Hammerstone’s Early Look

By admin | 02/03/2020

Monday, February 3, 2020

Stock futures in the U.S. are pointing to a higher open after plunging on Friday, pushing major averages lower for the week and year as the death toll and number on confirmed cases of the coronavirus rose, adding fears to slowing global growth concerns as travel and leisure stocks remain pressured. The Dow Jones, and S&P 500 registered their biggest weekly percentage declines since the week ended August 2^nd as the Dow fell -2.5%, the S&P down -2.1%, and the Nasdaq down -1.8%. For the month, the Dow was down -1%, S&P -0.2%, and the Nasdaq up 2%.

China’s death toll from the coronavirus has risen to 361 with 17,205 infections, according to figures released by the Chinese National Health Commission Monday (late Sunday PST), while the WHO said other governments need to prepare for “domestic outbreak control” if the disease spreads in their countries. Meanwhile, Beijing criticized Washington’s order barring entry to most foreigners who visited China in the past two weeks. The number of confirmed cases in China surpassed the number in the 2002-03 outbreak of SARS.

In Asian markets, the Shanghai Index reopened after its week long holiday, falling as much as 9% before paring losses to 2,746 (down 229 points or 7.7%) while the country’s central bank announced plans Sunday to inject 1.2 trillion yuan ($173 billion) into the economy to cushion the shock to financial markets from the outbreak of the coronavirus. The Nikkei Index fell -233 points to 22,971 and the Hang Seng Index gained 44 points to 26,356. In Europe, the German DAX is up over 30 points to move back above the 13,000 level while the FTSE 100is up around 42 points to 7,325.

Market Closing Prices Yesterday

• The S&P 500 Index dropped -58.14 points, or 1.77%, to 3,225.52
• The Dow Jones Industrial Average fell -603.37 points, or 2.09%, to 28,256.03
• The Nasdaq Composite plunged -147.99 points, or 1.59%, to 9,150.94
• The Russell 2000 Index declined -34.16 points, or 2.07% to 1,614.06

Events Calendar for Today

• 9:45 AM EST       Markit US Manufacturing PMI, Jan-F…est. 51.7
• 10:00 AM EST     Construction Spending MoM for Dec…est. 0.5%
• 10:00 AM EST     ISM Manufacturing for January…est. 48.5
• Monthly auto vehicle sales for January

Earnings Calendar:

• Earnings Before the Open: ABG, AMG, CTLT, DSPG, LUB, ON, SAIA, SYY
• Earnings After the Close: ARE, BECN, CBT, EZPW, GOOGL, HIG, HLI, HLIT, HXL, LEG, PAHC, PCH, WWD

Other Key Events:

• Monthly auto vehicle sales for January
• Fashion Footwear Association Conference, 2/3-2/7, in New York
• Stephens Dallas Banks Field trip, 2/3-2/5, in Dallas

World News

• China’s central bank lowered the interest rates of reverse repurchase agreements while injecting a large amount of liquidity into the banking system in a bid to provide support to an economy suffering from the outbreak of a deadly coronavirus. The People’s Bank of China cut the seven- and 14-day reverse repo rates by 10 basis points to 2.4% and 2.55%, respectively. The PBOC also injected 1.2 trillion-yuan ($173.0 billion) worth of liquidity via reverse repos.
• The Caixin China manufacturing purchasing managers index fell to 51.1 in January from 51.5 in December, a five-month low, Caixin Media Co. and research firm Markit said, though the reading stayed above the 50 mark that separates expansion in activity from contraction.
• Hong Kong will close 10 of its border crossings with mainland China in a further push to control the outbreak of the coronavirus

Sector News Breakdown

Consumer

• Nike (NKE) upgraded to Buy from Neutral at UBS
• Ulta Beauty (ULTA) upgraded to Buy from Neutral at Goldman Sachs
• Uber (UBER) ceased operations in Colombia after failing to win a government reprieve from a ruling that it was competing unfairly. Separately, the company has suspended 240 user accounts in Mexico to contain the potential spread of coronavirus

Energy

• Saudi Arabia is pushing for a drastic, short-term oil production cut in response to China’s deadly coronavirus, The Wall Street Journal reported, citing OPEC officials. The report said, under one scenario, Saudi Arabia would lead a collective 500,000 barrels a day reduction until the crisis is over, and another option would involve a 1 million barrel a day drop
• CenterPoint Energy, Inc. (CNP) and PowerTeam Services, LLC announced that they have entered into an agreement through which CenterPoint Energy will sell Miller Pipeline and Minnesota Limited to PowerTeam for $850 million in cash, subject to customary purchase price adjustments.
• Exxon Mobil (XOM) downgraded to Sell from Neutral at Goldman Sachs
• Hess Corp. (HES) upgraded to Overweight from Neutral at Piper Sandler
• PG&E (PCG) said it will overhaul its board of directors, bring in safety experts and create regional operating units as part of a broad reorganization proposal aimed at winning state approval for its bankruptcy exit.

Healthcare

• Aimmune (AIMT) shares rose 16% as U.S. health regulators (FDA) approved the first drug for children and teenagers with peanut allergies. The drug, which will be sold under the brand name Palforzia, will be marketed by Aimmune Therapeutics Inc.
• Clovis Oncology Inc. (CLVS) said that Rubraca rucaparib, a monotherapy maintenance treatment for adults with relapsed, platinum-sensitive high-grade epithelial ovarian, fallopian tube or primary peritoneal cancer, is available and reimbursed in France.
• Nektar (NKTR) upgraded to buy from neutral at Mizuho and raise tgt to $35 from $21 as sees a good risk/reward going into 2020 and 2021 with key pivotal Phase III readouts in melanoma and bladder cancer indications starting in Q4 of this year
• TherapeuticsMD (TXMD) submitted a New Drug Application prior-approval efficacy supplement for Bijuva 0.5 mg/100 mg capsules to the FDA late January 2020
• GlaxoSmithKline PLC (GSK) said it would donate a vaccine-booster to groups racing to develop a shot against the new coronavirus.

Industrials & Materials

• Lockheed Martin (LMT) is awarded $2.34b contract for repair, upgrade or replacement and other services for assemblies associated with MH-60R and MH-60S helicopters

Technology, Media & Telecom

• Baidu (BIDU) shares rose 4% late Friday after saying it expects revenue to be in the range of RMB 28.3-28.9 billion ($4.06B-$4.15B), rising 4%-6% YoY compared to its previous guidance in the range of RMB 27.1 billion to RMB 28.7 billion, or -1% to 6% increase year over year
• ON Semiconductor (ON) Q4 non-GAAP EPS 30c/$1.40B vs. est. 32c/$1.37B; sees Q1 revenue $1.36B-$1.41B vs. est. $1.35B and Q1 GAAP and non-GAAP gross margin is expected to be 33.7%-34.7%; announced it is exploring a sale of its manufacturing facility in Belgium
• Verizon (VZ) downgraded to neutral from outperform at Credit Suisse
• Check Point (CHKP) expands share repurchase program by additional $2B
• Roku Inc. (ROKU) and Fox Corp. (FOXA) reached a distribution deal late Friday, narrowly avoiding a blackout that would have removed Fox apps from the Roku streaming platform ahead of the Super Bowl.
• T-Mobile (TMUS) mentioned positively in Barron’s saying the company has continued to grow throughout the merger push with Sprint (S), and it doesn’t need Sprint to succeed saying even if the deal fails, T-Mobile keeps on -outgrowing the industry in terms of subscribers, earnings, and free cash flow
• Apple Inc. (AAPL) said it will close its stores and corporate offices in China until Feb. 9 in its response to the coronavirus outbreak gripping China

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