Morning Preview: July 10, 2019

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Early Look

Wednesday, July 10, 2019

Futures

Up/Down

%

Last

DJ Industrials

-79.00

0.30%

26,700

S&P 500

-9.50

0.31%

2,972

Nasdaq

-28.50

0.36%

7,816

 

 

U.S. stock futures are edging lower with weakness in Europe and mixed markets in Asia as markets remain cautious ahead of Federal Reserve Chairman Jerome Powell’s testimony to Congress. Stocks enjoyed a late day rally on Tuesday, helping the S&P 500 and Nasdaq Composite snap their modest two-day losing streaks, though the Dow Industrials couldn’t muster enough strength to turn positive, falling a 3rd day as markets prepare for the congressional testimony from Fed Chairman Powell which starts today and runs into tomorrow. REITs, technology and financials help pace the gains while materials, consumer staples and industrials ended lower. U.S. Treasury prices finished slightly lower as yields rose with markets anticipating comments on interest rates from Powell today. The Fed’s benchmark interest rate currently stands in a range of 2.25% to 2.5% and the central bank has not cut rates since the Great Recession in 2008. Last year, Fed officials raised rates four times, in part to stave off the risk of high inflation and in part to try to ensure that they would have room to cut rates if the economy stumbled. In Asian markets, The Nikkei Index fell -31 points to 21,533, the Shanghai Index dropped -12 points to 2,915 and the Hang Seng Index gained 88 points to settle at 28,204. In Europe, the German DAX is down around -60 points to 12,375, while the FTSE 100 is down -15 points to 7,520. Oil prices getting a boost after weekly inventory data was bullish, while Treasury yields rise a 4th day as the 10-year hits 2.09%.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 3.68 points, or 0.12%, to 2,979.63

·     The Dow Jones Industrial Average fell -22.65 points, or 0.08%, to 26,783.49

·     The Nasdaq Composite gained 43.35 points, or 0.54%, to 8,141.73

·     The Russell 2000 Index advanced 1.20 points, or 0.08% to 1,562.59

 

Events Calendar for Today

·     7:00 AM EST      MBA Mortgage Applications Data

·     10:00 AM EST    Fed Chairman Powell testifies before House Financial Services Panel

·     10:00 AM EST    Wholesale Inventories MoM for May…est. 0.4%

·     10:30 AM EST    Weekly DOE Inventory Data

·     1:30 PM EST       Fed’s Bullard speaks in St. Louis

·     2:00 PM EST       FOMC Meeting Minutes from June

 

Earnings Calendar:

·     Earnings Before the Open: ANGO, MSM

·     Earnings After the Close: AIR, BBBY, PSMT, SAR, SLP, VOXX

 

Other Key Events:

·     SemiCon West 2019, 7/9-7/11, in San Francisco

 

 

Macro

Up/Down

Last

WTI Crude

1.36

59.19

Brent

1.43

65.59

Gold

-2.10

1,395.50

EUR/USD

0.0012

1.1220

JPY/USD

0.06

108.91

10-Year Note

+0.032

2.097%

 

 

World News

·     China June consumer prices (CPI) rose 2.7% YoY, in-line with estimates while producer prices (PPI) were unchanged vs. an estimated increase of 0.2%; Food prices in June rose 8.3%, extending May’s 7.7% gain. Fresh fruit prices jumped 42.7% on year, following a 26.7% surge in May. Pork prices rose 21.1%, after May’s 18.2% increase

·     The U.K. economy returned to growth in May thanks to a revival in car production as the Office for National Statistics said the economy grew 0.3% on the month in May after shrinking in April, the month immediately after the U.K. was due to leave the European Union

·     In its quarterly report on the outlook released Wednesday, the European Commission said it now expects economic output in the currency area to increase by 1.4% next year, having previously forecast growth of 1.5%. It left its forecast for this year unchanged at 1.2%,

·     U.S. President Donald Trump’s administration on Tuesday threatened he would veto a massive defense bill being considered by the House of Representatives, saying it provides less money than he wants for the military and disagreeing with some of its policy provisions.

 

Sector News Breakdown

Consumer

·     Helen of Troy (HELE) Q1 adjusted EPS $2.06/$354.68M vs. est. $1.68/$351.53M; raises FY19 adj. EPS view to $8.40-$8.65 from $8.25-$8.50 (est. $8.38) while also raises FY19 revenue view to $1.59B-$1.62B from $1.58B-$1.61B (est. $1.59B)

·     Levi Strauss (LEVI) Q2 EPS 7c/$1.31B vs. est. 13c/$1.3B; said Q2 and 1H results reflect the continued strength of our diversified business model as we delivered broad-based growth across all brands, regions and key product categories despite a challenging retail and macroeconomic environment; sees FY19 revenue growth at high end of mid-single digit range (vs. est. $5.87B)

·     Nio Inc. (NIO) said Q2 deliveries was 3,550 more than the prior guidance range of 2,800 to 3,200 units; said delivery volume of ES8, its 7-seater electric SUV, for June was 927, while delivery volume of ES6, its 5-seater electric SUV, was 413 for the same period

·     WD-40 (WDFC) Q3 EPS $1.30/$114.0M vs. est. $1.22/$109M; still sees year sales $425M-$437M vs. est. $423.5M and EPS $4.58-$4.65

 

Energy, Industrials & Materials

·     The American Petroleum Institute (API) reported that U.S. crude supplies fell by -8.1M barrels for the week ended July 5, showed a stockpile decline of -257,000 barrels for gasoline, while distillate inventories rose by 3.7 million barrels

·     Gulfport Energy (GPOR) and Southwestern (SWN) both downgraded to underperform from neutral at Credit Suisse

·     KushCo Holdings (KSHB) Q3 EPS loss (10c) on revs $41.5M, rising 221% year-over-year and 17.9% on a sequential basis MoM; Cash was approximately $12.2M as of May 31, 2019, compared to approximately $13.5M as of August 31, 2018

·     Total (TOT) has agreed to sell a pool of North Sea oil assets – acquired as part of its 2017 deal for Maersk Oil – for $635M

·     MSC Industrial (MSM) Q3 EPS $1.44/$866.5M vs. est. $1.49/$880.9M; sees Q4 EPS $1.21-$1.27 on sales $835M-$851M below the est. $1.47/$881.9M; boosts quarterly dividend to 75c from 63c

·     Canadian Pacific (CP) and CSX Corp. (CSX) both downgraded to Hold from Buy at Loop Capital

·     Deere (DE) downgraded to neutral from buy at UBS

 

Healthcare

·     Hospitals (THC, CYH, UHS) and Managed care companies (ANTM, HUM, UNH) may be active after a federal appeals court panel appeared sympathetic on Tuesday to Republican efforts to overturn Obamacare, expressing skepticism to Democratic calls to overturn the ruling of a Texas judge who found the landmark U.S. healthcare reform law unconstitutional. Two Republican-appointed members of the three-judge panel of the 5th U.S. Circuit Court of Appeals sharply questioned lawyers for a group of Democratic state attorneys general defending ACA. The court made no decision on Tuesday, but the decision could prompt an appeal to the U.S. Supreme Court

·     GlaxoSmithKline PLC (GSK) said that ViiV Healthcare, its HIV venture with Pfizer Inc. (PFE), has met primary endpoint in a phase 3 clinical trial. The trial demonstrated the ability to control HIV with a two-drug regimen of dolutegravir plus lamivudine in virally suppressed patients switching from a three-drug regimen containing tenofovir alafenamide fumarate

·     Sanofi S.A. (SNY) said the U.S. FDA accepted for review the company’s biologics license application for isatuximab for patients with relapsed/refractory multiple myeloma.

·     Mirati Therapeutics (MRTX) announced a clinical collaboration agreement with Novartis (NVS) to evaluate the combination of MRTX849, Mirati’s investigational KRAS G12C inhibitor and TNO155, Novartis’ investigational SHP2 inhibitor, in patients with advanced solid tumors that harbor KRAS G12C mutations

·     Kadmon Holdings (KDMN) announced that the first patient has been dosed in a Phase 2 clinical trial of KD025, the company’s ROCK2 inhibitor, in patients with diffuse cutaneous systemic sclerosis, or SSc

·     HealthEquity (HQY) 6.75M share secondary priced at $61.00

 

Technology, Media & Telecom

·     T-Mobile US Inc. (TMUS) will replace Red Hat Inc. in the S&P 500 index at the open on Monday, S&P Dow Jones Indices said after IBM Corp. (IBM) completed the Red Hat $34 billion deal

·     Comcast (CMCSA) upgraded to Conviction Buy from Neutral at Goldman Sachs

·     Vipshop Holdings (VIPS) agrees to acquire Shan Shan Outlets and will pay two sellers 2.9 billion yuan (about $421 million) in cash installments

·     Harmonic Inc. (HLIT) said Comcast Cable (CMCSA) Communications Management elected enterprise license pricing for the company’s CableOS software. Comcast committed to $175 million in software license fees over the four-year term of the enterprise license

·     Firefox browser maker Mozilla is blocking the United Arab Emirates’ government from serving as one of its internet security gatekeepers, citing Reuters reports on a UAE cyber espionage program – Reuters

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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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