Morning Preview: September 04, 2019

Auto PostDaily Market Report

Early Look

Wednesday, September 4, 2019

Futures

Up/Down

%

Last

DJ Industrials

190.00

0.73%

26,312

S&P 500

21.50

0.73%

2,927

Nasdaq

73.50

0.96%

7,691

 

 

U.S. stock futures are spiking, gaining traction after yesterday’s market decline following reports that Hong Kong leader Carrie Lam announced the withdrawal of the extradition bill that has sparked the nearly three-month old protests, triggering gains for stocks across the globe, especially in Hong Kong as stocks rose nearly 1,000 points. The bill would have allowed Hong Kong residents to be sent to mainland China for trials, sparking massive protests that have become increasingly violent over the last few weeks. The news has lifted stocks while pulling back defensive/safe-haven assets that had risen the prior day including Treasury prices and precious metals. Speaking of, precious metals have spiked over the last month, with silver outperforming rising 4.5% on Tuesday after jumping 13.3% in August compared with a 7.6% gain for gold. U.S. equities dropped on the first trading day of August yesterday as Chinese and American officials struggled to agree on a schedule for trade negotiations and tariffs went into effect for both China and the U.S. In Asian markets overnight, the Nikkei Index rose 23 points to 2,949, the Shanghai Index gained 27 points to 2,957 and the Hang Seng Index surged 995 points (or 3.9%) as Hong Kong’s Lam withdraws extradition bill that triggered protests. In Europe, the German DAX is higher by 125 points to move back above the 12,000 level, while the FTSE 100 is up 25 points to 7,290.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -20.19 points, or 0.69%, to 2,906.27

·     The Dow Jones Industrial Average fell -285.26 points, or 1.08%, to 26,118.02

·     The Nasdaq Composite slid -88.72 points, or 1.11%, to 7,874.16

·     The Russell 2000 Index declined -88.72 points, or 1.51% to 1,472.28

 

Events Calendar for Today

·     7:00 AM EST      MBA Mortgage Applications Data

·     8:30 AM EST      Trade Balance for July

·     2:00 PM EST       Fed’s Beige Book released

·     4:30 PM EST       Weekly API inventory data

·     Fed’s Williams speaks in New York at 9:25 AM EST

·     Fed’s Bullard and Bowman at event in St. Louis

·     Fed’s Kashkari speaks in Townhall event in Minnesota at 1:00 PM EST

 

Earnings Calendar:

·     Earnings Before the Open: AEO, HOME, NAV, VRAY

·     Earnings After the Close: AVAV, CLDR, MDB, MIK, MIND, PANW, PRCP, PVTL, REVG, SMAR, VRNT, WORK

 

Other Key Events:

·     Baird 2019 Global Healthcare Conference, 9/4-9/5, in New York

·     Barclay’s CEO Energy-Power Conference, 9/3-9/5, in New York

·     Barclay’s Global Consumer Staples Conference, 9/3-9/5, in Boston, MA

·     Citigroup 14th Annual Biotech Conference, 9/4-9/5, in Boston, MA

·     Citigroup 2019 Global Technology Conference, 9/4-9/6, in New York

·     Cowen 12th Annual Global Transportation Conference, 9/4-9/5, in Boston, MA

·     DA Davidson 18th Annual Technology Conference, 9/4, in New York

·     Deutsche Bank 9th annual Aircraft, Finance and Leasing Conference, 9/3-9.4, in New York

·     Goldman Sachs 26th annual Global Retailing Conference, 9/4-9/5, in New York

·     KBW Inc. Insurance Conference, 9/4-9/5, in New York

·     Wells Fargo Healthcare Conference, 9/4-9/5 in Boston, MA

·     European Society of Cardiology (ESC) Congress Paris 2019, 8/31-9/4, in Paris France

·     Monthly US auto sales for August

 

 

Macro

Up/Down

Last

WTI Crude

0.46

54.40

Brent

0.34

58.60

Gold

-10.10

1,545.80

EUR/USD

0.0045

1.1019

JPY/USD

0.26

106.20

10-Year Note

+0.033

1.4909%

 

 

World News

·     Hong Kong stocks surged on reports that Carrie Lam, the territory’s chief executive, was set to withdraw the extradition bill that had set off twelve weeks of protests in the territory

·     The Caixin China services purchasing managers index (PMI) rose to 52.1 in August from 51.6 in July, Caixin Media Co. and research firm Markit said.

·     UK PM Boris Johnson lost control of Brexit after MPs paved the way to force an extension to the October 31 deadline. The prime minister also faced being unable to deliver his threat of calling a snap election after suffering a humiliating defeat in his first Commons vote

·     Investor Intelligence poll shows bullishness among equity newsletter writers rose to 44.9% from last week’s 43.9% (the lowest since June) while bearish sentiment was unchanged at 18.7% and those expecting a correction slips to 36.4% from last week’s 37.4%

·     Australia’s economy is growing at its slowest pace since the global financial crisis of 2009, as cautious consumers keep a tight lid on spending in spite of a surge in the nation’s exports

·     Hong Kong’s private sector fell to a fresh decade-low in August as the escalating trade war and political demonstrations hit demand

 

Sector News Breakdown

Consumer

·     Tyson Foods, Inc. (TSN) shares fell -5% as lowers guidance; cuts year EPS to $5.30-$5.70 from prior view $5.75-$6.10 saying it is experiencing short-term challenges that are negatively affecting Q4 earnings including margin compression related to a reversal of a gain on mark to market grain derivatives recognized in Q3, commodity market volatility, and implementation of enhanced food safety initiatives

·     Camping World (CWH) announced a plan to strategically shift away from locations where the company does not have the ability or where it is not feasible to sell and/or service RVs; evaluating shift or closing of up to 37 retail locations (currently operates 165 locations)

·     Scientific Games (SGMS) announces that it has been chosen by the winning joint venture for the Turkish National Lottery to exclusively supply lottery instant games, its latest generation WAVE retail technology and supporting systems for 10 years in the nation of more than 80M

·     Superior Industries (SUP) announced that its board determined to suspend the quarterly common dividend

·     Zillow Group (ZG) reports proposed offerings of $500 Million of convertible senior notes due 2024 and $500 million of convertible senior notes due 2026

·     G-III Apparel (GIII) downgraded to Neutral from Buy at Bank America

·     Campbell Soup (CPB) upgraded to Neutral from Underweight at Piper Jaffray

 

Energy, Industrials and Materials

·     Navistar (NAV) Q3 EPS $1.56/$3.04B vs. est. $1.22/$2.91B; still sees 2019 revenue $11.25B-$11.75B vs. est. $11.5B and guides 2019 adjusted EBITDA is expected to be $875M-$925M

·     Ferroglobe (GSM) Q2 EPS loss (13c)/$409.5M vs. est. loss (11c)/$467M; 2Q total shipments 232,903 MT, -14% YoY

·     Safe Bulkers (SB) Q2 adjusted EPS loss (1c)/$45.4M vs. est. up 1c/$44M

 

Financials

·     Treasury Sec. Steven Mnuchin and Mark Calabria, director of the Federal Housing Finance Agency, will testify on housing reform at a Senate Banking Committee hearing on Sept. 10, which Cowen says is a positive for Fannie Mae (FNMA) and Freddie Mac (FMCC)

·     Redwood Trust (RWT) 12.5M share Spot Secondary priced at $16.08

·     Deutsche Bank’s (DB) CEO has warned about the negative side effects of a likely cut in interest rates by the European Central Bank next week, arguing it would do little to stimulate the economy

 

Healthcare

·     Aerie (AERI) announces offering of $250M of convertible senior notes

·     Addus HomeCare (ADUS) announces offering of 2M shares of common stock

·     HealthEquity (HQY) Q2 EPS 45c/$86.6M vs. est. 35c/$85.32M; Q2 adj Ebitda $40.6M vs. est. $36.3M; guides FY adj EBITDA $138-142M vs prior $135-140M and year EPS $1.10-$1.16 vs. prior $1.28-$1.34 (est. $1.33)

·     Puma Biotechnology, Inc. (PBYI) announced that the U.S. FDA has granted Orphan Drug Designation to NERLYNX® (neratinib) for the treatment of breast cancer patients with brain metastases

·     PRA Health (PRAH) 6.667M share Secondary priced at $97.50

·     Intercept (ICPT) upgraded to Buy from Neutral at Citigroup but cut tgt to $85 from $106

·     Senseonics Holdings, Inc. (SENS) said Blue Cross Blue Shield of Massachusetts and Blue Cross Blue Shield of Idaho are now providing coverage for Eversense CGM for people with diabetes

·     Castle Biosciences (CSTL) Q2 EPS loss ($1.05)/$10.7m vs. est. loss ($1.36)/$7.48M; said as of June 30, 2019, the company’s cash balance was $17.5M

·     Turning Point Therapeutics (TPTX) files to sell 4.5M shares of common stock

 

Technology, Media & Telecom

·     Coupa Software (COUP) Q2 non-GAAP EPS 5c/$95.14M vs. est. loss (10c)/$85.38M; sees FY revenue $369M-$372M up from prior view of $342M-$344M (est. $345.4M); and guides Q3 revs $95.5M-$96.5M vs. est. $87M while also guides Q3 and year EPS higher; 2Q subscription revs up 51% YoY to $83.5M

·     Box (BOX) rises after Starboard Value discloses activist stake in 13D regulatory filing saying shares were “undervalued and represented an attractive investment opportunity” and may seek talks with holders or other third parties about its investment, according to filing

·     Microchip (MCHP) backs Q2 EPS view $1.37-$1.49 vs. est. $1.44 and currently expects net sales of between $1.323 billion and $1.375 billion, or flat to up 4% sequentially

·     Okta (OKTA) intends to offer $1B of convertible senior notes due 2025 in a private offering

·     Activision Blizzard (ATVI) upgraded to Outperform from Market Perform at BMO Capital

·     Stamp.com (STMP) upgraded to neutral from sell at Roth Capital and upped its tgt to $52 from $32 saying it had a slightly more favorable view of 2020

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Content is provided by Hammerstone Inc., which has no affiliation with Regal Securities, Inc. (“Regal”) This commentary is provided for information purposes only, and is not a recommendation, offer or solicitation by Regal to buy or sell securities or to adopt any investment strategy. Regal has not participated in the creation of the Hammerstone content and does not directly or indirectly endorse the content. Any reliance on this material is at the sole discretion of the reader.

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