Morning Preview: October 07, 2019

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Early Look

Monday, October 7, 2019

Futures

Up/Down

%

Last

DJ Industrials

-93.00

0.35%

26,432

S&P 500

-10.00

0.34%

2,941

Nasdaq

-24.50

0.31%

7,743

 

 

U.S. stock futures are pointing to a lower open, giving back gains late last week as attention firmly turns to trade with China, as high-level tariff negotiations between Beijing and Washington are scheduled to begin Oct. 10-11. The prospects of upbeat negotiations appear unlikely given the reports that China is advocating for a limited trade agreement. Reports over the weekend indicate Chinese officials are increasingly reluctant to agree to a broad trade deal pursued by President Donald Trump. The report said Vice Premier Liu He, President Xi Jinping’s No. 2, would arrive for discussions in Washington with terms for a deal that won’t include “commitments on reforming Chinese industrial policy” or “government subsidies.” The news dampens expectations ahead of a quiet Monday of news. U.S. stocks gained on Friday, closing out a volatile week with a strong effort, led higher as non-farm payrolls missed headline estimates but the August numbers were revised higher and the unemployment level fell to a 50-year low, bolstering optimism for continued economic growth. The two-year Treasury rate spiked past 1.40%, and the dollar fell for a fourth straight day. Overnight in Asian markets, The Nikkei Index slipped -34 points to 21,375, the Shanghai Index remained closed as did the Hang Seng Index. In Europe, the German DAX is up a few points to 12,025, while the FTSE 100 is flat at 7,155. Last week, the Dow lost 0.92% for a third weekly decline, while the S&P 500 ended 0.33% lower also posting a third down week, but the Nasdaq managed a gain of 0.54% snapping a two week losing streak.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 41.38 points, or 1.42%, to 2,952.01

·     The Dow Jones Industrial Average rose 372.72 points, or 1.42%, to 26,573.72

·     The Nasdaq Composite surged 110.20 points, or 1.40%, to 7,982.47

·     The Russell 2000 Index advanced 14.35 points, or 0.97% to 1,500.70

 

Events Calendar for Today

·     3:00 PM EST              Consumer Credit for August…$15.0B

 

 

Macro

Up/Down

Last

WTI Crude

0.33

53.14

Brent

0.33

58.70

Gold

-5.20

1,507.70

EUR/USD

-0.0006

1.0973

JPY/USD

-0.09

106.85

10-Year Note

-0.034

1.525%

 

 

World News

·     Hong Kong protests ramped up again on Sunday with tens of thousands yelling “wearing a mask is not a crime,” as masked protesters hit Hong Kong’s the streets Sunday in defiance of a new ban on facial coverings. Peaceful rallies again degenerated into widespread violence and chaos.

·     A second whistleblower has come forward with information about President Donald Trump’s dealings with Ukraine, adding to the impeachment peril engulfing the White House and potentially providing new leads to Democrats in their unfurling investigation of Trump’s conduct.

 

Sector News Breakdown

Consumer

·     Contract talks aimed at ending a 21-day strike by the United Auto Workers against General Motors (GM) took a turn for the worse, hitting a big snag over product commitments for U.S. factories, a union official wrote in an email to members.

·     Tata Motors Ltd (TTM) Sept qtr. jaguar retail sales 37,323 vehicles, down 11.0%; land rover retails 91,630 vehicles, up 4.2% year-on-year

·     Office furniture retailers Herman Miller (MLHR), and Steelcase (SCS) downgraded to Market Perform from Outperform at Raymond James and downgraded Knoll (KNL) to Outperform from Strong Buy

 

Energy

·     Chevron (CVX) signed an agreement with Shell for a 40% non-operating interest in three deepwater blocks in Mexico

·     PG&E Corp. (PCG), seeking to fend off a group of bondholders trying to take control of its bankruptcy, said it has lined up $34.4B in debt financing commitments for its planned reorganization.

·     Refiners such as Valero Energy (VLO) and Marathon Petroleum (MPC) that process low-sulfur fuel could be beneficiaries said Barron’s as ships need to use cleaner fuel or have new exhaust systems, according to rules that go into effect on Jan. 1. “It’s the biggest thing happening in the freight market and in the oil market,” according to one hedge fund manager. The changes could cause a demand spike in the oil market four to six times as big as in 2008

 

Financials

·     HSBC Holdings Plc. (HSBC) is planning cost-cutting measures that could result in 10,000 layoffs, the Financial Times reported Sunday. That will reportedly come on top of about 4,000 layoffs that the U.K.-based bank announced in August, following the departure of CEO John Flint.

·     Invesco (IVZ) is cutting 1,300 jobs to help meet an annual cost-savings target of $475M, The Financial Times reported saying the asset management firm has been cutting jobs after buying smaller rival OppenheimerFunds, a deal announced last October and closed earlier this year.

 

Healthcare

·     The marijuana sector mentioned cautiously in Barron’s saying it will soon take even more of a hit, even after the ETFMG Alternative Harvest exchange-traded fund (MJ), is down 18% so far this year. Its top holdings are mostly down: Aurora Cannabis (ACB) is down 15%; Canopy Growth (CGC), down 18%; GW Pharmaceuticals (GWPH), up 12%; Cronos Group (CRON), down 14%; and Tilray (TLRY), down 65%.

·     Align Technology (ALGN) downgraded to Neutral from Buy at Guggenheim

·     Zimmer Biomet (ZBH) upgraded to Buy from Neutral at BTIG

 

Industrials & Materials

·     General Electric (GE) announced plan they are expected to reduce GE’s pension deficit by approximately $5-8 billion and Industrial net debt by approximately $4-6 billion; is freezing the U.S. GE Pension Plan for approximately 20,000 employees with salaried benefits, and U.S. Supplementary Pension benefits for approximately 700 employees; pre-funding approximately $4-5 billion of estimated minimum ERISA funding requirements for 2021 and 2022.; offering a limited time lump-sum payment option to ~100,000 eligible former employees who have not started their monthly U.S. GE Pension Plan payments

·     Glencore (GLNCY) has agreed to supply cobalt to a leading Chinese battery materials company for five years, as China looks to secure supplies of the battery metal to meet rising demand for electric cars

·     Arconic (ARNC) upgraded to Overweight from Neutral at JPMorgan

·     Ingersoll-Rand (IR) downgraded to Equal Weight from Overweight at Stephens

 

Technology, Media & Telecom

·     Spotify (SPOT) mentioned cautiously in Barron’s saying the stock may well rise when the company reports third quarter numbers, given the bearish setup in the market, but for it to become an attractive longer-term investment, it needs a clearer path to profitability

·     Barron’s said while it has been a tough year for tech investors the good is that there still is a good way to play innovation through shares of TSMC (TSM), with a client list that includes the world’s top technology companies, such as Apple (AAPL), Qualcomm (QCOM), Huawei Technologies, Nvidia (NVDA), and Advanced Micro Devices (AMD)

·     Alteryx (AYX) upgraded to Outperform from Neutral at Wedbush and raise tgt to $135

·     Match.com (MTCH) upgraded to buy from hold at both Deutsche Bank and Nomura/Instinet

·     Uber (UBER) upgraded to Buy from Neutral at Citi

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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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