Morning Preview: July 15, 2019

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Early Look

Monday, July 15, 2019

Futures

Up/Down

%

Last

DJ Industrials

40.00

0.15%

27,349

S&P 500

4.50

0.15%

3,020

Nasdaq

9.50

0.12%

7,969

 

 

Stock futures are edging higher, led by gains in tech after reports overnight that U.S. companies may soon get approval to sell to Huawei again, while markets overlook negative data out of China as the country’s GDP grows at its slowest pace in 27-years leading to hopes of additional stimulus. In Asian markets, The Nikkei Index was closed, the Shanghai Index gained 11 points to 2,942 and the Hang Seng Index rose 83 points to 28,554. In Europe, the German DAX is up a few points at 12,325, while the FTSE 100 is little changed holding around the 7,500 level. In corporate news, Amazon starts its 48-hour Prime Day event, which is being matched by other top retailing giants. Boeing (BA) shares slipping after the WSJ reported its 737 MAX planes are unlikely to be ready to carry passengers again until 2020. In Biotech news, GILD agreed to pay $5.1 billion to raise its stake in GLPG, while GSK said its Phase III 3 Prima study met primary endpoint. Bitcoin prices are down over 13% at $10,300 as concerns about Facebook’s Libra has weighed on cryptos as a whole over the last week. Equities ended last week on a high note, with each of the major U.S. indexes ending at record highs, and the S&P 500 closing above the 3,000 mark for the first time as markets continue to anticipate a rate cut from the Fed at its July meeting at months end. Where last week was dominated by the Fed and rate cut hopes after Fed Chairman Powell’s testimony on Capitol Hill, this week’s attention turns to earnings, as the season unofficially kicks off this week with big banks, industrials and handful of big tech names.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 13.86 points, or 0.46%, to 3,013.77

·     The Dow Jones Industrial Average rose 243.95 points, or 0.90%, to 27,332.03

·     The Nasdaq Composite jumped 48.10 points, or 0.59%, to 8,244.14

·     The Russell 2000 Index advanced 12.08 points, or 0.78% to 1,570.00

 

Events Calendar for Today

·     8:30 AM EST      Empire Manufacturing for July

·     8:50 AM EST      Fed’s Williams speaks at Libor briefing

 

Earnings Calendar:

·     Earnings Before the Open: C, LUB

·     Earnings After the Close: JBHT, SFBS, WTFC

 

 

Macro

Up/Down

Last

WTI Crude

0.19

60.40

Brent

0.32

67.04

Gold

0.05

1,415.80

EUR/USD

0.0011

1.1281

JPY/USD

-0.07

107.84

10-Year Note

+0.001

2.123%

 

 

World News

·     China’s economic growth slowed to 6.2% in Q2 from a year earlier, down from 6.4% in Q1 and was the weakest pace in at least 27 years, amid an escalating trade war with the United States, but was in-line with economist forecasts

·     China’s new home prices grew 0.6% month-on-month in June, slowing from a 0.7% uptick in May. On a yearly basis, average new home prices in China’s 70 major cities rose 10.3% in June, compared with a 10.7% gain in May

·     China’s central bank on Monday lent 200 billion yuan to financial to financial institutions via its one-year medium-term lending facility (MLF), with the interest rate unchanged – Reuters

 

Sector News Breakdown

Consumer

·     Sports Direct has delayed publishing its annual results, blaming “current uncertainty” over the future financial performance of House of Fraser

·     Molson Coors (TAP) downgraded to Underperform from Buy at Bank America

 

Energy

·     Reports indicated that about 70% of oil production shut in U.S. Gulf of Mexico attributable to Tropical Storm Barry amounts to 1.33m barrels per day and natural gas shut-ins amount to ~56% of normal Gulf output (about 1.54 mmcfe/d of gas is offline)

·     Con Ed (ED) shares may be active after New York city was hit Saturday night with a 5-hour evening blackout, extending from about Fifth Avenue to the Hudson River and from the 40s to 72nd Street, hitting most of midtown including Madison Square Garden, Rockefeller Center and the lower reaches of Manhattan’s Upper West Side. The power failure struck on the anniversary of the historic 1977 blackout.

 

Financials

·     Discover Card (DFS) credit card delinquency rate 1.53 % at June end vs 1.54% at May end and credit card charge-off rate 2.18% at June end vs 2.12% at May end – SEC filing

·     Synchrony Financial (SYF) reported net charge-offs (NCO’s) for June of 4.05% vs. 4.73% YoY while June delinquencies 2.33% vs. 2.72% YoY

·     Prudential (PRU) mentioned favorably in Barron’s saying shares have enjoyed a nice turnaround this year with a 27% return but at 4%, the yield remains very attractive and well above the S&P 500’s average of 1.9%

 

Healthcare

·     Eton Pharmaceuticals (ETON) said the FDA provided the company’s partner with a complete response letter related to the application for EM-100. Eton says there were no concerns raised about the clinical data in the application, therefore no additional clinical work will be required

·     Gilead Sciences Inc. (GILD) agreed to pay $5.1 billion to raise its stake in Galapagos NV (GLPG) to develop and commercialize its treatments for a ten-year period, the companies

·     GlaxoSmithKline PLC (GSK) said it Zejula (Niraparib) showed significant improvement in progression free survival for women regardless of their biomarker status as the Phase III 3 Prima study met primary endpoint

·     Varex Imaging Corp. (VREX) said it is closing its Santa Clara facility in connection with the ongoing integration of the imaging business acquired from PerkinElmer Inc. (PKI) in May 2017 and sees the elimination of about 110 positions at that facility.

 

Industrials & Materials

·     American Airlines Group Inc (AAL) said Sunday it is extending for a fourth time cancellations of about 115 daily flights into early November due to the ongoing grounding of the Boeing Co (BA) 737 MAX jets.

·     The WSJ reported that Boeing Co.’s (BA) 737 MAX planes are unlikely to be ready to carry passengers again until 2020 because of the time it will take to fix flight-control software and complete other steps, an increasing number of government and industry officials say, even as the company strives to get its jet back into service this year.

·     Crane (CR) announced it is ceasing efforts to acquire Circor (CIR), following the company rejecting its takeover offer of $48 last week (its second attempt) – Circor shares down -16%

·     Deere (DE) upgraded to Buy from Neutral at Bank America

·     Air Lease Corp (AL) announces delivery of new Airbus A320-200neo Aircraft to Atlantic Airways

·     KeyBanc downgraded paper stocks Sealed Air (SEE), International Paper (IP), WestRock (WRK) and Packaging Corp. (PKG) to Underweight from Sector Weight

·     Hillenbrand (HI) mentioned positively in Barron’s noting the stock has had a rough spell falling 37% below its 52-week high, but with its recent Milacron (MCRN) acquisition set to deliver expected double-digit EPS accretion and improved profit margins, the stock could quickly recover

 

Technology, Media & Telecom

·     Facebook (FB) received a record $5 billion privacy fine in a settlement with the U.S. FTC by a vote of 3-2 on Friday, which resolves a probe that opened in March 2018 after news that consulting firm Cambridge Analytica obtained user data from a researcher. Though the fine is the largest privacy fine ever, it was only slightly above the $3 billion that the company had set aside in anticipation of the fine.

·     The Trump administration may start approving certain U.S. companies to sell their products to China’s Huawei Technologies Co. in as soon as two weeks, Reuters reported Sunday. U.S. chipmakers, including Qualcomm Inc. (QCOM), Intel Corp. (INTC), and Micron Technology Inc. (MU) have reportedly pushed to resume sales to the Chinese tech giant

·     Omnicom (OMC) downgraded to market perform from outperform at BMO Capital

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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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