Morning Preview: June 14, 2018

Terrie AmengualDaily Market Insights

Early Look

Thursday, June 14, 2018

U.S. stocks futures are down slightly, mostly steady as attention turns to the possible policy shift at the European Central Bank, holding their monetary policy meeting at 7:45 AM EST and press conference by ECB President Draghi at 8:30 AM EST. Expectations are for the central bank to make comments regarding the possible slowing of its QE program. The EU30 billion-a-month bond buys are slated to run at least until the end of September, but the ECB could extend it to continue supporting the economy and gradually taper the purchases. The other big news was Comcast topping Disney’s bid for Fox assets with a $65B offer, above the prior $52.4B made by Disney. The move comes on the heels of AT&T winning government approval to proceed with its $85B offer for Time Warner yesterday.

On Wednesday, the Federal Reserve raised its benchmark federal funds rate by 25 basis points to a range of 1.75% to 2%, while they also signaled a small shift in its thinking by projecting a total of four rate increases in 2018 instead of three as previously planned. Bonds fell as 2-year Treasury yield hits more than 3-week highs, topping 2.60% as the Fed lifts rates. Meanwhile, stocks slid late day amid the jump in yields. In Asian markets, The Nikkei Index declined -227 points to 22,738, the Shanghai Index fell -5 points to settle at 3,044 and the Hang Seng Index fell -284 points to 30,440. In Europe, the German DAX is off by about -30 points at 12,850, while the FTSE 100 is down over -30 points to 7,660.

Outside of the central bank news, trade worries continued to be on traders’ minds on Thursday. President Donald Trump’s administration is preparing to announce tariffs on tens of billions of dollars in Chinese goods as early as Friday, a move that is feared to trigger retaliatory action by China.

Market Closing Prices Yesterday

· The S&P 500 Index dropped -11.22 points, or 0.40%, to 2,775.63

· The Dow Jones Industrial Average fell -119.53 points, or 0.47%, to 25,201.20

· The Nasdaq Composite dropped -8.09 points, or 0.11%, to 7,695.70

· The Russell 2000 Index declined -5.76 points, or 0.34% to 1,676.54

Events Calendar for Today

· 8:30 AM EST Weekly Jobless Claims…est. 223K

· 8:30 AM EST Continuing Claims…est. 1.734M

· 8:30 AM EST Retail Sales MoM for May…est. 0.4%

· 8:30 AM EST Retail Sales Ex: Autos MoM for May…est. 0.5%

· 8:30 AM EST Import Prices MoM for May…est. 0.5%

· 9:45 AM EST Bloomberg Consumer Comfort Index…prior 54.8

· 10:00 AM EST Business inventories MoM for April…est. 0.3%

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

Earnings Calendar:

· Earnings Before the Open: MIK

· Earnings After the Close: ADBE, FNSR, FRED, JBL, VNCE

Other Key Events:

· European Central Bank policy decision at 7:45 AM EST and press conference at 8:30 AM EST

· 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

· U.S. President Donald Trump will meet with his top trade advisers on Thursday to decide whether to activate threatened tariffs on billions of dollars in Chinese goods, a senior Trump administration official said – Reuters

· White House press secretary Sarah Sanders and her top aide, Raj Shah, are planning to leave their jobs, CBS News reported Wednesday night. Citing multiple sources, CBS said Sanders planned to leave before the end of the year, while Shah had no timeline yet.

Sector News Breakdown

Consumer

· Daimler AG and Ford Motor Co. (F) plan to close a joint venture formed to develop fuel-cell technology, Daimler said

· Tailored Brands (TLRD) Q1 EPS 50c/$818M vs. est. 48c/$794M; Q1 Men’s Wearhouse comparable sales +3.2%, 1Q Jos A. Bank comparable sales +1.2% and 1Q K&G comparable sales -1.7%; reaffirms 2018 outlook of $2.35-$2.50 vs. est. $2.49; expects comparable sales for Men’s Wearhouse and Jos. A. Bank to be positive low-single-digits

· Fred’s (FRED) reports Q1 EPS (54c) on revs $437.1M and comparable store sales decreased 3.9% in Q1 2018 versus a 4.2% decline in Q1 2017

Energy

· Pioneer Natural Resources Company (PXD) signed a purchase and sale agreement with Evergreen Natural Resources LLC to sell all of its assets in the Raton Basin in southeastern Colorado for $79 million, subject to normal closing adjustments.

Financials

· H&R Block (HRB) has decided to close about 400 store locations as a result of simpler filings with the new tax law and customers’ digital preferences, according to the Wall Street Journal

· Arbor Realty (ABR) files $500M mixed securities shelf

Healthcare

· Merck’s (MRK) KEYTRUDA (pembrolizumab) received FDA approval for the treatment of pediatric and adult patients with refractory primary mediastinal large B-cell lymphoma (PMBCL) who have received at least two prior lines of therapy, the first PD-1 inhibitor approved for the indication

· Mylan (MYL) said the FDA will issue a complete response letter this month on its application for a generic version of GlaxoSmithKline’s asthma medicine Advair Diskus

· Novavax (NVAX) announced that The New England Journal of Medicine published a peer-reviewed letter to the editor detailing the positive results from Novavax’ Phase 1/2 clinical trial in older adults comparing its Matrix-M adjuvanted nanoparticle seasonal influenza vaccine candidate to the leading licensed egg-based, high-dose influenza vaccine

· Sonoma Pharmaceuticals (SNOA) Q4 EPS loss (93c)/$3.7M vs. est. loss (59c)/$4.49M; as of March 31, 2018, Sonoma had cash and cash equivalents of $10.1 million, as compared to $8.6 million as of December 31, 2017

Industrials & Materials

· Goldman upgrades U.S. engineering and construction sector to attractive as it expects an organic growth inflection in the second quarter of this year – the first time in nearly five years — on increased energy and mining activity. Upgrades KBR to neutral from sell on the back of significant LNG sanctioning cycle

· Charah Solutions (CHRA) 7.35M share IPO priced at $12.00

· U.S. Xpress Enterprises (USX) 18.056M share IPO priced at $16.00

· Steel Dynamics (STLD) downgraded to Sector Weight from Overweight at KeyBanc

· Genesee & Wyoming Inc. (GWR) traffic in May 2018 was 293,096 carloads, an increase of 18,042 carloads, or 6.6%, compared with May 2017. G&W’s same-railroad traffic in May 2018 was 292,371 carloads, an increase of 17,317 carloads, or 6.3%, compared with May 2017.

· Culp, Inc. (CULP) Q4 EPS 37c/$78.2M vs. est. 43c/$78.35M; sees Q1 sales down 10% year-over-year, vs. estimates $81.8M and pre-tax income for Q1 is expected to be $3.8M-$4.8M

Technology, Media & Telecom

· Comcast Corp. (CMCSA) offered 21st Century Fox Inc. (FOXA) $35 a share in cash for assets that it had agreed to sell Walt Disney Co. (DIS); the offer is a 19% premium over Disney’s offer and values Fox at $65 billion (above the $52.4B offer from DIS) https://bloom.bg/2LOdPhm

· Oracle (ORCL) downgraded to Neutral from Overweight at JPMorgan

· SoftBank is in talks to invest more capital in WeWork Cos., with a potential deal that would value the shared-office company at $35B-$40B, The Wall Street Journal reports, citing people familiar with the matter. The potential investment would nearly double WeWork’s $20B valuation, which was set when SoftBank invested $4.4B in the company last August https://on.wsj.com/2JOLf1T

· Legislation to block the Trump administration’s agreement allowing China’s ZTE Corp to resume business with American suppliers could be killed in the U.S. Congress in the coming weeks, lawmakers and aides said Wednesday

· Cision (CISN) files to sell 12M shares of common stock for holders

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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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