Morning Preview: July 17, 2019

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Early Look

Wednesday, July 17, 2019

Futures

Up/Down

%

Last

DJ Industrials

23.00

0.08%

27,351

S&P 500

2.50

0.08%

3,009

Nasdaq

12.50

0.15%

7,955

 

 

Stocks futures are pointing to a small advance, having pared overnight gains ahead of several key earnings results in the banking sector later this morning (BAC, BK, CMA, PNC, USB) while Asian markets were down slightly on renewed trade tensions and European markets are little changed. In Asian markets, The Nikkei Index fell -66 points to 21,469, the Shanghai Index slipped -5 points to 2,931 and the Hang Seng Index dipped -26 points to 28,593. In Europe, the German DAX is up a few points to 12,440, while the FTSE 100 is little changed at 7,575. The euro erased a decline after June inflation data largely met economists’ expectations while the British Pound was trading below $1.24 on Wednesday morning amid dollar strength and growing investor concern that a no-deal Brexit is becoming increasingly likely. Oil prices look to rebound after yesterday’s sharp decline. Stocks slipped late day to close off their earlier intraday record highs, led by declines in energy stocks after WTI crude dropped over 3% and after President Trump said there was “a long way to go” toward making trade progress between China and the U.S., renewing trade concerns. Oil fell after Secretary of State Pompeo said Iran was ready to negotiate on its missile program. The Dow Industrial Average had set a new all-time high in the early going amid positive reactions to earnings reports from big banks including JPMorgan Chase and Goldman Sachs, but the gains failed to hold. Transports outperformed, led by gains in truckers after JBHT earnings results and CP beat in the rail space. U.S. Treasury prices fell, lifting both the two-year and 10-year yields by 3 bps to 1.86% and 2.12%, respectively. Transports may give back some of yesterdays gains after rail operator CSX missed earnings and lowered its outlook.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -10.26 points, or 0.34%, to 3,004,04

·     The Dow Jones Industrial Average fell -23.53 points, or 0.09%, to 27,335.63

·     The Nasdaq Composite slumped -35.39 points, or 0.43%, to 8,222.80

·     The Russell 2000 Index inched higher 0.17 points, or 0.01% to 1,562.00

 

Events Calendar for Today

·     7:00 AM EST      MBA Mortgage Applications Data

·     8:30 AM EST      Housing Starts for June MoM…est. 1.26M

·     8:30 AM EST      Building Permits MoM for June…est. 1.30M

·     10:30 AM EST    Weekly DOE Inventory Data

·     2:00 PM EST       Fed Beige Book

 

Earnings Calendar:

·     Earnings Before the Open: ABT, BAC, BK, CATC, CMA, PGR, PNC, TXT, USB

·     Earnings After the Close: AA, ADTN, BXS, CATY, CCI, CCK, CNS, EGBN, IBM, LLNW, NFLX, NVEC, PFBC, PLXS, RLI, SLG, TBK, TCBI, TSC, UMPQ, URI

 

 

Macro

Up/Down

Last

WTI Crude

0.41

58.03

Brent

0.66

65.01

Gold

-8.50

1,402.70

EUR/USD

0.0005

1.1216

JPY/USD

0.03

108.27

10-Year Note

-0.003

2.099%

 

 

World News

·     U.S. Net Long-Term portfolio securities inflow $3.5B in May, and U.S. total cross-border investment inflows at $32.9B in May while China reported $1.11T of U.S. Treasuries, a decrease of $2.8B from last month while Japan holds $1.10T, an increase of $37B from last month

·     Investor Intelligence Poll shows equity newsletter writers classified as bullish rose for a sixth week to 58.0% vs 56.7% last week while those considered bearish shrink to 16.8%, the smallest since March 2018, vs 18.3% a week ago; and those expecting a correction held steady at 25.2% vs last week’s 25% reading, which was a new 2019 low

 

Sector News Breakdown

Consumer

·     Nu Skin (NUS) shares fell -17%; after cutting FY19 EPS view to $3.20-$3.35 from $3.80-$4.05 (est. $3.95) and lowers FY19 revenue view to $2.48B-$2.52B from $2.76B-$2.81B (est. $2.77B) primarily due to a reduced revenue outlook in Mainland China following the government’s 100-day campaign to review and inspect the health products and direct selling industries

·     Cintas (CTAS) shares rose 5%; Q4 EPS $2.07/$1.79B vs. est. $1.93/$1.78B; sees FY20 EPS $8.30-$8.45 vs. est. $8.28 and guides FY20 revenue $7.24B-$7.31B vs. est. $7.29B

·     Hershey (HSY) upgraded to Neutral from Sell at Goldman Sachs

·     Retailers PVH Corp. (PVH) and Ralph Lauren (RL) both downgraded to Sell from Neutral at Goldman Sachs

 

Energy

·     The American Petroleum Institute (API) reported that U.S. crude supplies fell by -1.4M barrels for the week while showed a stockpile decline of 476,000 barrels for gasoline, but distillate inventories jumped by 6.2 million barrels

·     ConocoPhillips (COP) upgraded to buy from neutral at Bank America

 

Financials

·     Bank of New York (BK) 2Q EPS $1.01 vs. est. 95c; Q2 net interest margin 1.12% vs. 1.26% YoY and vs. est. 1.16%; Q2 return on equity +10%; Q2 non-interest expenses $2.65 billion, -3.6% YoY and recovery of credit losses $8M

·     Comerica (CMA) Q2 EPS $1.94 vs. est. $2.00; 2Q NIM on taxable-equivalent basis 3.67% vs. 3.62% YoY; net charge-offs $33M above the $16M view; return on average equity 16.4% and provision for credit losses $44M vs. loss $29.0M YoY

·     Fidelity National (FNF) Q2 EPS 92c/$2.1B vs. est. 84c/$2.08B; extended closing date of Stewart Info purchase to Sept 18th

·     Interactive Brokers (IBKR) Q2 EPS 46c/$413M below est.54c/$451M; said total DARTs increased 4% from the year-ago quarter to 828,000; customer accounts rose 19% to 645,000

·     Fulton Financial (FULT) Q2 EPS 35c vs. est.34c; Q2 net interest margin 3.44% vs. 3.39% YoY

·     Hope Bancorp (HOPE) Q2 EPS 34c (in-line w estimates); as Q2 et interest income before provision for loan losses was $117.2M vs. $119.6M in Q1 and NIM was 3.31%, compared with 3.39% in Q1

·     Wells Fargo (WFC) downgraded to Neutral from Outperform at Macquarie

 

Healthcare

·     Inovio Pharmaceuticals, Inc. (INO) said it sharpened its corporate strategy to focus on the commercial development of its late-stage HPV assets and reallocate capital to develop fast-to-market product candidates; cut selected early-stage R&D programs and discontinued further development of its Phase 1/2 study in advanced bladder cancer, while reducing its annual burn rate by 25% and its workforce by 28%

·     Seattle Genetics (SGEN) Q2 EPS loss (49c)/$218.4M vs. est. loss (39c)/$189.81M; said Q2 net sales for the U.S. and Canada were $159.0M, up 30% from last year; 2Q Adcetris revenue $159.0M (above views); says Q2 cash and cash equivalents $376.1M, -18% YoY

·     Puma Biotechnology’s (PBYI) said Health Canada approves NERLYNX (neratinib) for the extended adjuvant treatment of women with early-stage hormone receptor-positive, HER2-overexpressed/amplified breast cancer within one year after completion of adjuvant therapy with Roche’s Herceptin (trastuzumab) while licensee Knight Therapeutics will commercialize.

·     Mallinckrodt (MNK) shares slid after permanently discontinuing its Phase 2B study designed to assess the efficacy and safety of Acthar Gel as an investigational treatment for amyotrophic lateral sclerosis, or ALS (drug is not FDA-approved for the ALS indication)

·     Forty-Seven (FTSV) announces $75M common stock offering

·     Senseonics (SENS) files to sell $25M in common stock and guides Q2 prelim revs $4.4M-$4.7M vs. est. $4.52M

·     Vanda Pharmaceuticals Inc. (VNDA) announced that Tradipitant, a neurokinin-1 receptor antagonist, was effective in treating motion sickness in a clinical study conducted in the Pacific Ocean

·     Avrobio (AVRO) 6.5M share Secondary priced at $18.50

·     Repligen (RGEN) 1.38M share Secondary priced at $87.00

·     Tonix Pharmaceuticals (TNXP) 9M share Secondary priced at $0.60

 

Industrials & Materials

·     CSX Corp. (CSX) shares fell -5% as Q2 EPS $1.08/$3.06B below consensus $1.10/$3.14B; Q2 operating ratio set a company second quarter record of 57.4%and improved from 58.6% YoY; said Q2 volume -4%, Intermodal volume -10%; cuts forecast as sees year revenue down 1%-2% from prior view of low single digit rev growth

·     United Continental (UAL) Q2 adjusted EPS $4.21/$11.4B vs. est. $4.12/$11.34B; raises low end of year EPS view to $10.50-$12.00 from $10.00-$12.00; authorized a new $3B share buyback plan; Q2 traffic up 5.1%, load factor 86.0% and capacity up 3.6%; Q2 total passenger revenue up 6.1% YoY

·     Textron (TXT) Q2 EPS 93c/$3.23B vs. est. 86c/$3.44B; raises FY19 EPS view to $3.65-$3.85 from $3.55-$3.75 (est. $3.70) and reiterated its expectation for cash flow from continuing operations of the manufacturing group before pension contributions of $700M-$800M with planned pension contributions of about $50M

 

Technology, Media & Telecom

·     Omnicom (OMC) Q2 EPS $1.68/$3.72B vs. est. $1.61/$3.72B

·     Littlefuse (LFUS) preliminary Q2 EPS $1.91/$398M below consensus $2.03/$412.86M (and down from previously guided Q2 EPS $2.00-$2.14 and revenue of $409M-$421M)

·     Dialog Semiconductor (DLGNF) raises Q2 revenue view to $482M, up from prior view of $438M-$478M and sees prelim Q2 operating profit $82M

·     Anterix (ATEX) 2.22M share Secondary priced at $45.00

·     DouYu (DOYU) 67.387M share IPO priced at $11.50

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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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