Morning Preview: May 21, 2019

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Early Look

Tuesday, May 21, 2019

Futures

Up/Down

%

Last

DJ Industrials

143.00

0.56%

25,839

S&P 500

17.50

0.61%

2,861

Nasdaq

70.50

0.95%

7,462

 

 

U.S. futures are pointing to a rebound as markets continue to trade on any and every headline related to a tenuous trading relationship with China. Overnight, U.S. officials said they would offer some temporary exceptions to an export blacklist against Huawei Technologies Co., which will offer some suppliers and customers of China’s telecom giant a 90-day reprieve from tough trade penalties. The recent trading blacklist against Huawei has been a black-eye for several technology companies that are impacted by sales to the company. But the CEO of Huawei said the U.S. government is underestimating how powerful his company will be in the 5G space in a few years. China also vowed to retaliate for the blacklisting of Huawei and accused the U.S. of undermining more than a year of talks. U.S. tactics are wrong and will elicit “a necessary response,” Ambassador to the EU Zhang Ming said. Stocks dropped on Monday as shares of tech companies fell after some U.S. businesses moved to comply with the Trump administration’s decision to put Huawei Technologies on a trade blacklist, pushing the S&P 500 lower to start the week, while the tech heavy Nasdaq Comp fell nearly 1.5% led by sharp declines in Apple and Tesla. In Asian markets overnight, The Nikkei Index slipped -29 points to 21,272, the Shanghai Index rose 35 points to 2,905 and the Hang Seng Index dropped -130 points to 27,657. In Europe, the German DAX is up 120 points to 12,160, while the FTSE 100 is up around 50 points to 7,360. In stock news, Dow component Home Depot reports with retailers KSS, TJX, AZO results expected later.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -19.30 points, or 0.67%, to 2,840.23

·     The Dow Jones Industrial Average fell -84.10 points, or 0.33%, to 25,679.90

·     The Nasdaq Composite slumped -113.91 points, or 1.46%, to 7,702.38

·     The Russell 2000 Index declined -10.80 points, or 0.70% to 1,524.96

 

Events Calendar for Today

·     7:45 AM EST      ICSC Weekly Retail Sales

·     8:55 AM EST      Johnson/Redbook Weekly Sales

·     10:00 AM EST    Existing Home Sales MoM for April…est. 5.35M

·     4:30 PM EST       API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: AZO, DY, EV, HD, JCP, KSS, MNRO, TJX

·     Earnings After the Close: CRMT, OOMA, SKY, TRNS

 

Other Key Events:

·     AGA Financial Forum 2019 Conference, 5/21-5/23, in Fort Lauderdale, FL

·     Credit Suisse 2019 Mortgage REIT Conference, 5/21 in New York

·     RECon 2019 – Int’l Council of Shopping Centers, 5/19-5/22, in Las Vegas

·     UBS Global Healthcare Conference, 5/20-5/22, in New York

·     UBS Global Oil and Gas conference, 5/20-5/22, in New York

·     RBC Capital Healthcare Conference, 5/21-5/22, in New York

·     Wolfe 12th Annual Transportation Conference, 5/21-5/22, in New York

·     OECD economic outlook

·     Eurozone consumer confidence for May

 

 

Macro

Up/Down

Last

WTI Crude

0.41

63.51

Brent

0.33

72.30

Gold

-1.80

1,276.00

EUR/USD

-0.0015

1.1151

JPY/USD

0.16

110.22

10-Year Note

-0.008

2.414%

 

 

World News

·     The OECD lifts growth forecast for Eurozone, U.S., U.K. despite a cut in the global projection to 3.2% from 3.3% expected previously and versus 3.5% in 2018. The organization warned that China developments continue to weigh on the outlook, but Eurozone growth is now seen at 1.2%, the U.S. economy expected to expand 2.8% and U.K. growth is now expected at 1.2%, down from 1.4% in 2018, and seen slowing further to 1.0% next year. U.S. and eurozone economies by contrast are expected to strengthen further in 2020.

·     Fed Chairman Jerome Powell confirmed the Fed’s looking at targeting an inflation range rather than a single point as “we are well aware dynamics have changed.” On trade, he said the outcome of talks “is highly uncertain and it would be premature” to judge. He rapped the buildup of leveraged lending but said it isn’t a threat to the financial system just now – Bloomberg

·     U.S. director of national intelligence Dan Coats has given several briefings with colleagues from the FBI and National Counterintelligence and Security Center to large technology companies, venture capitalists and educational institutions to warn them of the risks of working with China – Financial Times

·     A federal judge said President Trump can’t block a subpoena demanding his tax records from his accountants, rejecting his claim the request wasn’t for a legitimate legislative purpose. Trump pledged to appeal.

 

Sector News Breakdown

Consumer

·     Home Depot (HD) Q1 EPS $2.27/$26.4B vs. est. $2.19/$26.39B; Q1 comp sales up 2.5% below est. 4.3%; backs FY19 EPS view of about $10.03 vs. est. $10.09; expects its FY19 sales to grow by approximately 3.3% and comp sales for the comparable 52-week period to be up approximately 5%; 1Q U.S. comparable sales +3%, vs. estimate +4.3%

·     Ascena Retail (ASNA) announced plans to commence to wind down its Dressbarn’s operations

·     Kroger (KR) was upgraded to Outperform from Market Perform at Bernstein

·     Veoneer (VNE) files to sell $350M in common stock

·     Tesla Inc. (TSLA) was delivered another blow Tuesday by Morgan Stanley which slashed their worse-case scenario for the stock price to just $10 because of concerns the electric-car leader has saturated the market

 

Energy, Industrials & Materials

·     Crane (CR) submitted a proposal to acquire Circor International (CIR) for $45 per share in cash, representing a 47% premium over yesterday’s closing price; the total deal price is valued at about $1.7B https://on.mktw.net/2VPdWCK

·     Oil rose on signs OPEC and its allies will extend production cuts beyond June, while a steadily deteriorating U.S.-China trade relationship kept prices from pushing higher. Saudi Energy Minister Khalid Al-Falih urged the OPEC+ coalition to “stay the course” on output limits after a meeting in Jeddah over the weekend.

·     SolarWinds (SWI) files to sell 17.25M shares of common stock

·     Nordson (NDSN) Q2 EPS $1.58/$551M vs. est. $1.60/$558.3M

·     Raven Industries (RAVN) Q1 EPS 36c vs. 61c YoY and Q1 net sales $98.2M

·     Dycom (DY) Q1 EPS 53c/$806.73M vs. est. 42c/$773.79M; sees Q2 adj. EPS 70c-92c on revs $835M-$885M vs. est. 82c/$839.92M

 

Healthcare

·     Clovis Oncology (CLVS) said recurrent ovarian cancer patients who received Rubraca had longer periods of quality-adjusted time without clinically relevant symptoms, according to Phase 3 ARIEL3 study results.

·     Emergent BioSolutions (EBS) gets marketing authorization for oral typhoid vaccine Vivotif in 5 additional European Union Member States

·     Guardant Health (GH) files to sell 4.5M shares of common stock

·     NeoGenomics (NEO) files $150M common stock shelf

·     Insmed (INSM) files to sell $250M of common stock

·     Merck (MRK) said its Phase 3 trial evaluating Keytruda as monotherapy for the second- or third-line treatment of patients with metastatic triple-negative breast cancer didn’t meet its pre-specified primary endpoint of superior overall survival compared to chemotherapy.

·     Ocular Therapeutix (OCUL) said OTX-TP failed to meet its primary endpoint; said OTX-TP achieved statistically significant reduction of intraocular pressure versus placebo at eight of the nine pre-specified time points; company plans to discuss the data from the clinical trial with the FDA and determine next steps

·     Varian Medical Systems (VAR) announced it has entered into a definitive agreement to acquire privately held Cancer Treatment Services International for $283M; cuts FY19 adj. EPS view to $4.55-$4.70 from $4.60-$4.75 and backs FY19 revenue view $3.09B-$3.18

 

Technology, Media & Telecom

·     Carvana (CVNA) files to sell 3.5M shares of Class A common stock

·     Mercury Systems (MRCY) files to sell 5M shares of common stock

·     Marvell Technology Group Ltd. (MRVL) to acquire the Avera Semiconductor chip-design unit from Globalfoundries Inc. for $650 million in cash, adding the ability to produce more specialized semiconductors needed for 5G phone networks and cloud-data centers.

·     TripAdvisor (TRIP) upgraded to Neutral from Sell at Guggenheim

·     Qutoutiao (QTT) Q1 ADS loss 2.51 yean vs. est. loss 2.60 yuan; 1Q net revenue 1.12 billion yuan vs. estimate 1.09 billion yuan; sees 2Q net revenue 1.38 billion-1.42 billion yuan below Bloomberg estimate 1.64 billion yuan; said Mr. Lei Li has resigned from the position of CEO due to personal reasons

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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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