Morning Preview: July 29, 2019

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Early Look

Monday, July 29, 2019

Futures

Up/Down

%

Last

DJ Industrials

-6.00

0.02%

27,143

S&P 500

-2.00

0.07%

3,022

Nasdaq

-7.00

0.09%

8,012

 

 

Stocks futures in the U.S. are little changed after rising to record highs for the S&P 500 and Nasdaq Composite last week, as markets are quiet ahead of a jam-packed week of news and earnings. Outside of another onslaught of quarterly corporate earnings, trade talks between China and the U.S. will resume (along with the very important FOMC policy meeting Tuesday/Wednesday), as negotiators between the two countries will meet again in Shanghai in yet another attempt to piece together a trade accord, but on lowered expectations. Small wins could be enough to keep stock markets happy, with the U.S. still focusing on insistence that China commit to legal changes to protect intellectual property while China demands that the U.S. drop all tariffs as a condition for a deal. Note China said several million tons of U.S. soybeans have been shipped to China since the two countries’ leaders agreed to resume trade talks in Japan last month. In Central Bank action, the ECB held its key interest rate steady last Thursday, but it made clear that more stimulus is on the way. The Bank of Japan starts a two-day policy board meeting Monday, but expectations are for the central bank to keep rates unchanged. In the U.S. It is all but certain the Fed will cut its benchmark short-term rate on Wednesday, likely by a quarter of a percentage point from its current range of 2.25% to 2.50%. In Asian markets, The Nikkei Index fell -41 points to 21,616, the Shanghai Index dipped 3 points to 2,941 and the Hang Seng Index dropped -291 points to 28,106. In Europe, the German DAX is little changed at 12,415, while the FTSE 100is up over 80 points to 7,635. The British pound fell to another two-year low this morning as Prime Minister Boris Johnson’s new cabinet members made headlines over the weekend with Brexit pronouncements. Michael Gove, Johnson’s top aide, wrote that “no-deal is now a very real prospect.” Oil, gold, Treasury and the dollar are all little changed to start the week.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 22.19 points, or 0.74%, to 3,025.86

·     The Dow Jones Industrial Average rose 51.47 points, or 0.19%, to 27,192.45

·     The Nasdaq Composite surged 5.02 points, or 1.11%, to 8,330.21

·     The Russell 2000 Index advanced 17.52 points, or 1.12% to 1,578.97

 

Events Calendar for Today

·     Dallas Fed Manufacturing Activity for July

 

Earnings Calendar:

·     Earnings Before the Open: AMAL, AMG, AWI, CTB, MCY, NSP, OIS, ONDK, OPB

·     Earnings After the Close: AKS, AMKR, APPF, ARE, BYND, CGNX, CHGG, EHC, FRAC, HLIT, HSII, HTLF, INST, JBT, LEG, MDR, NBIX, NBR, NOV, PCH, PI, PKI, RGA, RIG, RNG, SBAC, SCI, TACO, TREX, VNO, WCN

 

 

Macro

Up/Down

Last

WTI Crude

-0.04

56.16

Brent

-0.25

63.21

Gold

0.10

1,419.40

EUR/USD

-0.0003

1.1125

JPY/USD

-0.02

108.66

10-Year Note

-0.014

2.056%

 

 

Sector News Breakdown

Consumer

·     Macquarie downgraded several airlines, cutting American Airlines (AAL), Spirit Airlines (SAVE), Hawaiian Holdings (HA), and Alaska Air (ALK) to Neutral from Outperform as part of a broader industry note, saying the competitive environment for these airlines should become choppy in the fall of 2019 and in 2020 as Southwest (LUV) attempts to win back market share

·     Heineken stock has fallen sharply after profits fell in the first half of the

·     Mohawk (MHK) downgraded to Underperform from Market Perform at Wells Fargo

 

Energy

·     Anadarko (APC) Q2 EPS 51c/$3.44B vs. est. 50c/$3.34B; Q2 sales volume 68MMBOE vs. 58MMBOE last year and Q2 sales volume 744 MMBOE/d vs. 636 MMBOE/d last year

·     Pacific Gas & Electric (PCG) mentioned positively in Barron’s saying shares could be a buy despite risks of billions of dollars in potential legal claims against it as it offers an opportunity for individual investors with a strong stomach

 

Financials

·     The London Stock Exchange has confirmed it is in talks to acquire Refinitiv for $27B, including debt, which would create a UK data and trading giant. The LSE said on July 27 it is in discussions with the owners of Refinitiv to buy the data company. A consortium led by private equity company Blackstone owns 55% of Refinitiv https://bit.ly/2K9Z35g

·     Aflac (AFL) downgraded to outperform from strong buy at Raymond James

·     PayPal (PYPL) downgraded to sell from neutral at Guggenheim

·     Amalgamated Bank (AMAL) Q2 EPS 36c, in line with consensus as Q2 provisions for loan losses totaled an expense of $2.1M compared to $2.2M in the Q1 and a release of $2.8M in Q2 of FY18

 

Healthcare

·     Pfizer Inc. (PFE) is in talks to merge its off-patent drugs business with generic drugmaker Mylan NV (MYL), according to reports. The deal, which hasn’t been completed, could be announced as early as Monday if an agreement is reached, where Mylan shareholders would own a little more than 40% of the new entity and Pfizer shareholders the remainder https://on.mktw.net/2K0bPEO

·     Separately, Mylan (MYL) Q2 EPS $1.05/$2.85B vs. est. 95c/$2.82B and reaffirms year EPS and sales views and Pfizer (PFE) Q2 EPS 80c vs. est. 75c

·     Exact Sciences Corp (EXAS) is in advanced negotiations to buy healthcare company Genomic Health Inc (GHDX) for about $2.8B, Bloomberg reported. A deal could be announced as early as next week but the talks could still be delayed or fall apart altogether https://yhoo.it/312rEQR

·     Lexicon (LXRX) shares fell late Friday after Sanofi (SNY) terminates its partnership to develop diabetes drugs citing mixed results from Phase III trials on Zynquista

·     Kodiak Sciences (KOD) presented positive interim phase Ib data for KSI-301 in patients with anti-VEGF treatment-naïve neovascular age-related macular degeneration (wAMD), diabetic macular edema (DME), and macular edema due to retinal vein occlusion (RVO) during an oral presentation at the American Society of Retina Specialists. Though early, the KSI-301 safety data suggest a potentially better profile for KSI-301 relative to reported, according to Chardan

 

Industrials & Materials

·     Dow (DOW) downgraded to neutral from buy at Citigroup

·     Eastman Chemical (EMN) downgraded to Neutral from Overweight at JPMorgan

·     UPS (UPS) downgraded to hold from buy at Stifel

 

Technology, Media & Telecom

·     Software stocks mentioned cautiously in Barron’s saying analysts are starting to see bubbles in cloud software companies, warning of earnings disappointments given expectations for annual revenue gains of more than 30%. Workday (WDAY) has a market capitalization of nearly $50B but doesn’t make any money, and ServiceNow (NOW) and Okta (OKTA) are also unprofitable, but investors seem to be willing to overlook a lack of earnings based on standard accounting

·     Walt Disney (DIS) “Lion King” delivered $75.5 million in domestic ticket sales in its second weekend

·     Sixteen-year-old Kyle Giersdorf — screen name “Bugha” — took home $3 million Sunday after winning the inaugural Fortnite World Cup in New York, the largest-ever prize for a single player in a videogame tournament. Fortnite is made by privately held Epic Games Inc., which is backed by Hong Kong-based Tencent Holdings Inc. (TCEHY)

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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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