Morning Preview: April 01, 2019

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Early Look

Monday, April 1, 2019

Futures

Up/Down

%

Last

DJ Industrials

177.00

0.68%

26,110

S&P 500

17.50

0.63%

2,855

Nasdaq

67.50

0.91%

7,467

 

 

Global stocks are surging, getting a boost after better-than-expected China manufacturing data calmed concerns about slowing global growth, as stocks look to build on their strong quarterly returns. In Asian markets, The Nikkei Index jumped 303 points to21,509, the Shanghai Index surged 79 points (2.58%) to close at 3,170 and the Hang Seng Index gained 510 points to end at 29,562. In Europe, the German DAX is higher by 130 points to 11,660, while the FTSE 100 is up around 50 points at 7,330. The spike came after the Caixin China manufacturing purchasing managers index rose to 50.8 in March from 49.9 in February, rebounding to expansionary territory for the first time in four months. The data followed better private China PMI data earlier, which touched a 6-month high prior. Meanwhile, this week, U.S.-China trade talks resume when Vice Premier Liu He leads a delegation to Washington, days after negotiations in Beijing; while Britain’s Parliament tries again to adopt a Brexit withdrawal deal; and U.S. banks submit capital plans to the Fed ahead of stress tests. Turkey’s lira sank and overnight swap rates climbed after President Erdogan lost control of Ankara, cities on the Mediterranean coast and possibly even Istanbul in local elections according to Bloomberg.

 

U.S. stocks posted strong returns on Friday, ending the month and quarter with solid gains as optimism over U.S.-China trade talks helped outweigh fears over a slowing global economy. For the month, the S&P was up 1.8%, the Dow was up less than 0.1%, and the Nasdaq was up 2.6%. For the quarter, the S&P was up 14%, the Dow was up 12.4%, the Nasdaq was up 17.4%. The S&P 500 index recorded its strongest quarterly performance since the second quarter of 2009. Over the weekend, President Trump tweeted “had the Fed not mistakenly raised interest rates, especially since there is very little inflation, and had they not done the ridiculously timed quantitative tightening, the 3.0% GDP, & Stock Market, would have both been much higher & World Markets would be in a better place!”

Market Closing Prices Yesterday

·     The S&P 500 Index gained 18.96 points, or 0.67%, to 2,834.40

·     The Dow Jones Industrial Average rose 211.22 points, or 0.82%, to 25,928.68

·     The Nasdaq Composite jumped 60.16 points, or 0.78%, to 7,729.32

·     The Russell 2000 Index advanced 4.63 points, or 0.30% to 1,539.74

 

Events Calendar for Today

·     8:30 AM EST      Advance Retail Sales MoM for February…est. 0.3%

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

·     9:45 AM EST      Markit US Manufacturing PMI, Mar-F…est. 52.5

·     10:00 AM EST    ISM Manufacturing for March…est. 54.5

·     10:00 AM EST    Construction Spending MoM for February…est. (-0.2%)

·     10:00 AM EST    Business Inventories for January…est. 0.5%

 

Earnings Calendar:

·     Earnings Before the Open: CALM, DGLY, NVGS

·     Earnings After the Close: KODK, SGLB

 

 

Macro

Up/Down

Last

WTI Crude

0.40

60.54

Brent

0.80

68.38

Gold

-3.40

1,295.10

EUR/USD

0.0019

1.1237

JPY/USD

0.13

110.99

10-Year Note

+0.036

2.442%

 

 

World News

·     The Caixin China manufacturing purchasing managers index rose to 50.8 in March from 49.9 in February, rebounding to expansionary territory for the first time in four months

·     China’s manufacturing purchasing managers index for March rose to 50.5 from 49.2 last month, the biggest increase since 2012 and exceeding all estimates by economists. Both new orders and new export orders rose to the highest levels in six months.

·     Treasury Secretary Steven Mnuchin said in a tweet Friday that discussions between U.S. and Chinese officials had proven “constructive,” with China’s Vice Premier Liu He scheduled to make a visit to Washington next week.

·     Minneapolis Fed president Kashkari tells the Wall Street Journal he believes central bank is in the right place as officials assess health of expansion. Neel Kashkari said it isn’t the time for the central bank to cut borrowing costs.

 

Sector News Breakdown

Consumer

·     Kellogg Co. (K) is near a deal to sell its Keebler, Famous Amos and fruit snacks units to Ferrero in a deal worth between $1 billion and $1.5 billion, CNBC reported. Italy-based Ferrero owns Nutella and bought Nestle’s U.S. candy business in January 2018 https://on.mktw.net/2FMyjqp

·     Watch U.S. auto shares and ADRs after China said it will continue with suspension of retaliatory tariffs on U.S. autos and auto parts from April 1, according to a statement on Ministry of Finance’s website

·     Cal-Maine (CALM) Q3 EPS 82c/$384M vs. est. 49c/$383.8M

 

Energy, Industrials & Materials

·     A federal judge in Alaska struck down an executive order from President Donald Trump that had opened Arctic waters and deep canyon shelfs in the Atlantic to oil and gas activity. The March 29 decision by U.S. District Judge Sharon Gleason restores Obama-era protections for the Chuckchi and Beaufort seas in the Arctic Ocean, as well as waters in the Atlantic – Bloomberg

·     Norfolk Southern (NSC) was upgraded to buy at Bank America

·     Sempra Energy (SRE) announced that its subsidiary Energia Costa Azul, or ECA, LNG received two authorizations from the U.S. Department of Energy to export U.S. produced natural gas to Mexico

·     Investigators probing the Ethiopian 737 Max crash decided the same system malfunctioned as in the Lion Air disaster five months ago – Bloomberg

 

Financials

·     Willis Towers Watson (WLTW) has acquired TRANZACT for $1.2B, comprises of $1.1B of cash consideration and $100M of cash or stock consideration payable at close

·     Cable One (CABO) to acquire Fidelity’s data, video and voice business and certain related assets for $525.9M in cash, funded through a combination of cash on hand, revolving credit facility capacity and the proceeds of new indebtedness

·     Green Dot (GDOT) upgraded to Outperform from Market Perform at Keefe Bruyette

 

Healthcare

·     Barron’s said the animal-health market growth may be limited, as a surge in pet sales is leading growth overall in the $36B market, with livestock accounting for two-thirds of the market, while pets make up the remainder. Of the four large animal-health entities – Zoetis (ZTS), Elanco Animal Health (ELAN), Merck (MRK) and Bayer (BAYRY), only Zoetis and Elanco are pure plays

·     The FDA approves AngioDynamics’ (ANGO) investigational device exemption (IDE) application for NanoKnife Irreversible Electroporation “Direct IRE Cancer Treatment” clinical study ((DIRECT)).

·     Novartis AG (NVS) said Monday that it has agreed to buy IFM Tre, a developer of anti-inflammatory medicines, from IFM Therapeutics for an undisclosed amount.

·     Protalix (PLX) files $100M mixed securities shelf

 

 

Technology, Media & Telecom

·     Facebook (FB) Chief Executive Mark Zuckerberg called on Saturday for regulators to play a “more active role” in establishing rules that govern the internet, as the world’s largest social media network struggles to defuse criticism.

·     Telecom mentioned in Barron’s this weekend, saying the industry typically holds up in recessions, making it a popular haven for investors navigating a bumpy economy. As the landline and cable-TV business unwinds, America’s top phone rivals, AT&T (T) and Verizon (VZ) aren’t side by side like they once were. Investors prefer Verizon right now, with its stock returning 29% over the past year including dividends, versus AT&T’s slide of 12%. But they shouldn’t overlook AT&T’s generous dividend yield of 6.6% versus Verizon’s 4.1%,

·     Amphenol (APH), which makes connectors for electronics, has been a sleeper success for ages, according to Barron’s, noting the stock has returned an average of 16% annually for the past five years, well above the S&P 500 index. Morgan Stanley sees shares rising to $110 at the least, or to $150 under a best-case scenario, from the current $94.44

·     Amazon (AMZN): The EU has gathered “a lot of data” in its preliminary investigation of how Amazon uses customer data and will make a decision on next steps within a “reasonable” time frame, EU competition chief Margrethe Vestager said

·     Discovery Inc. (DISCA) has expanded its push into subscription streaming TV with a new natural-history-themed video service, part of the media company’s bet that consumers will pay a few dollars a month for the nonfiction programming they love https://on.wsj.com/2OAn33t

·     Barron’s noted Apple’s (AAPL) recent service event unveiled an array of half-step, incremental services that disappointed even ardent Apple fans. Perhaps the biggest letdown was the small scale and vague details for the Apple TV+ video subscription offering, but with $130B in net cash on its balance sheet and annual earnings of $50B-plus, Apple has vast financial resources to compete

·     ComScore (SCOR) announced the appointment of Irwin Gotlieb, Joanne Bradford and Kathi Love to its board. Dale Fuller, currently a director, was named interim CEO following the resignation of Bryan Wiener, who is also stepping down from the board effective March 31.

·     Jeff Bezos’ investigator claims Saudi Arabia is behind leaks of the Amazon (AMZN) chief executive’s steamy sexts to the National Enquirer

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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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