Morning Preview: February 19, 2019

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Early Look

Tuesday, February 19, 2019

Futures

Up/Down

%

Last

DJ Industrials

-89.00

0.34%

25,800

S&P 500

-9.00

0.32%

2,768

Nasdaq

-21.50

0.30%

7,042

 

 

U.S. stocks are looking at a bumpy open, pulling back near overnight lows ahead of another week of potential macro moving meetings, with traders focused on trade, Brexit and corporate earnings. Markets expect earnings from retailing giant and Dow component Wal-Mart (WMT) later this morning to kick off another busy week of quarterly results. Trade talks between China and the U.S. restart in Washington today, with Vice Premier Liu He scheduled to meet U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Feb. 21-22. In political news, California is leading 16 states as they sue to block President Donald Trump using emergency powers to pay for his promised border wall. In Asian markets, The Nikkei Index rose 20 points to 21,302, the Shanghai Index gained a point to 2,755 and the Hang Seng Index fell -118 points to settle at 28,228. In Europe, the German DAX is flat around the 11,300 level, while the FTSE 100 is down around -30 points at 7,190. The long-standing March 29 deadline is fast approaching, with negotiators looking to clinch a deal for the U.K.’s exit from the European Union. Gold prices edged higher, hitting a ten-month high amid ongoing political uncertainty which has supported investor appetite for the haven metal (gold topped $1,332 an ounce). Stocks closed out last week with good gains, as the Dow Jones Industrial Average and Nasdaq each notched their eighth straight weekly gains (S&P 500 logs third straight weekly win) helped all week by growing optimism that the U.S. and China can strike a trade truce ahead of the March 1 deadline (or that President Trump said he could delay the hike in tariffs if positive developments occurred).

 

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 29.87 points, or 1.09%, to 2,775.60

·     The Dow Jones Industrial Average rose 443.86 points, or 1.74%, to 25,883.25

·     The Nasdaq Composite gained 45.46 points, or 0.61%, to 7,472.41

·     The Russell 2000 Index advanced 24.14 points, or 1.56% to 1,569.25

 

Events Calendar for Today

·     7:45 AM EST      ICSC Weekly Retail Sales

·     8:50 AM EST      Fed’s Mester speaks on Economic Outlook and Monetary Policy

·     8:55 AM EST      Johnson/Redbook Weekly Sales

·     10:00 AM EST    NAHB Housing Market Index for February

 

Earnings Calendar:

·     Earnings Before the Open: AAP, CEQP, CTB, ECL, EXPD, FDP, FELE, GPC, HEP, JELD, LDOS, NBL, NBLX, ONCE, SAGE, SITE, SLCA, TEX, TTS, USAC, WLK, WMT

·     Earnings After the Close: ACC, CDNS, CXO, CXW, DK, DVN, ENLC, EVBG, FANG, FE, FIVN, HLF, HST, HVT, INST, KAR, LC, LZB, NVTA, RARE, SSTI, TILY, TVTY, TXRH, VRSK

 

Other Key Events:

·     Consumer Analyst Group of New York (CAGNY) Conference, 2/18-2/22, in New York

 

 

Macro

Up/Down

Last

WTI Crude

0.56

56.15

Brent

-0.07

66.43

Gold

10.10

1,332.20

EUR/USD

-0.0027

1.1284

JPY/USD

0.16

110.78

10-Year Note

-0.006

2.661%

 

 

World News

·     U.S. total cross-border investment (TIC) outflows at $33.1B in December and U.S. net long-term portfolio securities outflows at $48.3B in December; China holds $1.12T of U.S. Treasuries, an increase of $2.1B from last month while Japan holds $1.04T, an increase of $5.7B MoM

·     The ECB said the eurozone’s current-account balance registered a surplus of 16 billion euros ($18.1 billion) in December compared with November’s surplus of EUR23 billion.

 

Sector News Breakdown

Consumer

·     The U.S. Commerce Department sent a report to President Trump that could unleash steep tariffs on imported cars and auto parts, provoking a sharp backlash from the industry even before it is unveiled, the agency confirmed to Reuters. Trump has 90 days to decide whether to act upon the recommendations, which auto industry officials expect to include at least some tariffs on fully assembled vehicles

·     Advance Auto Parts (AAP) Q4 EPS $1.14/$2.11B vs. est. $1.13/$2.11B; sees FY1 revenue $9.65B-$9.8B vs. consensus $9.78B; sees FY19 SSS growth of 1%-2.5%

·     Otter Tail (OTTR) Q4 adjusted EPS 35c/$221.2M vs. est. 39c/$209.4M; FY18 adjusted EPS $2.06 on revs $916.4M vs. est. $2.10/$884M

·     Masonite (DOOR) Q4 adjusted EPS 68c/$528.4M vs. est. 75c/$531.3M; sees 2019 adjusted EPS $3.60-$4.40 vs. est. $4.26; Q4 adjusted Ebitda $57.5M

·     Sonic Automotive (SAH) said it sees Q4 preliminary EPS from continuing operations 74c-78c, below the 89c est. citing incentives and performance of its two largest brands — BMW and Honda

·     Service Corp. (SCI) Q4EPS 54c/$820.8M vs. est. 56c/$844.3M

·     Honda Motors (HMC) is set to announce the closure of its only British car plant in 2022 with the loss of 3,500 jobs, a lawmaker told Reuters

·     Yeti Holdings (YETI) mentioned positively in Barron’s noting the stock jumped 17% Thursday after the company beat estimates for fourth-quarter earnings, but says Yeti’s brand-recognition rates are still low, which can be a good sign as it suggests that as more people learn about it, sales could surge and stock has 60% upside

 

Energy, Industrials & Materials

·     Midstream energy producer Targa Resources (TRGP) sells 45% interest in Bakken assets for $1.6B

·     Transocean (RIG) Q4EPS loss (34c)/$748M in drilling revs vs. est. loss (24c)/$743M; Q4 revenue efficiency 96% vs. 92.4% YoY and rig utilization 62% vs. 53% YoY

·     Aqua America (WTR) Q4 EPS 31c/$205.75M vs. est. 31c/$211.35M; sees FY18 EPS $1.41 on revs $838.09M vs. est. $1.41/$847.81M

·     Continental Resources (CLR) Q4 adjusted 54c/$1.15B vs. est. 62c/$1.18; full-year 2018 production increased 23% over full-year 2017, averaging 298,190 Boe per day. 2018 oil production increased 21% over 2017, averaging 168,177 barrels of oil per day

·     Helix Energy (HLX) Q4 adjusted EPS loss (9c)/$158M vs. est. loss (7c)/$156M; FY18 adjusted EPS 19c on revs $740M vs. est. 23/$737.4M

·     Westlake Chemical (WLK) Q4 EPS 95c/$1.99B vs. est. $2.09B

 

Financials

·     HSBC Holdings PLC (HSBC) reported lower than expected Q4 profit as choppy financial markets, U.S.-China trade tensions and Brexit uncertainty weighed on the global bank; it reported a full-year net profit of $12.6 billion, less than the $13.71 billion analysts expected.

·     Navient Corp (NAVI) has rejected a $3.2 billion takeover bid from two investors Reuters reported. Navient’s board voted on Monday to reject the $12.50 per share offer from hedge fund Canyon Capital Advisors LLC and private-equity firm Platinum Equity Advisors LLC, believing it undervalues the company, according to the source https://reut.rs/2EguGZ7

·     Equinix (EQIX) and CoreSite Realty (COR) are among stocks to play data-center boom, Barron’s said saying the data-center stocks may finally be getting over a rough patch

 

Healthcare

·     Pfizer Inc. (PFE) and Merck KGaA’s immune therapy Bavencio, combined with Inlyta, cut the likelihood of advanced kidney tumors getting worse or death by more than five months compared with the standard treatment, trial analysis shows.

·     Cannabis stocks mentioned cautiously in Barron’s saying companies like Canopy Growth (CGC), iAnthus Capital Holdings (ITHUF), Curaleaf Holdings (CURLF), Acreage Holdings (ACRGF), Green Thumb Industries (GTBIF), MedMen Enterprises (MMNFF), are extremely risky, in part because recreational marijuana remains illegal under federal law in the U.S.

 

Technology, Media & Telecom

·     Apple (AAPL) has hired former Microsoft Corporate (MSFT) Vice President Sam Jadallah to lead home initiatives at the company, according to CNBC

·     McClatchy Co. (MNI) plans a new all-cash bid for Tribune Publishing (TPCO) “as early as this week,” New York Post reported, citing people familiar with issue. New offer is expected to be in the $15-per-share range, according to person cited by NY Post https://nyp.st/2T68YPI

·     Palo Alto Networks (PANW) said that it has entered into a definitive agreement to acquire Demisto, a security company in the security orchestration, automation and response for $560M

·     Pearson (PSO) has agreed to sell its US schools course materials business to the private equity group Nexus Capital Management after a year of trying to find a buyer for the division

·     Windstream (WIN) announced it is postponing the release of the company’s Q4 and FY18 financial results following a federal judge’s ruling against one of its subsidiaries

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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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