Early Look

Monday, June 10, 2019

Futures	Up/Down	%	Last
DJ Industrials	120.00	0.46%	26,127
S&P 500	11.50	0.40%	2,886
Nasdaq	31.75	0.43%	7,451

 

 

Stock futures are looking at a strong open, adding to last week’s solid gains amid news on the trade front with both Mexico and China, as well as a large M&A deal in the defense sector. This weekend President Trump said that plans for a 5% tariff on Mexican goods had been indefinitely suspended, which boosted sentiment in markets (but warned Mexico in a series of tweets on Sunday that if cooperation should fail, “we can always go back to our previous, very profitable, position of tariffs).” In stock news over the weekend, a big M&A deal in the defense sector with United Technologies (UTX) merging with Raytheon (RTN) to form a company with annual revenue of about $75B. On the trade front, White House’s acting budget chief Russell Vought is pushing for a delay in implementing key provisions of a law that restricts U.S. government’s business with Huawei Technologies Co., citing the burdens on U.S. companies that use Huawei. The headlines all point to a strong open, building on last weeks gains. In Asian markets, The Nikkei Index gained 249 points to settle at 21,134, the Shanghai Index gained 24 points to 2,852 and the Hang Seng Index jumped 613 points to 27,578. In Europe, the German DAX is up around 90 points to trade just under 12,050, while the FTSE 100 rose 35 points.

 

Stocks surged on Friday, adding to its best weekly gains since November, as the Dow Industrials rallied after lackluster employment figures raised expectations for a potential interest-rate cut from the Federal Reserve in the next two months. For the week, the Dow Industrials rose 4.7%, the S&P 500 climbed 4.4%, and the Nasdaq Composite gained 3.9%. The Dow Industrials also snapped its 6-week losing streak and posted first 5-day win streak since January and rose more than 1,000 points from last Monday. The rising expectations of a Fed rate cut has sent Treasury’s higher, sending yields plunging over the last two weeks. The shorter-term2-year Treasury yield fell over 9 bps in the week following last week’s 23 bps drop while the US 10-year Treasury yields fell 6 bps following previous week’s 19 bps decrease. However, trade tensions between the U.S. and China (and latest with Mexico) that sparked the recent downdraft in stocks remain unresolved. Fed fund futures have placed a 79% chance of a rate cut at the Fed’s July meeting, and a 95% chance of at least one cut by the meeting after that in September.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 29.85 points, or 1.05%, to 2,873.34

·     The Dow Jones Industrial Average rose 263.28 points, or 1.02%, to 25,983.94

·     The Nasdaq Composite spiked 126.55 points, or 1.66%, to 7,742.10

·     The Russell 2000 Index advanced 10.85 points, or 0.72% to 1,514.39

 

Events Calendar for Today

·     10:00 AM EST    JOLTs Job openings for April…est. 7496

 

Earnings Calendar:

·     Earnings Before the Open: FGP, SHLO, THO

·     Earnings After the Close: ADXS, ASNA, CASY, ENZ, LAKE, LOVE

 

Other Key Events:

·     American Diabetes Association (ADA) Scientific Sessions, 6/7-6/11 in San Francisco

·     E3 2019 Conference, 6/10-6/14, in Los Angeles, CA

·     FBN Silicon Valley Technology Tour, 6/10-6/11, in Silicon Valley

 

 

Macro	Up/Down	Last
WTI Crude	0.14	54.13
Brent	-0.06	63.23
Gold	-12.70	1,328.00
EUR/USD	-0.0026	1.1308
JPY/USD	0.37	108.56
10-Year Note	+0.021	2.14%

 

 

World News

·     China’s exports unexpectedly returned to growth in May despite higher U.S. tariffs, but imports fell; China’s May exports rose 1.1% from a year earlier, surprising analysts which expected exports to have fallen 3.8% from a year earlier

·     China’s imports dropped 8.5% in May, leaving the country with a trade surplus of $41.65 billion for the month

·     Japan’s economy grew an annualized 2.2% in January-March, stronger than economists’ forecast for 2.1% annualized growth and the preliminary reading of the same rate of expansion, Cabinet Office data showed

·     The UK pound fell below $1.27 after figures showed gross domestic product in the UK had declined in April, increasing concerns about the health of the economy

 

Sector News Breakdown

Consumer

·     Thor Industries (THO) Q3 EPS $1.65/$2.51B vs. est. $1.65/$2.72B; Q3 gross margins 11.7%

·     Nissan (NSANY) is set to ask Renault to significantly cut its 43.4% stake in the Japanese car maker in return for supporting an FCA-Renault merger, Reuters reports https://on.mktw.net/2EZCs9W

·     Late Friday, Uber Technologies (UBER) said COO Barney Harford, marketing chief Rebecca Messina are leaving after the company’s tumultuous IPO

·     Kraft Heinz (KHC) said an internal investigation did not identify any misconduct by the senior management team

 

Energy, Industrials & Materials

·     United Technologies Corp. (UTX) agreed to buy defense contractor Raytheon Co. (RTN) over the weekend in an all-stock deal, forming an aerospace and defense giant with $74 billion in sales. The new entity will be called Raytheon Technologies Corp. when the deal closes in the first half of 2020. Raytheon shareholders will receive 2.3348 shares in the new company for every share they currently own https://bloom.bg/2WzoaY8

·     United Technologies (UTX) upgraded to Buy from Neutral at Seaport Global

·     The Rice Team, shareholders of EQT Corporation (EQT), today sent a letter to EQT shareholders seeking to correct a number of false claims that EQT has made in its efforts to mislead shareholders. The letter also addresses a number of personal attacks that EQT has made against the Rice Team

·     China increased its gold purchases for the sixth month running in May, taking its total reserves to 1,916 tonnes

 

Financials

·     JPMorgan (JPM) mentioned favorably in Barron’s saying falling interest rates and a threatening economic slowdown bode ill for U.S. banks, and their stocks have fallen out of favor, but there are some compelling reasons to embrace the banks, especially JPMorgan, saying it strengths are underappreciated, with shares trading for 11x projected 2019 earnings of $10 a share

·     Lazard (LAZ) downgraded to Neutral from Buy at UBS

 

Healthcare

·     AstraZeneca PLC (AZN) said that a phase 3 study of diabetes medication Farxiga showed the drug lowered the risk of kidney-function decline. The data from the Declare-Timi 58 trial showed that patients with type-2 diabetes administered Farxiga showed a 47% reduction in the relative risk of the composite renal-specific outcome of kidney function decline

·     Spark Therapeutics (ONCE) shares fell -19% as the company and Roche (which agreed to buy them), received requests for more information and documentary material from the U.S. FTC in connection with the agency’s review of the pending deal

·     Provention Bio says (PRVB) shares rose 60% after results from the NIH-sponsored “At-Risk” study published in the New England Journal of Medicine show a single course of the company’s PRV-031 (Teplizumab) delays Type 1 diabetes onset in high-risk individuals by at least two years.

·     Tilray (TLRY) announced that it has signed a non-binding letter of intent with its largest stockholder Privateer for a transaction that will extend the lock-up on and provide for the orderly release of the 75M Tilray shares held by Privateer to Privateer’s equity holders

·     Insys Therapeutics Inc. (INSY) filed for bankruptcy protection after agreeing to pay hundreds of millions of dollars to settle a probe by U.S. prosecutors last week

·     Abbott (ABT) announced new data showing use of its FreeStyle Libre system, the company’s continuous glucose monitoring technology, significantly reduced hemoglobin A1c levels for people living with Type 2 diabetes on intensive insulin therapy.

·     Medtronic (MDT) announced that it has initiated the company’s pivotal trial for its next-generation Guardian continuous glucose monitoring sensor designed to improve accuracy and overall system performance

·     Eli Lilly (LLY) said two phase 3 studies show that ultra-rapid lispro (URLi) provided non-inferior A1C reductions compared to Humalog (insulin lispro) at 26 weeks in people with type 1 and type 2 diabetes

 

Technology, Media & Telecom

·     Tencent (TCEHY) and Alibaba (BABA) look like winners according to Barron’s noting Alibaba reported strong quarterly earnings in May but the stock has fallen 22% since Donald Trump took a hawkish turn toward Beijing on May 4, while shares of Tencent (TCEHY) are off 15%

·     Chipmakers Intel Corp (INTC) and Qualcomm Inc (QCOM), mobile research firm InterDigital Wireless Inc and South Korean carrier LG Uplus have restricted employees from informal conversations with Huawei – Reuters

·     Emcore (EMKR) cuts Q3 revenue view to $20M-$21M from $21M-$23M (vs. est. $23.69M) citing the negative impact to Emcore’s chip business from the Huawei-related U.S. export restrictions

·     Disney’s (DIS) $200 million “Dark Phoenix” earned a franchise low of $33 million from 3,721 North American locations over the weekend for a second-place finish, according to studio estimates Sunday. Comcast’s (CMCSA) “The Secret Life of Pets 2” grossed an estimated $47.1 million in ticket sales