Morning Preview: September 12, 2019

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Early Look

Thursday, September 12, 2019

Futures

Up/Down

%

Last

DJ Industrials

43.00

0.16%

27,170

S&P 500

3.50

0.12%

3,007

Nasdaq

22.50

0.28%

7,933

 

 

U.S. futures edge higher, adding to the strong gains generated on Wednesday, as President Trump agreed to delay the $250B China tariff increase to October 15th from October 1st saying in a tweet last night “at the request of the Vice Premier of China, Liu He, and due to the fact that the People’s Republic of China will be celebrating their 70th Anniversary on October 1st, we have agreed, as a gesture of good will, to move the increased tariffs on 250 Billion Dollars’ worth of goods (25% to 30%), from October 1st to October 15th.” The news is helping sentiment early ahead of a few potential catalysts today, including the European Central Bank policy meeting at 7:30 AM EST where additional easing measures are expected and then later tonight the third democratic debate. Stocks jumped yesterday led by trade sensitive sectors (materials, tech and industrials) along with defensive as well (utilities) after China unveiled a list of products it will exempt from higher tariffs ahead of key talks set for next month, although key farm products were not included. The S&P and Dow both closed within 0.8% of their all-time highs reached in July, but the blue-chip benchmarks continue to be eclipsed by small caps, as the Russell 2000 climbed another 2% today to extend its gain for the week to 4.7%. Apple shares rose 3%, helping pace the gains but market strength was broad based. Energy stocks erased early market gains, tumbling from its highs as October WTI crude sank 2.9% to $55.75/bbl on reports that President Trump may want to ease sanctions on Iran. In Asian markets, The Nikkei Index gained 161 points to 21,759, the Shanghai Index jumped 22 points to 3,031 and the Hang Seng Index fell -71 points to settle at 27,087. In Europe, the German DAX is up a few points at 12,375, while the FTSE 100 is little changed at 7,335.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 21.54 points, or 0.72%, to 3,000.93

·     The Dow Jones Industrial Average rose 227.61 points, or 0.85%, to 27,137.04

·     The Nasdaq Composite surged 85.52 points, or 1.06%, to 8,169.68

·     The Russell 2000 Index advanced 32.72 points, or 2.12% to 1,575.71

 

Events Calendar for Today

·     8:30 AM EST      Weekly Jobless Claims…est. 215K

·     8:30 AM EST      Continuing Claims…est. 1.675M

·     8:30 AM EST      Consumer Price Index (CPI) MoM for August…est. 0.1%

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

·     8:30 AM EST      CPI Final Demand YoY for August…est. 1.8%

·     8:30 AM EST      CPI (core) Ex: Food & Energy YoY for August…est. 2.3%

·     10:30 AM EST    Weekly EIA Natural Gas Inventory Data

·     2:00 PM EST       Monthly Budget Statement for August…est. (-$197.5B)

 

Earnings Calendar:

·     Earnings Before the Open: DLTH, KR, MCFT

·     Earnings After the Close: AVGO, LPTH, ORCL, PCYG, VNCE

 

Other Key Events:

·     Democratic debate (3rd one) in Houston

·     Morgan Stanley 7th Annual Laguna Conference, 9/11-9/13, in California

 

 

Macro

Up/Down

Last

WTI Crude

-0.50

55.25

Brent

-0.73

60.08

Gold

7.30

1,510.50

EUR/USD

0.0011

1.1021

JPY/USD

0.06

107.88

10-Year Note

-0.012

1.726%

 

 

World News

·     Germany’s Ifo Institute said that recession is likely in Europe’s biggest economy as the Ifo now expects growth of 0.5% compared with a previous forecast of 0.6%. For 2020, the economic institute slashed its growth forecast to 1.2% from 1.7%. The German economy shrank by 0.1% percent in the second quarter and Ifo expects another 0.1% decline in the third quarter.

·     U.S. expansion, plus big gains from Norway and Brazil, is set to boost non-OPEC supply growth in 2020 to 2.3 million barrels a day from 1.9 million barrels a day this year, the International Energy Agency said in its monthly outlook. The non-OPEC surge will cut the need for OPEC crude to 28.3 million barrels a day, which is 1.4 million barrels a day below its August output

 

Sector News Breakdown

Consumer

·     SmileDirectClub (SDC) 58.54M share IPO priced at $23.00 (above expected range $19-$22)

·     Walmart (WMT) is rolling out an unlimited grocery delivery subscription service this fall, as the service will charge an annual membership fee of $98 for subscribers to access unlimited same-day delivery, which will be offered in 1,400 stores in 200 markets (watch shares of KR)

·     Oxford Industries (OXM) Q2 adj EPS $1.84/$302M vs. est. $1.86/$307M; lowers year EPS $4.25-$4.45, down from prior view of $4.45-$4.65 while still sees year sales $1.14B-$1.16B vs. est. $1.14B; Q2 comp sales were unchanged; guides Q3 EPS 1c-11c vs. est. 14c

·     Tailored Brands (TLRD) shares fell over -30%; Q2 retail comps fell -3.6% vs. 1.7% YoY; suspends quarterly dividend starting in Q4; Q2 adj EPS 82c vs. est. 74c and guides Q3 EPS 40c-45c below the est. 74c

·     Activist investor ValueAct Capital has taken a 5.2% stake in LKQ Corp. (LKQ), the auto parts company, according to a Securities and Exchange Commission filing.

·     Wolverine World Wide (WWW) approves new $400M share repurchase program

 

Energy, Industrials & Materials

·     Landstar (LSTR) issues warning saying it won’t meet the bottom end of its EPS forecast range (on July 24th had guided Q3 EPS $1.48-$1.54 vs. est. $1.55)

·     Emerson (EMR) says trailing three-month orders rose 2%; underlying orders rose 3%, excluding a 1% unfavorable currency impact; Automation Solutions, orders rose 4% (up 5% underlying and unfavorable currency impact of 1%), in line with management expectations

·     Baker Hughes (BHGE) 115M share Secondary priced at $21.50

·     Caterpillar (CAT) downgraded to market perform with $143 tgt from $150

 

Financials

·     US Bancorp (USB) revises its long-term EPS growth view to 7%-10%, down from prior view of 8%-10% and sees long-term revenue growth 5%-7%, down from 6%-8% prior

·     AllianceBernstein (AB) says preliminary AUM $587B as of August 31, up from $585B at the end of July. The 0.3% increase was due to total firm-wide net inflows, partially offset by market depreciation

·     Asset Management (APAM) assets under management as of August 31 totaled $111.5B. Separate accounts accounted for $58.4B of total firm AUM, while Artisan Funds and Artisan Global Funds accounted for $53.1B.

·     Invesco (IVZ) reported preliminary month-end assets under management, or AUM, of $1,175.1B, a decrease of 2.0%

·     International Money Express (IMXI) 5.22M share Secondary price at $12.75

 

Healthcare

·     Aurora Cannabis Inc. (ACB) shares fell after the pot company missed revenue expectations even after dropping its forecast; reported Q4 adjusted Ebitda loss of C$11.7 million ($8.9M) on net revenue of $98.94M vs. est. adjusted losses of C$0.06 a share on revenue of C$108 million

·     Fate Therapeutics (FATE) $150M Spot Secondary re-offered at $17.50

·     Ligand Pharmaceuticals (LGND) sets new $500 mln stock repurchase program

 

Technology, Media & Telecom

·     Oracle Corp. (ORCL) reports earnings a day earlier than expected – Q1 EPS 81c/$9.22B vs. est. 81c/$9.29B; boosts share repurchase authorization by $15B; 1Q service revenue fell -3.3% YoY to $786M, 1Q hardware revenue down -9.8% YoY to $815M and 1Q Cloud services and license support revenue $6.81B; CEO Mark Hurd to take leave of absences for health related reasons

·     Yelp Inc. (YELP) shares edge higher after a report that Groupon Inc. (GRPN) could attempt to acquire the company. The Wall Street Journal reported that Groupon is seeking a large acquisition amid unrest from some prominent investors. Two anonymous sources told the Journal that Yelp could be the target, even though Yelp is worth substantially more than Groupon. https://on.mktw.net/2lSs0dp

·     Yahoo Japan Corp. intends to buy a majority stake in Japanese online fashion retailer Zozo Inc. for about $3.7B, according to multiple reports Wednesday. Nikkei Asian Review reported Yahoo Japan plans to purchase 50.1% of Zozo and make it a subsidiary. https://on.mktw.net/2md3VOS

·     DXC Technology Co. (DXC) said Mike Lawrie retired as president and chief executive and was succeeded by Mike Salvino, but will remain on as chairman until the end of the year.

·     Ansys (ANSS) agreed to acquire Livermore Software Technology, a provider of explicit dynamics and other advanced finite element analysis technology, for $775 million.

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Content is provided by Hammerstone Inc., which has no affiliation with Regal Securities, Inc. (“Regal”) This commentary is provided for information purposes only, and is not a recommendation, offer or solicitation by Regal to buy or sell securities or to adopt any investment strategy. Regal has not participated in the creation of the Hammerstone content and does not directly or indirectly endorse the content. Any reliance on this material is at the sole discretion of the reader.

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