Morning Preview: May 17, 2018

Terrie AmengualDaily Market Insights

Early Look

Thursday, May 17, 18

U.S. stock futures are slipping as shares of Dow component CSCO slides as forecasts missed consensus expectations, while markets prepare for earnings from retailing giant (and also Dow component) Wal-Mart later this morning. Retailers got a boost on Thursday after department store Macy’s posted a quarterly beat and raise. The energy sector will be in focus after Brent oil rose to $80 a barrel for the first time since 2014 as markets prepare for the impact of renewed sanctions on OPEC member Iran. Rising borrowing costs also on investor minds, with the 10-year yield holds around the 3.10% level for the first time since 2011, though major averages have held up relatively well despite the recent jump in rates and the U.S. dollar which remains near 2018 highs. Standing out yesterday, the small-cap benchmark Russell 2000 index which hit an all-time high of 1,620.64. The index also closed at a record, ending at 1,616.37, a gain of 16.03 points, or 1%. In Asian markets, The Nikkei Index gained 121 points to settle at 22,838, the Shanghai Index fell -15 points to end at 3,154 and the Hang Seng Index fell -168 points to end at 30,942. In Europe, the German DAX is up over 40 points, back above the 13,000 level, while the FTSE 100 is up a few points around 7,750. U.K. stocks rose for a third straight session as markets largely ignored a rally in the pound and instead welcomed reports that Britain plans to stay in the customs union after Brexit.

Market Closing Prices Yesterday

· The S&P 500 Index climbed 11.01 points, or 0.41%, to 2,722.46

· The Dow Jones Industrial Average rose 62.52 points, or 0.25%, to 24,768.93

· The Nasdaq Composite gained 46.67 points, or 0.63%, to 7,398.30

· The Russell 2000 Index advanced 16.03 points, or 1.00% to 1,616.37

Events Calendar for Today

· 8:30 AM EST Weekly Jobless Claims…est. 215K

· 8:30 AM EST Continuing Claims…est. 1.78M

· 8:30 AM EST Philly Fed Business Outlook…est. 21.0

· 9:45 AM EST Bloomberg Consumer Comfort Index…prior 55.8

· 10:00 AM EST Leading Index for April…est. 0.4%

· 10:30 AM EST Weekly EIA Natural Gas Inventory Data

· 10:45 AM EST Fed’s Kashkari speaks at moderated Q&A in Minneapolis

Sector News Breakdown

Consumer

· Staples-owner Sycamore offers to buy workplace wholesaler Essendant (ESND); Sycamore is offering to buy the rest of the company for $11.50 per share. Essendant confirmed it received Staples’ bid and said that Genuine Parts had made a pursuant offer of $12 a share, contingent on Essendant’s stock price https://cnb.cx/2rM29Eg

· Jack in the Box (JACK) Q2 operating EPS 80c/$209.8M vs. est. 86c/$213M; 2Q Jack system comp sales -0.1% vs. est. +0.1%, Q2 Jack company comp sales +0.9% vs. est. +0.1% and 2Q Jack franchise comparable sales -0.2% vs. est. +0.1%; announces additional $200M share repurchase

· Flowers Foods (FLO) Q1 adjusted EPS 30c/$1.206B vs. est. 31c/$1.2B; backs FY18 adjusted EPS view $1.04-$1.16 and revs about $3.921B-$3.982B vs. est. $1.10/$3.96B

· Ford Motor (F) resuming production of F-150 pickup at Dearborn Truck Plant on Friday; has repaired supply chain for Super Duty; production targeted to restart by Monday for Super Duty at Kentucky Truck Plant and F-150 at Kansas City Assembly Plant; Ford reaffirms 2018 adj. EPS guidance of $1.45-$1.70, sees adverse impact of 12c-14c per share in 2Q due to lost production

· The National Highway Traffic Safety Administration confirmed it has opened a probe into a Tesla (TSLA) crash in South Jordan, Utah

· Herbalife Nutrition (HLF) announced the adjusted price range of its tender offer for Herbalife Nutrition’s common shares, par value $0.0005 per share, wherein the company is seeking to purchase up to $600M in shares. Following the adjustment to reflect the company’s recently implemented two-for-one stock split, the cash purchase price in the tender offer shall not be greater than $54 nor less than $49 share, with the exact price to be determined through a “modified Dutch auction” pricing mechanism

· Chegg (CHGG) has acquired WriteLab for $15M, an AI-enhanced writing platform that teaches students grammar, sentence structure, writing style, and offers instant feedback to help students revise, edit, and improve their written work

· Group 1 Automotive (GPI) raises share repurchase authorization to $126M

· British game maker Bossa Studios will release Worlds Adrift on Thursday, an ambitious adventure game designed to appeal to the Minecraft generation that has taken three years and 50,000 gamers to create

Energy

· Williams (WMB) to buy Williams Partners (WPZ) in all-stock deal valued at $10.5 billion https://reut.rs/2KwupBT

· Enbridge Inc (ENB) said it would bring its sponsored vehicles and all liquids and gas pipeline assets under a single listed entity. Enbridge said it would buy in outstanding shares of its various corporate units, including Spectra Energy Partners (SEP), for a value of C$11.4 billion ($8.94 billion), or 272 million of its common shares. https://reut.rs/2Kx8KcE

· EnerSys (ENS) Q4 EPS $1.24/$683M vs. est. $1.23/$669.22M

Financials

· AIG Inc. (AIG) upgraded to buy from neutral at UBS with $65 tgt

· Curo Group (CURO) 5M share Secondary priced at $23.00

Healthcare

· Jounce (JNCE) shares down over 30% after results from a cancer drug combo released in an abstract ahead of a key cancer conference next month. JNCE’s JTX-2011 in combination with Opdivo had two partial responses (PR) among 19 patients with gastric cancer and two patients with ongoing stable disease in Phase 1/2 results; one partial response in 15 patients in Phase 2 triple-negative breast cancer results

· Nektar (NKTR) may be active after ASCO abstracts posted last night showed lower response rates than previously reported for Nektar’s NKTR-214 in combination with Bristol-Myers Squibb’s Opdivo for melanoma

· Merck KGaA rises as TGF-β Trap bifunctional fusion protein M7824 and tepotinib show promise in studies to be presented at the American Society of Clinical Oncology conference

Industrials & Materials

· Axon (AAXN) 4.3M share Secondary priced at $53.00

· Aircastle (AYR) files to sell 7.89M shares of common stock for holders

· Flir Systems (FLIR) sees FY18 adjusted EPS $2.11-$2.16 vs. est. $2.15 and sees FY18 revenue $1.76B-$1.79B vs. est. $1.79B; expects first half growth to be stronger than the second half and sees annual revenue growth for the next 3 years around 5%

· Atkore (ATKR) files to sell 7.23M shares of common stock for holders

· Ocean Rig UDW (ORIG) Q1 EPS 60c/$194.1M vs. est. 80c/$168.34M

Technology, Media & Telecom

· Cisco (CSCO) Q3 EPS 66c/$12.5B vs. est. 65c/$12.43B; Q3 cash flow from operations $2.4B, a decrease of 28%; Q3 operating income was $3.1B, down 1%, with GAAP operating margin of 25.1%; sees 4Q adjusted EPS 68c-70c on revs up 4%-6% vs. est. 69c/+4.79%

· Take-Two (TTWO) shares fell -3%; Q4 adjusted EPS 71c/$411.3M vs. est. 63c/$445.36M; sees Q1 net revenue $215M-$265M on EPS loss (5c)-5c vs. est. $356.74M/43c; sees Q1 net bookings $215M-$265M after reporting Q4 net bookings $411.4M vs. $407.1M last year; sees fiscal 2019 adj. revenue about $2.67B-$2.77B and EPS $3.97-$4.22 vs. est. $2.87B/$4.77

· Pluralsight (PS) 20.7M share IPO priced at $15.00

· Netease (NTES) shares fall -8%; Q1 EPS $1.61/$2.3B vs. est. $1.97/$2.18B; Q1 online game service revenues down 18.4%; Q1 E-commerce net revenues up 101%

· Acxiom (ACXM) Q4 adjusted EPS 27c/$245M vs. est. 21c/$239.88M; sees FY19 adjusted EPS 90c-95c on revs $935M-$955M vs. est. $1.02/$972.37M

· Model N (MODN) Q2 adjusted EPS loss (2c)/$39.23M vs. est. loss (4c)/$38.27M; narrows FY18 EPS loss view to (7c)-(5c) from (10c)-(3c) vs. est. loss (6c) and raises FY18 revenue view to $152M-$154M from $149M-$151M vs. est. $150.41M

· Amazon.com, Inc. (AMZN) announced plans to open its first fulfillment center in Tucson, creating more than 1,500 full-time jobs with competitive hourly wages and a comprehensive benefits package including healthcare, 401(k) and company stock awards starting on day one

· China regulatory authorities have approved the $18 billion sale of Toshiba Corp’s (6502.T) chip unit to a consortium led by U.S. private equity firm Bain Capital, Japanese public broadcaster NHK reported on Thursday https://reut.rs/2Irs7TK

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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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