Morning Preview: December 7, 2018

Terrie AmengualDaily Market Report

Early Look

Friday, December 7, 2018

U.S. stock futures are pointing to a lower open, on track for weekly losses ahead of another big day of potential market moving catalysts. Big news is expected in the form of Nonfarm payrolls, with estimates of 198,000 jobs added in November, down from 250,000 in October, showing a moderating but still strong pace of hiring. The jobless rate is expected to hold steady at 3.7%, the lowest since 1969. Oil extended losses to a third day after OPEC struggled to reach a deal on oil production cuts, with headlines showing members are currently deadlocked on a vote. In Asian markets, The Nikkei Index gained 177 points to settle at 21,678, the Shanghai Index was little changed at 2,605 and the Hang Seng Index fell -92 points to 26,063. In Europe, the German DAX is up 70 points at 10,880 (after plunging near bear market territory yesterday – 20% of 2018 highs) while the FTSE 100 rises over 100 points or 1.5% back above 6,800 after falling more than 3% yesterday ahead of Brexit vote next week.

U.S. equities climbed from their session lows late Thursday, with the Nasdaq Composite finishing in the green. The Dow and S&P 500 closed down for the day but recovered gains for the year. Markets seemed to have turned late afternoon after the WSJ reported that Federal Reserve officials are considering whether they should signal a wait-and-see mentality after the likely rate increase at Dec. meeting. This move could slow the pace of rate increases while officials still see short-term rates moving higher, but are less sure how fast. The headlines helped ease the pain in stocks, with averages rising late day. Treasury prices again rose, pushing yields lower, as renewed tensions between the U.S. and China prompted investors to leave stocks for the perceived safety of haven assets. The 10-year Treasury note yield fell 5.3 basis points to 2.870%, while the 2-year note yield slipped 6.5 basis points to 2.746%.

Market Closing Prices Yesterday

· The S&P 500 Index slipped -4.11 points, or 0.15%, to 2,695.95

· The Dow Jones Industrial Average fell -79.40 points, or 0.32%, to 24,947.67

· The Nasdaq Composite gained 29.83 points, or 0.42%, to 7,188.26

· The Russell 2000 Index declined -3.34 points, or 0.23% to 1,477.41

Events Calendar for Today

· 8:30 AM EST Change in Nonfarm Payrolls for Nov…est. 198K

· 8:30 AM EST Change in Private Payrolls for Nov…est. 198K

· 8:30 AM EST Changes in Manufacturing for Nov…est. 18K

· 8:30 AM EST Unemployment Rate for Nov…est. 3.7%

· 8:30 AM EST Average Hourly Earnings for Nov…est. 0.3%

· 10:00 AM EST Wholesale Inventories MoM, Oct-F…est. 0.7%

· 10:00 AM EST University of Michigan Confidence, Dec-P…est. 97.0

· 12:00 PM EST Fed’s Brainard speaks in Washington

· 1:00 PM EST Baker Hughes Weekly Rig Count

· 3:00 PM EST Consumer Credit for Oct…est. $15.0B

World News

· Bloomberg News has quietly shed dozens of experienced reporters and editors this year — including some of its most senior staff — as its owner Michael Bloomberg considers selling its parent company ahead of a possible presidential run, The Post has learned. https://on.mktw.net/2rpHcP2

· OPEC talks in Vienna remained deadlocked on Friday morning, says a delegate. Iran refused to accept a symbolic output cut as part of a wider deal with non-OPEC allies to reduce production, says another delegate. There’s been no agreement and Iran must be exempt from making a cut, says the delegate

Sector News Breakdown

Consumer

· Lululemon (LULU) Q3 adjusted EPS 75c/$748M vs. est. 69c/$737.45M; Q3 total comp sales rose 17%, or increased 18% on a constant dollar basis; comp sales increased 6%, or increased 7% on a constant dollar basis; raises FY18 EPS view to $3.65-$3.68 from $3.45-$3.53 (est. $3.60) and raises FY18 revenue view to $3.235B-$3.245B from $3.185B-$3.235B (est. $3.23B)

· Ulta Beauty (ULTA) Q3 EPS $2.18/$1.56B vs. est. $2.16/$1.56B; sees FY capital expenditure $375 million; 3Q comparable sales +7.8% vs. est. +7.8%; reiterates FY 2018 Guidance for Diluted EPS Growth in the Low Twenties Percentage Range

· American Outdoor Brands (AOBC) shares rose 15%; Q2 EPS 20c/$161.7M vs. est. 14c/$154.07M; sees Q4 non-GAAP EPS 9c-13c on revs $155M-$165M vs. est. 10c/$158.44M; sees FY adjusted EPS 69c-73c on revs $625.0M-$635.0M vs. est. 64c/$624.9M

· Big Lots (BIG) Q3 EPS loss (16c)/$1.15B vs. est. 0c/$1.14B; Q3 comps up 3.4% vs. est. 3%; sees Q4 EPS $2.20-$2.40 below consensus $2.94 and lowers year outlook to $3.55-$3.75 from $4.40-$4.50 (est. $4.46) while affirms FY18 comp sales growth guidance of approximately 1%

· United Natural Foods (UNFI) Q1 EPS 59c/$2.87B vs. est. 73c/$2.7B; reports Q1 gross margin 14.38% of net sales and included a $1.8M, or 0.06% of net sales; sees FY19 adjusted EPS $1.69 – $1.89 and sees FY19 revenue $21.5B-$22B vs. est. $21.72B

· Tesla Inc. (TSLA) has notified holders of bonds due in March that if they elect to convert the debt, they’ll be paid with a 50-50 mix of cash and stock, according to a copy of the settlement notice seen by Bloomberg News.

· Zumiez (ZUMZ) Q3 EPS 55c/$248.8M vs. est. 49c/$248.7M; sees Q4 EPS $1.02-$1.08 on revs $295M-$301M vs. est. $1.13/$312.27M; sees 4Q comparable sales 0% to +2% after Q3 comps rose +4.8% vs. estimate +4.6%

Energy, Industrials and Materials

· Boeing Co. (BA) said it was canceling a controversial satellite order that was financed by a Chinese government-owned firm, citing “default for nonpayment.” Boeing’s decision follows a Wall Street Journal investigation this week that highlighted China’s opaque role in funneling around $200 million to the project, called Global IP.

· Chevron Corporation (CVX) announced a 2019 organic capital and exploratory spending program of $20 billion.

· Blue Bird (BLBD) Q4 adjusted EPS 70c/$331.6M vs. est. 81c/$321.08M; sees FY19 revenue $990M-$1.025B vs. est. $1.05B; sees FY19 adjusted EBITDA $80M-$85M

· Southwest Airlines (LUV) Nov. traffic rose 4.9%, while capacity climbs 6.5%; load factor was 84.5% vs. 85.8% a year ago

Healthcare

· Fresenius (FMS) plunged overseas after saying it won’t meet its financial goals through 2020, the second profit warning in two months. Separately, Fresenius Medical Care said sales growth and net income may be comparable to this year’s level. Its shares also slumped.

· Moderna (MRNA) IPO priced at $23 apiece, in line with expectations as the deal was set to raise at least $500 million and value Moderna at roughly $7.5 billion.

· Synthorx (THOR) 11.9M share IPO priced at $11.00

· Quotient (QTNT) 9.23M share Spot Secondary priced at $6.50

· Inspire Medical (INSP) 2.5M share Secondary priced at $40.00

· Momenta (MNTA) 17.4M share Secondary priced at $11.50

· Global Blood Therapeutics (GBT) files to sell $150M in common stock

· Genentech, a member of the Roche Group (RHHBY), said the FDA approved Tecentriq and chemotherapy for some patients with a certain type of lung cancer.

· Cooper Companies (COO) Q4 EPS $2.87/$651.5M vs. est. $2.96/$644.99M. Q4 operating margin was 27% compared with 27% last year; guides initial FY19 EPS $11.30-$11.70 on revs $2.60B-$2.66B vs. est. $12.08/$2.53B

· Viveve Medical (VIVE) said a feasibility study of its cryogen-cooled, monopolar radiofrequency, or CMRF, technology platform improved mild-to-moderate stress urinary incontinence in women; says 72% of patients treated experienced an improvement from baseline in the one-hour pad weight test at 12 months

· OrthoPediatrics (KIDS) files to sell 1.5M shares of common stock

Technology, Media & Telecom

· Broadcom (AVGO) Q4 EPS $5.85/$5.44B vs. est. $5.56/$5.39B; sees FY19 revenue $24.5B vs. est. $22.4B; sees FY19 net operating margin 51% while 4Q adjusted gross margin +68.4% vs. Bloomberg estimate +67.0%; sees Capital expenditures for the fiscal year approximately $550M; boosts quarterly dividend to $2.65 from $1.75

· Comtech (CMTL) raises FY19 revenue view to $625M-$640M from $600M-$625M (est. $608.3M) and is also increasing its adjusted EBITDA goal to a range of $84M-$88M

· SAIC (SAIC) Q3 adjusted EPS $1.35/$1.18B vs. est. $1.17/$1.16B; 3Q free cash flow $80 million; 3Q net new bookings $1.2 billion; 3Q book to bill ratio 1%

· VeriSign (VRSN) reports Q3 domain registrations 342.4M, up 0.8% from Q2

· DocuSign (DOCU) Q3 EPS loss (31c) on revs $178.4M; sees 4Q revenue $192M-$194M and sees FY revenue $693M-$695M vs. est. $686M

· HCL Technologies Ltd. is acquiring some of International Business Machines Corp.’s (IBM) software products for $1.8 billion

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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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