637.54

·     The Russell 2000 Index advanced 6.94 points, or 0.46% to 1,512.86

 

Events Calendar for Today

·     6:30 AM EST      Fed’s Evans takes part in moderated Q&A in Hong Kong

·     7:45 AM EST      ICSC Weekly Retail Sales

·     8:00 AM EST      Fed’s Harker speaks in Frankfurt on Economic Outlook

·     8:30 AM EST      Housing Starts MoM for February…est. (-1.6%) to 1.12M

·     8:30 AM EST      Building Permits MoM for February…est. (-0.9%) to 1.305M

·     8:55 AM EST      Johnson/Redbook Weekly Sales

·     9:00 AM EST      FHFA Housing Price Index MoM for January…est. 0.4%

·     9:00 AM EST      S&P CoreLogic CS 20-Citi Index for January…est. 0.3%

·     10:00 AM EST    Richmond Fed Manufacturing for March…est. 10

·     10:00 AM EST    Consumer Confidence for March…est. 132.5

·     4:30 PM EST       API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: CCL, CONN, FAT, FDS, MKC, NEOG, OLLI, SCVL

·     Earnings After the Close: KBH, PFMT

 

Other Key Events:

·     Academy of Managed Care & Specialty Pharma, 3/25-3/29 in San Diego, CA

·     Adobe Summit – The Digital Experience Conference, 3/25-3/28, in Las Vegas

·     Scotia 47th Annual Energy Conference, 3/25-3/26 in New Orleans

 

 

Macro

Up/Down

Last

WTI Crude

0.79

59.61

Brent

0.64

67.85

Gold

-8.70

1,320.30

EUR/USD

0.0007

1.1319

JPY/USD

0.39

110.36

10-Year Note

+0.042

2.442%

 

 

World News

·     In a vote late Monday, the House of Commons split 329 to 302 to schedule votes on a series of alternative strategies, potentially including a second referendum, keeping the U.K. in the bloc’s customs union, leaving without a deal and even canceling Brexit altogether. Bloomberg

·     German consumer sentiment is set to face the first setback in April after the indicator’s positive start to 2019, as GfK’s forward-looking confidence index is expected to come in at 10.4 points in April after a downwardly revised 10.7 points in March (the first reading for March was 10.8)

·     Fed’s Rosengren warned that U.S. Q1 growth is likely to be weak and the next three quarters are likely to be much closer to 2.0-2.5%. Rosengren warned that China and Europe are still risks to that downgraded growth forecast

·     Japanese Finance Minister Taro Aso said on Tuesday he did not mean to suggest that the central bank could ditch its 2 percent price target when he made a comment in parliament this month that Japan could be flexible in achieving the long-elusive goal.

·     The number of shares repurchased by S&P 500 companies in the last three months of 2018 hit a record, marking the fourth consecutive quarterly all-time high and the longest such streak since S&P Dow Jones Indices began tracking repurchases two decades ago. A preliminary reading of buybacks in the fourth quarter of 2018 shows that $222.98 billion worth of shares were bought back over the three-month period – Marketwatch.com

 

Sector News Breakdown

Consumer

·     Bed Bath & Beyond Inc.’s (BBBY) is being targeted by three activist funds — Legion Partners Asset Management LLC, Macellum Advisors GP LLC and Ancora Advisors LLC — which together control a roughly 5% stake and are preparing to launch a proxy fight to replace its entire 12-person board, according to people familiar with the matter https://on.mktw.net/2FruRjU

·     Beacon Roofing (BECN) guides Q2 EPS loss (55c)-(45c) vs. est. loss (25c) saying the quarter is being impacted by unfavorable weather conditions; sees FY19 EPS at lower end of $2.90-$3.50 vs. est. $3.13

·     Conn’s (CONN) Q4 non-GAAP EPS 96c/$432.98M vs. est. 76c/$438.12M; reports same store sales of -1.4%, an improvement of 660 basis points from the Q4 of FY18, despite lapping the benefit Hurricane Harvey rebuilding efforts had in the Q4 of FY18

·     McCormick (MKC) Q1 adjusted EPS $1.12/$1.23B vs. est. $1.03/$1.24B; sees year EPS $5.17-$5.27 vs. est. $5.23 and sees FY sales up 1%3%

·     McDonald’s Corp. (MCD) is buying closely held Israeli digital startup Dynamic Yield Ltd. For more than $300M, in a bid to improve in-store ordering and online marketing at the burger giant.

 

Energy, Industrials & Materials

·     Paulson & Co. is withdrawing its opposition to the terms of a merger between Newmont Mining (NEM) and Goldcorp, after Newmont promised a special dividend to its investors if the deal is approved.

 

Financials

·     IHS Markit (INFO) Q1 adjusted EPS 60c/$1.046B vs. est. 57c/$1.06B; backs FY19 adjusted EPS view $2.52-$2.57 vs. est. $2.55 and backs FY19 revenue view $4.425B-$4.5B, including total organic growth of 5%-6% including Ipreo for the 4-month stub period

·     MasterCard (MA) will invest $300M in the planned London IPO of Network International, a Dubai-based payments processor, Reuters reported

 

Healthcare

·     Allergan (AGN) says in filing that Appaloosa is attempting to undermine its CEO and “pushing for a fire sale of the company for a short-term bump in stock price.”

·     The Trump administration hardened its legal position toward the Affordable Care Act, arguing the entire law is unconstitutional. The Justice Department had previously held the view that large parts, but not all, of the law should be struck down

·     The government says 11.4 million people have signed up for coverage this year under former President Barack Obama’s health law, a 500K decline from 2018

·     MyoKardia (MYOK) files to sell $200M in common stock

·     CytomX Therapeutics, Inc. (CTMX) announced that its CFO, Debanjan Ray, will be stepping down from the Company, effective May 15, 2019, to become the Chief Executive Officer of a newly-formed private biotechnology company

·     aTyr Pharma (LIFE) Q4 EPS loss (21c) and said a of December 31, 2018, aTyr had $49.5M in cash, cash equivalents and investments and 42M shares of common stock outstanding on an if-converted basis

 

Technology, Media & Telecom

·     Samsung Electronics Co. shares slipped overseas after the company issued a premarket earnings warning, saying Q1 results will miss consensus views because of weakened sales of its display panels and memory chips.

·     Red Hat (RHT) Q4 adjusted EPS $1.16/$879M vs. est. $1.01/$883.85M; Q4 subscription revenue from Infrastructure-related offerings for the quarter was $549 million, an increase of 8% YoY, or 10% measured in constant currency. Subscription revenue from Application Development-related and other emerging technology offerings for the quarter was $225 million, an increase of 30% YoY, or 34% measured in constant currency; due to the pending transaction with IBM, Red Hat will not be hosting a conference call for its fourth quarter 2019

·     WeWork Cos. said its loss last year doubled to nearly $2 billion, revenue more than doubled to $1.82 billion, mostly from leasing office space. But heavy expansion costs led to a loss of $1.93B

·     The Pentagon is laying the groundwork to use technology from rivals Nokia (NOK) and Ericsson (ERIC) in its 5G development plans, a Pentagon official said on Monday.

·     AMSC (AMSC) announced four new D-VAR STATCOM system orders valued at over $10M. Three of the orders serve the industrial power quality sector and one of the orders serves the renewable connectivity sector

·     Lantronix, Inc. (LTRX) announced that Paul Pickle will join the company as president and CEO effective April 22.

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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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