Morning Preview: May 20, 2019

Auto PostDaily Market Report

Early Look

Monday, May 20, 2019

Futures

Up/Down

%

Last

DJ Industrials

-107.00

0.42%

25,673

S&P 500

-14.50

0.50%

2,847

Nasdaq

-79.50

1.06%

7,432

 

 

U.S. futures are moving lower, tracking weakness in Europe and Asia as markets look to extend their two weeks of declines, as the trade situation between The U.S. and Beijing is no better from where it was last week. Markets are pressured on reports several chip suppliers in the U.S. cut ties with Huawei over the weekend after the U.S. put the China company on a blacklist last week escalating trade tensions. In a positive note in Asia, Japan’s Q1 GDP came in much higher than expected, rising 2.1% vs. the street estimate for down -0.2% while in emerging markets, India and Australia markets jumped following surprise elections. Oil prices are holding firm following commentary out of the OPEC ministers meeting this weekend (ahead of the full OPEC meeting late June in Vienna). Trump also warned Iran not to threaten the U.S. or face ruinous consequences. “If Iran wants to fight, that will be the official end of Iran,” the president tweeted (also supporting oil prices). Lastly on the Fed front, Jerome Powell, Richard Clarida and John Williams are set to speak today with Fed Chair Powell the keynote address at an Atlanta Fed conference, while Clarida and Williams speak in New York. Note last week stocks ended lower as the S&P 500 fell -0.76%, the Dow lost -0.7% and the Nasdaq Composite declined -1.27%. With the losses, the S&P 500 and Nasdaq Comp posted consecutive weekly declines for the first time since Q4’18. In Asian markets, The Nikkei Index rose 51 points to21,301, the Shanghai Index slipped -11 points to 2,879 and the Hang Seng Index fell -158 points to 27,787. In Europe, the German DAX drops over -80 points to 12,150, while the FTSE 100 is down over -25 points to 7,320.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -16.79 points, or 0.58%, to 2,8259.53

·     The Dow Jones Industrial Average fell -98.68 points, or 0.38%, to 25,764.00

·     The Nasdaq Composite slumped -81.76 points, or 1.04%, to 7,816.28

·     The Russell 2000 Index declined -21.48 points, or 1.38% to 1,535.76

 

Events Calendar for Today

·     8:30 AM EST      Chicago Fed Nat Activity Index for April

 

 

Macro

Up/Down

Last

WTI Crude

0.04

62.80

Brent

0.14

72.35

Gold

-2.55

1,275.00

EUR/USD

-0.0004

1.1154

JPY/USD

-0.14

109.94

10-Year Note

+0.00

2.394%

 

 

World News

·     Japan’s economy surprised with solid growth during Q1 of the year, as gross domestic product expanded an annualized 2.1% in the three months through March, a surprise compared to median estimate for a contraction of -0.2%

·     In Australia, the center-right gov’t clung to power in a surprise victory, with voters backing its stewardship of a slowing economy for another three years and rejecting the opposition’s progressive agenda. In India, Narendra Modi is poised to retain power in India – Bloomberg

 

Sector News Breakdown

Consumer

·     International Game Technology (IGT) Q1 EPS 12c/$417M Ebitda vs. est. 19c/$399.9M

·     Nordstrom (JWN) stock looks like a bargain according to Barron’s citing Evercore ISI analyst who upgraded the department store last week, citing historically low valuations for Nordstrom and rivals Kohl’s (KSS) and Macy’s (M). He sees a 50% to 100% upside in all three stocks

·     Uber (UBER), Lyft (LYFT) mentioned cautiously in Barron’s saying the top ride-sharing firms may never reach profitability.

·     Airline rating changes at Morgan Stanley: United (UAL) upgraded to overweight from equal-weight and up tgt to $110 from $101; Delta (DAL) downgraded to equal-weight from overweight and American (AAL) downgraded to underweight from equal-weight and cut tgt to $26 from $40

·     Nissan (NSANY) dropped as S&P cut its ratings outlook on the Japanese auto maker to negative while saying that Nissan earnings are “likely to decline over the next two years to a greater degree than we previously assumed.”

 

Energy, Industrials & Materials

·     The United Arab Emirates’ energy minister said he does not think oil producing nations should relax the production cuts currently in place. Suhail al-Mazrouei suggested there’s support within the OPEC oil cartel to extend the 1.2 million barrels a day cut in place since January

·     Ryanair Holdings PLC (RYAAY) Europe’s largest budget airline warned that profit for this year would be dented by Boeing’s (BA) global grounding; said profit for the financial year that ended March 31 slumped to 885M euros ($987M), despite a 7% increase in sales to EUR7.7 billion.

·     Exxon Mobile (XOM) has drawn interest from Repsol SA and closely held U.K. petrochemical company Ineos Group Holdings in a package of oil fields it’s selling in the Gulf of Mexico, Bloomberg reported

·     Carlyle Group (CG) is in talks with three pipeline companies to sell a 25% stake in its Corpus Christi, Texas, crude oil export project for $625 million, Reuters reported

·     Lockheed Martin’s (LMT) Sikorsky unit will build 12 production CH-53K King Stallion helicopters under a new $1.13 billion contract from the U.S. Navy.

·     General Dynamics (GD) upgraded to buy from neutral with $204 tgt at Goldman Sachs

 

Healthcare

·     Medicines Co. (MDCO) presented data Saturday for inclisiran, its cholesterol-lowering medication saying interim results from an ongoing study showed LDL, the “bad” cholesterol, was lowered by more than 50% out to three years, when receiving twice-a-year dosing of inclisiran, with no material safety issues

 

Technology, Media & Telecom

·     Google (GOOGL) has suspended business with Huawei Technologies Co. that requires the transfer of hardware and software products except those covered by open source licenses – Reuters reported

·     Bloomberg reported that several major chipmakers, including Intel Corp. (INTC), Qualcomm Inc. (QCOM), Xilinx Inc. (XLNX) and Broadcom Inc. (AVGO) have decided to cut their ties with Huawei until further notice.

·     Dish (DISH) executed an agreement to buy EchoStar’s (SATS) Broadcast Satellite Service business in an all-stock deal valued at about $800M as EchoStar shareholders will receive about 22.9 million shares of Dish Class A stock

·     T-Mobile (TMUS) and Sprint (S) will make a swathe of concessions to gain approval for their $26.5 billion merger, Bloomberg reported. They plan to sell Sprint’s Boost brand, reducing their hold on the pay-as-you-go market, and make service and price guarantees as they build out their 5G network. https://bloom.bg/2YER8CF

·     Barron’s said Apple (APPL), Cisco Systems (CSCO), Qualcomm (QCOM), Honeywell International (HON) and Eaton (ETN) are most at risk to the ongoing tit-for-tat with China, citing a Barclays equity strategist who looked at foreign sales as well as import and export levels. Retailers and their suppliers like VF (VF) and Nike (NKE) are also high on the list. Bank of America Merrill Lynch strategists forecast a pullback of 5% to 10% in the S&P 500 related to the latest round of tariffs, and a 20% to 30% hit if the White House imposes tariffs on the rest of Chinese goods.

·     Barron’s said companies such as Applied Materials (AMAT), BorgWarner (BWA), Charles Schwab (SCHW), Regeneron Pharmaceuticals (REGN) and Tapestry (TPR) look good to ride out a trade war with China because they’ve been recently sold off and are cheaper relative to earnings than the market and their five-year averages

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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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