Morning Preview: October 08, 2019

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Early Look

Tuesday, October 8, 2019

Futures

Up/Down

%

Last

DJ Industrials

-171.00

0.65%

26,268

S&P 500

-17.50

0.60%

2,920

Nasdaq

-46.50

0.60%

7,693

 

 

Stock futures are lower, on track to slip for a second consecutive session as the focus this week remains firmly on the renewed trade talks later this week (Oct 10-11) between high level trade representatives from the United States and China. Late yesterday, ahead of key trade negotiations later this week, the U.S. announced it was blacklisting several Chinese tech companies (including Hikvision, Sense Time, Megvii and iFlytek) that develop facial recognition and other artificial intelligence technology that the U.S. says is being used to repress China’s Muslim minority groups. The move Monday by the U.S. Commerce Department seeks to put the companies on a so-called Entity List for acting contrary to American foreign policy interests. The move also comes ahead of tariffs this week with an import of duties set to be implemented on $250 billion worth of Chinese goods to 30% from 25% set to take effect Oct. 15. In Asian markets, The Nikkei Index gained 212 points to settle at 21,587, the Shanghai Index rose 8 points to 2,913 and the Hang Seng Index rose 72 points to 25,893. In Europe, the German DAX is down over -100 points to trade just under the 12,000 level and the FTSE 100 is down a few points at 7,180. In addition to trade talks, markets focus on inflation data with September PPI released later today followed by CPI later this week.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -13.22 points, or 0.46%, to 2,938.79

·     The Dow Jones Industrial Average fell -95.70 points, or 0.36%, to 26,478.02

·     The Nasdaq Composite slipped -26.18 points, or 0.33%, to 7,956.29

·     The Russell 2000 Index declined -2.91 points, or 0.19% to 1,497.79

 

Events Calendar for Today

·     6:00 AM EST              NFIB Small Business Optimism for September…est. 102.0

·     7:45 AM EST              ICSC Weekly Retail Sales

·     8:30 AM EST              Producer Price Index (PPI) MoM for September…est. 0.1%

·     8:30 AM EST              PPI Ex Food & Energy MoM for September…est. 0.2%

·     8:30 AM EST              PPI YoY for September…est. 1.8%

·     8:30 AM EST              PPI Ex: Food & Energy YoY for September…est. 2.3%

·     8:55 AM EST              Johnson/Redbook Weekly Sales

·     4:30 PM EST              API Weekly Inventory Data

 

Earnings Calendar:

·     Earnings Before the Open: AZZ, DPZ, HELE

·     Earnings After the Close: LEVI

 

Other Key Events:

·     Jefferies Industrial Conference in London

·     UBS Utilities Conference, 10/7-10/8 in Denver, CO

·     William Blair Healthcare Day in Washington DC

·     Fed’s Evans speaks in Chicago at 1:35 PM EST

·     Fed’s Kashkari takes part in Town Hall in Minnesota

 

 

Macro

Up/Down

Last

WTI Crude

-0.25

52.50

Brent

-0.17

58.18

Gold

4.40

1,508.80

EUR/USD

0.0023

1.0994

JPY/USD

-0.29

106.97

10-Year Note

-0.025

1.532%

 

 

Sector News Breakdown

Consumer

·     Hawaiian Holdings (HA) reported traffic for September of +3%, load factor 85.5% and capacity +0.7%; raises Q3 RASM view to (0.5%)-0.5% from (1.5%)-(4.5%) and narrows Q3 CASM growth view to 4.5%-5.5% from 3.5%-6.5%

·     Helen of Troy (HELE) Q2 adjusted EPS $2.24/$414M vs. est. $1.96/$390M; sees year EPS $8.50-$8.75 vs. est. $8.53

·     EasyJet shares dropped in Europe after the European budget carrier forecast in-line full-year results, but failed to impress investors with its outlook.

 

Energy, Industrials & Materials

·     Alcoa (AA) discloses it booked a $37M restructuring charge, or an adjusted $0.14/share, for Q3 related to previously announced layoffs and severances; says it expects to realize ~$60M in annual savings from the restructuring starting in Q2 2020, after implementation of the new operating model and the restructuring is substantially complete.

·     Air Lease (AL) announced an update on activity taking place in the Q3. As of September 30, ALC’s fleet was comprised of 307 owned aircraft and 64 managed aircraft

·     AZZ Inc. (AZZ) postponed its quarterly earnings release to give the company more time to complete a review of its Form 10-Q quarterly report, adding that it will announce a new report date upon completion of the review.

·     Celanese Corp. (CE) is undertaking a strategic review that could include a breakup of the chemical’s producer, according to people familiar with the matter – Bloomberg reported

·     Southwest (LUV) union pilots sued Boeing (BA) saying the manufacturer rushed output of the 737 Max jet to stay competitive, withholding key information about a feature that contributed to two fatal crashes within five months; sees $115M mostly in lost pay

·     Tallgrass Energy (TGE) announced a binding open season soliciting shipper commitments for crude oil transportation for near-term expansion on the Pony Express system from origin points in Wyoming to the McPherson refinery destination in Kansas

 

Financials

·     Hong Kong Exchanges & Clearing Ltd. said that it will drop its $37 billion bid to buy the London Stock Exchange Group PLC. “The Board of HKEX continues to believe that a combination of LSEG and HKEX is strategically compelling,” HKEX said in a statement, but the boards of the two companies were “unable to engage.

·     Arch Capital Group Ltd. (ACGL) announced it expects to report third quarter 2019 pre-tax catastrophe losses of approximately $65M-$75M, net of reinsurance recoveries and reinstatement premiums. These losses are primarily from Hurricane Dorian and Typhoon Faxai.

·     Deutsche Bank (DB) plans to cut 18,000 jobs, including half in Germany, Bloomberg News reported, citing people familiar with the matter. The bank is seeking to find savings at its retail units to lower costs, the report said

·     Pzena Investment (PZN) reports preliminary AUM $35.8B at September 30 vs. $34.4B at August 31 and $38.9B as of September 30, 2018

·     JPMorgan made a handful of REIT rating changes as they believe the sector is set up well in this environment. Earnings growth should remain stable into 2020, driven by commercial real estate fundamentals that are moderating a little but lower capital costs afford companies the ability to drive growth through accretive investments, Downgraded Corporate Office Properties (OFC) and Taubman (TCO) to Neutral from Overweight, while upgraded HCP (HCP) and Spirit Realty (SRC) to Overweight from Neutral

 

Healthcare

·     Illumina, Inc. (ILMN) and QIAGEN N.V. (QGEN) announced a 15-year partnership intended to broaden the availability and use of NGS-based IVD kits, including companion diagnostics, for patient management

·     Qiagen (QGEN) guides Q3 EPS 35c-36c vs. est. 35c; says sales results for Q3 don’t meet views; to take restructuring charges of about $260M-$265M; announces leadership transition at CEO; to suspend ongoing NGS-related developmental activities

·     ICU Medical, Inc. (ICUI) announced a voluntary recall on 29 July 2019 of certain lots of Plum and Sapphire Microbore Infusion Sets with inline filters due to the potential for small amounts of fluid leaking out of the air vents on the inline filters. To date, ICU Medical is not aware of adverse events related to this matter and is issuing this notification out of an abundance of caution

·     Ocugen (OCGN) files to sell 111.54M shares of common stock for holders

 

Technology, Media & Telecom

·     Ambarella (AMBA) shares fall -13% following a Reuters report that says China’s Hikvision, which Ambarella is a supplier to, will be added to the Commerce Dept.’s blacklist

·     Samsung Electronics said it expects a Q3 operating profit of 7.7 trillion South Korean won ($6.4 billion), a drop of 56.2% YoY, but tops the 7.2 trillion won estimate; expects revenue will fall 5.3% to 62 trillion won year-over-year

·     Software sector assumed coverage at Jefferies as upgraded Microsoft (MSFT) to buy from hold with $160 tgt, while downgraded Oracle (ORCL), Carbonite (CARB) and Checkpoint (CHKP) to hold from buy

·     Spanish wireless infrastructure operator Cellnex (CLNX.MC) said it had reached a deal to buy the telecoms division of Britain’s Arqiva for 2.0 billion pounds ($2.5 billion). The transaction involves acquiring about 7,400 owned sites and the rights to market about 900 additional sites in Britain.

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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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