Morning Preview: August 20, 2019

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Early Look

Tuesday, August 20, 2019

Futures

Up/Down

Last

DJ Industrials

2.00

26,120

S&P 500

0.50

2,924

Nasdaq

5.50

7,733

 

 

U.S. futures in the U.S. are little changed, managing to hold yesterday’s gains as investors look for earnings in Dow component Home Depot, while they also await details and comments from Fed officials who will gather later this week in Jackson Hole with academics and foreign central bankers to discuss the economic outlook. Fed Chairman Jerome Powell will deliver a closely-watched speech on the challenges facing monetary policy at 10:00 AM EST on Friday. Stocks surged for a second day Monday, rising once again on light volume amid positive comments from President Trump and other officials on trade talks, along with a move by China over the weekend to lower borrowing costs for companies. Monday’s gains are the first consecutive 1% gains for the S&P 500 since November 2018 helped after the Commerce Department said that it has given Chinese telecom giant Huawei Technologies Co. Ltd. another 90-day reprieve during which it can continue to do business with American companies, without the granting of case-by-case licenses that would otherwise be needed. In Europe, the German DAX is up a few points to 11,730, while the FTSE 100 is higher by about 40 points to 7,230. The U.S. dollar is around 3-week highs given the recent hopes on trade.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 34.97 points, or 1.21%, to 2,923.65

·     The Dow Jones Industrial Average rose 249.78 points, or 0.96%, to 26,135.79

·     The Nasdaq Composite surged 106.82 points, or 1.35%, to 8,002.81

·     The Russell 2000 Index advanced 15.21 points, or 1.02% to 1,508.85

 

Events Calendar for Today

·     7:45 AM EST      ICSC Weekly Retail Sales

·     8:55 AM EST      Johnson/Redbook Weekly Sales

·     4:30 PM EST       API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: HD, KSS, MDT, PINC, PLAB, TJX

·     Earnings After the Close: CREE, JKHY, NDSN, SCSC, TOL, URBN

 

 

Macro

Up/Down

Last

WTI Crude

0.08

56.29

EUR/USD

0.0005

1.1081

Gold

3.00

1,514.60

Pound

-0.0051

1.2076

10-Year Note

+0.002

1.598%

 

 

World News

·     The British economy shrank in Q2 for the first time in six and a half years largely because Brexit uncertainties weighed heavily on business investment. The decline was the first since the fourth quarter of 2012, was unexpected vs. the expected reading of flat

·     Boston Fed President Eric Rosengren said late Monday that U.S. central bank should be careful not to cut interest rates too much now because it would push U.S. homeowners and businesses to take on more debt, thus making any recession more painful.

 

Sector News Breakdown

Consumer

·     Home Depot (HD) Q2 EPS $3.17/$30.8B vs. est. $3.08/$30.98B; Q2 comp sales rose 3%; and U.S. comp sales rose 3.1%; backs FY19 EPS view of about $10.03 vs. est. $10.10 and updated its guidance for FY19, a 52-week year compared to FY18, a 53-week year; warned that lumber price deflation, as well as the impact of possible tariffs, will impact its fiscal year sales

·     Lumber Liquidators Holdings Inc. (LL) said that Nancy A. Walsh has been named its chief financial officer, effective Sept. 9. Walsh replaces interim CFO Timothy Mulvaney, who will return to his role as chief accounting officer

·     Apollo Global (APO) is considering steps to buy Hilton Grand Vacations (HGV), and has given the company three options to consider: It could buy Hilton Grand at a premium to its share price, merge the company with smaller Apollo-owned rival Diamond Resorts and keep the combined business public, or tender for Hilton Grand shares at a premium -NY Post https://bit.ly/2Hgja0S

 

Energy, Industrials & Materials

·     BHP Group Ltd. (BHP) said its annual net profit more than doubled because of strong iron-ore prices; BHP posted a profit of $8.31B for the 12 months through June which compared to $3.71B for the fiscal year prior when it absorbed $5.23B in one-off items, linked to the write-down of its former U.S. shale assets, U.S. tax reform and a 2015 dam failure in Brazil.

·     C&J Energy Services (CJ) upgraded to Buy from Hold at Jefferies

·     United States Steel Corp. (X) will temporarily lay off up to 200 workers from a facility in Michigan, Reuters reported and said production at the Great Lakes facility, near Detroit, would be halted, perhaps for more than six months.

 

Healthcare

·     Elanco Animal Health (ELAN) said it’s buying Bayer’s (BAYRY) animal health business for $7.6B; Elanco said it will pay $5.32B in cash and $2.28B in stock. Elanco said it intends to fund the cash consideration through a combination of new debt and equity https://on.mktw.net/2ZcgxmX

·     AstraZeneca PLC (AZN) said that Farxiga met the primary endpoint in a Phase 3 trial for the treatment of patients with heart failure as it reduced the risk of cardiovascular death or worsening of heart failure when added to standard of care

·     Medtronic (MDT) Q1 adjusted EPS $1.26/$7.5B vs. est. $1.18/$7.4B; raises FY20 adjusted EPS view to $5.54-$5.60 from $5.44-$5.50 (est. $5.48) and said continues to expect revenue growth in its fiscal year 2020 to approximate 4% on an organic basis. If current exchange rates hold, revenue growth in FY20 would be negatively affected by 0.8%-1.2%

·     Moderna (MRNA) announced that the U.S. FDA has granted Fast Track designation for its investigational Zika vaccine currently being evaluated in a Phase 1 study for the prevention of Zika virus infection in healthy adults

·     Nabriva Therapeutics (NBRV) shares rose overnight as announced late Monday that the FDA has approved its new drug applications for the oral and intravenous formulations of Xenleta for the treatment of community-acquired bacterial pneumonia, or CABP, in adults

·     Sarepta Therapeutics (SRPT) announced it had received a Complete Response Letter from the FDA regarding the NDA seeking accelerated approval of golodirsen injection for the treatment of DMD in patients

·     Boston Scientific Corporation (BSX) announced the U.S. FDA approval of its ImageReady MRI labeling for the Vercise Gevia Deep Brain Stimulation System

·     Synlogic (SYBX) announced that it is discontinuing development of SYNB1020, an early stage clinical product candidate for the treatment of hyperammonemia based on top-line data from an interim analysis of a randomized, double-blind, placebo-controlled Phase 1b/2a study of the Synthetic Biotic medicine in 23 patients with cirrhosis and elevated blood ammonia

 

Technology, Media & Telecom

·     Baidu (BIDU) shares rose over 8%; Q2 adjusted EPS $1.47/$3.84B vs. est. 87c/$3.66B; sees Q3 revenue $3.84B-$4.07B compared to consensus $3.97B; daily active users (DAUs) in June reached 188M, growing 27% year over year

·     iQIYI (IQ) Q2 EPS loss (49c)/$1.0B vs. es.t loss (44c)/$996.9M; Q2 total subscribing members 100.5M, up 50% from last year (compares to 67.1M of total subscribing members as of June 30, 2018); sees Q3 revenue $1.03B-$1.09B vs. est. $1.11B

·     Apple Inc. (AAPL) has committed to spending more than $6 billion on original content for its upcoming streaming-video service, which it expects to launch within two months, the Financial Times reported Monday. That would beat the launch of rival Disney+ from Walt Disney Co. (DIS) which is set to debut Nov. 12. Apple has not yet announced a price for its TV+ service, nor many other details, though a separate Bloomberg News report Monday said Apple is weighing a price of $9.99 a month, with a likely free trial period https://on.mktw.net/2NfQbhA

·     A former Walt Disney (DIS) accountant says she has filed a series of whistleblower tips with the Securities and Exchange Commission alleging the company has materially overstated revenue for years, this according to Marketwatch.com late Monday. Disney says in response to whistleblower claims that they are “utterly without merit”

·     Fabrinet (FN) shares fell; Q4 EPS $1.00/$405.1Mvs. est. 94c/$399.7M; sees Q1 EPS 80c-84c on revs $386M-$394M below est. 96c/$407.3M; said they remain optimistic that leadership as a trusted manufacturing partner positions us for continued success in FY20 and beyond

·     Sea Limited (SE) Q2 revenue $436.15M while adjusted revenue $665.42M; Quarterly active users, or QAUs, reached 310.5M, an increase of 93.3% year-on-year from 160.6M for Q2 of 2018. Q2 average revenue per user was $1.40 compared to 90c for Q2 of 2018

·     A group of state attorneys general intends to proceed with a joint antitrust probe of large technology companies, the WSJ reported, citing people familiar with the matter. The effort is expected to be formally launched as soon as next month and will likely focus on whether a few dominant technology platforms use their marketplace powers to harm competition

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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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