Morning Preview: December 02, 2019

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Early Look

Monday, December 2, 2019

Futures

Up/Down

%

Last

DJ Industrials

51.00

0.18%

28,124

S&P 500

4.50

0.14%

3,148

Nasdaq

8.50

0.10%

8,426

 

 

U.S. stock futures rise along with a bounce in oil prices following upbeat China manufacturing surveys this weekend and as investors clung to hopes Beijing and Washington could reach a compromise in trade talks. According to reports this weekend, China is insisting that U.S. tariffs be rolled back as part of any “phase one” trade deal, China’s state-run Global Times said Sunday. A US pledge to scrap tariffs scheduled for December 15 cannot replace the rollbacks of tariffs,” the newspaper said. Meanwhile, a phase one” trade deal is unlikely to be agreed upon before late December, Axios reported Sunday. Citing a source close to the trade negotiations, Axios reported the deal has stalled over the bill President Donald Trump signed last week supporting Hong Kong’s pro-democracy demonstrators.

 

In Asian markets, The Nikkei Index gained 235 points to 23,529, the Shanghai Index inched higher 3 points to 2,875 and the Hang Seng Index rose 98 points to 26,444. In Europe, the German DAX is higher by about 40 points to 13,275, while the FTSE 100 is up around 15 points to 7,365. Defensive assets slipped after an unexpected rebound in Chinese manufacturing as the Japanese yen slipped to 6-month lows against the U.S. dollar and riskier currencies rallied after two surveys showed Chinese factory activity expanding. The U.S. Treasury 10-year yield rose over 5 bps to above 1.83% given the decline in prices this morning. Stocks closed out Friday lower, but still posted good gains for the week and month. For the week, the S&P 500 index rose 1%, the Dow gained 0.65%, and the NASDAQ climbed 1.71%. For the month, the S&P rose 3.4%, the Dow gained 3.7%, and the NASDAQ climbed 4.5%.

Market Closing Prices Yesterday

·     The S&P 500 Index dropped -12.65 points, or 0.40%, to 3,140.98

·     The Dow Jones Industrial Average slid -112.59 points, or 0.40%, to 28,051.41

·     The Nasdaq Composite slumped -39.70 points, or 0.46%, to 8,665.47

·     The Russell 2000 Index declined -9.60 points, or 0.59% to 1,624.50

 

Events Calendar for Today

·     9:45 AM EST      Markit US Manufacturing PMI, Nov-F…est. 52.2

·     10:00 AM EST    ISM Manufacturing, for Nov…est. 49.2

·     10:00 AM EST    Construction Spending MoM for Oct…est. 0.3%

 

Earnings Calendar:

·     Earnings Before the Open: None

·     Earnings After the Close: BRP, COUP, UTI

 

Other Key Events:

·     Citigroup Basic Material Conference, 12/2-12/4, in New York

·     Credit Suisse 23rd Annual Technology Conference, 12/2-12/5, in Scottsdale, AZ

·     Fashion Footwear Association of New York, 12/2-12/6, in New York

 

 

Macro

Up/Down

Last

WTI Crude

1.19

56.36

Brent

1.32

61.81

Gold

-8.80

1,463.90

EUR/USD

-0.0005

1.1013

JPY/USD

0.05

109.54

10-Year Note

+0.058

1.834%

 

 

World News

·     China’s Purchasing Managers’ Index (PMI) bounced back to 50.2 in November from 49.3 in October and marks the first time in seven months the figure has been above the 50-point mark that separates growth from contraction on a monthly basis.

·     The White House told Democratic lawmakers that President Donald Trump would not send legal counsel to participate in a congressional impeachment hearing this week, citing a lack of “fundamental fairness.”

 

Sector News Breakdown

Consumer

·     Black Friday: Online sales rose more than 19.6% to $7.4B on Black Friday, marking the day’s largest revenue grab ever, according to Adobe Analytics. For Thanksgiving, it estimated web sales grew 14.5% to $4.2B, while “Small Business Saturday” sales are on pace to surpass $3B. Adobe is expecting Cyber Monday spending to hit a record $9.4B, an 18.9% jump from a year ago

·     Wynn Resorts (WYNN), Melco (MLCO), MGM Grand (MGM): Macau casino revenue tumbles 8.5% amid the ongoing China-U.S. trade war and protests in neighboring Hong Kong, gambling revenue for the Chinese territory in November slid 8.5% Y/Y to 22.9B patacas ($2.8B). However, the figure was better than analyst expectations of a drop between 10%-13%

·     Fiat Chrysler Automobiles NV (FCAU) clinched a new tentative labor contract with the United Auto Workers by agreeing to double up on a major investment in U.S. production announced earlier this year

·     Hostess Brands (TWNK) said it’s going to buy wafer-maker Voortman Cookies from Swander Pace Capital for $320 million (C$425 million) in cash. Hostess says the deal will result in cost savings of at least $15 million in 12 to 18 months https://on.mktw.net/33BgmDX

·     Philip Morris (PM) downgraded to Neutral from Buy at Citigroup and upgraded Altria (MO) to buy from neutral

 

Energy, Industrials & Materials

·     Oil prices rallying early, benefitting from the improved Chinese economic data over the weekend

·     Deere (DE) downgraded to Underperform from Neutral with a $150 price target at Bank America

·     The National Weather Service predicted more than a foot of snow in swaths of upstate New York and New England, as well as ice accumulations in parts of Pennsylvania.

·     President Trump said this morning, “Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries.”

 

Financials

·     Barron’s said shares of Tanger Factory Outlet Centers (SKT), one of the nation’s largest outlet-mall landlords, have been beaten down for years and now look like a bargain, especially given its healthy dividend yield, now north of 9%

 

Healthcare

·     Biogen (BIIB) downgraded to Underperform from Neutral at Baird

·     ChromaDex (CDXC) received approval from the Australian Therapeutic Goods Administration for patented nicotinamide riboside chloride for use in listed complementary medicines

·     Teladoc (TDOC) downgraded to Hold from Buy at SunTrust

 

Technology, Media & Telecom

·     Barron’s cover story noted tech stocks are having their best year in a decade, yet legacy companies in the sector have had two options to survive generational changes such as the transition to the cloud and artificial intelligence: innovate, or hire bankers. Most legacy tech has stopped growing, and there are no easy fixes, leaving companies like Cisco Systems (CSCO), IBM (IBM), Intel (INTC) and Oracle (ORCL) in an awkward spot

·     The European Commission has sent out questionnaires as part of a preliminary investigation into Google’s (GOOGL) practices relating to Google’s collection and use of data. The preliminary investigation is ongoing,” the EU regulator told Reuters

·     Roku (ROKU) downgraded to Underweight from Equal Weight at Morgan Stanley

·     Splunk (SPLK) upgraded to Buy from Neutral at Goldman Sachs

·     Sprout Social (SPT) 8.82M IPO priced at $16.00-$18.00

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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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