Morning Preview: May 22, 2019

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Early Look

Wednesday, May 22, 2019

Futures

Up/Down

%

Last

DJ Industrials

-8.00

0.03%

25,867

S&P 500

-2.25

0.08%

2,863

Nasdaq

-14.75

0.20%

7,449

 

 

U.S. equity futures are edging slightly lower after a handful of earnings in the retail sector (JWN, LOW, URBN) disappoint investors, following the weak results from KSS yesterday that weighed on discretionary stocks, though shares of TGT rise after beating on the top/bottom line and better comps.

Trade tensions with China continue with reports the U.S. is weighing whether to blacklist more Chinese companies. The White House is considering adding five Chinese companies involved in the manufacture of surveillance equipment to the blacklist that bars them from using U.S. components or software. Shares of Hangzhou Hikvision Digital Technology Co. and Zhejiang Dahua Technology Co. plunged in Shenzhen after reports of the potential move were published according to Bloomberg. In Asian markets, The Nikkei Index gained 10 points to 21,283, the Shanghai Index fell -14 points to 2,891 and the Hang Seng Index rose 48 points to 27,705. In Europe, the German DAX is up nearly 50 points to trade just below 12,200, while the FTSE 100 is up over 30 points to 7,365. The pound dropped to the lowest level in over four months as Prime Minister Theresa May came under renewed pressure. Later today, minutes of the FOMC’s April 30-May 1 gathering will be released at 2 p.m. in Washington. Stocks ended higher on Tuesday as technology, energy and materials paced the near 1% gain in the S&P 500 index, while defensive consumer staples and discretionary lagged. Smallcaps and tech were the standouts however after U.S. officials said they would offer some temporary exceptions to an export blacklist against Huawei Technologies Co., which will provide some suppliers and customers of China’s telecom giant a 90-day reprieve from tough trade penalties.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 24.13 points, or 0.85%, to 2,864.36

·     The Dow Jones Industrial Average rose 197.43 points, or 0.77%, to 25,877.33

·     The Nasdaq Composite spiked 83.35 points, or 1.08%, to 7,785.72

·     The Russell 2000 Index advanced 20.28 points, or 1.33% to 1,545.25

 

Events Calendar for Today

·     7:00 AM EST      MBA Mortgage Applications Data

·     10:30 AM EST    Weekly DOE Inventory Data

·     2:00 PM EST       FOMC Meeting Minutes

 

Earnings Calendar:

·     Earnings Before the Open: AAP, ADI, ECC, LOW, PLAB, SMRT, TGT, VFC

·     Earnings After the Close: LB, MOD, NTAP, SCVL, SNPS, UVV

 

Other Key Events:

·     AGA Financial Forum 2019 Conference, 5/21-5/23, in Fort Lauderdale, FL

·     B Riley 20th Annual Investor Conference, 5/22-5/23, in CA

·     RECon 2019 – Int’l Council of Shopping Centers, 5/19-5/22, in Las Vegas

·     UBS Global Healthcare Conference, 5/20-5/22, in New York

·     UBS Global Oil and Gas conference, 5/20-5/22, in New York

·     RBC Capital Healthcare Conference, 5/21-5/22, in New York

·     Wolfe 12th Annual Transportation Conference, 5/21-5/22, in New York

 

 

Macro

Up/Down

Last

WTI Crude

-0.50

62.63

Brent

-0.28

71.90

Gold

-0.55

1,274.10

EUR/USD

0.0008

1.11169

JPY/USD

-0.03

110.47

10-Year Note

+0.001

2.423%

 

 

World News

·     President Donald Trump told Democratic leaders Tuesday that he believes Congress should first pass a new trade deal with Canada and Mexico before taking up a bill to boost the nation’s infrastructure. The president made his request in a letter to House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer before a White House meeting Wednesday.

·     Japanese exports declined for the fifth straight month in April as the buildup in trade tensions between its two biggest trading partners with exports falling -2.4% from the same month a year ago, and more than the median 1.8% decline forecast

·     Investor Intelligence poll equity newsletter writer classified as bullish slipped to 49.5% from 51.4% last week while bearish sentiment edged lower to 17.2% from 17.5% and those expecting a correction rises a third week to 33.3%, highest since January 30, from 31.1% last week

 

Sector News Breakdown

Consumer

·     Lowe’s (LOW) shares fall -7%; Q1 EPS $1.31/$17.7B vs. est. $1.34/$17.7B; Q1 comp sales up 3.5% vs. est. 3.2%; cuts FY19 EPS view to $5.45-$5.65 from $6.00-$6.10 (below consensus $6.05) while backs FY19 revenue growth guidance of approximately 2% and back comp sales view of up approximately 3%

·     Target Corp. (TGT) shares rise 6%; Q1 EPS $1.53/$17.6B vs. est. $1.43/$17.5B; sees Q2 EPS $1.52-$1.72 vs. est. $1.60; still sees FY EPS $5.75-$6.05 vs. est. $5.86; Q1 comp sales rose 4.8% vs. est. 4.3%

·     Advance Auto Parts (AAP) Q1 EPS $2.46/$3.0B vs. est. $2.37/$2.95B; Q1 comp sales rose 2.7% vs. est. 2.9%; backs FY19 revenue view $9.65B-$9.8B (est. $9.78B) and backs FY19 comp sales growth of 1%-2.5%

·     MGM Resorts (MGM) has ended talks to buy Wynn’s (WYNN) nearly-completed casino near Boston, saying it plans to focus on its existing Springfield, Massachusetts property – Bloomberg

·     Nordstrom (JWN) shares plunge -7%; Q1 EPS 23c/$3.35B vs. est. 43c/$3.57B; said top-line results were impacted by three areas – loyalty, digital marketing and merchandise – which contributed to declines across its Full-Price and Off-Price businesses, in both stores and online; Q1 comp sales fell (3.5%) vs. est. (-0.1%; cuts FY19 EPS view to $3.25-$3.65 from $3.65-$3.90 (below est. $3.74) and cuts FY19 net sales view to down 2% to flat from up 1%-2%

·     Toll Brothers (TOL) Q2 EPS 87c/$1.72B vs. est. 75c/$1.54B; Q2 home building deliveries 1.9K, up 1%, net signed contract value was $2.0B, down 16%; contract units 2,424, down 9%; backlog value $5.66B, down 11%

·     Urban Outfitters (URBN) shares fell -8%; Q1 EPS 31c/$864.41M vs. est. 25c/$855.65M; Q1 comparable retail segment net sales increased 1% (vs. est. -1.3%), driven by double-digit growth in the digital channel, partially offset by negative retail store sales; Urban Outfitters comparable sales 0% vs. est. (-1.8%) and Q1 Free People comparable sales +2% vs. est. +1.2%. Urban Outfitters Inc. reported the launch of Nuuly, a women’s apparel, subscription rental service that costs $88 per-month, 6-item box per month

·     America’s Car-Mart (CRMT) Q4 EPS $2.07/$177M vs. est. $1.82/$187.04M; reports Q4 net Charge-offs as a percentage of average finance receivables of 6.4%, down from 7.5% for prior year quarter

·     Skyline Champion (SKY) Q4 adjusted EPS 26c/$327.7M vs. est. 20c/$344.22M

 

Energy, Industrials & Materials

·     The American Petroleum Institute (API) reported that U.S. crude supplies rose by 2.4 million barrels for the week ended May 17, showed a stockpile increase of 350,000 barrels in gasoline, but distillate supplies fell by 237,000 million barrels

·     Sasol Ltd. (SSL) said the cost of its giant Lake Charles chemicals project in Louisiana will balloon to as much as $12.9 billion, or about 50% more than initially planned.

·     Saudi Aramco has announced a deal with Sempra Energy (SRE) for a 25% stake in the first phase of its Port Arthur liquefied natural gas export project in Texas

·     Aircastle (AYR) raises repurchase program up to $100M from $76M

 

Healthcare

·     Tocagen (TOCA) shares fell -44% after saying its Phase III study of Toca 511 & Toca FC in patients with recurrent high-grade glioma will continue without any modification after a planned interim analysis of data conducted by an Independent Data Monitoring Committee (IDMC)

·     Mylan N.V. (MYL) said that its U.S. based Mylan Pharmaceuticals business is expanding its consumer-level voluntary nationwide recall to include all lots of Valsartan-containing products within expiry

·     Insmed (INSM) 9.62M share Secondary priced at $26.00

·     NeoGenomics (NEO) 7M share Secondary priced at $21.25

 

Technology, Media & Telecom

·     Qualcomm Inc. (QCOM) unlawfully suppressed competition in the market for cellphone chips and used its dominant position to exact excessive licensing fees, a federal judge ruled in a decision that could challenge the company’s business model and shake up the smartphone industry.

·     Ooma (OOMA) Q4 EPS loss (4c)/$34M vs. est. loss (5c)/$33.58M; sees Q2 EPS loss (7c)-(5c) on revs $35.5M-$36.0M vs. est. loss (4c)/$34.6M; narrows FY20 EPS view to (24c)-(19c) from (24c)-(14c) while raises FY20 revenue view to $145M-$148M from $140M-$143M (est. $141.69M)

·     Pure Storage (PSTG) shares fell -17%; Q1 adjusted EPS loss (11c)/$326.7M vs. est. loss (7c)/$333.16M; sees Q2 revenue $389M-$401M vs. est. $397.1M and sees Q2 Non-GAAP gross margin in the range of 65.0%-68.0%, or 66.5% at the midpoint; sees FY20 revenue $1.7B-$1.77B vs. est. $1.77B

·     Photronics (PLAB) Q2 EPS 13c/$131.6M vs. est. 6c/$130.05M; sees Q3 5c-14c on revs $132M-$142M vs. est. 10c/$139.6M

·     Carvana (CVNA) 4.2M share Secondary priced at $65.00

·     Ceridian (CDAY) 8M share Spot Secondary priced at $50.50

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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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