Morning Preview: May 23, 2019

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Early Look

Thursday, May 23, 2019

Futures

Up/Down

%

Last

DJ Industrials

-231.00

0.90%

25,540

S&P 500

-26.50

0.92%

2,831

Nasdaq

-93.50

1.25%

7,337

 

 

U.S. futures are sharply lower, with global markets feeling pain overnight as the war of words between China and the U.S. intensifies. Overnight a top Chinese government researcher said that a trade war may last until 2035, predicting a cycle of “fighting and talking.” Bloomberg also noted that Goldman Sachs Group Inc., Nomura Holdings Inc. and JPMorgan Chase and Co. are among those pricing-in a greater chance of a protracted trade war. Meanwhile, the South China Morning Post reported that tensions are forcing China to rethink its entire economic relationship with the U.S. Lots of negativity weighing on stock market sentiment, as global markets are lower. In Asian markets, The Nikkei Index fell -132 points to 21,151, the Shanghai Index dropped -39 points (1.36%) to end at 2,852 and the Hang Seng Index dropped -438 points to 27,267. In Europe, the German DAX is plunging over -230 points (nearly 2%) to 11,935, while the FTSE 100 is down over -100 points to 7.225. The macro picture dominating again with technology shares among the biggest casualties amid the escalating trade war between the U.S. and China. European markets weak after an EU official said the U.S. was unlikely to start trade talks with the bloc soon while it’s preoccupied with China. Economic data overseas also taking its toll on European markets (weak German data – see below). The British pound weakened against the euro for a record 14th day as the prospect of Prime Minister Theresa May being forced from power brought yet more uncertainty over the U.K.’s Brexit strategy. Oil extended losses after tumbling 2.7% in the previous session. Defensive assets are higher with gains in gold, Treasuries and the yen. It looks like another rough day for stocks with no trade deal in sight!

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -8.09 points, or 0.28%, to 2,856.27

·     The Dow Jones Industrial Average fell -100.72 points, or 0.39%, to 25,776.61

·     The Nasdaq Composite slipped -34.88 points, or 0.45%, to 7,750.84

·     The Russell 2000 Index declined -13.62 points, or 0.88% to 1,531.63

 

Events Calendar for Today

·     8:30 AM EST      Weekly Jobless Claims…est. 215K

·     8:30 AM EST      Continuing Claims…est. 1.66M

·     9:45 AM EST      Markit US Manufacturing PMI, May-P…est. 52.7

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

·     9:45 AM EST      Bloomberg Consumer Comfort Index…prior 59.9

·     10:00 AM EST    New Home Sales for April…est. 675K

·     10:30 AM EST    Weekly EIA Natural Gas Inventory Data

·     11:00 AM EST    Kansas City Fed Manufacturing for May…est. 6

 

Earnings Calendar:

·     Earnings Before the Open: BBY, BJ, BRC, CTRN, HRL, SSI, TTC

·     Earnings After the Close: DECK, DXC, HPE, HPQ, INTU, LGF/A, ROST, SPLK

 

 

Macro

Up/Down

Last

WTI Crude

-1.05

60.37

Brent

-1.20

69.79

Gold

3.55

1,276.85

EUR/USD

-0.0014

1.1136

JPY/USD

-0.30

110.06

10-Year Note

-0.032

2.354%

 

 

World News

·     Business confidence in Germany weakened to its lowest level in more than four years this month as the German Ifo business confidence stood at 97.9 vs 99.2 in April while business confidence forecast range 98.5 to 99.7 and expectations at 95.3 vs 95.3 in April

·     Purchasing-managers’ survey data for the euro area came in softer than expected. German manufacturing continuing to be a weak spot, with the reading at 44.3 both below forecasts and a drop from April’s 44.4. Overall, PMI for the euro area remained relatively subdued, with the reading for the currency zone inching higher to 51.6 from 51.5

·     The Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 49.6 in May from a final 50.2 in the previous month.

·     The U.S. Treasury will not introduce a redesigned $20 bill picturing escaped slave and abolitionist Harriet Tubman next year as planned, Treasury Secretary Steven Mnuchin said on Wednesday.

 

Sector News Breakdown

Consumer

·     L Brands (LB) Q1 EPS 14c/$2.63B vs. est. 0c/$2.56B; Q1 comparable sales declined (-5%) at the Victoria’s Secret segment and increased 13% at Bath & Body Works; sees Q2 EPS 15c-20c vs. est. 23c; Q1 L Brands stores & direct comp 0% vs. est. (-1.2%); narrows FY19 EPS view higher to $2.30-$2.60 from $2.20-$2.60 (est. $2.39)

·     Brazilian cosmetics maker Natura agreed to buy Avon Products (AVP) in an all-stock deal that it valued at $3.7 billion https://on.mktw.net/2HyjSY3

·     Shoe Carnival (SCVL) Q1 EPS 91c/$253.8M vs. est. 84c/$258.9M; Q1 comparable store sales fell (-0.2%)decreased 0.2 percent in the first quarter of fiscal 2019; raises FY19 EPS view to $2.73-$2.83 from $2.60-$2.70 (est. $2.66) and backs FY19 revenue view $1.035B-$1.043B (est. $1.04B)

·     Hormel Foods (HRL) Q2 EPS 46c/$2.34B vs. est. 45c/$2.37B; lowers FY net sales to $9.50B-$10B from prior view $9.7B-$10.2B and lowers year EPS view to $1.71-$1.85, from prior $1.77-$1.91 (est. $1.80)

·     Philip Morris (PM) upgraded to Equal Weight from Underweight at Barclay’s and raised target to $82 from $67

·     Tesla (TSLA) shares are down for a 7th straight session

·     Veoneer (VNE) 24M share Secondary priced at $17.50

·     ePlus (PLUS) Q4 EPS $1.03/$325.4M vs. est. $1.18/$355.9M; said strong growth in adjusted gross billings and an industry-leading gross margin of 25% were the highlights of this year’s fourth quarter”

 

Energy, Industrials & Materials

·     Oil extended losses after tumbling 2.7% in the previous session

·     The United States should help Venezuela keep control over U.S. refiner Citgo by preventing its seizure by creditors seeking to collect on unpaid Venezuelan debts, opposition leader Juan Guaido said to Reuters

·     Rattler Midstream (RTLR) 38M share IPO priced at $17.50

 

Financials

·     Toronto-Dominion (TD) reports Q2 adjusted EPS C$1.75, consensus C$1.68 and reports Q2 revenue C$10.23B vs. est. C$9.61B; 2Q common equity Tier 1 ratio 12% and 2Q return on equity +16.5%

 

Healthcare

·     Medtronic (MDT) Q4 EPS $1.54/$8.18B vs. est. $1.46/$8.11B; sees 2020 organic revenue about 4% and year EPS $5.44-$5.50 vs. est. $5.44

·     Bicycle Therapeutics (BCYC) 4.333M share IPO priced at $14.00

·     Guardant Health (GH) 4.5M share Spot Secondary priced at $71.00

·     IDEAYA Biosciences (IDYA) 5M share IPO priced at $10.00

·     Thermo Fisher (TMO) boosted its 2020-2022 organic growth forecast to 5%-7% from 4%-6%. Sees margin expansion of 40-50 bps from organic growth generated.

·     Iovance Biotherapeutics (IOVA) said that the FDA granted Breakthrough Therapy designation to TIL therapy candidate LN-145 in recurrent, metastatic, or persistent cervical cancer with disease progression on or after chemotherapy.

·     Organovo Holdings, Inc. (ONVO) said recent data from larger group of animal studies provides differing results from what the company observed in earlier pilot studies; says it’s seeing evidence of shorter tissue duration as measured by human protein output and the quantity of hepatocytes

·     Community Health Systems (CYH) announced that affiliates of the company have signed definitive agreements to sell two Florida hospitals to affiliates of Adventist Health System Sunbelt Healthcare Corporation

 

Technology, Media & Telecom

·     NetApp (NTAP) Q4 adjusted EPS $1.22/$1.59B vs. est. $1.26/$1.64B; 4Q adjusted gross margin 65.2% vs. Bloomberg est. 62.8%; raises quarterly dividend by 20% to 48c per share; sees Q1 EPS 78c-86c on revs $1.315B-$1.465B well below consensus $1.05/$1.50B

·     Synopsys (SNPS) Q2 non-GAAP EPS $1.16/$836.2M vs. est. $1.09/$829.33M; sees Q3 non-GAAP EPS $1.07-$1.12 on revs $810M-$850M vs. est. $1.96/$828.69M; sees FY19 non-GAAP EPS $4.24-$4.40 on revs $3.3B-$3.35B vs. est. $4.2B/$3.33B

·     Vipshop (VIPS) Q1 adjusted EPS 18c/$3.18B vs. est. 15c/$2.97B; sees Q2 revenue growth 0%-5% YoY vs. est. $3.12B (sees 2Q revenue 20.7 billion yuan to 21.7 billion yuan vs. estimate 21.61 billion yuan)

·     Arm Holdings (ARMH) the latest to suspend business with Huawei Technologies

·     Mercury Systems (MRCY) 6M share Secondary priced at $69.00

·     Panasonic said yesterday it has instructed employees to halt transactions with Huawei and its 68 affiliates covered by the U.S. ban,” the company said in a statement

·     Sina (SINA) Q1 EPS 40c/$475.1M vs. est. 36c/$474.7M; Q1 gross margins 76% vs. Bloomberg est. 73.8%

·     Lawmakers introduced legislation Wednesday that would provide up to $700 million to help U.S. telecom carriers remove equipment purchased from Huawei Technologies Co. and other Chinese companies deemed a security risk. The bill establishes a policy that U.S. next-generation 5G wireless networks shouldn’t include equipment or services provided by Huawei, ZTE Corp

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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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