Early Look

Thursday, June 20, 2019

Futures	Up/Down	%	Last
DJ Industrials	205.00	0.77%	26,741
S&P 500	23.50	0.80%	2,957
Nasdaq	90.50	1.18%	7,792

 

 

Global stocks remain in a euphoric state, with both the S&P 500 and Dow Industrial Average on track to open around their all-time best levels a day after the FOMC kept interest rates unchanged, but indicated it was considering future rate cuts amid a global economic slowdown and trade uncertainties. In Asian markets, The Nikkei Index rose 128 points to settle at 21,462, the Shanghai Index surged 69 points (2.38%) to 2,987 and the Hang Seng Index jumped 348 points to 28,550. In Europe, the German DAX is up about 120 points to 12,430, while the FTSE 100 is up about 30 points to 7,430. Oil prices rise overnight amid reports Iran’s revolutionary guard said it had shot down a US drone, escalating tensions between Washington. Also raising market concerns was a WSJ report that a Saudi desalination plant was struck by a missile that appeared to come from within Yemen, as each raise fresh potential supply fears. The reports, along with the dovish stance by the Fed yesterday, is pushing gold prices to their best levels since 2013, topping the $1,380 per ounce level. Right now, stocks, bonds, oil, gold are all pushing significantly higher in one big rally.

 

U.S. stocks rallied on Wednesday following commentary and projections from the Federal Reserve. It was a third straight day of gains for stocks while yields on shorter-maturity Treasuries tumbled after the Fed said it will “closely monitor” the economy given increasing uncertainty about government policy though it signaled it may not need to lower rates before 2020. The central bank remained mostly optimistic about the economic outlook, but said inflationary pressures have receded, lowering its forecast for PCE inflation in 2019 to 1.5% from 1.8%, below its 2% target. The dollar weakened against almost all its major peers while the S&P 500 pushed within striking distance of an all-time high led by gains in the defense and interest rate sensitive health care, real estate and utilities sectors. The yield on the U.S. two-year note fell by as much as 12 basis points to 1.74%

Market Closing Prices Yesterday

·     The S&P 500 Index climbed 8.71 points, or 0.30%, to 2,926.46

·     The Dow Jones Industrial Average rose 38.46 points, or 0.15%, to 26,504.00

·     The Nasdaq Composite gained 33.44 points, or 0.42%, to 7,987.32

·     The Russell 2000 Index advanced 5.35 points, or 0.35% to 1,555.58

 

Events Calendar for Today

·     8:30 AM EST      Weekly Jobless Claims…est. 220K

·     8:30 AM EST      Continuing Claims…est. 1.68M

·     8:30 AM EST      Current Account Balance for Q1…est. (-$124.3B)

·     8:30 AM EST      Philly Fed Business Outlook for June…est. 10.7

·     10:00 AM EST    Leading Index for May…est. 0.1%

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

 

Earnings Calendar:

·     Earnings Before the Open: CCL, CMC, DRI, KR, MEI

·     Earnings After the Close: KFY, RHT

 

Other Key Events:

·     The 53rd International Paris Air Show takes place 6/17-6/23, at Paris-Le Bourget Airport

·     Roth Capital 5th Annual London Conference, 6/18-6/20, in London, UK

 

 

Macro	Up/Down	Last
WTI Crude	1.54	55.30
Brent	1.44	63.26
Gold	21.25	1,381.75
EUR/USD	0.0076	1.1302
JPY/USD	-0.27	107.83
10-Year Note	-0.015	2.009%

 

 

World News

·     The WSJ reported a Saudi desalination plant was struck by a missile that appeared to come from within Yemen, according to a senior U.S. official. It wasn’t clear if there were any casualties in the attack on the Red Sea facility, the official said.

·     Iran said Thursday that it shot down a U.S. military drone, the latest in a series of skirmishes across the Middle East that have stoked fears of a wider military conflict. The Islamic Revolutionary Guard Corps said its air force brought down the American surveillance drone in a southern coastal region along the Strait of Hormuz, according to Iranian state-owner Press TV.

·     Bank of Japan voted by a majority vote of 7-2 to keep rates unchanged, shrugging off the US Federal Reserve’s shift to a dovish stance

·     Mexico’s Senate overwhelmingly voted for a broad rewrite of trade rules between the United States, Canada and Mexico—making the nation the first of the three partners to ratify the pact designed to replace the North American Free Trade Agreement (NAFTA). Senators voted 114-4 with three abstentions on Wednesday to ratify the accord—rebranded as the U.S.-Mexico-Canada Agreement, or USMCA

 

Sector News Breakdown

Consumer

·     American Outdoor Brands (AOBC) shares rise 10%; Q4 non-GAAP EPS 26c/$175.7M vs. est. 16c/$169.17M; sees Q1 EPS 3c-7c on revs $120.0M-$130M; sees 2020 adjusted EPS 76c-84c on sales $630M-$650M vs. est. 83c/$654.7M; 4Q gross margin 36.1% vs. 33.4% YoY

·     Carnival (CCL) shares fall -4%; Q2 adjusted EPS 66c/$4.84B vs. est. 62c/$4.54B; lowers year EPS outlook to $4.25-$4.35 from prior view $4.35-$4.55 as sees lower ticket prices in 2H of the year; sees Q3 EPS $2.50-$2.54 vs. est. $2.69

·     Grocery Outlet Holding Corp. (GO) priced its 17.187M share IPO at $22 a share, well above the high end of its expected range to $18 to $19 a share, from $15 to $17 a share. Grocery Outlet is offering 17,187,500 shares for sale, raising about $378 million

·     Steelcase (SCS) Q1 EPS 15c/$824.3M vs. est. 18c/$839.07M; company said 15% order growth was particularly strong and in line with our expectations while just short of revenue estimates because order growth was weighted toward the second half of the quarter and customers requested delivery dates later than we typically see, in part because of construction labor shortages that caused their projects to be delayed; backs FY19 EPS $1.20-$1.35 (est. $1.29) and reaffirms 2020 targets of 5.5 to 9.5% revenue growth

·     Mondelez (MDLZ) to acquire majority interest in Perfect Snacks. In 2018, the business generated approximately $70M in net revenue, with strong double-digit growth year-on-year.

 

Energy, Industrials & Materials

·     Oil prices rise overnight amid reports Iran’s revolutionary guard said it had shot down a US drone, escalating tensions between Washington. Also raising market concerns was a WSJ report that a Saudi desalination plant was struck by a missile that appeared to come from within Yemen,

·     The Trump administration ordered a sweeping about-face Wednesday on Obama-era efforts to fight climate change, easing restrictions on coal-fired power plants in a move it predicted would revitalize America’s sagging coal industry.

·     Commercial Metals (CMC) Q3 EPS 67c/$1.6B vs. est. 62c/$1.59B

·     Delta Air Lines Inc. (DAL) said it was not expecting flight cancellations as a result of a technical glitch that had affected booking, check-in and boarding services

 

Financials

·     The annual stress-test report cards for the 18 largest U.S. financial companies are due out Friday after the market closes. The consensus is that these banks are largely well-capitalized and should pass the exam. It will mark the first of a two-step process

·     Raymond James (RJF) reported financial assets under management for May of $137.2 billion and assets under administration $789.4 billion

 

Healthcare

·     The Federal Trade Commission said UnitedHealth Group Inc. (UNH) and DaVita Inc. (DVA) have agreed to a settlement to resolve FTC allegations their $4.3 billion deal would stifle competition in the Las Vegas area. Under the proposed settlement, UnitedHealth would have 40 days to sell DaVita’s healthcare provider in the Las Vegas region

·     Akero Therapeutics (AKRO) 5.75M share IPO priced at $16.00

·     Atreca 7.35M (BCEL) share IPO priced at $17.00

·     Cryoport (CYRX) 3.75M share Spot Secondary priced at $17.00

·     Genocea (GNCA) 10M share Secondary priced at $3.50

·     Personalis (PSNL) 7.922M share IPO priced at $17.00

·     Prevail Therapeutics (PRVL) 7.35M share IPO priced at $17.00

·     Zymeworks (ZYME) 5.56M share Secondary priced at $18.00

·     Qiagen (QGEN) announced an agreement for McKesson Medical-Surgical Inc., an affiliate of McKesson (MCK), to serve as the exclusive distributor of QIAGEN’s QIAstat-Dx syndromic testing solution in the “acute” market segment of U.S. hospitals with 200 beds or less and in other select segments

 

Technology, Media & Telecom

·     Oracle (ORCL) Q4 adjusted EPS $1.16/$11.14B vs. est. $1.07/$10.95B; Q4 adjusted operating margin 47%; Q4 Cloud Services and License Support revenues $6.8B, while Cloud License and On-Premise License revenues were $2.5B and total Cloud Services and License Support plus Cloud License and On-Premise License revenues were $9.3B, up 3% in USD and 6% in constant currency

·     CACI (CACI) said revenue growth projected to be 12.8% with 5.5% organic at the midpoint of guidance and net income projected to be $295M-$315M, up 14.7% at the midpoint of guidance; operating cash flow projected to be at least $400M; sees year EPS $11.52-$12.30 vs. est. $11.80

·     Slack Technologies (WORK), which will be begin publicly trading on Thursday, June 20, pursued a direct listing, rather than a traditional initial public offering and set a reference point of $26 per share