Morning Preview: May 29, 2019

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Early Look

Wednesday, May 29, 2019

Futures

Up/Down

%

Last

DJ Industrials

-143.00

0.56%

25,226

S&P 500

-15.50

0.54%

2,789

Nasdaq

-56.50

0.78%

7,238

 

 

Global stock markets are under pressure again as bond market warnings ring louder, with Treasury prices surging and yields tumbling on the continued flight out of riskier assets for investors. Between political issues in Europe (UK, Italy), slowing global growth concerns and the trade tensions between the U.S. and China, markets have been under constant pressure the last few weeks, pushing major global averages well off their all-time high records just about a month ago. The U.S. 10-year bond’s yield fell to its lowest level in nearly two years, falling three basis points to 2.23%, viewed as a flight to quality assets in preparation for a possible downturn, though macroeconomic data has improved lately. In Asian markets, The Nikkei Index dropped -256 points to settle at 21,003, the Shanghai Index inched higher 4 points to 2,914 while the Hang Seng Index fell -155 points to 27,235. In Europe, the German DAX is lower by about -150 points to trade under 11,900, while the FTSE 100 is down around -100 points to 7,175. Commodity prices are active, with oil prices dropping sharply on the risk aversion, while grains and metals are higher given the flight to safety and planting being affected due to the heavy flooding and storms across the U.S. China threatened to curb U.S. companies’ access to its rare-earth resources, according to a report in a China paper (The People’s Daily). Yesterday, stocks fell as investors positioned for what could be a prolonged trade dispute with China. A key part of the Treasuries yield curve fell deeper into inversion, with the gap between 3-month and 10-year rates dipping to the lowest since March – spread between three-month and 10-year yields fell to -12, the most negative since 2007.

 

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -23.67 points, or 0.84%, to 2,802.39

·     The Dow Jones Industrial Average fell -237.92 points, or 0.93%, to 25,347.77

·     The Nasdaq Composite slipped -29.66 points, or 0.39%, to 7,607.35

·     The Russell 2000 Index declined -10.09 points, or 0.67% to 1,504.02

 

Events Calendar for Today

·     7:00 AM EST      MBA Mortgage Applications Data

·     10:00 AM EST    Richmond Fed Manufacturing Index for May…est. 7

·     4:30 PM EST       API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: ANF, CMCO, DAKT, DKS, EVLV, HLNE

·     Earnings After the Close: PANW, QADB, VEEV

 

Other Key Events:

·     Bernstein 35th Annual Strategic Decisions Conference, 5/29-5/31, in NY

·     Cowen 47th Annual Technology, Media & Telecom Conference, 5/29-5/30, in NY

·     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

·     Jefferies 4th Annual IT & Internet & Service Summit, 5/29-5/30, in New York

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

·     RBC Capital Consumer & Retail Conference, 5/29-5/20, in Boston

·     Bank of Canada rate decision

 

 

Macro

Up/Down

Last

WTI Crude

-1.18

57.96

Brent

-1.34

68.77

Gold

4.00

1,283.35

EUR/USD

-0.0005

1.1155

JPY/USD

-0.04

109.34

10-Year Note

-0.03

2.236%

 

 

World News

·     Germany’s jobless rate this month climbed for the first time in more than five years as the unemployment rate climbed to 5%

·     Boris Johnson, the frontrunner to become the next leader of the Conservative party, faces a trial over accusations of misconduct in a public office

·     The contest to replace outgoing U.K. Prime Minister Theresa May as Conservative party leader is under way, and the political uncertainty has drawn fresh attention to the opposition Labour Party’s plans

 

Sector News Breakdown

Consumer

·     Capri Holdings (CPRI) Q4 EPS 63c/$1.34B vs. est. 61c/$1.33B; sees Q1 revenue $1.36B below the $1.45 B estimate; backs FY20 adjusted EPS view of $4.95 and backs FY20 revenue view approximately $6B; Q1 Kors same-store sales fell (-1%)

·     Canada Goose (GOOS) Q4 EPS C9c/C$156.2M vs. est. C4c/$c$158.9M

·     Bed Bath & Beyond (BBBY) to add four new directors in settlement with activist trio, pursue permanent CEO

·     Bloomin’ Brands (BLMN) will replace Travelport Worldwide (TVPT) in the S&P SmallCap 600 effective June 3rd

·     General Mills (GIS) downgraded to Sell from Neutral at Goldman Sachs with a $41 tgt

·     Invitation Homes (INVH) 40M share Secondary priced at $25.30

 

Energy

·     Devon Energy (DVN) has entered into a definitive agreement to sell its Canadian business to Canadian Natural Resources (CNQ) for $2.8B

·     Exxon (XOM) and Chevron (CVX) face a shareholder vote on climate change proposals and decide whether to form a board committee dedicated to the issue at each company.

·     Plains GP Holdings (PAGP) 7.33M share Block Trade priced at $23.55

·     China’s crude imports from Iran jumped by a fifth last month before the US removed sanction waivers on the Middle Eastern country – Financial Times

 

Financials

·     Realogy (RLGY) will replace Pioneer Energy Services Corp. (PES) in the S&P SmallCap 600 Index next week.

·     Bank of Montreal (BMO) Q2 EPS C$2.30 vs. C$2.20 last year and Q2 revenue C$6.21B vs. C$5.58B last year

·     LiveRamp (RAMP) Q4 adjusted EPS loss (13c)/$78M vs. est. loss (16c)/$76.88M; sees FY20 revenue $358M-$372M vs. est. $363.98M and sees FY20 adjusted operating loss $50M-$70M

·     Sun Communities (SUI) files to sell 3.25M shares of common stock

 

Healthcare

·     Inovio Pharmaceuticals, Inc. (INO) said AstraZeneca (AZN) intends to discontinue activities with respect to the research collaboration programs, other than MEDI0457, that are the subject of the parties’ license and collaboration agreement dated August 7, 2015

·     Ziopharm Oncology, Inc. (ZIOP) announced an exclusive licensing agreement with the National Cancer Institute (NCI), an institute of the National Institutes of Health (NIH), for intellectual property for the development and commercialization of cell therapies for cancer

·     Genmab filed for an IPO of American depositary shares on Nasdaq under the GMAB ticker

 

Industrials & Materials

·     Corteva Inc., (CTVA) an agricultural company being spun off from DowDuPont Inc. (DWDP) will join the S&P 500 index replacing Fluor Corp. (FLR) next week. Fluor will move to the S&P MidCap 400 replacing Realogy Holdings Corp. (RLGY). The Corteva spinoff is expected to be completed on Monday. After it closes, DowDuPont will remain

·     Steelmaker ArcelorMittal (MT) said it would cut European production for the second time in a month as weak demand and high quantities of imports continue to take their toll

·     DowDuPont (DWDP) said it sees $1.3B goodwill and non-impairments in Q2

·     Heico (HEI) Q2 EPS 60c/$515.6M vs. est. 49c/$479.47M; Q2 operating margin 23.1% vs. 21.3% last year; with respect to remainder of FY 19, electronic technologies group estimates FY net sales growth of about 15% – 17% over prior year; now estimate consolidated fiscal 2019 year-over-year growth in net sales to be 12% – 13%

·     Hub Group (HUBG) announces $100M share repurchase program

·     Columbus McKinnon (CMCO) Q4 EPS 83c/$216.7M vs. est. 61c/$210.61M; sees Q1 revs up about 3% vs. est. $215M

 

Technology, Media & Telecom

·     Workday (WDAY) Q1 EPS 43c/$825.1M vs. est. 41c/$813.93M; Q1 subscription revs $701.0M up 34% YoY; raises FY20 subscription revenue to $3.045B-$3.06B from $3.03B-$3.045B and sees Q2 subscription revenue to be $746M-$748M up about 32%

·     T-Mobile (TMUS) and Sprint (S) may sell Boost Mobile for up to $3B, Reuters reported https://reut.rs/2HHU0sE 

·     YY Inc. (YY) Q1 adjusted EPS $1.38/$705.3M vs. est. $1.38/$603.78M; sees Q2 revenue growth 59%-64.3%

·     FireEye (FEYE) announced the acquisition of Verodin as the transaction closed and is valued at approximately $250M in cash and stock; cuts FY19 EPS view to 12c-16c from 17c-21c while raises FY19 revenue view to $890M-$900M from $880M-$890M to reflect the Verodin acquisition

·     LiveXLive Media (LIVX) cuts FY19 revenue view to $33M-$34M from $37.5M-$45M and revises FY19 adjusted operating loss to ($12.4M)-($13.4M); surpasses 700,000 paid subscribers, up 50% from March 31, 2018

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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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