Morning Preview: April 17, 2019

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Early Look

Wednesday, April 17, 2019

Futures

Up/Down

%

Last

DJ Industrials

30.00

0.11%

26,477

S&P 500

5.50

0.18%

2,916

Nasdaq

21.50

0.28%

7,701

 

 

U.S. futures and European stocks are in positive territory, helped by reports overnight that China is considering stimulus measures to bolster consumption. Also helping, the Chinese economy grew at a faster-than-expected rate during the first quarter of this year, up 6.4%, matching the previous quarter’s pace, while industrial output and retail sales for March also beat. In trade news, The European Union published its preliminary list of U.S. goods being targeted in a $12 billion plan for retaliatory tariffs over subsidies to Boeing Co. As for Tuesday, stocks finished higher but surrendered most of their early gains, as a decline in health care shares (managed care and hospitals specifically) limited broader gains. The S&P health care sector tumbled 2% after UnitedHealth raised its profit guidance for the year on revenue growth across all its businesses but CEO David Wichmann warned the “Medicare for All” legislation proposed by House Democrats threatened to “destabilize the nation’s health system.” In tech news, QCOM shares soared 23% on news it reached a patent deal with Apple and ended their long-brewing legal battle. The move prompted INTC to halt production of its 5G chips overnight. NFLX and IBM shares are both lower after mixed quarterly results and/or guidance (more below). In Asian markets, The Nikkei Index gained 56 points to 22,277, the Shanghai Index gained 9 points to 3,263 and the Hang Seng Index slipped -5 points to 30,124. In Europe, the German DAX is up over 20 points to around 12,120, while the FTSE 100 is little changed at 7,475.

Market Closing Prices Yesterday

·     The S&P 500 Index inched higher 1.48 points, or 0.05%, to 2,907.06

·     The Dow Jones Industrial Average rose 67.89 points, or 0.26%, to 26,452.66

·     The Nasdaq Composite gained 24.21 points, or 0.30%, to 8,000.23

·     The Russell 2000 Index advanced 3.62 points, or 0.23% to 1,582.79

 

Events Calendar for Today

·     7:00 AM EST      MBA Mortgage Applications Data

·     8:30 AM EST      Trade Balance for February…est. (-$53.4B)

·     10:00 AM EST    Wholesale Inventories MoM for February…est. 0.3%

·     10:30 AM EST    Weekly DOE Inventory Data

·     2:00 PM EST       Fed Beige Book Released

 

Earnings Calendar:

·     Earnings Before the Open: ABT, BK, BMI, HOFT, KMI, KSU, MS, PEP, POL, TXT, USB

·     Earnings After the Close: AA, ADTN, BXS, CATY, CCI, CCK, CNS, ETFC, LLNW, LVS, OZK, PFBC, PLXS, RLI, SLG, SLM, SNBR, TBK, TCBI, TMK, UMPQ, URI

 

Other Key Events:

·     12:30 PM EST    Fed’s Harker speaks on the Economic Outlook

·     12:45 PM EST    Fed’s Bullard speaks at conference

·     5:30 PM EST       Fed’s Logan speaks in New York

 

 

Macro

Up/Down

Last

WTI Crude

0.46

64.51

Brent

0.51

72.23

Gold

1.50

1,278.70

EUR/USD

0.0029

1.1310

JPY/USD

0.02

112.02

10-Year Note

+0.02

2.605%

 

 

World News

·     Germany’s GDP will grow just 0.5% this year, the economy ministry said in the latest in a series of downward revisions from 2.1% projection a year ago. Growth for next year is forecast at 1.5%.

·     Investor Intelligence Poll says newsletter writers classified as bulls rise to 54.8% from 53.9%, holding at the highest since October 10, while bears were unchanged at 19.2%, the lowest since Nov. 14; those expecting a correction slips to 26.0% (lowest since March 20) from 26.9%

·     The Chinese economy (GDP) grew at a faster-than-expected rate during the first quarter of this year, up 6.4%, matching the previous quarter’s pace, while industrial output and retail sales for March also beat

 

Sector News Breakdown

Consumer

·     PepsiCo (PEP) Q1 adjusted EPS 97c/$12.88B vs. est. 92c/$12.7B; sees FY19 core EPS $5.50 vs. est. $5.51; consistent with its previous guidance for 2019, the company continues to expect full-year organic revenue growth to be 4% and a core effective tax rate of approximately 21%

·     Chipotle Mexican Grill (CMG) downgraded to equal-weight from overweight at Morgan Stanley

·     Domino’s Pizza (DPZ) was upgraded to overweight from equal-weight at Morgan Stanley

·     Smart & Final Stores Inc. (SFS) agreed to be acquired by private-equity firm Apollo Global Management LLC for $6.50 a share in cash. At $6.50 a share, Smart & Final would have a market cap of about $500 million https://on.mktw.net/2v8Ei31

·     Funko, Inc. (FNKO) CFO Russell Nickel intends to leave the Company at the end of 2019

 

Energy

·     The American Petroleum Institute (API) reported that U.S. crude supplies fell by -3.1M barrels for the week ended April 12, showed a stockpile decline of -3.6M barrels for gasoline, but distillate stockpiles climbed by 1.3M barrels

·     GasLog (GLOP) downgraded to Equal Weight from Overweight at Morgan Stanley

 

Financials

·     Bank of New York Mellon (BK) Q1 EPS $1.10c vs. est. 96c; Q1 net interest margin 1.20% vs. estimate 1.26% and 1Q common equity Tier 1 ratio 11%

·     Interactive Brokers (IBKR) Q1 EPS 64c/$558M vs. est. 60c/$505M

·     PayPal (PYPL) downgraded to Neutral from Buy at UBS

·     Americold Realty Trust (COLD) 43.8M share Secondary priced at $29.75

·     Fulton Financial (FULT) Q1 EPS 33c vs. est. 32c; Q1 net interest margin 3.49% vs. 3.35% last year, provision for credit losses $5.1M vs. $4.0M last year

·     Hope Bancorp (HOPE) Q1 EPS 34c (in-line) as 1Q net interest margin 3.39% and 1Q provision for loan losses $3MK               

·     United Financial (UCFC) Q1 EPS 25c/$55.92M vs. est. 27c/$47.55M; book value per share at March 31 was $14.17

·     WesBanco (WSBC) Q1 EPS 78c vs. est. 80c; 1Q net interest margin 3.68%

 

Healthcare

·     Brainsway (BWAY) 2.5M share IPO priced at $11.00

·     Roche (RHHBY) raises FY19 revenue guidance to mid-single digit growth as sales are now expected to grow in the mid-single digit range, at constant exchange rates

·     Turning Point Therapeutics (TPTX) 9.25M share IPO priced at $18.00

·     Natera (NTRA) files $100M common stock shelf

 

Industrials & Materials

·     CSX Corp. (CSX) Q1 EPS $1.02/$3.01B vs. est. 91c/$3.01B; 1Q operating income $1.22 billion; 1Q operating ratio 59.5% versus 60.3% in 4Q and says no change to below 60% operating ratio expectation; reaffirmed its full-year outlook for low single digit revenue growth

·     United Continental (UAL) Q1 adjusted EPS $1.15/$9.59B vs. est. 94c/$9.6B; backs FY19 adj. EPS view $10.00-$12.00 (est. $11.13) and backs FY20 adj. EPS view $11.00-$13.00 (est. $12.12)

·     Textron (TXT) Q1 EPS 76c/$3.1B vs. est. 68c/$3.17B; confirmed its 2019 earnings per share from continuing operations guidance of $3.55-$3.75 and its expectation for cash flow from continuing operations of the manufacturing group before pension contributions of $700M-$800M with planned pension contributions of about $50 million

·     Marten Transport (MRTN) Q1 EPS 25c/$199M vs. est. 24c/$199.3M

·     BHP Group (BHP) cut its 2019 forecast for iron production on the impact of Cyclone Veronica last month. 

·     Boeing (BA) should split the CEO and chairman roles, advisory firms ISS and Glass Lewis said. But they stopped short of calling for the company to strip power from current chief Dennis Muilenburg ahead of the annual shareholder meeting on April 29 – Bloomberg

 

Technology, Media & Telecom

·     Netflix (NFLX) Q1 EPS 76c/$4.52B vs. est. 57c/$4.5B; sees Q2 EPS 55c on revs $4.93B below est. 99c/$4.95B; sees 2Q streaming paid net change +5.00 million, below Bloomberg estimate +6.09 million; sees 2Q U.S. streaming paid net change +300,000 vs. est. +617,000 and sees 2Q international streaming paid net change +4.70M vs. estimate +5.47M; reported Q1 streaming paid net change +9.60M vs. est. 8.64M while 1Q international streaming paid net change +7.86M vs. est. +7.33M; doesn’t see apple, Disney services materially affecting growth

·     IBM Corp. (IBM) Q1 operating EPS $2.25/$18.2B vs. est. $2.22/$18.51B; 1Q cloud and cognitive software revenue $5.04B vs. $5.12B YoY, 1Q global business services revenue $4.119B vs. $4.115B YoY and 1Q global technology services revenue $6.88B vs. $7.42B YoY; said cloud revenue was up 10% over the last 12 months, down from a 12% gain reported in 4Q; reaffirmed year EPS and free cash flow views

·     Intel Corp. (INTC) said it will get out of the business for 5G modem chips, in which it was trying to compete with Qualcomm (QCOM). The move comes hours after Apple (AAPL) and Qualcomm (QCOM) settled all litigation between the companies. Apple’s partnership with Intel on modem chips was a big part of the legal fight between Apple and Qualcomm. Intel has had trouble getting up to speed in making the chips, and had said that they would not be available until 2020

·     Microsoft Corp. (MSFT) is planning to sell an Xbox videogame machine that doesn’t use discs or cartridges, a first for a major console maker and a move that brings the industry a step closer to an all-digital, streaming future. The new device, due May 7, will have the same hardware specs as the lower-tier Xbox One S model— minus the slot for physical media. It will come with a terabyte of storage for downloading games and cost $249 (watch shares of GME on the news)

·     Shares of Sprint (S) and T-Mobile US (TMUS) fell in after-hours trade after The Wall Street Journal reported that Justice Department staffers have told the companies their planned merger is unlikely to be approved as currently structured https://on.mktw.net/2V09ccn

·     ASML (ASML) sees 2Q net sales EU2.5 billion to EU2.6 billion vs. estimate EU2.55B and sees 2Q gross margin 41% to 42%; Q1 net sales EU2.23 billion, vs. estimate EU2.11 billion

·     Mellanox (MLNX) Q1 adjusted EPS $1.59/$305.2M vs. est. $1.45/$300.4M – says due to pending acquisition of Nvidia, Mellanox won’t hold an earnings call and has suspended provision of guidance

·     Longbow downgraded Diodes (DIOD), ON Semiconductor (ON), Littlefuse (LFUS) and Texas Instruments (TXN) to Neutral from Buy to reflect a more conservative view of Q2 and second half sales growth relative to consensus expectations

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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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