Hammerstone’s Early Look

|


Thursday, September 19, 2019

Futures Up/Down % Last
DJ Industrials -70.00 0.26% 27,073
S&P 500 -7.50 0.26% 3,000
Nasdaq -32.50 0.41% 7,885

U.S. stock futures are lower as investors digest the moves and commentary from the Fed yesterday, while also watching several other central banks in action (BOJ, SNB, Brazil) overnight (and upcoming later this morning with the Bank of England due). U.S. stocks slipped Wednesday after the Fed announced it would cut its benchmark federal funds by 25-bps, in line with market expectations, but also revealed economic projections that called into question whether there will be another rate cut this year or next as five FOMC members saw no change in rates by the end of the year, five wanting one more cut and seven expecting two cuts. But stocks pushed back into positive territory by days end (for the S&P and Dow) after Chairman Jerome Powell suggested during his press conference that the Fed may need to expand its balance sheet in order to combat a liquidity shortage that has weighed on money markets in recent days. Last night, the NY Fed said it will conduct a third straight day of Repo operations as it aims “to help maintain the Federal Funds rate within the target range” of 1.75%-2.00% – said repo operation will be conducted with primary dealers for up to an aggregate amount of $75B. The New York Fed held a second repurchasing auction early Wednesday, injecting another $75 billion which followed its first overnight repurchase auction in a decade Monday to bring the benchmark federal-funds rate, which jumped to a high around 9%, back into a desired 2%-2.25% range by purchasing repos worth $53 billion. In Asian markets, The Nikkei Index rose 83 points to 22,044, the Shanghai Index rose 13 points to settle at 2,999, and the Hang Seng Index fell -285 points to 26,468. In Europe, the German DAX is higher by about 25 points to 12,415, while the FTSE 100 is up about 50 points to 7,360. While the Fed did deliver a cut and was positive on the economy, markets were hoping for more. In market news today, CNBC holding its annual Delivering Alpha Conference today in New York with speakers such as VP Pence, Chanos, Peltz, Schwarzman, and Cooperman on the agenda.

Market Closing Prices Yesterday

  • The S&P 500 Index gained 1.03 points, or 0.03%, to 3,006.73
  • The Dow Jones Industrial Average rose 36.28 points, or 0.13%, to 27,147.08
  • The Nasdaq Composite dipped -8.62 points, or 0.11%, to 8,177.39
  • The Russell 2000 Index declined -9.95 points, or 0.63% to 1,568.34

Events Calendar for Today

  • 8:30 AM EST       Weekly Jobless Claims…est. 213K
  • 8:30 AM EST       Continuing Claims…est. 1.672M
  • 8:30 AM EST       Philly Fed Survey Outlook for Sept…est. 10.5
  • 10:00 AM EST     Existing Home Sales MoM for August…est. (-0.1%) to 5.38M
  • 10:00 AM EST     Leading Index for August…est. (-0.1%)
  • 10:30 AM EST     Weekly EIA Natural Gas Inventory Data

Earnings Calendar:

  • Earnings Before the Open: DRI
  • Earnings After the Close: SCHL, SCS

Other Key Events:

  • Goldman Sachs 28th Annual Communaacopia Conference, 9/17-9/19, in New York
  • Davidson Annual Diversified Industrial & Services Conference, 9/18-9/19, in Chicago
Macro Up/Down Last
WTI Crude 1.16 59.27
Brent 1.66 65.26
Gold -12.40 1,503.40
EUR/USD 0.0032 1.1062
JPY/USD -0.47 107.98
10-Year Note -0.006 1.789%

World News

  • The Organization for Economic Cooperation and Development (OECD) downgraded its assessment of the global economy to the worst growth rate since the financial crisis. They cut its global GDP view to 2.9% this year, a downgrade of 0.3% points in its interim report, and its growth view for 2020 was reduced by 0.4% points to 3%. The OECD cut its view of U.S. growth by 0.4% in 2019 to 2.4% and by 0.3% in 2020 to 2%.
  • The Bank of England will release its decision on interest rates later Thursday. U.K. retail sales data released Thursday indicated modest growth in August
  • The Bank of Japan left policy unchanged but hinted at possible action at its next meeting, saying it believes momentum toward achieving its inflation target may be falling short. The BOJ said that it would take that sluggish momentum into account and re-examine economic and price developments at its next regular two-day policy meeting Oct. 30-31.
  • The Swiss National Bank has held interest rates steady even as it slashed its growth forecast for the year amid rising global headwinds
  • Norway’s central bank boosted interest rates again, going against the tide in monetary policy, as it decided to increase rates by 25 basis points
  • Taiwan’s central bank left its policy rate unchanged on Thursday, as expected, and raised its 2019 growth forecast amid signs the island’s export outlook may be slowly improving despite the escalating U.S.-China trade war.
  • The U.S. SEC has approved changes to rules that limit banks’ ability to trade with their own funds (Volker rule). SEC commissioners voted privately to approve rule; called off previously scheduled public vote. Backers of changes say that new rule will simplify and improve regulations; critics argue that amendments will allow banks to engage in riskier behavior

Sector News Breakdown

Consumer

  • Target (TGT) announces a new $5B share buyback plan
  • Overstock (OSTK) shares fell overnight as founder Patrick Byrne, the largest shareholder exited his entire stake in the company, according to a regulatory filing, selling almost 4.7 million shares at a range of $16.32 to $21.84 from Monday to Wednesday
  • Etsy (ETSY) announces $650M convertible senior notes offering due 2026
  • Costco (COST) downgraded to underperform from market perform at Bernstein but up tgt to $230 from $220
  • Herman Miller (MLHR) Q1 adjusted EPS 84c/$670.9M vs. est. 78c/$661.8M; sees Q2 EPS 85c-89c on revs $685M-$705M vs. est. 85c/$684.83M
  • RH Corp. (RH) raises FY19 guidance by 25c to $10.78-$11.01 after announced the closing of the sale of $350 million aggregate principal amount of its 0.00% convertible notes due 2024, including the full exercise of the $50 million over-allotment option
  • CBS (CBS), AT&T’s (T) WarnerMedia, and Viacom (VIAB) have said that they will start pulling e-cigarette advertising from their airways – CNBC reported

Healthcare

  • China Biologic (CBPO) received a preliminary non-binding go private proposal letter from Beachhead Holdings, CITIC Capital China Partners IV, PW Medtech Group, Parfield International, HH Sum-XXII Holdings and V-Sciences Investments to acquire shares not already owned by the Buyer Group for $120 per share in cash https://yhoo.it/2kUjYRl
  • Tandem Diabetes (TNDM) announces publication of real-world basal-iq predictive low glucose suspend technology data in diabetes technology and Therapeutics Journal
  • Exagen (XGN) 3.6M share IPO priced at $14.00
  • Provention Bio (PRVB) 5M share Spot Secondary priced at $8.00

Industrials & Materials

  • United States Steel Corporation (X) shares fell -11%; said it expects Q3 adjusted EBITDA to be approximately $115M and sees Q3 EPS loss (35c) vs. est. loss (6c) citing fire impact; said the positive flat-rolled steel market indicators experienced earlier this summer have softened after a brief recovery in steel selling prices. The impact of falling steel prices through Q2, combined with the impact of a larger than expected drop in scrap prices on market sentiment, is expected to negatively impact Flat-rolled earnings in 2H’19

Technology, Media & Telecom

  • Cisco Systems Inc. (CSCO) approached software company Datadog Inc. (DDOG) in recent weeks with a takeover offer significantly higher than the $7 billion valuation it is aiming for in an initial public offering, according to people familiar with the matter, Bloomberg reported https://yhoo.it/2mlWlkV
  • Microsoft (MSFT) announces $40B share buyback and raises dividend to 51c from 46c
  • Datadog (DDOG) 24M share IPO priced at $27.00
  • Ping Identity (PING) 12.5M share IPO priced at $15.00
  • AT&T (T) and Dish Network (DISH) are not in talks over a deal with DirecTV due to regulatory issues, Reuters reports. Report follows earlier story in the Wall Street Journal that AT&T was exploring parting ways with its satellite TV unit DirecTV – https://on.mktw.net/2m1uZQQ

Want a free trial to The Hammerstone Report 4x Daily ? Sign-up for a trial today at https://www.hammerstonemarkets.com/

Please be sure to check out The Hammerstone Pro Feed; News and Analysis for the Informed Trader at https://www.hammerstonemarkets.com/pro-trader/#get-started