Morning Preview: August 12, 2019

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Early Look

Monday, August 12, 2019

Futures

Up/Down

%

Last

DJ Industrials

-208.00

0.79%

26,060

S&P 500

-23.50

0.80%

2,896

Nasdaq

-66.50

0.87%

7,593

 

 

U.S. stock futures are pointing to a weak open, led by declines in Asia after Hong Kong airport cancelled all remaining flights on Monday afternoon as thousands of protesters flooded the main terminal of the international aviation hub, with protestors entering their ninth week of anti-government demonstrations. The yen has also advanced against most other currencies, reflecting a risk in the currency’s safe-haven premium as stock futures sputter lower. The People’s Bank of China set the official midpoint reference for the yuan at 7.0211 per dollar on Monday — weaker than Friday’s session, but stronger than what market watchers predicted. This is the third consecutive session where the central bank set the midpoint at a level weaker than the psychologically important 7-yuan-per-dollar level. Late last week, White House trade advisor Peter Navarro said the U.S. will respond forcefully if Beijing devalues its currency to “neutralize” the effect of tariffs. In Asian markets, The Nikkei Index was closed, the Shanghai Index rose 40 points to 2,814 and the Hang Seng Index fell -114 points to 25,824. In Europe, the German DAX is flat trading just under 11,700, while the FTSE 100 is down about -20 points to 7,230. The ongoing protests, which effected travel today, has put additional economic pressures in a region that is already suffering due to a trade dispute with the U.S. Stocks managed to pare losses last week, as the Dow Industrials closed out the week down about 0.75%, the S&P 500 down 0.46%, and the Nasdaq down 0.56%, well off last Monday’s lows around 3% across the board. Stocks are on track to start the week lower as earnings season slows up with a few key retailers and tech names remaining.

 

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -19.44 points, or 0.66%, to 2,918.65

·     The Dow Jones Industrial Average fell -90.76 points, or 0.34%, to 26,287.44

·     The Nasdaq Composite slumped -80.02 points, or 1.00%, to 7,959.14

·     The Russell 2000 Index declined -19.09 points, or 1.25% to 1,513.04

 

Events Calendar for Today

·     8:30 AM EST      Monthly Budget Statement for July…est. (-$120.0B)

 

Other Key Events:

·     BTIG Biotechnology Conference in New York (one-day event)

·     Cowen Communication Infrastructure Summit, 8/12-8/13, in CO

·     KeyBanc Annual Technology Conference, 8/12-8/13, in Vail, CO

·     Wells Fargo 2019 Technology Services Forum, 8/12-8/13, in Newport, RI

 

 

Macro

Up/Down

Last

WTI Crude

-0.87

53.63

Brent

-0.60

57.93

Gold

6.70

1,515.20

EUR/USD

-0.0006

1.1194

JPY/USD

-0.51

105.18

10-Year Note

-0.058

1.686%

 

 

World News

·     In Hong Kong, police again clash with protesters, with no end in sight as demonstrations enter their ninth week of anti-government demonstrations. The movement’s demands include the resignation of the Chinese territory’s leader, democratic elections, the release of those arrested in earlier protests and an investigation into police use of force against the protesters.

·     Goldman Sachs on Sunday said that it does not expect a trade deal before the 2020 presidential election, and warned that the ongoing trade war is having a greater effect on the U.S. economy that first estimated

·     China’s central bank set the midpoint for the yuan weaker than 7 per U.S. dollar for the third day in a row. The People’s Bank of China set the currency’s reference point at 7.0211 per dollar

 

Sector News Breakdown

Consumer

·     Tesla (TSLA) Model 3 electric car caught fire after crashing into a parked tow truck on a Moscow motorway late on Saturday, with the Tesla driver saying he had failed to see the vehicle with which he collided. – Reuters

·     Transform Holdco, the company formed in January to buy the remaining assets of bankrupt retailer Sears Holdings Corp., said it will begin “liquidation sales” next week in 26 stores that will close in late October. The large-format store closures include 21 Sears stores in 15 states and 5 Kmart stores in 3 states and Puerto Rico

·     Tyson Foods (TSN) said over 3,800 workers at a meat-processing plant in Kansas will be out of work after a Friday night fire that caused significant damage, but the company said it will provide them some guaranteed pay according to Reuters

·     Uber Technologies Inc. (UBER) said it instituted a hiring freeze for employees working on software and services across the U.S. and Canada, as the ride-hailing company faces mounting losses.

·     Wynn Resorts, Melco (MLCO): Macau gross gaming revenue (GGR) on an average daily basis for the week of August 5-11 improved to 814 million patacas compared to the 750 million patacas for the Aug. 1-4 period, according to Bernstein as the month-to-date average daily rate is “flat” vs July’s 789 million patacas and down 8% vs Aug. 2018’s 857 million patacas

 

Energy, Industrials & Materials

·     Arconic stock (ARNC) mentioned in Barron’s noting shares rose this week as the company plans to split in two, with one company focusing on aerospace and the other on autos. Meanwhile, Alcoa (AA) has dropped 24% this year and if it gets cheap enough, maybe Arconic will decide it’s time to consume its former parent company

·     Swedish engineering group Sandvik’s Chief Executive Officer Bjorn Rosengren will step down next year and will join robotics and engineering group ABB Ltd (ABB) as CEO, the companies said

 

Financials

·     BlackRock Inc. (BLK) is poised to become the largest shareholder of Authentic Brands Group LLC, the company that owns brands including Sports Illustrated, Nine West and Aéropostale with an $875M stake

·     KKR and NVC Lighting announced the signing of a Share Purchase Agreement under which KKR has agreed to set up a strategic partnership with NVC Lighting and acquire a majority interest in NVC Lighting’s China Lighting Business for a total equity value of approximately $794M

 

Healthcare

·     AtriCure (ATRC) agreed to buy SentreHeart Inc., a privately held developer of percutaneous left-atrial-appendage management solutions, for an initial $40 million in cash and stock; guided total2019 revenue to be in the range of $224.5M-$228.5M, which includes minimal contribution from SentreHEART, and reflects approximately 11% to 13% organic growth vs. est. $227.06M

·     Humana (HUM) upgraded to Overweight from Neutral at Cantor

·     Immunic Inc. (IMUX) announced enrollment of the first patient in an investigator-sponsored proof-of-concept clinical trial of IMU-838 for the treatment of patients with primary sclerosing cholangitis, or PSC

 

Technology, Media & Telecom

·     IHeartMedia (IHRT) mentioned positively in Barron’s saying it is ready for its next chapter after exiting from Chapter 11 looking slimmer and fitter. The article notes its debt was cut to $5.8B from $16B before bankruptcy, and it is well-positioned in the fast-growing and competitive digital streaming and podcasting businesses

·     Amazon (AMZN), Arista Networks (ANET), Equinix (EQIX) and Merck (MRK) can buck slowing growth according to Barron’s while Broadcom (AVGO), Target (TGT), Verizon Communications (VZ) and Weyerhaeuser (WY) have big dividends for a yield-hungry world. AMZN free cash flow is expected to more than double in three years, ANET is expected to grow earnings per share by 21% this year, EQIX is expected to increase revenue by 10% a year over the next few years, AVGO generates more than twice the free cash flow it needs to pay its dividend

·     Take-Two (TTWO), Shopify (SHOP), Match Group (MTCH) and AMD (AMD) are among tech stocks to beat expectations, Barron’s said and could be primed for more upside surprises in the coming quarters

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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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