Morning Preview: January 18, 2019

Scott GreenDaily Market Report

Early Look

Friday, January 18, 19

Futures

Up/Down

%

Last

DJ Industrials

136.00

0.56%

24,457

S&P 500

10.50

0.39%

2,645

Nasdaq

25.50

0.38%

6,745

 

 

Stock futures are pointing higher, as U.S. futures follow gains in both Europe and Asia on hopes of progress for U.S.-China trade talks. Late yesterday, US stock markets surged on a WSJ report that Treasury Secretary Mnuchin might support a cut in U.S. penalty duties on Chinese imports. The report was quickly denied by a Treasury Department spokesman saying that no recommendations had been made. Stocks pared gains, but still posted strong returns on the day. China announced its economy czar, Vice Premier Liu He, will go to Washington for talks Jan. 30-31 aimed at ending the tariff war. Netflix underwhelmed investors as Q4 revenue of $4.19 billion fell short of the $4.21 billion estimate while its guidance for the next quarter also fell short, sending shares down about 2% overnight. Tesla shares are down about 8% after cutting staff by about 7% and issued a more cautious Q4 outlook. In Asian markets, The Nikkei Index rose 263 points to 20,666, the Shanghai Index jumped 36 points to 2,596 and the Hang Seng Index gained 335 points to 27,090. In Europe, the German DAX is higher by about 125 points to move firmly back above 11,000, while the FTSE 100 is up over 80 points at 6,920.

 

Stocks ended the day off session highs but with solid gains after The Wall Street Journal reported that Trump administration officials were debating an easing of tariffs on Chinese imports in a bid to calm markets and offer Beijing an incentive to make deeper concessions. A Treasury Department spokesman told the newspaper that no recommendations had been made. The S&P 500 SPX, +0.76% ended with a gain of around 20 points, or 0.8%, near 24,370, according to preliminary figures, while the Dow Jones Industrial Average DJIA, +0.67% advanced around 163 points, or 0.7%, to close near 24,370. The Nasdaq Composite COMP, +0.71% gained around 50 points, or 0.7%, to end near 7,084.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 19.86 points, or 0.76%, to 2,635.96

·     The Dow Jones Industrial Average rose 162.94 points, or 0.67%, to 24,370.10

·     The Nasdaq Composite gained 49.77 points, or 0.71%, to 7,084.46

·     The Russell 2000 Index advanced 12.55 points, or 0.86% to 1,467.25

 

Events Calendar for Today

·     9:15 AM EST      Industrial Production MoM for December…est. 0.2%

·     9:15 AM EST      Capacity Utilization for December…est. 78.5%

·     10:00 AM EST    University of Michigan Confidence, Jan-P…est. 96.8

·     1:00 PM EST       Baker Hughes Weekly Rig Count

 

Earnings Calendar:

·     Earnings Before the Open: CFG, KSU, RF, SLB, STI, STT, VFC

 

Other Key Events:

·     9:05 AM EST      Fed’s Williams speaks on Economy and Monetary Policy

·     11:00 AM EST    Fed’s Harker speaks

 

 

Macro

Up/Down

Last

WTI Crude

0.71

52.78

Brent

0.72

61.90

Gold

-6.90

1,285.40

EUR/USD

0.0017

1.1406

JPY/USD

0.20

109.46

10-Year Note

+0.013

2.768%

 

 

World News

·     President Trump canceled the U.S. delegation’s trip to the economic summit in Davos hours after denying Nancy Pelosi a plane to visit U.S. troops in Afghanistan. Steven Mnuchin, Michael Pompeo and Wilbur Ross were due to go.

·     Trump will meet Mnuchin today after confusion reigned over the trade war. The Treasury denied a report the government is debating rolling back tariffs on China. WSJ said Mnuchin pushed the idea and Trade Rep Robert Lighthizer was warming to it.

·     According to Buzzfeed, lawmakers will investigate a report that Trump ordered Michael Cohen to lie to Congress about talks to build a skyscraper in Moscow. House Intelligence Committee Chairman Adam Schiff said his panel will do what’s necessary to establish the truth about the Buzzfeed report

·     Japan’s inflation in December came in weaker than expected, temporarily putting the central bank farther from its target of 2%. Prices rose 0.3%, down from November’s 0.8%, as tumbling food costs offset a rise in energy prices.

 

Sector News Breakdown

Consumer

·     Nautilus (NLS) shares fell -29%; guides Q4 EPS 4c-5c on revs $114M-$116M below est. 56c/$150.5M; Q4 prelim. gross margin 44% vs. Bloomberg est. 48.5%; said expects new digital platform to help accelerate sales starting this year

·     Tesla Inc. (TSLA) -8%; will cut “approximately” 7% of its full-time workforce, said Chief Executive Officer Elon Musk in an update on the company’s blog Friday that was emailed to all employees; also said it will post a GAAP-reported profit for the three months ending in December, but cautioned that number will be less than the $312 million it posted for the third quarter

·     Tiffany (TIF) said it now sees FY18 EPS at the lower end of $4.65-$4.80 view (vs. est. $4.81); holiday period same-store sales fell 2% and holiday-period net sales fell 1% to $1.04B; sees FY18 sales up 6%-7%

·     Ryanair Holdings PLC (RYAYY) lowered its full-year profit guidance citing lower winter fares, and said further cuts could be on the way depending on how Brexit develops; sees profit after tax–excluding start-up losses in the range of 1B-1.1B euros down from prior guidance of 1.1B-1.2B euros saying a 7% fall in winter fares contributed to the lowered guidance.

 

Energy, Industrials & Materials

·     Gulfport Energy (GPOR) reports 4Q net production of 1,392.8 MMcfe/d, while forecasting 1,360 -1,400 MMcfe/d for 2019, and issues 2019 operational views; sets new $400M stock repurchase program

·     JB Hunt (JBHT) Q4 EPS 81c/%$2.32B vs. est. $1.48/$2.3B; 4Q effective tax rate 20.5%; 4Q Intermodal revenue $1.26B

·     Rio Tinto (RIO) said it shipped 338.2 million metric tons of iron ore from its pits in the remote Pilbara region in northwest Australia last year, up 2% on 2017. Exports were in line with an earlier forecast from the company, which in October predicted shipments in the upper end of a 330-340-million-ton range

 

Financials

·     American Express (AXP) Q4 EPS $2.32/$10.47B vs. est. $1.80/$10.56B; sees FY revenue +8% to +10%; 4Q provision for loan losses $954M up 14% from last year; sees 2019 EPS $7.85-$8.35 vs. est. $8.13

·     SunTrust (STI) Q4 EPS $1.40/$2.37B vs. est. $1.38/$2.37B; Q4 book value per share $49.57 and Q4 CET1 capital ratio 9.2%

·     First Horizon (FHN) Q4 EPS 35c/$412.79M vs. est. 36c/$442.52M; 4Q net interest income $302.5 million and 4Q net interest margin 3.38%

·     Malaysian Finance Minister Lim Guan Eng said the government is open to discussing dropping criminal charges against Goldman Sachs (GS) over the 1MDB scandal if the bank pays $7.5B in reparations, Reuters reports

·     Regions Financial (RF) Q4 EPS 37c/$1.44B vs. est. 38c/$1.48B; Q4 net interest margin 3.55% up 5 bps sequentially

·     People’s United (PBCT) Q4 EPS 36c/$428.2M vs. est. 34c/$427.4M; Q4 loan loss provision $9.9M vs. $7.5M a year ago; Q4 net charge-offs $7.5M vs. $6.5M a year ago; tangible book value per common share was $9.23 vs. $9.19 at previous quarter end; 4Q net interest margin 3.17% vs. est. 3.18%

·     Bank OZK (OZK) Q4 EPS 89c vs. est. 83c; Q4 Net-interest income $228.4M vs. $214.8M last year and reports Q4 net interest margin 4.59%

·     BancFirst (BANF) Q4 EPS 98c vs. est. 94c; 4Q net interest margin 3.77% and 4Q provision for loan losses $1.52M

·     Independent Bank (INDB) Q4 EPS $1.07/$103.8M vs. est. $1.20/$103.6M; net interest margin rose to 4.05%, compared to 3.94% in the prior quarter

·     Argo Group International Holdings (ARGO) preliminary pre-tax catastrophe loss estimate $32M for the three-month period ended Dec. 31, primarily related to Hurricane Michael and the California Wildfires

 

Healthcare

·     An FDA advisory committee voted 8 – 8 that the benefits of Sanofi (SNY) and Lexicon Pharmaceuticals’ (LXRX) Sotagliflozin outweigh the risks as an adjunct to insulin to improve glycemic control in adults with type 1 diabetes

·     CVS Health (CVS) and Walmart (WMT) announced the companies have reached a multi-year agreement on terms under which Walmart will continue participating in the CVS Caremark pharmacy benefit management (PBM) commercial and Managed Medicaid retail pharmacy networks. The companies are not disclosing the financial terms of the new contract

·     Sunesis (SNSS) 23M share Spot Secondary priced at $.50

 

Technology, Media & Telecom

·     Netflix (NFLX) Q4 EPS 30c/$4.19B vs. est. 24c/$4.21B; sees 1Q EPS 56c on revs $4.49B below est. 94c/$4.60B; sees 1Q paid streaming net change +8.90Mvs. est. +8.50M; 4Q paid streaming net change +8.84M; said “Bird Box” est. seen by over 80M member households first 4 weeks

·     Progress (PRGS) Q4 EPS 76c/$111.3M vs. est. 73c/$109.35M; sees FY19 adjusted EPS $2.33-$2.39 vs. est. $2.49; sees FY19 revenue $380M-$386M, vs. consensus $398.37M

·     Atlassian (TEAM) Q2 EPS 25c non-IRFS/$299M vs. est. 21c/$288.32; sees 3Q non-IFRS EPS 18c on revs $303M-$305M vs. est. 18c/$300.7M

·     Telecom Italia SpA (TI) said 2018 earnings from its domestic business unit are expected to be lower than in 2017; said organic Ebitda for 2018 should be a mid-single digit lower than in the year-earlier period

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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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