Morning Preview: January 15, 2020

Darwin SarazaDaily Market Report

Early Look

Wednesday, January 15, 2020

Futures

Up/Down

%

Last

DJ Industrials

-12.00

0.04%

28,922

S&P 500

-1.50

0.03%

3,286

Nasdaq

-2.50

0.03%

9,060

 

 

Stock futures inching lower, as weakness in retailers following Target’s (TGT) weaker Q4 comp sales and holiday outlook disappoint, and overshadows positive sentiment tied to trade and financial bank earnings. U.S. stocks closed mixed on Tuesday as a midday report saying existing tariffs on Chinese imports would likely stay in place until after the U.S. elections took the wind out of sails for stocks that had benefitted earlier from better earnings results out of banks (JPM, Citi) and airlines (DAL). All three major indexes had rallied to intraday records in earlier trade as earnings season got under way. As part of a U.S.-China trade deal, expected to be signed in Washington later today, China will pledge to buy $200 billion of U.S. goods over a two-year period in four industries, according to several reports. In Asian markets, The Nikkei Index fell -108 points to 23,916, the Shanghai Index fell -16 points to 3,090 and the Hang Seng Index dropped -111 points to 28,773. In Europe, the German DAX is down about -15 points to 13,440, while the FTSE 100 is little changed at 7,625. A busy morning of earnings, especially in the banking sector with BAC, PNC, USB, BLK and GS all expected to report his morning.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -4.98 points, or 0.15%, to 3,283.15

·     The Dow Jones Industrial Average rose 32.62 points, or 0.11%, to 28,939.67

·     The Nasdaq Composite dropped -22.60 points, or 0.24%, to 9,251.33

·     The Russell 2000 Index advanced 6.13 points, or 0.37% to 1,675.74

 

Events Calendar for Today

·     7:00 AM EST      MBA Mortgage Applications Data

·     8:30 AM EST      Empire Manufacturing Index for January…est. 3.6

·     8:30 AM EST      Producer Price Index (PPI) MoM for December…est. 0.2%

·     8:30 AM EST      PPI (PPI) core (ex: food & energy) MoM for December…est. 0.2%

·     8:30 AM EST      Producer Price Index (PPI) YoY for December…est. 1.3%

·     8:30 AM EST      PPI (PPI) core (ex: food & energy) YoY for December…est. 1.3%

·     10:30 AM EST    Weekly DOE Inventory Data

·     2:00 PM EST       Fed Beige Book released

 

Earnings Calendar:

·     Earnings Before the Open: BAC, GS, PNC, UNH, USB

·     Earnings After the Close: AA, BLK, EGBN, HWC, VOLT

 

Other Key Events:

·     ICR Annual Xchange Conference, 1/13-1/15, in Orlando, FL

·     Citigroup European Utilities & Infrastructure Conference, 1/15-1/16, in England

·     JPMorgan Healthcare Conference, 1/13-1/16, in San Francisco, CA

·     Needham Annual Growth Conference, 1/14-1/15, in New York

·     UBS Midstream, MLP and Utility conference, 1/13-1/15, in Utah

 

 

Macro

Up/Down

Last

WTI Crude

-0.06

58.17

Brent

-0.11

64.38

Gold

8.40

1,553.00

EUR/USD

0.002

1.1148

JPY/USD

-0.14

109.85

10-Year Note

-0.02

1.789%

 

 

World News

·     German economic growth slowed last year to its lowest rate in six years as global trade tensions, export weakness and a persistent downturn in the automotive industry took their toll

·     U.K. inflation eased to 1.3%, the slowest pace in three-years, in December from 1.5% the previous month. Consensus was for 1.5%. The core reading decelerated to 1.4% from 1.7%.

·     The BOJ won’t hesitate to add stimulus if there’s a greater risk of losing inflation momentum, Haruhiko Kuroda said; inflation is expected to gradually pick up toward the 2% target

 

Sector News Breakdown

Consumer

·     Target Corp. (TGT) shares fall -8%; guides Q4 comp sales 1.4%, below the 3.8% estimate and vs. prior view of 3%-4% as sales comps growth in-line with Nov/Dec levels; said comparable digital sales grew 19% in November/December period; reaffirms Q4 EPS outlook

·     Beyond Meat (BYND) downgraded to Market Perform from Outperform at Bernstein

·     Beyond Meat (BYND) announced a multi-year pea protein supply agreement with Roquette, a global leader in plant-based ingredients and a pioneer of plant proteins

 

Energy, Industrials & Materials

·     PG&E Corp (PCG) is nearing deal with creditors, led by Elliott Management and Pacific Investment Management Co, that would entitle them to a mix of equity and new debt if they scrap their rival restructuring plan, according to Bloomberg late Tuesday

·     Spirit AeroSystems (SPR) downgraded to neutral from buy at Bank America

·     The American Petroleum Institute (API) reported that U.S. crude supplies rose by 1.1M barrels for the week ended Jan. 10, showed a stockpile climb of 3.2M barrels for gasoline, while distillate stocks rose by 6.8M barrels

·     Kaiser Aluminum (KALU) increases quarterly dividend 12% to 27c

 

Financials

·     Bank America (BAC) Q4 EPS 74c and equities trading revs ex-DVA $1.02B vs. est. $1.08B; Q4 trading revs ex-DVA $2.86B vs. est. $2.76B; Q4 net interest income FTE $12.14B vs. est. $12.09B; investment banking revs $1.5B vs. est. $1.42B and FICC trading revs $1.84B vs. est. $1.68B

·     Blackrock (BLK) Q4 adjusted EPS $8.34/revs $3.98B vs. est. $7.69 and $385B; while assets under management at $7.43T vs. est. $7.28T; said Q4 iShares net inflows $75.2B

·     Chubb Limited (CB) said net catastrophe loss estimates for Q4 of $430M pre-tax, or $353M after tax was primarily attributable to severe weather-related events around the globe including tornadoes in Texas, wildfires in California, and Typhoon Hagibis in Japan, as well as civil unrest in Hong Kong and Chile

·     CNO Financial Group, Inc. (CNO) announced a new operating model that realigns the company from three operating business segments into two divisions—Consumer and Worksite. The new structure will create a leaner, more integrated, customer-centric organization that better positions CNO Financial for long-term success and shareholder value creation; sees pretax charge about $14Mm in 4Q19; sees gross annual spending reduction about $22Mm by end 2020

·     Cubic (CUB) sees 1Q Ebitda in high single-digit to low double-digit millions, translating to mid to high single-digit millions operating loss for the quarter; reaffirms 2020 forecast for FY sales

·     Owl Rock (ORCC) authorizes $150M stock buyback with market price below reported NAV

 

Healthcare

·     UnitedHealth (UNH) reports Q4 EPS $3.90/$60.9B vs. est. $3.78/$61.04B; backs FY20 EPS view of $16.25-$16.55 vs. est. $16.46; Premiums increased 6.0% to $47.63B, while products fell 10.8% to $7.63B missing views and Optum revenue increased 8.0%.

·     Community Health (CYH) sees 2020 adjusted Ebitda $1.65B-$1.8B vs. est. $1.62B and sees 2020 operating revenue $12.4 billion to $12.8 billion

·     Integra LifeSciences (IART) sees prelim Q4 revs at or near low-end of $395M-$400M range (est. $398M)

·     Heska (HSKA) announced that the company has entered into an agreement to acquire 100% of the capital stock of scil animal care company GmbH from Covetrus (CVET) for $125M in cash

·     Momenta (MNTA) upgraded to Overweight from Neutral at JPMorgan

·     Nektar Therapeutics [NKTR) shares fell -13%; after an FDA advisory panel voted against recommending one of the drug maker’s painkillers for approval; members of the committees voted 27-0 against recommending approval for Nektar’s NKTR-181 drug to treat lower back pain on the grounds it could be easily abused

 

Technology, Media & Telecom

·     Fluent (FLNT) raises FY19 revenue view to $280.8M-$281.8M from $265M-$267M (est. $266.05M) which reflects Q4 revenue $79.1M-$80.1M (above est. $64.3M) and media margin now est. at $93M-$94M up from prior view $87M-$88M

·     IIVI Incorporated (IIVI) announced the introduction of its electro-optic modulators, based on proprietary crystal technology, for ultrafast lasers in materials processing

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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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