Markets Morning Briefing

Daily Morning Prep

Set back by big tech investigation and CAT disappointment

U.S. equity futures have been weighed down this morning by the big technology stocks amid continued regulatory scrutiny. The S&P 500 futures trade eight points, or 0.3%, below fair value.

The Department of Justice announced yesterday that it will conduct a broad antitrust review of the “market-leading online platforms.” Big tech scrutiny is nothing new, but the latest action confirms serious efforts to check the influence of big tech companies. The regulatory overhang has weighed on shares of Alphabet (GOOG 1134.00, -12.21, -1.1%), Facebook (FB 199.55, -2.81, -1.4%), and Amazon (AMZN 1976.60, -17.89, -0.9%) in pre-market action. 

In earnings news, Dow components Visa (180.20, -0.70, -0.4%), Boeing (BA 370.50, -2.57, -0.7%), and Caterpillar (CAT 133.49, -4.61, -3.3%) were some blue-chip companies to report since yesterday’s close. Shares of Caterpillar are getting hit following disappointing results and guidance, while shares of Boeing slip after the company continues to hold off providing full-year guidance.

Elsewhere, the eurozone flash July Manufacturing PMI declined below expectations, coming in at 46.4, amid weakness in Germany. A reading below 50.0 denotes a contraction. In U.S. data, investors will receive New Home Sales for June (Briefing.com consensus 660,000) at 10:00 a.m. ET. The weekly MBA Mortgage Applications Index declined 1.9% following a 1.1% decline in the prior week.

U.S. Treasuries have haven’t reflected too much concern about the eurozone slowdown, as they are little changed at the moment. The 2-yr yield is down two basis points to 1.81%, and the 10-yr yield is down one basis point to 2.06%. The U.S. Dollar Index is down 0.1% to 97.61. WTI crude is up 0.4% to $56.99/bbl. 

In U.S. Corporate news:

  • Boeing (BA 370.50, -2.57, -0.7%): despite beating top and bottom-line estimates. Boeing reported an EPS loss, which was expected, but the company continues to not provide full-year guidance.   
  • Caterpillar (CAT 133.49, -4.61): -3.3% after missing earnings expectations and lowering its FY19 EPS guidance.  
  • Visa (V 180.20, -0.70): -0.4% despite beating top and bottom-line estimates and slightly raising its FY19 EPS guidance. 
  • Texas Instruments (TXN 126.33, +6.26): +5.2% after beating top and bottom-line estimates. 
  • AT&T (T 31.53, -0.56): -1.8% despite releasing in-line results and raising its free cash flow guidance. 
  • UPS (UPS 108.00, +2.73): +2.6% after beating profit expectations. 

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended the midweek session on a mixed note. Japan’s Nikkei +0.4%, Hong Kong’s Hang Seng +0.2%, China’s Shanghai Composite +0.8%, India’s Sensex -0.4%, South Korea’s Kospi -0.9%, Australia’s ASX All Ordinaries +0.7%.
    • In economic data:
      • Japan’s May Leading Index 94.9 (expected 95.2; last 95.9) and flash July Manufacturing PMI 49.6 (expected 49.7; last 49.3).
      • Australia’s flash July Manufacturing PMI 51.4 (last 52.0) and flash Services PMI 51.9 (last 52.6).
      • New Zealand’s June trade surplus NZD365 mln (expected surplus of NZD100 mln; last surplus of NZD175 mln).
    • In news:
      • People’s Bank of China Governor, Yi Gang, said that the central bank does not intend to follow the Fed with a rate cut of its own.
      • Meanwhile, Westpac expects that the Reserve Bank of Australia will lower its cash rate in October and February.
      • Japan threatened to remove South Korea from a list of countries that face minimum export restrictions.
      • Nissan will reportedly fire more than 10,000 workers.
  • Major European indices are mixed. STOXX Europe 600 UNCH, Germany’s DAX +0.4%, U.K.’s FTSE 100 -1.0%, France’s CAC 40 -0.3%, Italy’s FTSE MIB +0.4%, Spain’s IBEX 35 +0.3%.
    • In economic data:
      • Eurozone’s flash July Manufacturing PMI 46.4 (expected 47.6; last 47.6) and flash Services PMI 53.3, as expected (last 53.6). June M3 Money Supply +4.5% yr/yr (expected 4.6%; last 4.8%) and Private Sector Loans +3.3% yr/yr (expected 3.2%; last 3.3%).
      • Germany’s flash July Manufacturing PMI 43.1 (expected 45.1; last 45.0) and flash Services PMI 55.4 (expected 55.3; last 55.8).
      • France’s flash July Manufacturing PMI 50.0 (expected 51.6; last 51.9) and Services PMI 52.2 (expected 52.7; last 52.9). July Business Survey 101 (expected 102; last 102).
      • Swiss July ZEW Expectations -24.0 (last -30.0)
    • In news:
      • The latest flash Manufacturing PMI readings from France and Germany showed another decrease with Germany’s flash Manufacturing PMI sliding to 43.1, a level not seen since the summer of 2012 when the region was grappling with a financial crisis.
      • Incoming British Prime Minister Boris Johnson said that all members of his cabinet must allow for the possibility of a no-deal Brexit.
      • Deutsche Bank is down 2.5% after reporting its largest loss in eleven years.

U.S. equity futures:

  • S&P 500 Futures -7 @ 3001
  • DJIA Futures -101 @ 27222
  • Nasdaq Futures -34 @ 7950

Overseas

  • Europe: DAX +0.4%, FTSE -1.0%, CAC -0.3%
  • Asia: Nikkei +0.4%, Hang Seng +0.2%, Shanghai +0.8%

Commodities

  • Crude Oil +0.27 @ 57.04
  • Nat Gas -0.025 @ 2.275
  • Gold +5.90 @ 1427.60
  • Silver +0.10 @ 16.58
  • Copper +0.01 @ 2.71

U.S. Summary:

  • Earnings/Guidance:
    • Alexion Pharma (ALXN) beats by $0.30, beats on revs; raises FY19 EPS above consensus, revs in-line
    • Anthem (ANTM) beats by $0.02, beats on revs; guides FY19 EPS above consensus, revs above consensus
    • Arch Coal (ARCH) misses by $0.06, beats on revs
    • AT&T (T) reports EPS in-line, revs in-line; raises FCF, reaffirms EPS, leverage guidance
    • Boeing (BA) beats by $0.84, beats on revs, continues to not provide full year guidance; delays first flight target date for 777X until early 2020
    • Boston Scientific (BSX) beats by $0.01, reports revs in-line; guides Q3 EPS in-line, revs above consensus; guides FY19 EPS in-line, reaffirms FY19 revs guidance
    • Brinks (BCO) beats by $0.04, beats on revs; reaffirms FY19 guidance
    • Canadian Nat’l Rail (CNI) beats by $0.07, reports revs in-line, reaffirms FY19 adjusted EPS guidance for low double digit growth
    • Caterpillar (CAT) misses by $0.28, reports revs in-line; lowers FY19 EPS guidance, putting guidance at lower end of range of previously given guidance
    • Check Point Software (CHKP) beats by $0.01, reports revs in-line
    • Chipotle Mexican Grill (CMG) beats by $0.23, beats on revs; co also raises FY 19 comps outlook
    • Chubb (CB) beats by $0.04, beats on revs
    • Deutsche Bank (DB) reports Q2 results; misses by EUR0.05; beats on revs
    • Discover Financial Services (DFS) beats by $0.21, beats on revs
    • DTE Energy (DTE) misses by $0.10; raises FY19 EPS guidance
    • Edwards Lifesciences (EW) beats by $0.05, beats on revs; guides Q3 EPS below consensus, revs above consensus; raises FY19 guidance
    • FirstCash (FCFS) beats by $0.01, beats on revs; guides Q3 EPS below consensus; raises bottom end of FY19 EPS guidance
    • FLIR Systems (FLIR) beats by $0.02, reports revs in-line; reaffirms FY19 EPS guidance, revs guidance
    • General Dynamics (GD) beats by $0.08, beats on revs
    • GlaxoSmithKline (GSK) beats by $0.06, beats on revs; raises EPS guidance
    • Hilton (HLT) beats by $0.04, beats on revs; guides Q3 EPS below consensus, revs below consensus; guides FY19 EPS below consensus, revs below consensus
    • Inter Parfums (IPAR) reports upside prelim Q2 sales and reaffirms FY19 guidance
    • iRobot (IRBT) beats by $0.07, misses on revs; guides FY19 EPS below consensus, revs below consensus
    • Lithia Motors (LAD) beats by $0.13, reports revs in-line
    • NASDAQ (NDAQ) beats by $0.02, beats on revs
    • Northern Trust (NTRS) beats by $0.07, reports revs in-line
    • Northrop Grumman (NOC) beats by $0.41, reports revs in-line; raises FY19 EPS above consensus, reaffirms FY19 revs guidance
    • Owens Corning (OC) beats by $0.15, beats on revs
    • RenaissanceRe (RNR) beats by $1.11, beats on revs
    • Robert Half (RHI) reports EPS in-line, revs in-line; sees Q3 EPS in-line
    • Silicon Labs (SLAB) beats by $0.09, reports revs in-line; guides Q3 EPS in-line, revs below consensus
    • Six Flags (SIX) misses by $0.05, beats on revs
    • Snap (SNAP) beats by $0.04, beats on revs, beats on DAUs, beats on Adj-EBITDA; guides Q3 revs, Adj-EBITDA above consensus; calls for Q3 DAUs of 205-207 mln
    • TE Connectivity (TEL) beats by $0.08, misses on revs; guides Q4 EPS below consensus, revs below consensus; guides FY19 EPS below consensus, revs below consensus
    • Teradyne (TER) beats by $0.04, beats on revs; guides Q3 above consensus
    • Texas Instruments (TXN) beats by $0.07, beats on revs; guides Q3 in-line
    • Thermo Fisher (TMO) beats by $0.04, reports revs in-line; raises FY19, in-line
    • T. Rowe Price (TROW) beats by $0.15, reports revs in-line
    • Tupperware (TUP) misses by $0.04, misses on revs; guides Q3 EPS below consensus, revs below consensus; guides FY19 EPS below consensus, revs below consensus
    • UPS (UPS) beats by $0.03, reports revs in-line; reaffirms FY19 EPS guidance
    • V.F. Corp (VFC) beats by $0.01, beats on revs; raises FY20 EPS and revenue guidance
    • Visa (V) beats by $0.05, beats on revs; raises FY19 EPS slightly, reaffirms revenue
  • General News:
    • DoJ to open up antitrust review of large technology companies (“market-leading online platforms”), according to The Wall Street Journal
    • San Francisco will vote this year on ballot measure that will tax ride sharing companies, according to Bloomberg
    • API reports crude inventories had a draw of 10.96 mln barrels for week ending July 19; gasoline stockpiles had a build of 4.436 mln barrels
    • Dunkin’ (DNKN) announced a new partnership with Beyond Meat (BYND) to introduce the Beyond Sausage Breakfast Sandwich, available now at participating Dunkin’ restaurants in Manhattan with plans for a future national rollout
    • Facebook (FB) CEO Mark Zuckerberg will have to certify privacy compliance under upcoming FTC settlement, according to The Wall Street Journal
    • Newmont Goldcorp (NEM) appoints President Tom Palmer to succeed Gary Goldberg as CEO
    • Starbucks (SBUX) to make Starbucks Delivers available throughout the U.S. in early 2020 through an agreement with Uber (UBER) Eats
    • Tenet Healthcare (THC) to pursue a tax-free spin-off of its Conifer business as a separate, independent publicly traded company
    • UPS (UPS) to launch package pickup and drop-off services at Michaels (MIK) and CVS (CVS); announces new service offerings
    • Wells Fargo (WFC) confirms increase of quarterly common stock dividend to $0.51/share from $0.45/share and increases common stock repurchase authority by an additional 350 mln shares
    • WeWork planning IPO in September, which is sooner than expected, according to The Wall Street Journal
  • M&A:
    • Dish Network (DISH) aims to pay $5 bln for wireless assets from Sprint (S) and T Mobile (TMUS), according to Bloomberg
    • Moody’s (MCO) acquires majority stake in Four Twenty Seven; terms not disclosed
    • Old Line Bancshares (OLBK) merging with WesBanco (WSBC); OLBK to receive 0.7844 shares of WSBC, valuing the company at $500 mln, or $29.56/share
    • Quaker Chemical (KWR) and Houghton International agree to divest certain products and related assets to Total S.A. (TOT) to settle FTC charges that the proposed merger would violate federal antitrust law
    • Speedway Motorsports (TRK) to be acquired by Sonic Financial for $19.75/share in cash
    • Starwood Capital and Apollo Global Management (APO) have offered to purchase General Electric’s (GE) aircraft financing unit for $4 bln, according to Bloomberg
    • Tilray (TLRY) to acquire alcoholic candy company Smith & Sinclair
  • Syndicate:
    • Athenex (ATNX) files for 10 mln share common stock offering by selling shareholders
    • RA Pharmaceuticals (RARX) prices offering of 4 mln shares of common stock at $32.50 per share
    • SandRidge Energy (SD) filed for $500 mln mixed securities shelf offering
    • Seattle Genetics (SGEN) prices offering of 7,142,858 shares of its common stock at $70.00 per share
  • IPOs:
    • Expected this week:
      • Castle Biosciences (Nasdaq: CSTL): Commercial-stage dermatological cancer company. 3.3 million initial shares. Initial price range $14.00-16.00.
      • Health Catalyst (Nasdaq: HCAT): Provider of data and analytics technology to healthcare organizations. Boosts size and price range of pending IPO — now offering 7 mln shares (Prior 6 mln) between $24.00-25.00 (Prior $20.00-23.00)
      • Livongo Health (Nasdaq: LVGO): Healthcare technology company that developed platform to create personalized care for people with chronic conditions. Boosts price range of pending IPO, now offering 10.7 mln shares between $24.00-26.00 (Prior $20.00-23.00)
      • Sunnova Energy (NYSE: NOVA): Residential solar and energy story service provider. 17.7 million initial shares. Initial price range $16.00-18.00.
      • ProSight Global (NYSE: PROS): Specialty insurance company leveraging customized technology infrastructure. 8.8 million initial shares. Initial price range $16.00-18.00.
      • Wanda Sports Group (Nasdaq: WSG): Global sports events, media, and marketing platform. 33.3 million initial shares. Initial price range $12.00-15.00.

Gapping Up/Down

  • Gapping up: JNCE +24.7%, TER +14.6%, SNAP +11.1%, EW +10.6%, ITCI +8.7%, MANH +8.5%, GHDX +7.5%, TXN +6.6%, OLBK +4.5%, CSL +4%, ADI +3.4%, DFS +2.9%, CMG +2.9%,RHI +2.9%, CNI +2.5%, NAVI +2.2%, MXIM +1.3%, CSTM +1.2%, SOXX +1%, TLRY +1%, RNR +1%, SPN +0.9%, UMC +0.9%, SIX +0.9%, SMH +0.8%, CELG +0.8%, NXPI +0.7%
  • Gapping down: IRBT -17.1%, SGEN -5%, HCSG -3.9%, CROX -2.5%, WIX -2.1%, AVD -1.4%, FB -1.3%, WSBC -1.2%, GOOGL -1%, AMZN -0.9%, HLT -0.6%

Analyst Research:

  • Upgrades:
    • Celanese (CE) upgraded to Overweight from Neutral at JP Morgan; tgt raised to $120
    • Cott (COT) upgraded to Buy from Neutral at Goldman Sachs; tgt $18
    • Emerald Expositions Events (EEX) upgraded to Neutral from Sell at Citigroup; tgt raised to $11.50
    • Kimberly-Clark (KMB) upgraded to Neutral from Underweight at Atlantic Equities
    • Lions Gate Entertainment (LGF.A) upgraded to Buy from Neutral at Goldman Sachs; tgt lowered to $19
    • Medical Properties Trust (MPW) upgraded to Buy from Hold at Stifel; tgt raised to $19
    • PACCAR (PCAR) upgraded to Neutral from Underweight at JP Morgan; tgt lowered to $66
    • Party City (PRTY) upgraded to Buy from Neutral at Goldman Sachs; tgt lowered to $8
    • PulteGroup (PHM) upgraded to Sector Perform from Underperform at RBC Capital Mkts; tgt raised to $33
    • Snap (SNAP) upgraded to Neutral from Sell at UBS; tgt raised to $16
  • Downgrades:
    • 8×8 (EGHT) downgraded to Neutral from Buy at Rosenblatt; tgt $27
    • Akamai Tech (AKAM) downgraded to Neutral from Buy at Guggenheim
    • Leggett & Platt (LEG) downgraded to Mkt Perform from Outperform at Raymond James
    • The Trade Desk (TTD) downgraded to Neutral from Buy at Citigroup; tgt raised to $250
    • Tile Shop (TTS) downgraded to Underperform at Telsey Advisory Group; tgt lowered to $2.50 from $5
  • Others:
    • Anaplan (PLAN) initiated with a Buy at Deutsche Bank; tgt $70
    • Churchill Downs (CHDN) initiated with a Positive at Susquehanna; tgt $140
    • Coupa Software (COUP) initiated with a Hold at Deutsche Bank; tgt $150
    • MGM Resorts (MGM) initiated with a Negative at Susquehanna; tgt $23

Upcoming Events:

  • Econ Data:
    • 07:00 ET: MBA Mortgage Applications for week ending July 20 (Prior -1.1%)
    • 10:00 ET: New Home Sales for June (Briefing.com consensus 660K; Prior 626K)
    • 10:30 ET: EIA Crude Oil Inventories for week ending July 20 (Prior +62 bcf)
  • Earnings:
    • Monday (July 22)
      • Pre-Market: CALM GNC HAL RPM
      • After-Hours: AKR BRO CR ELS HSTM HXL HMST LOGI AMTD WHR
    • Tuesday (July 23)
      • Pre-Market: ATI AN BIIB CNC CIT KO HOG HAS IPG IRDM JBLU LMT PII DGX SHW SWK TTS TRU UTX
      • After-Hours:  CNI CMG DFS EW IRBT MANH SNAP TXN V
    • Wednesday (July 24)
      • Pre-Market:  ANTM BA T BSX CAT CHKP FCX GWW HLT LAD MHO NDAQ NTRS NOC NSC OC TUP
      • After-Hours: ALGN ALGT AMP ANIK ARI ASGN BCOV CERN CLS CLB COR CUZ ECHO FFIV FB F GGG HP HNI KRA LSTR LVS LMAT
    • Thursday (July 25)
      • Pre-Market: MMM AAN ABB AAL BUD AZN BWA BMY CMCSA DLX DBD HSY LNTH TREE MNRO NVCR PRLB LUV TSCO WWE
      • After the close: ALK GOOG AMZN BJRI COLM DECK BOOM ENVA EXPE FTV JNPR MAT MGM MXL PEB PFPT PRO SNBR SBUX SYK
    • Friday (July 26)
      • Pre-Market:  ABBV ABG COG CHTR CL ROCK GT ITW MCD TYPE PSX TWTR WETF
      • After-hours:  None of note

Asia & Europe detail:

Asia: Nikkei +0.4%, Hang Seng +0.2%, Shanghai +0.8%

Equity indices in the Asia-Pacific region ended the midweek session on a mixed note. People’s Bank of China Governor, Yi Gang, said that the central bank does not intend to follow the Fed with a rate cut of its own. Meanwhile, Westpac expects that the Reserve Bank of Australia will lower its cash rate in October and February. Japan threatened to remove South Korea from a list of countries that face minimum export restrictions. Nissan will reportedly fire more than 10,000 workers.

  • In economic data:
    • Japan’s May Leading Index 94.9 (expected 95.2; last 95.9) and flash July Manufacturing PMI 49.6 (expected 49.7; last 49.3).
    • Australia’s flash July Manufacturing PMI 51.4 (last 52.0) and flash Services PMI 51.9 (last 52.6).
    • New Zealand’s June trade surplus NZD365 mln (expected surplus of NZD100 mln; last surplus of NZD175 mln).

—Equity Markets—

  • Japan’s Nikkei: +0.4%
  • Hong Kong’s Hang Seng: +0.2%
  • China’s Shanghai Composite: +0.8%
  • India’s Sensex: -0.4%
  • South Korea’s Kospi: -0.9%
  • Australia’s ASX All Ordinaries: +0.7%

—FX—

  • USD/JPY: -0.2% to 108.05
  • USD/CNH: -0.1% to 6.8766
  • USD/INR: UNCH at 69.00

Europe: DAX +0.4%, FTSE  -1.0%, CAC -0.3%

Major European indices are mixed. The latest flash Manufacturing PMI readings from France and Germany showed another decrease with Germany’s flash Manufacturing PMI sliding to 43.1, a level not seen since the summer of 2012 when the region was grappling with a financial crisis. Incoming British Prime Minister Boris Johnson said that all members of his cabinet must allow for the possibility of a no-deal Brexit. Deutsche Bank is down 2.5% after reporting its largest loss in eleven years.

  • In economic data:
    • Eurozone’s flash July Manufacturing PMI 46.4 (expected 47.6; last 47.6) and flash Services PMI 53.3, as expected (last 53.6). June M3 Money Supply +4.5% yr/yr (expected 4.6%; last 4.8%) and Private Sector Loans +3.3% yr/yr (expected 3.2%; last 3.3%).
    • Germany’s flash July Manufacturing PMI 43.1 (expected 45.1; last 45.0) and flash Services PMI 55.4 (expected 55.3; last 55.8).
    • France’s flash July Manufacturing PMI 50.0 (expected 51.6; last 51.9) and Services PMI 52.2 (expected 52.7; last 52.9). July Business Survey 101 (expected 102; last 102).
    • Swiss July ZEW Expectations -24.0 (last -30.0)

—Equity Markets—

  • STOXX Europe 600: UNCH
  • Germany’s DAX: +0.4%
  • U.K.’s FTSE 100: -1.0%
  • France’s CAC 40: -0.3%
  • Italy’s FTSE MIB: +0.4%
  • Spain’s IBEX 35: +0.3%

—FX—

  • EUR/USD: UNCH at 1.1148
  • GBP/USD: +0.6% to 1.2506
  • USD/CHF: UNCH at 0.9851