Morning Preview: September 18, 2019

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Early Look

Wednesday, September 18, 2019

Futures

Up/Down

%

Last

DJ Industrials

-24.00

0.09%

27,086

S&P 500

-4.00

0.13%

3,004

Nasdaq

-10.50

0.13%

7,904

 

 

Stock futures in the U.S. point to a slightly lower open as Fed day is finally here! Stocks nudged higher late day Tuesday as investors await a widely expected interest rate cut on Wednesday from the Federal Reserve. The day was slow moving as a pullback in crude oil prices a day after posting its best day in over a decade (WTI rose 15% on Monday) was the big story with WTI October crude settling -5.7% to $59.34 per barrel after Saudi Arabia said it soon would restore most of its oil production from the recent attack and fully recover within weeks. Energy stocks were the biggest drag in the S&P while most sectors finished higher. Treasuries also rallied ahead of the FOMC meeting along with gold prices amid a weaker dollar. A quiet story thus far, but definitely worth keeping an eye on remains liquidity concerns as the New York Federal Reserve announced after the close last night, it would carry out its second repurchasing operation of the week today, after it conducted $53 billion of repos on Tuesday morning. The central bank pledged to carry out up to $75 billion of repos on Wednesday. As part of the repurchasing operations, the central bank buys Treasuries and other highly rated debt from dealers in order to inject liquidity into the system. The decision comes in the wake of a recent spike in repurchasing rates, a short-term borrowing rate utilized by hedge funds and banks. In Asian markets, The Nikkei Index fell -40 points to 21,960, the Shanghai Index rose 7 points to 2,985 and the Hang Seng Index slipped -36 points to 26,754. In Europe, the German DAX is up a few points to 12,380, while the FTSE 100 is also up a few points around 7,325.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 7.74 points, or 0.26%, to 3,005.70

·     The Dow Jones Industrial Average rose 33.98 points, or 0.173, to 27,110.80

·     The Nasdaq Composite climbed 32.47 points, or 0.40%, to 8,186.02

·     The Russell 2000 Index declined -6.31 points, or 0.40% to 1,578.29

 

Events Calendar for Today

·     7:00 AM EST      MBA Mortgage Applications Data

·     8:30 AM EST      Building Permits MoM for August…est. up 5% to 1.25M

·     8:30 AM EST      Housing Starts MoM for August…est. down -1.3% to 1.30M

·     10:30 AM EST    Weekly DOE Inventory Data

·     2:00 PM EST       FOMC Rate Decision on Interest Rates…25 bps cuts expected

 

Earnings Calendar:

·     Earnings Before the Open: GIS, SANW

·     Earnings After the Close: MLHR

 

Other Key Events:

·     FOMC Rate Decision on Interest Rates at 2:00 PM EST with press conference at 2:30 PM

·     Goldman Sachs 28th Annual Communaacopia Conference, 9/17-9/19, in New York

·     BMO Capital 14th Annual Real Estate Conference, 9/17-9/18

·     Davidson Annual Diversified Industrial & Services Conference, 9/18-9/19, in Chicago

·     FDA Joint Regulatory Conference, 9/16-9/18, in Washington DC

·     Facebook, Twitter and Google to testify before the Senate

 

 

Macro

Up/Down

Last

WTI Crude

-0.44

58.90

Brent

-0.18

64.37

Gold

-4.30

1,509.10

EUR/USD

-0.0026

1.1047

JPY/USD

0.07

108.20

10-Year Note

-0.031

1.77%

 

 

World News

·     U.S. total cross-border investment (TIC) inflows at $43.8B in July while U.S. net long-term portfolio securities inflows at $84.3B in July; Japan holds $1.13T, an increase of $7.9B from last month; moving farther ahead of China as top foreign holder of U.S. Treasuries which showed $1.11T of U.S. Treasuries, a decrease of $2.2B from last month

·     Investor Intelligence Poll shows equity newsletter writers considered bullish climbs a third week to 53.8% vs 50.0% last week, while those considered bearish fall to 17.0% from 17.9%, lowest since July 24 and those expecting a correction slips to 29.2% vs 32.1% last week

·     Japanese exports fell for the ninth straight month in August, data showed on Wednesday, as shipments from the world’s number three economy flail amid a global slowdown and trade tensions

 

Sector News Breakdown

Consumer

·     Chewy (CHWY) Q1 EPS loss (21c)/$1.15B vs. est. $1.13B; Q2 adjusted Ebitda loss $29.2M vs. est. loss $29.6M; sees FY net sales $4.75B-$4.8B and Q3 sales $1.19B-$1.21B vs. est. $1.17B

·     Altria (MO): Governor Andrew M. Cuomo announced that New York State is the first state in the nation to implement a ban on the sale of flavored electronic cigarettes and nicotine e-liquids, following a vote on emergency regulations by the Public Health and Health Planning Council

·     New car registrations in the UK, a reflection of sales, fell 8.4% on year in August across the EU to 1.04 million vehicles, the European Automobile Manufacturers’ Association said

·     Whirlpool (WHR) downgraded to sector weight from overweight at KeyBanc, citing limited valuation upside as earnings momentum weakens saying they are concerned that slowing GDP in Europe, China, and now India may complicate existing plans to expand margins, while increasing competition

·     Construction Partners (ROAD) 5M share Secondary priced at $14.25

·     Invitation Homes (INVH) 44M share Spot Secondary priced at $28.25

 

Energy

·     The American Petroleum Institute (API) reported that U.S. crude supplies rose by 592,000 barrels for the week ended Sept. 13, showed a stockpile increase of 1.6 million barrels for gasoline, while distillate inventories rose by 2 million barrels.

·     Exxon Mobil (XOM) is looking to sell its 50% stake in the Gippsland Basin oil and gas development in Australia’s Bass Strait as part of a broader review of its portfolio of assets around the world – Reuters

·     Electricite de France shares rose overseas after saying faults found in nuclear reactor components made by its mostly held Framatome unit do not adversely affect the components’ fitness for service and do not require immediate action

 

Healthcare

·     NewLink Genetics Corp. (NLNK) announced the U.S. FDA accepted a partnered biologics license application and granted priority review for the company’s V920 Ebola vaccine

·     Acadia (ACAD) 6.25M share Spot Secondary priced at $40.00

·     IGM Biosciences (IGMS) 10.937M share IPO priced at $16.00

·     Zynerba (ZYNE) said Phase II trial of Zygel showed 44% median seizure reduction in focal impaired awareness (FIAS) and convulsive seizures in DEE patients by the second month/Zygel was well tolerated, and the safety profile was consistent

·     Johnson & Johnson’s (JNJ) Janssen Pharmaceutical said FDA approved Erleada for the treatment of patients with metastatic castration-sensitive prostate cancer

·     Envista (NVST) 26.77M share IPO priced at $22.00 (was a dental products company spun off from Danaher)

·     Translate Bio (TBIO) 9M share Spot Secondary priced at $10.00

·     Acadia (ACAD) files to sell $250M in common stock

·     PTC Therapeutics (PTCT) files to sell $100M in common stock and commences offering of $250M of convertible senior notes

·     Kadmon Holdings (KDMN) said the FDA approved its generic trientine hydrochloride, a chelating agent for removing excess copper from the body (Wilson’s disease). Bausch Health Companies markets the branded version as Syprine

 

Industrials & Materials

·     Fed-Ex (FDX) shares fell -8%; Q1 adjusted EPS $3.05/$17.04B vs. est. $3.16/$17.06B; said results declined primarily due to weakening global economic conditions, increased costs to expand service offerings and continued mix shift to lower-yielding services; cuts FY20 adj EPS $11-13 vs est. $14.73; still sees year cap-ex spending $5.9B

·     Southwest (LUV) cuts Q3 CASM view to up 8%-10% vs. previous 9%-11% view and guides Q3 capacity down approximately 3% vs. previous down 2%-3% view; said continues to expect its third quarter 2019 operating revenue per available seat mile to increase in the range of 3%-5% YoY

·     Air Lease (AL) announced the delivery of one new Boeing (BA) 787-9 aircraft on long-term lease to Neos. Featuring Rolls-Royce Trent 1000 engines, this aircraft delivered from ALC’s order book with Boeing

·     Steel Dynamics (STLD) guided Q3 EPS 66c-70c, slightly below the consensus 71c saying reduced earnings are primarily related to lower profitability from the company’s sheet steel operations, as shipments and average steel pricing declined in the quarter, more than offsetting lower scrap costs

 

Technology, Media & Telecom

·     Adobe Systems (ADBE) Q3 EPS $2.05/$2.83B vs. est. $1.97/$2.82B; sees Q4 EPS $2.25 on revs about $2.97B below est. $2.30/$3.03B (pressured shares overnight); sees FY19 digital experience bookings growth greater than 20%

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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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