Morning Preview: June 12, 2019

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Early Look

Wednesday, June 12, 2019

Futures

Up/Down

%

Last

DJ Industrials

-48.00

0.18%

26,019

S&P 500

-6.50

0.21%

2,885

Nasdaq

-29.50

0.39%

7,515

 

 

Global stocks dropped on Wednesday, a day after major averages in the U.S. snapped month long winning streaks as lingering trade tensions and questions over the direction of Federal Reserve policy continue to swirl. Oil prices drop over 2% overnight following a large build in weekly crude oil inventories reported by the API (and ahead of the DOE inventory data at 10:30 AM this morning). In Asian markets, The Nikkei Index slipped -74 points to settle at 21,129, the Shanghai Index fell -16 points to 2,909 and the Hang Seng Index dropped -480 points (1.73%) to end at 27,308. In Europe, the German DAX is down around -75 points to 12,080, while the FTSE 100 is down about -50 points to 7,350. U.S. stocks slipped on Tuesday, snapping the longest winning streak in two months for major averages as investors weighed the outlook for trade talks and interest rate policy. A day after the U.S. suspended its tariffs on Mexico, President Trump threatened to raise duties again on China if President Xi Jinping doesn’t meet with him at the G-20 summit. After a strong start to the trading session, stocks slowly bled lower, flipping between small gains and losses before ending in the “red”, with the Dow snapping a six-session winning streak and the S&P 500 ending a five-day run. U.S. Treasury prices ended mixed, with the two-year yield adding 3 bps to 1.93% while the 10-year yield finished flat at 2.14%.

 

Market Closing Prices Yesterday

·     The S&P 500 Index slipped -1.01 points, or 0.03%, to 2,885.72

·     The Dow Jones Industrial Average fell -14.17 points, or 0.05%, to 26,048.51

·     The Nasdaq Composite dipped -0.60 points, or 0.01%, to 7,822.57

·     The Russell 2000 Index declined -4.45 points, or 0.29% to 1,519.11

 

Events Calendar for Today

·     7:00 AM EST      MBA Mortgage Applications Data

·     8:30 AM EST      Consumer Price Index (PPI) Final MoM for May…est. 0.1%

·     8:30 AM EST      CPI Ex: Food & Energy (core) MoM for May…est. 0.2%

·     8:30 AM EST      CPI Ex: Food & Energy (core) YoY for May…est. 2.1%

·     10:30 AM EST    Weekly DOE Inventory Data

·     2:00 PM EST       Monthly Budget Statement for May…est. (-$199.5B)

 

Earnings Calendar:

·     Earnings Before the Open: None

·     Earnings After the Close: LULU, OXM, RFIL, RH, TLRD, ZDGE

 

Other Key Events:

·     E3 2019 Conference, 6/10-6/14, in Los Angeles, CA

·     Deutsche Bank Global Consumer Conference, 6/11-6/13, in Paris

·     Goldman Sachs 40th Annual Global Healthcare Conference, 6/11-6/13, in CA

·     Morgan Stanley 10th Annual Financials Conference, 6/11-6/12, in New York

 

 

Macro

Up/Down

Last

WTI Crude

-1.39

51.88

Brent

-1.51

60.78

Gold

8.90

1,335.75

EUR/USD

-0.0001

1.1326

JPY/USD

-0.19

108.33

10-Year Note

-0.016

2.122%

 

 

World News

·     China’s consumer inflation hit a 15-month high in May, fueled by food prices, as the consumer-price index was up 2.7% in May compared with a year earlier, accelerating from 2.5% growth in April (and in line with a median forecast). Food prices in May rose 7.7%, the fastest pace in over three years, after climbing 6.1% in April.

·     Boris Johnson launched his campaign to succeed Theresa May by warning the Conservative party would “kick the bucket” if Brexit is delayed again – Financial Times

·     Thousands of protesters blocked entry to Hong Kong’s government headquarters Wednesday, delaying a legislative session on a proposed extradition bill that has heightened fears over greater Chinese control

 

Sector News Breakdown

Consumer

·     Tesla (TSLA) CEO Elon musk said at the company’s annual shareholder meeting on Tuesday that the company has “a decent shot at a record quarter on every level.” Musk also said the company was on track to hit its volume production goal by the end of this year. Tesla previously said it plans to deliver 90,000 to 100,000 vehicles to customers in the second quarter versus 63,000 vehicles in the first, and is aiming to deliver 360,000 to 400,000 vehicles in 2019.

·     Dave & Buster’s (PLAY) shares fell -16%; Q1 EPS $1.13/$363.6M vs. est. $1.13/$371.7M; Q1 comp sales fell (-0.3%) vs. est. +1.6%; sees 2019 total revenues of $1.365B-$1.390B (down from prior $1.37B-$1.4B) and sees 2019 comparable store sales of -1.5.% to +0.5%; sees 2019 net income of $103M-$113M

·     British American Tobacco (BTI) says H1 new category rev growth approaching FY forecast range, and expects New Category rev growth to accelerate in H2 leading to FY growth around mid of 30-50% range (Dow Jones note that range comes well below broker Jefferies’ estimate of 79% growth in FY)

·     China’s auto sales declined for the eleventh straight month in May, falling 16.4% from a year earlier to 1.91 million

 

Energy

·     Members of the OPEC are close to reaching an agreement on extending production cuts, the energy minister of the United Arab Emirates said on Tuesday. Energy Minister Suhail bin Mohammed al-Mazroui said that given existing oil inventories the output curbs should remain in place or be extended “at least until the end of the year.” Reuters

·     The American Petroleum Institute (API) reported weekly crude stockpiles rose +4.852M barrels, with gasoline inventories rising +829K barrels and distillates falling -3.461M barrels

·     Shell (RDSA) will sell its Martinez Refinery in California to PBF Energy for $1 billion plus the value of hydrocarbon inventory, crude oil supply and product offtake agreements, and other adjustments.

 

Financials

·     KKR & Co. (KKR) offers to acquire the shares of Axel Springer SE (AXELF) after reaching an agreement with the German media company. KKR will offer all Axel Springer shareholders 63 euros ($71.31) a share in cash https://on.mktw.net/2X9fbMV

·     Invesco Ltd. (IVZ) reported preliminary month-end assets under management (AUM) of $1,159.3 billion, an increase of 18.9%. The increase was driven by the OppenheimerFunds combination, modest net long-term inflows and reinvested distributions, partially offset by unfavorable market returns, lower money market AUM, foreign exchange, and non-management fee earning AUM outflows. FX decreased AUM by $3.7 billion

·     Artisan Partners (APAM) reports AUM $106.9B as of May 31; separate accounts accounted for $56B of total firm AUM, while Artisan Funds and Artisan Global Funds accounted for $50.9B

·     American Assets Trust (AAT) 9.5M share Secondary priced at $44.75

 

Healthcare

·     Corcept Therapeutics (CORT) received a Paragraph IV Notice Letter advising that Sun Pharmaceutical submitted an ANDA to the U.S. FDA seeking authorization to manufacture, use or sell a generic version of Korlym Mifepristone Tablets, 300 mg

·     Neurocrine (NBIX) announced it will present data from two of its movement disorder programs, including INGREZZA capsules, the first U.S. FDA approved treatment for adults with tardive dyskinesia, and opicapone, an investigational adjunct treatment for Parkinson’s disease

·     Aratana Therapeutics (PETX) reports the FDA’s Center for Veterinary Medicine has approved an additional 10 mL vial size for Nocita, which is currently available in a 20 mL size

 

Industrials & Materials

·     Late yesterday, activist Bill Ackman, a big United Technologies Corp. (UTX) shareholder who earlier pushed the industrial giant to streamline its business, is now urging the company to call off its planned megamerger with Raytheon Co. (RTN), which he says makes no strategic sense.

·     Celanese (CE) announced it will raise prices of all acetate tow product grades sold globally by up to 10%

 

Technology, Media & Telecom

·     MagnaChip (MX) shares rise 25%; raises Q2 revenue view to at least $194M from $173M-$181M (est. $177M) and gross profit margin is expected to be at least 21% (up from prior view to be in the range of 16%-18%)

·     Dassault Systemes SE (DASTY) announced a definite agreement for U.S. technology group Medidata Solutions Inc. (MDSO), in an agreement valued at $5.8 billion. Under terms of the all-cash deal, the French technology group will offer $92.25 for each share of Medidata, whose shares closed at $94.75 a share on Tuesday. https://on.mktw.net/2ZpfErZ

·     The U.S. Federal Trade Commission on Tuesday said in a court filing that mobile chip supplier Qualcomm Inc (QCOM) should not be allowed to put a sweeping antitrust ruling against it on hold as it pursues an appeal – Reuters

·     Nintendo Co. (NTDOY) is shifting some production of its Switch videogame console to Southeast Asia from China to limit the impact of possible U.S. tariffs on Chinese-made electronics, according to some reports

·     Smartsheet (SMAR) 12.9M share Secondary priced at $43.50

·     Cisco (CSCO) downgraded to Market Perform from Outperform at William Blair

·     NXP Semiconductors (NXPI) upgraded to Overweight from Equal Weight at Morgan Stanley

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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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