Morning Preview: March 29, 2019

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Early Look

Friday, March 29, 2019





DJ Industrials




S&P 500










U.S. stocks are steady, holding yesterday’s gains as markets turn their attention to trade talk hopes as U.S. negotiators, led by Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, attended a working dinner Thursday night with Chinese Vice Premier Liu He, who is expected to travel to Washington next week. News about the talks was read as largely positive by the markets. However yesterday, markets were leery after White House economic adviser Larry Kudlow said the U.S. administration was prepared to continue trade negotiations with China for weeks or even months (longer than markets want). In corporate news, Lyft priced its 32.5M shares IPO at $72 per share, the high end of its range ahead of trading today, one of the highly anticipated IPOs of the year. Also, Wells Fargo CEO Sloan steps down from the bank and in the drug space, AZN announces a $6B deal. In Fed news, St. Louis President Bullard said at a speech last night that the slowdown seen in the most recent economic data is likely to be short-lived, and there is no need to talk about cutting interest rates. The S&P 500 index, along with other main U.S. averages are on track to close out their best quarter in years.


In Asian markets, The Nikkei Index gained 172 points to settle at 21,205, the Shanghai Index surged 95 points (3.2%) to close the quarter at 3,090 and the Hang Seng Index rose 276 points to finish at 29,051. In Europe, the German DAX is up about 40 points to 11,470, while the FTSE 100 rises around 30 points at 7,270. Yesterday, stocks closed higher as the rally in Treasuries eased and investors shrugged off comments from White House economic adviser Larry Kudlow about a trade talk agreement taking longer than expected. Investors also overlooked a rough round of economic data s GDP was revised lower for the current quarter and pending home sales declined.


Market Closing Prices Yesterday

·     The S&P 500 Index climbed 10.07 points, or 0.36%, to 2,815.44

·     The Dow Jones Industrial Average rose 91.87 points, or 0.36%, to 25,717.46

·     The Nasdaq Composite gained 25.79 points, or 0.34%, to 7,669.17

·     The Russell 2000 Index advanced 12.87 points, or 0.85% to 1,535.10


Events Calendar for Today

·     8:30 AM EST      Personal Income for February…est. 0.3%

·     8:30 AM EST      Personal Spending for January…est. 0.3%

·     8:30 AM EST      PCE Deflator MoM for January…est.0.0%

·     8:30 AM EST      PCE Core MoM for January…est. 0.2%

·     8:30 AM EST      PCE Core YoY for January…est. 1.9%

·     9:45 AM EST      Chicago PMI for March…est. 61.0

·     10:00 AM EST    New Home Sales MoM for February…est. +2.1% to 620K

·     10:00 AM EST    University of Michigan Confidence, March-F…est. 97.8

·     12:45 PM EST    Fed Quarles speaks in New York

·     1:00 PM EST       Baker Hughes Weekly Rig Count






WTI Crude















10-Year Note





World News

·     Japan retail sales fell slightly in February from a month earlier, preliminary data showed. But industrial production rose 1.4%, as compared to January’s 3.4% decline. The unemployment rate beat market expectations, falling to 2.3% in February from 2.5% in the previous month.

·     An IRS reform bill introduced in both House, Senate: The Taxpayer First Act of 2019 would create an independent appeals process; ensure taxpayers have the access to the same information as the IRS during a dispute; require the IRS to provide taxpayers notice of an audit before contacting friends, neighbors and clients; and provide for easier electronic submission of tax return forms.


Sector News Breakdown


·     Lyft Inc. (LYFT) priced its 32.5M share initial public offering at $72 a share, the top of the recently increased price range, valuing the company at about $24 billion.

·     RH (RH) shares fell -14%; Q4 adjusted EPS $3.00/$670.9M vs. est. $2.85/$686.6M; lowers year rev view to $2.58bB-$2.635B, representing growth of 3% to 5% (6 point reduction at the midpoint from our prior preliminary guidance) due to the continued weakness in our core business post the fourth quarter market volatility, the negative trends in the high end housing market; sees FY19 EPS $8.41-$9.09 vs. est. $10.13; expecting adjusted operating margins in the range of 12.7% to 13.3% slightly lower than our prior guidance of 13.0% to 14.0%

·     Oxford Industries (OXM) Q4 EPS $1.08/$298.5M vs. est. $1.07/$303M; sees FY adjusted EPS $4.45-$4.65 (est. $4.79) and sales $1.14B-$1.16B (est. $1.16B; guided Q1 EPS $1.15-$1.25 on revs $270M-$280M (est. $1.35/$284.3M); Q4 gross margin 55.1% vs. estimate 57.3%; 4Q Lilly Pulitzer comparable sales +3%, and Tommy Baham comparable sales +2%; raises dividend

·     Revlon (REV) said that it identified a material weakness in its internal control over financial reporting primarily related to the implementation of the company’s new ERP system



·     Wells Fargo & Company (WFC) announced today that CEO and President Timothy J. Sloan has informed the Company’s Board of Directors of his decision to retire from the Company, effective June 30, 2019, and to step down as CEO, president, and Board member effective immediately. The Board has elected C. Allen Parker, who served as the Company’s General Counsel, as interim CEO and President

·     Morgan Stanley President (MS) Colm Kelleher, who was once seen as a potential successor to Chief Executive Officer James Gorman, plans to depart at the end of June

·     BGC Partners (BGCP) sees Q1 adjusted EPS around midpoint of previous range; had forecast $515M-$555M in revs



·     AstraZeneca (AZN) to pay Daiichi Sankyo up to $6.9B, including $1.35B upfront payment; both agree to jointly develop and commercialize cancer treatment trastuzumab deruxtecan

·     Achaogen (AKAO) Q4 EPS loss ($1.01)/$2.03M vs. est. loss (75c)/$2.85M; 4Q cash and cash equivalents $31.0 M and Q4 restructuring expenses $15.6M

·     NovaBay (NBY) Q4 EPS loss (7c)/$3.63M vs. est. loss (8c)/$3.75M; reported cash and cash equivalents of $3.2M as of both December 31, 2018

·     Blueprint Medicines (BPMC) 4.05M share Secondary priced at $74.00

·     Dicerna Pharmaceuticals (DRNA) said the updated data from the ongoing Phyox1 Phase 1 trial evaluating DCR-PHXC in primary hyperoxaluria types 1 and 2 continues to demonstrate the compound’s potential ability to improve clinical outcome

·     Magellan Health (MGLN) announced that it has entered into an agreement with Starboard Value, which owns approximately 9.8% of the company’s outstanding common stock. Under the terms of the agreement, four new independent directors will join its board


Industrials & Materials

·     DowDuPont (DWDP) lowers Q1 revenue view to down high-single digits from previous view of down mid-single digits citing near-term trends and discrete headwinds in some of its key value chains in the Agriculture and Materials Science divisions

·     Mosaic (MOS) upgraded to Neutral from Underperform at Credit Suisse

·     Albemarle (ALB) backs FY19 adjusted EPS view $6.10-$6.50 vs. est. $6.24 and said it expects Q1 adjusted EPS $1.20-$1.25 (est. $1.33); said its Lithium segment expects a shift of approximately 3,000-3,500 metric tons on an LCE basis in volume from Q1 to subsequent quarters in 2019 and the volume shift will impact Q1 by approximately $40M-$45M in revenue and $15M-$18M in EBITDA

·     Rio Tinto PLC (RIO) said it has issued force majeure notices to some buyers of its iron ore after a tropical cyclone lashed the coast of northwest Australia, disrupting exports of the steelmaking commodity.


Technology, Media & Telecom

·     Progress Software (PRGS) Q1 EPS 50c/$89.5M vs. est. 47c/$87.64M; Q1 operating margin 34% vs. 38% last year; sees Q2 EPS 55c-57c on revs $96M-$99M vs. est. 57c/$93.22M; boosts 2019 guidance to reflect Ipswitch purchase (revs $422M-$428M vs. est. $383.2M)

·     SAIC (SAIC) Q4 adjusted EPS $1.17/$1.19B vs. est. 79c/$1.17B; raises dividend by 6c to 37c per share, authorizes increase to buyback plan; 4Q free cash flow $18 million, 4Q net new bookings $900 million and 4Q book to bill ratio 0.8%

·     Smart Global (SGH) shares fell -17%; Q2 EPS 77c/$304.06M vs. est. 75c/$317.31M; sees 3Q adjusted EPS 34c-38c on sales $260M-$270M vs. est. 90c/$331.5M; sees 3Q adjusted gross margin 17% to 19%

·     VeriSign (VRSN) announced that Q4 closed with approximately 348.7M domain name registrations across all top-level domains, an increase of approximately 6.3M domain name registrations, or 1.8% MoM; domain name registrations have grown by approximately 16.3M, or 4.9%, YoY

·     Sony (SNE) could cut as much as half of its 4,000 staff at its smartphone operations and also looks to halve procurement and fixed costs in the business, Nikkei reports

·     Verizon (VZ) said in a statement that “customers are about to get new and improved tools to help identify and block robocalls. A free version of the Call Filter service, which offers spam alerts and more, is starting to be rolled out today to Verizon Wireless customers


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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