Morning Preview: January 28, 2019

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Early Look

Monday, January 28, 2019

Futures

Up/Down

%

Last

DJ Industrials

-102.00

0.41%

24,594

S&P 500

-11.50

0.43%

2,652

Nasdaq

-37.50

0.55%

6,753

 

U.S. stock futures are lower overnight, dropping ahead of earnings results from Dow component Caterpillar (CAT) later this morning as well as a Fed meeting later this week, and important trade talks between the U.S. and China. Markets are also focused on one of the busier weeks of quarterly earnings. Stocks gained on Friday as the Dow rose 0.8%, edging higher 0.1% for the week, and extending gains for a fifth week in a row. The S&P 500 rose about 1% but settled down 0.2% on the week while the Nasdaq Composite gained 1.3%, for a weekly rise of 0.1%. In Asian markets overnight, The Nikkei Index fell -124 points to 20,64, the Shanghai Index fell -4 points to 2,596 and the Hang Seng Index inched higher 7 points to 27,576. In Europe, the German DAX is down about -30 points at 11,250, while the FTSE 100 is down over -10 points trading just under 6,800.

The U.S. and China will hold a pivotal round of talks this week in an attempt to end their trade war. President Donald Trump and China’s Xi Jinping gave their officials until March 1 to work out a deal on “structural changes” to China’s economic model. If they fail, Trump has promised to raise the tariff rate on $200 billion in Chinese imports to 25% from 10%. Vice Premier Liu He will meet U.S. Trade Representative Robert Lighthizer in Washington for two days of talks starting Wednesday. The U.S. partial government shutdown ended at day 35 on Friday after President Donald Trump and lawmakers struck a deal Friday to get federal employees back to work. But fears of another shutdown weren’t far away as Trump said he didn’t think a newly created board of 17 lawmakers would reach a deal over border-wall funding before the next government-funding deadline.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 22.43 points, or 0.85%, to 2,664.76

·     The Dow Jones Industrial Average rose 183.96 points, or 0.75%, to 24,737.20

·     The Nasdaq Composite spiked 91.40 points, or 1.29%, to 7,164.86

·     The Russell 2000 Index advanced 18.45 points, or 1.26% to 1,482.85

Events Calendar for Today

·     8:30 AM EST      Chicago Fed National Activity Index for Dec

·     10:30 AM EST    Dallas Fed Manufacturing Activity for January

Earnings Calendar:

·     Earnings Before the Open: ARLP, BOH, CAT, IDTI

·     Earnings After the Close: AKS, CE, CR, ETH, GGG, RMBS, SANM, WHR

 

 

Macro

Up/Down

Last

WTI Crude

-0.97

52.72

Brent

-1.06

60.58

Gold

2.00

1,306.20

EUR/USD

0.0012

1.1418

JPY/USD

-0.11

109.44

10-Year Note

-0.006

2.755%

 

World News

·     Venezuela has backed down from their demand that U.S. diplomats leave the country, saying they’re open to talks — as the Trump administration warned of a “significant response” if American personnel are threatened or intimidated.

·     Any act of violence or intimidation against U.S. diplomatic personnel in Venezuela, leader Juan Guaido, or the country’s National Assembly would “represent a grave assault on the rule of law and will be met with a significant response,” U.S. National Security Adviser John Bolton tweets

Sector News Breakdown

Energy, Industrials & Materials

·     Versum Materials Inc. (VSM) is in advanced talks to combine with Entegris Inc., (ENTG) in a deal that would unite two chemical companies. Versum and Entegris are nearing agreement on a stock-for-stock merger that could be announced Monday, the WSJ reported https://on.mktw.net/2S8SJ46

·     Vale SA (VALE) said it had suspended dividend payments and share buybacks as the miner faces spiraling losses over its dam that burst leaving hundreds of people missing and presumed dead in southeast Brazil. The iron ore miner also froze executive bonuses and created independent committees to help victims and investigate the cause

·     Alstom SA (ALO.FR) shares slip after the company and Siemens AG (SIE.XE) made a last-minute bid to ease the passage of their planned rail merger by submitting fresh concessions to the European Commission seeking to allay the regulator’s antitrust concerns

·     PG&E (PCG) still plans to move forward with its Chapter 11 bankruptcy protection filing, according to Axios, citing a source familiar with the matter. On Thursday, California investigators ruled that the company was not responsible for the 2017 Tubbs fire near Santa Rosa that destroyed thousands of acres and killed more than 20 people, the publication noted

·     The Treasury Department announced that it had lifted sanctions on three companies linked to Russian oligarch Oleg Deripaska, including the world’s second-largest aluminum producer Rusal

Financials

·     MoneyGram International Inc (MGI) is exploring strategic alternatives, including a sale of the money transfer company, a year after a U.S. government panel nixed its $1.2 billion sale to China’s Ant Financial, people familiar with the matter said – Reuters https://reut.rs/2HzbXeZ

·     TCF Financial (TCF) Q4 EPS 51c/$377M vs. est. 47c/$251.65M; Q4 net charge-off rate of 0.46%, up 8 basis points from the Q4 of FY17; net charge-off rate excluding auto finance net charge-offs of 0.28%

·     Bank of Montreal (BMO) was downgraded to underperform from neutral at Bank America

·     U.S. Bancorp (USB) and SunTrust (STI) both downgraded to Neutral from Outperform at Baird

Healthcare

·     Crispr Therapeutics (CRSP) downgraded to neutral at Goldman Sachs

·     Alexion Pharmaceuticals (ALXN) reports the Phase 3 study of its long-acting C5 complement inhibitor ULTOMIRIS, met its primary objective.

Technology, Media & Telecom

·     Alphabet (GOOGL), CenturyLink (CTL) and the infrastructure arm of private equity firm EQT Partners are among the potential suitors weighing takeover bids for Zayo Group Holdings (ZAYO), Bloomberg reported https://on.mktw.net/2Wn2s6f

·     Intel’s (INTC) mixed mention at Barron’s noting the stock has been trading cheaply relative to its earnings, with global growth slowing, U.S. trade with China turning chilly, and the company’s data center customers sitting on a glut of chips left over from a buying rush last year. Says while Intel looks like a good value for long-term investors, it is not difficult to imagine it sinking lower

·     Barron’s said Dell Technologies (DELL) is one of the most intriguing value plays in the stock market today and that is because it owns an 81% stake in VMware (VMW), as well as interests in two other public companies, namely Pivotal Software (PVTL) and SecureWorks (SCWX)

·     Japan Display shares fell after the supplier of mobile displays for Apple warned of a “harsh” earnings impact from the US-China trade wars

·     Arris (ARRS) Q4 prelim net sales $1.78B-$1.8B vs. est. $1.79B; sees 1Q19 as the lowest quarter of the year in part due to shift of manufacturing out of China

·     Comcast (CMCSA) subsidiary Universal’s “Glass” won the weekend at the box office with an estimated $19M in its second outing, for a 10-day domestic total of $73.6M

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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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