Morning Preview: June 13, 2018

Terrie AmengualDaily Market Insights

Early Look

Wednesday, June 13, 2018

Stock futures are edging higher ahead of the expected rate decision from the Federal Reserve, which is widely expected to increase rates by a quarter of a percentage point and offer details on path forward for monetary policy. Markets have priced in expectations that the Fed will lift the target range for the federal-funds rate to a range between 1.75% to 2%, from 1.5% to 1.75%, marking the second rate hike this year, though given the improved economic data and rising inflation reports, markets are also anticipating for two further hikes in 2018, bringing the total to four. The central bank’s updated “dot-plot”, a chart of the projections for interest rates of Fed members, also will offer a clearer outline for how many rate hikes are coming, and will be released at 2:00 PM EST followed by a press conference from Fed Chair Powell at 2:30 PM EST. Following the meeting, markets will then turn its attention to the European Central Bank meeting tomorrow morning and the Bank of Japan on Friday. In Asian markets, The Nikkei Index gained 88 points to settle at 22,966, the Shanghai Index fell -30 points to end at 3,049 and the Hang Seng Index dropped -377 points to settle at 30,725. In Europe, the German DAX is up around 20 points at 12,860, while the FTSE 100 is up over 20 points at 7,730.

U.S. stocks mostly ended higher Tuesday, though the Dow slipped, snapping its 4-day win streak, as shares of technology and consumer-discretionary stocks supported a modest rise in the broad-market benchmark. However, trading action was largely subdued ahead of a key policy decision expected by the Federal Reserve Wednesday afternoon, which could determine the near-term outlook for stocks. Trading action followed a historic meeting between President Donald Trump and North Korean leader Kim Jong Un in Singapore, which yielded a pact on the denuclearization of the country.

In big merger news overnight, AT&T Inc. (T) won approval from a U.S. court on Tuesday to buy Time Warner Inc. (TWX) for $85.4B. Now other companies with large deals in the making, such as CVS and its bid for Aetna (AET) and T-Mobile (TMUS) and its proposed merger with Sprint (S) can now point to Tuesday’s ruling to support their cases with regulators. Also, the court decision will also open the door to a bidding war between Comcast Corp. (CMCSA) and Walt Disney Co. (DIS) for some of 21st Century Fox Inc.’s (FOXA) most coveted assets after Fox agreed to sell its entertainment unit to DIS for $52B.

Market Closing Prices Yesterday

· The S&P 500 Index gained 4.85 points, or 0.17%, to 2,786.85

· The Dow Jones Industrial Average slipped -1.58 points, or 0.01%, to 25,320.73

· The Nasdaq Composite climbed 43.87 points, or 0.57%, to 7,703.79

· The Russell 2000 Index advanced 7.62 points, or 0.46% to 1,682.30

Events Calendar for Today

· 7:00 AM EST MBA Mortgage Applications Data

· 8:30 AM EST Producer Price Index (PPI) MoM for May…est. 0.3%

· 8:30 AM EST PPI: Ex: Food & Energy MoM for May…est. 0.2%

· 8:30 AM EST PPI (core) Ex: Food & Energy YoY for May…est. 2.3%

· 10:30 AM EST Weekly DOE Inventory Data

· 2:00 PM EST FOMC Rate decision (25 bps hike is expected) and Powell Press Conference

Earnings Calendar:

· Earnings Before the Open: KFY

· Earnings After the Close: HJLI, SNOA, TLRD

Other Key Events:

· FOMC Rate decision (25 bps hike is expected)

· Stifel 2018 Cross Sector Insight Conference, 6/11-6/13, in Boston

· Morgan Stanley Financials Conference, 6/12-6/13, in New York

· Wells Fargo West Coast Energy Conference, 6/12-6/13, in San Francisco

· Deutsche Bank Global Consumer Conference, 6/12-6/14, in Paris France

· Goldman Sachs Healthcare Conference, 6/12-6/14, in California

· William Blair Annual Growth Stock Conference, 6/12-6/14, in Chicago

· UBS Global Industrials and Transportation Conference, 6/13-6/14, in New York

World News

· Investor Intelligence Poll shows newsletter writers classified as bulls rises for a fifth week to 55.5%, which remains at the highest since mid-March and was above the 52.9% last week; also marks a 5-week string of gains, its longest since an eight-week streak from Nov. 2016 to Jan. 2017; bearish sentiment stood at 17.8% vs 17.7% last week and those expecting a correction tumbles a fifth week to 26.7% from 29.4%

· UK Prime Minister Theresa May’s officials begin work Wednesday drafting a new clause in her key piece of Brexit legislation, after she narrowly avoided a defeat in Parliament by offering last-minute concessions to pro-EU lawmakers. The new text will probably reduce the chances of Britain tumbling out of the bloc without a deal

Sector News Breakdown

Consumer

· Oxford Industries (OXM) Q1 EPS $1.28/$272.6M vs. est. $1.23/$274.3M; sees Q2 EPS of $1.75 -$1.85 on revs $300M-$310M s. est. $1.95/$303.32M; sees FY18 EPS $4.45-$4.65 on revs $1.125B-$1.145B vs. est. $4.55/$1.13B

· Scotts Miracle-Gro Company (SMG) announced that consumer purchases of its lawn and garden products were a record $565M in May, resulting in the near full recovery of the decline reported through the first seven months of the fiscal year; though lowers year sales view to flat to up 2%, down from prior view up 2%-4% and sees year EPS $3.70-$3.90 vs. est. $4.03

· Toyota Motor Corp. (TM) said Wednesday that it plans to invest $1 billion in Southeast Asian ride-hailing firm Grab Inc.

· Paul Marciano to resign as Executive Chairman of Guess (GES) board

· Target Corp. (TGT) boosts quarterly dividend to 64c from 62c

Energy

· Enphase Energy, Inc. (ENPH), and SunPower Corporation (SPWR), today announced a definitive agreement for Enphase to acquire SunPower’s microinverter business for $25 million in cash and 7.5 million shares of Enphase common stock

· The American Petroleum Institute (API) reported U.S. crude supplies rose by 833,000 barrels for the week ended June 8; showed an increase of 2.3 million barrels in gasoline stockpiles, while inventories of distillates climbed by 2.1 million barrels

· In its closely watched monthly oil market report, the IEA laid out for the first time its oil demand forecast for next year, saying it expects demand to grow by 1.4 million barrels a day in 2019, on par with this year

Financials

· H&R Block (HRB) shares fell -18%; Q4 EPS $5.47/$2.39B vs. est. $5.30/$2.35B; increased its quarterly dividend by 4% to 25c per share from 24c

· Brighthouse Financial (BHF) files to sell 23.16M shares of common stock for holders

· Manning & Napier (MN) preliminary AUM $23B as of May 31; compared with $22.9B at April 30, and $23.4B at March 31

· Waddell & Reed Financial (WDR) preliminary assets under management of $79.8 billion for the month ended May 31, 2018, compared to $79.2 billion on April 30, 2018

Healthcare

· Johnson & Johnson (JNJ) announced that it has accepted the binding offer from Platinum Equity, previously announced on March 16, 2018, to acquire its LifeScan business for about $2.1B

· Esperion (ESPR) said it plans to submit new drug applications to the U.S. FDA for bempedoic acid and the bempedoic acid/ezetimibe combination pill for LDL cholesterol-lowering indications by the first quarter of 2019; also plans to submit marketing authorization applications to the European Medicines Agency by 2Q of 2019

Industrials & Materials

· Thyssenkrupp’s supervisory board will discuss the planned merger of the company’s European steel operations with Tata Steel on Wednesday, Handelsblatt says, a transaction that has faced criticism from shareholders. https://on.mktw.net/2sP4YF9

Technology, Media & Telecom

· AT&T Inc. (T) won approval from a U.S. court on Tuesday to buy Time Warner Inc. (TWX) in one of the largest antitrust cases in decades. The Justice Department had filed suit to block the $85.4B acquisition deal last November, claiming the deal would hurt consumers and competition

· Pivotal Software (PVTL) Q1 EPS loss (10c)/$155.7M vs. est. loss (13c)/$140.44M; sees Q2 EPS loss (10c)-(9c) on revs $157M-$159M vs. est. loss (10c)/$152.82M; sees FY19 EPS loss (39c)-(37c) on revs $642M-$649M vs. est. loss (46c)/$622.13M

· Pareteum (TEUM) files to sell 7.15M shares of common stock for holders

· Digital Turbine (APPS) Q4 adjusted EPS loss (1c)/$21M vs. est. loss (3c)/$26.53M; sees Q1 revenue approximately $23M vs. est. $25.53M; sees positive non-GAAP adjusted EBITDA in Q1

· SAIC Corp. (SAIC) Q1 EPS $1.13/$1.18B vs. est. $1.04/$1.13B; Q1 free cash flow $82M

· Unisys (UIS) files $700M mixed securities shelf

· Shares of ZTE Corp. lost more than a third of their value in their first day of trading in nearly two months, falling about 40% to $15.36 Hong Kong dollars in the opening minutes of trading in Hong Kong, wiping out nearly $8 billion in market value; shares had been halted since April 17, after the U.S. imposed an order banning American companies from selling to ZTE

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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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