Morning Preview: August 05, 2019

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Early Look

Monday, August 5, 2019

Futures

Up/Down

%

Last

DJ Industrials

-327.00

1.24%

26,122

S&P 500

-39.50

1.33%

2,893

Nasdaq

-133.50

1.73%

7,569

 

 

Stock futures are sharply lower in the U.S., tracking Asian and European markets lower, and looking to expand on the biggest losses of the year last week following President Donald Trump’s threat last week of tariff hikes on additional Chinese imports. As aggressive as the moves in global stocks are, it is the move in Treasury markets that are really staggering, with the benchmark 10-year yield falling to lows below 1.75% and the 2-year briefly sliding under 1.60% as investors pour into defensive assets on trade and market concerns. Gold prices jump up around $1,470 an ounce while the U.S. dollar fell below 106 overnight against the Japanese yen to its lowest level since early January. In Asian markets, The Nikkei Index dropped -366 points to 20,720, the Shanghai Index lost -46points (1.6%) to 2,821 and the Hang Seng Index plunged -767 points (2.85%) to close at 26,151. In Europe, the German DAX is lower by -150 points (1.3%) to 11,700, while the FTSE 100 is down around -130 points (1.8%) to 7,275. Asian stocks were hit hard as the dollar rose above the key 7 level vs. the Chinese yuan, and as protests continued in Hong Kong. The yuan’s weakness is among a series of U.S. complaints that are fueling tensions with Washington, with President Trump complaining that they have been devaluing their currency, and today’s move is not going to help matters. Stocks fell last week as the S&P suffered its worst week of the year as President Trump intensified his trade war talk with China, threatening to raise tariffs by 10% on $300B of additional China goods starting September 1st after a week of talks between U.S. and China trade reps failed to deliver any meaningful outcome. Most sectors came under pressure, but declines in consumer discretionary, technology, energy and financials weighed the most while investors rotated into defensive sectors (utilities, healthcare and REITs). The trade news also overshadowed the FOMC’s first interest rate cut in over a decade (cutting by 25 bps) and an in-line monthly jobs report on Friday.

 

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -21.51 points, or 0.73%, to 2,932.05

·     The Dow Jones Industrial Average fell -98.39 points, or 0.37%, to 26,485.01

·     The Nasdaq Composite plunged -107.05 points, or 1.32%, to 8,004.07

·     The Russell 2000 Index declined -17.10 points, or 1.10% to 1,533.66

 

Events Calendar for Today

·     9:45 AM EST      Markit US Services PMI, Jul-F…

·     9:45 AM EST      Markit US Composite PMI, Jul-F…

·     10:00 AM EST    ISM Non-Manufacturing Index for July…

 

Earnings Calendar:

·     Earnings Before the Open: BCC, CARS, CNA, DK, DO, DSKE, JES, KOS, L, LONE, ON, TA, TSN, WEC

·     Earnings After the Close: ACTG, AEIS, ANSS, APPS, APU, ARWR, ATSG, BHF, BKD, BKH, CAR, CBT, CCXI, CDEV, CLR, COHU, CXW, CYH, CZR, DCO, DIOD, FRPT, HIIQ, KLAC, KMT, MAR, MG, NPTN, O, PLOW, PODD, SHAK, STE, THC, TTWO, VECO, WPX

 

 

Macro

Up/Down

Last

WTI Crude

-0.47

55.19

Brent

-0.60

61.29

Gold

11.70

1,469.20

EUR/USD

0.0047

1.1155

JPY/USD

-0.55

106.04

10-Year Note

-0.08

1.765%

 

 

World News

·     The shooting that killed 20 people at a crowded El Paso, Texas Wal-Mart will be handled as a domestic terrorism case, federal authorities said Sunday as they weighed hate-crime charges against the suspected gunman. The attack did not spread to other nearby shopping areas.

·     The attack on Saturday was followed less than a day later by another shooting that claimed nine lives in a nightlife district of Dayton, Ohio. That shooter was killed by police

·     The IHS Markit/CIPS UK Services Purchasing Managers’ Index (PMI) rose to a nine-month high of 51.4 from 50.2 in June

·     Private sector business activity in Hong Kong plunged to its lowest level since the financial crisis, a private survey showed on Monday

 

Sector News Breakdown

Consumer

·     Dollar Tree (DLTR) downgraded to Hold from Buy at Deutsche Bank

·     Target (TGT) upgraded to Buy from Hold at Deutsche Bank

·     Barron’s noted Under Armour (UAA) shares remains under pressure from trade war as the stock tumbled 12% despite Q2 results that were not all bad but included some downbeat numbers, and said shareholders could discover the stock cannot outperform with North American sales growth under pressure

·     Barron’s noted stores closures in the U.S. are projected to reach a record this year, yet consumer spending is strong and a number of retailers are thriving noting Best Buy (BBY), Target (TGT), and Dick’s Sporting (DKS)

 

Energy, Industrial and Materials

·     Jacob’s Engineering (JEC) Q3 EPS $1.40/$3.17B vs. est. $1.24/$3.09B; raises year EPS view to $4.75-$5.00 from prior $4.45-$4.85

·     Diamond Offshore (DO) Q2 adj. EPS loss (99c)/$216.71M vs. est. loss (88c)/$230.11M

·     Williams (WMB) downgraded to Market Perform from Outperform at Bernstein

·     CF Industries (CF) upgraded to Neutral from Underperform at Bank America

·     Univar Inc. (UNVR) said Q2 profit fell and the company is cutting its full-year adjusted EBITDA guidance due to decreased demand; now sees its adjusted EBITDA guidance for the full-year to $725M-$740M down from $740M-$760M prior citing the cut to lower-than-expected demand for chemicals and ingredients

 

Financials

·     Berkshire Hathaway (BRK/A) Q2 net earnings $14.07B vs. $12.01B last year; Q2 operating earnings $6.14B versus $6.89B last year

·     HSBC Holdings PLC (HSBC) said its CEO John Flint is out and new leadership is needed as the bank’s global commercial banking head, Noel Quinn, will take temporary charge of the CEO role while a search is carried out

·     Wells Fargo (WFC) said late Friday it establishes accruals for legal actions when potential losses associated with the actions become probable and the costs can be reasonably estimated; said the high end of the range of reasonably possible potential losses in excess of the company’s accrual for probable and estimable losses was approximately $3.9B as of June 30, 2019

 

Healthcare

·     GlycoMimetics (GLYC) shares drop after partner Pfizer (PFE) said a late-stage trial testing GLYC’s drug rivipansel failed the main goal of time to readiness-for-discharge from a hospital for patients with a complication of sickle cell disease

 

Technology, Media & Telecom

·     Tech companies underperform as shares of Apple Inc. (AAPL) slide over 2% after an escalation in U.S.-China trade tensions. Last week, President Donald Trump announced plans to impose additional tariffs on $300B of Chinese imports on Sept. 1 and China vowed to retaliate. China let its currency weaken below 7 yuan per dollar on Monday, an 11-year low. Semiconductors are also under pressure this morning in a broad technology sell-off

·     ON Semiconductor (ON) Q2 adjusted EPS 42c/$1.35B vs. est. 42c/$1.38B; sees Q3 revenue $1.36B-$1.41B vs. est. $1.46B

·     HP Inc. (HPQ) mentioned positively in Barron’s saying the stock is now 15% below its February peak, but should recover those losses over time, noting shares trade at less than nine times earnings estimates for the coming year, making it the sixth cheapest name in the S&P 500 Info Tech sector.

·     Fox Corp. (FOXA) struck a deal to buy a majority stake in Credible Labs Inc., a marketplace for consumer-lending information, for $265 million, the company said

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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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