Morning Preview: May 28, 2019

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Early Look

Tuesday, May 28, 2019

Futures

Up/Down

%

Last

DJ Industrials

-31.00

0.12%

25,590

S&P 500

-6.50

0.22%

2,825

Nasdaq

-11.50

0.16%

7,303

 

 

U.S. stocks are pointing to a lower open Monday, trying to rebound after stocks slumped last week, with the Dow Jones Industrial Average extending its losing streak for a fifth straight week heading into the Memorial Day weekend, though U.S. stocks gained on Friday on renewed signs of progress in trade negotiations between the U.S. and China. Crude oil rebounded from its biggest one-day loss of the year but still ended the week sharply lower. Treasury prices are once again on the rise, with yields moving back to their lowest levels in about 17-months (10-year at 2.28%) as markets deal with the escalating trade tensions between the U.S. and China. President Trump said this weekend the U.S. isn’t ready to make a trade deal with China, while on a state visit to Japan. “I think they probably wish they made the deal that they had on the table before they tried to renegotiate it,” Trump said Monday alongside Japanese leader Shinzo Abe. “They would like to make a deal. We’re not ready to make a deal.” Trump said American tariffs on Chinese goods “could go up very, very substantially, very easily.” In Asian markets, The Nikkei Index gained 77 points to settle at 21,260, the Shanghai Index gained 17 points to settle at 2,909 and the Hang Seng Index rose 102 points to settle at 27,390. In Europe, the German DAX is down roughly -50 points to hold a little above the 12,000 mark. while the FTSE 100 is little changed at 7,720. European stocks, bond yields and the euro fell on Tuesday as concern about Italy’s budget overshadowed talks of a Fiat-Chrysler and Renault merger. Commodity prices are higher, with grains extending their recent gains as ongoing flooding in the Midwest has disrupted planting, sending corn and soybean prices higher. In other commodity prices iron ore holds above $100 a ton and WTI crude rebounds after last week losses.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 3.82 points, or 0.14%, to 2,826.06

·     The Dow Jones Industrial Average rose 95.22 points, or 0.37%, to 25,585.69

·     The Nasdaq Composite climbed 8.72 points, or 0.11%, to 7,637.01

·     The Russell 2000 Index advanced 12.73 points, or 0.85% to 1,514.11

 

Events Calendar for Today

·     7:45 AM EST      ICSC Weekly Retail Sales

·     8:55 AM EST      Johnson/Redbook Weekly Sales

·     9:00 AM EST      FHFA House Price Index MoM for March

·     9:00 AM EST      S&P CoreLogic’s Case Shiller for March

·     10:00 AM EST    Consumer Confidence for May

·     10:30 AM EST    Dallas Fed Manufacturing for May

 

Earnings Calendar:

·     Earnings Before the Open: AMWD, BAH, MOMO, PLAN

·     Earnings After the Close: HEI, RAMP, WDAY

 

Other Key Events:

·     Craig Hallum 16th Annual Institutional Investor Conference, 5/28-5/29 in Minnesota

·     Deutsche Bank 9th Annual Global Financial Services Conference, 5/28-5/29, in NY

·     KeyBanc Industrial & Materials Conference, 5/28-5/30, in Boston

 

Macro

Up/Down

Last

WTI Crude

0.43

59.06

Brent

0.13

70.24

Gold

-5.30

1,283.65

EUR/USD

-0.0010

1.1184

JPY/USD

-0.20

109.31

10-Year Note

-0.046

2.28%

 

 

World News

·     President Donald Trump said Monday that he is not “personally bothered” by recent short-range missile tests that North Korea conducted this month

·     Germany’s GfK’s forward-looking consumer sentiment index is set to fall to 10.1 points in June from a downwardly revised May figure of 10.2 points, it said

·     On Thursday, the Senate passed a bill 97 votes to 1 to authenticate and block robocalls, and to introduce penalties of $10,000 for companies who unleash a flood of automatic robocalls to millions of unsuspecting consumers. The act is called the Telephone Robocall Abuse Criminal Enforcement and Deterrence (TRACED)

 

Sector News Breakdown

Consumer

·     Fiat Chrysler Automobiles NV (FCAU) has proposed a merger with French rival Renault SA, which would create the third-largest auto maker by production. Fiat Chrysler said the combined business would be 50% owned by its shareholders and 50% by Renault shareholders with a “balanced governance structure.” https://on.mktw.net/2wm1rzh

·     Uber (UBER) announced it will report quarterly earnings on Thursday, its first as a publicly traded company and disclosed ahead of the IPO that it expected to lose at least $1 billion in the first quarter, with net revenue of $3.04 billion to $3.10 billion. In the year-ago quarter, Uber reported massive earnings of $3.75 billion on revenue of $2.58 billion

·     MGM Resorts (MGM) mentioned positively in Barron’s saying though the stock has languished for year, it looks like an attractive gambling play, given low investor expectations, activist involvement, and a management team under pressure to deliver on ambitious financial goals

·     Target (TGT) noted in Barron’s saying earnings season has been tough on retailers of all stripes and department stores have been hit particularly hard with Kohl’s (KSS), Dillard’s (DDS), J.C. Penney (JCP), Nordstrom (JWN), and Macy’s (M) all under pressure after reporting, but big retailers like Target (TGT) are showing they can succeed in a tough environment

·     With the jeans business spun off to operate on its own, executives at VF Corp. (VFC) say they’re going to focus on a message of environmental sustainability and the outdoor lifestyle with many of its remaining brands, which include The North Face and Timberland.

 

Energy, Industrials & Materials

·     Huawei is reviewing its relationship with FedEx (FDX) as the Chinese telecom’s equipment maker claims the package delivery company diverted two parcels destined for Huawei addresses in Asia to the United States and attempted to reroute two others. Reuters

·     Chevron Corp. (CVX) and its Gorgon LNG venture partners began an offshore drilling campaign targeting 11 new wells to feed the gas project

·     Pareteum (TEUM) announced mgmt. changes late Friday as Executive Chairman Robert Turner is adding the title of CEO, while current CEO Vic Bozzo is becoming chief commercial officer and Denis McCarthy is becoming COO and resigning the title of president.

·     American Woodwork (AMWD) Q4 EPS $1.87/$407.4M vs. est. $1.89/$414.5M

 

Financials

·     Fintech mentioned positively in Barron’s saying together with PayPal (PYPL), Visa (V) and Mastercard (MA) look virtually unassailable in the digital-payments market. The stocks, while pricey by traditional price/earnings metrics, show no signs of slowing down.

 

Healthcare

·     Pfizer (PFE) said that its Phase III study of Lyrica (pregabalin) as adjunctive therapy for epilepsy patients 5 to 65 years old with primary generalized tonic-clonic (PGTC) seizures didn’t meet its primary endpoint in a statistically significant reduction in seizure frequency versus placebo

·     Teva Pharmaceuticals USA and related affiliates of Teva Pharmaceutical (TEVA) and the state of Oklahoma entered into an agreement for a one-time payment of $85M to the state over claims related to the opioid epidemic

·     Gilead (GILD) downgraded to Sell from Neutral at Goldman Sachs

 

Technology, Media & Telecom

·     Apple Inc. (AAPL) could be hit hard if China imposes a retaliatory ban against its products, but the founder and CEO of Huawei Technologies Co. doesn’t think it’ll come to that. In an interview with Bloomberg Sunday, Ren Zhengfei said he’d “protest” such a move.

·     Apple (AAPL) was sued by customers who claim the company is unlawfully disclosing and selling information about people’s iTunes purchases as well as their personal data

·     Meredith (MDP) sold Sports Illustrated to Authentic Brands for $110 million while Meredith will continue to publish the magazine for at least two years

·     Momo (MOMO) Q1 EPS 62c/$554.7M vs. est. 54c/$526.67M

·     Nutanix (NTNX) downgraded to Equal Weight from Overweight at Morgan Stanley

·     Quotient (QTNT) Q4 EPS loss (41c)/$8.28M vs. est. loss (45c)/$7.3M; sees FY20 total product sales $30M-$31M vs. $28.7M in 2019

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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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