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Markets Morning Briefing

Daily Morning Prep

Market jitters ahead of eventful day in Washington

U.S. futures are trading lower in front of Fed Chair Powell’s congressional testimony today, as investor sentiment contends with lingering trade uncertainty and some weakness in global stocks. The S&P 500 futures trade ten points, or 0.3%, below fair value after a record-setting day on Wall Street yesterday.

Fed Chair Powell’s testimony, in which he will discuss the economic outlook, begins at 11:00 a.m. ET before the Congressional Joint Economic Committee. Mr. Powell will return to Capitol Hill tomorrow to testify before the House Budget Committee. 

Separately, The Wall Street Journal published a negative-sounding trade report that corroborated concerns that removing existing tariffs on Chinese imports is a roadblock in reaching a “Phase One” deal. Elsewhere, the continued unrest in Hong Kong contributed to a 1.8% decline in the region’s Hang Seng index on Wednesday, while struggling bank stocks currently weigh on the Europe Stoxx 600 (-0.5%). 

Back on the home front, investors will receive the Consumer Price Index for October (Briefing.com consensus 0.3%) at 8:30 a.m. ET and the Treasury Budget for October at 2:00 p.m. ET. Earlier, the weekly Mortgage Applications Index jumped 9.6% following a 0.1% decline in the prior week. 

U.S. Treasuries are up modestly, pushing yields lower across the curve. The 2-yr yield is down two basis points to 1.63%, and the 10-yr yield is down three basis points to 1.88%. The U.S. Dollar Index is up 0.1% to 98.40. WTI crude is down 0.7%, or $0.39, to $56.41/bbl.

In U.S. Corporate news:

  • Skyworks Solutions (SWKS 96.60, -4.99): -4.9% despite beating earnings estimates and guiding Q1 EPS above consensus. SWKS was downgraded to Hold from Buy at Canaccord Genuity.
  • Tech Data (TECD 129.95, +4.54): +3.6% after entering into a definitive agreement to be acquired by funds managed by affiliates of Apollo Global Management (APO 42.90, unch) for $130/share.
  • SmileDirectClub (SDC 10.30, -0.78): -7.0% after posting an EPS loss in its first earnings report as a public company. 

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended the midweek session on a lower note. Japan’s Nikkei -0.9%, Hong Kong’s Hang Seng -1.8%, China’s Shanghai Composite -0.3%, India’s Sensex -0.6%, South Korea’s Kospi -0.9%, Australia’s ASX All Ordinaries -0.8%.
    • In economic data:
      • South Korea’s October Unemployment Rate 3.5% (last 3.4%)
      • Australia’s Q3 Wage Price Index +0.5% qtr/qtr, as expected (last 0.6%); +2.2% yr/yr (expected 2.3%; last 2.3%). November Westpac Consumer Sentiment 4.5% (last -5.5%)
      • New Zealand’s October FPI -0.3% m/m (last 0.0%)
    • In news:
      • Property names remained weak in Hong Kong while bank stocks also underperformed.
      • Nissan lowered its guidance.
      • The Wall Street Journal reported that tariffs are the main stumbling block to a partial trade deal with China, echoing what had been admitted by top administration officials in recent days.
      • The Reserve Bank of New Zealand left its official cash rate at 1.00% despite expectations for a 25-bps cut.
  • Major European indices trade in negative territory with Spain’s IBEX (-1.8%) continuing its display of relative weakness after the Socialist party agreed to form a government with Podemos.  STOXX Europe 600: -0.5%, Germany’s DAX: -0.7%, U.K.’s FTSE 100: -0.5%, France’s CAC 40: -0.4%, Italy’s FTSE MIB: -1.4%, Spain’s IBEX 35: -1.8%.
    • In economic data:
      • Eurozone’s September Industrial Production +0.1% m/m (expected -0.3%; last 0.4%); -1.7% yr/yr (expected -2.3%; last -2.8%)
      • Germany’s October CPI +0.1% m/m, as expected (last 0.1%); +1.1% yr/yr, as expected (last 1.1%)
      • U.K.’s October CPI -0.2% m/m (expected -0.1%; last 0.1%); +1.5% yr/yr (expected 1.6%; last 1.7%). Core CPI +0.1% m/m (expected 0.2%; last 0.2%); +1.7% yr/yr, as expected (last 1.7%). October Input PPI -1.3% m/m (expected -1.2%; last -0.9%) and Output PPI -0.1% m/m (expected 0.1%; last -0.1%)
    • In news:
      • Bank stocks have been at the forefront of today’s retreat. 
      • An election poll conducted by YouGov and Sky suggests that Conservatives are on track to win 42% of the vote while Labour is projected to receive 28%.

U.S. equity futures:

  • S&P 500 Futures -11 @ 3081
  • DJIA Futures -102  @ 27559
  • Nasdaq Futures -35 @ 8240

Overseas:

  • Europe: DAX -0.7%, FTSE -0.5%, CAC -0.4%
  • Asia: Nikkei -0.9%, Hang Seng -1.9%, Shanghai -0.3%

Commodities: 

  • Crude Oil -0.37 @ 56.45
  • Nat Gas -0.027 @ 2.778
  • Gold +13.40 @ 1466.80
  • Silver +0.288 @ 16.975
  • Copper -0.0005 @ 2.594

U.S. Summary:

  • Earnings/Guidance:
    • 2U (TWOU) beats by $0.09, beats on revs; guides FY19 revs above consensus  
    • Adaptive Biotechnologies (ADPT) beats by $0.11, beats on revs  
    • ADT (ADT) misses by $0.23, beats on revs; reaffirms FY19 revs guidance  
    • Amdocs (DOX) reports EPS in-line, revs in-line; guides DecQ EPS below consensus, revs in-line; guides FY20 in-line; announces several new deals including AT&T, US Cellular, Vodafone Germany  
    • American Public (APEI) beats by $0.11, beats on revs; guides Q4 EPS in-line  
    • BEST Inc. (BEST) misses by $0.07, misses on revs; lowers FY19 revs below consensus  
    • Canada Goose (GOOS) beats by CAD0.14, beats on revs; reaffirms FY20 EPS guidance, revs guidance  
    • Cardlytics (CDLX) beats by $0.17, beats on revs; Q4 revs above consensus at midpoint; raises FY19 revs above consensus  
    • Catalyst Pharma (CPRX) beats by $0.02, misses on revs; guides FY19 revs below consensus; guides FY20 revs below consensus  
    • Datadog (DDOG) beats by $0.14, beats on revs; guides Q4 EPS above consensus, revs above consensus  
    • Energizer (ENR) beats by $0.12, reports revs in-line; guides FY20 EPS below consensus, revs below consensus  
    • Halozyme Therapeutics (HALO) misses by $0.05, misses on revs; lowers FY19 revs mostly below consensus  
    • Health Catalyst (HCAT) beats by $0.10, beats on revs; guides Q4 revs in-line  
    • Huazhu Group (HTHT) reports Q3 results, revs in-line; maintains FY19 net rev growth outlook  
    • HUYA (HUYA) beats by RMB0.13, beats on revs; guides Q4 revs above consensus  
    • IHS Markit (INFO) sees 2019 adj EBITDA trending above the mid-point of the prior guidance and reaffirms revs; issues FY20 guidance  
    • Luckin Coffee (LK) beats by $0.06, beats on revs; guides Q4 revs above consensus  
    • M/A-COM Tech (MTSI) beats Q4 estimates and issuing upside Q1 guidance  
    • Meritor (MTOR) beats by $0.15, misses on revs; guides FY20 EPS, revs below consensus; adds to repurchase authorization  
    • Milacron Holdings (MCRN) misses by $0.02, misses on revs; expects Hillenbrand to close acquisition by end of 2019  
    • Omeros (OMER) beats by $0.08, beats on revs  
    • Quaker Chemical (KWR) beats by $0.15, reports revs in-line, reaffirms Q4 adjusted EBITDA guidance  
    • ScanSource (SCSC) misses by $0.01, beats on revs; guides Q2 EPS below consensus  
    • ShotSpotter (SSTI) beats by $0.01, misses on revs; guides FY19 revs below consensus; guides FY20 revs below consensus  
    • Skyworks (SWKS) beats by $0.02, reports revs in-line; guides Q1 EPS above consensus, revs in-line  
    • Spectrum Brands (SPB) beats by $0.01, reports revs in-line  
    • Stratasys (SSYS) reports EPS in-line, misses on revs; reaffirms FY19 EPS guidance, lowers FY19 revs below consensus  
    • Sunrun (RUN) beats by $0.19, beats on revs; guides Q4  
    • Tilray (TLRY) misses by $0.06, beats on revs  
    • Tivity Health (TVTY) misses by $0.10, reports revs in-line; reaffirms FY19 EPS guidance, revs guidance  
    • Tower Semi (TSEM) misses by $0.04, reports revs in-line; guides Q4 revs below consensus  
    • Varex Imaging (VREX) beats by $0.02, reports revs in-line; guides FY19 EPS above consensus, revs above consensus  
    • ViewRay (VRAY) beats by $0.08, beats on revs; reaffirms FY19 revs guidance  
    • Vipshop (VIPS) beats by RMB 0.64, beats on revs; guides Q4 revs below consensus  
    • YY (YY) beats by $0.09, beats on revs; sees Q4 revs +57.7-62% yr/yr  
  • General News:
    • Existing trade tariffs have become a roadblock in efforts to reach a limited trade deal between US and China, according to the Wall Street Journal
    • Congress is expected to extend government funding to December 20 from November 21, according to The Hill
    • India mulling changes to dividend distribution tax, according to Bloomberg
    • Abbott Labs (ABT) names Robert B. Ford as CEO after Miles D. White steps down, effective March 31, 2020
    • Alibaba (BABA) has secured approval for up to $15 bln secondary Hong Kong listing, according to Financial Times
    • Automatic Data (ADP) authorizes purchase of $5 bln of its common stock
    • E*TRADE (ETFC) reports Oct DARTs +9% m/m and -1% yr/yr to 290,578
    • Google (GOOG) aims to start offering checking accounts to consumers, according to the  Wall Street Journal
    • Google’s (GOOG) project to collect health data has triggered a federal inquiry, according to the  Wall Street Journal
    • Hawaiian Electric (HE) Chair calls letter from ValueAct’s Jeff Ubben misguided, factually inaccurate and misleading
    • KC Southern (KSU) announces new capital allocation policy, increases dividend, announces new $2 bln repurchase program
    • Kinsale Capital Group (KNSL) will replace Dean Foods Company (DF) in the S&P SmallCap 600 effective prior to the open on Monday, November 18
    • Nike (NKE) will stop selling products directly to Amazon (AMZN), according to the  Wall Street Journal
    • U.S. Bancorp (USB) receives Fed approval for capital distribution
    • Unilever NV (UN) announces that Marijn Dekkers has decided to step down as Chairman of the Board with immediate effect
  • M&A:
    • Air Liquide (AIQUY) says studying potential sale of its schlke subsidiary  
    • BioLife Solutions (BLFS) announced the acquisition of substantially all of the assets of Custom Biogenic Systems; reports Q3 results
    • Continental Building (CBPX) to be acquired by Compagnie de Saint-Gobain S.A. for $37.00 per share in cash  
    • Fulton Fincl (FULT) subsidiary purchases wealth management business of APS Wealth Management; terms not disclsoed  
    • Sysco (SYY) acquires Armstrong Produce and Kula Produce; terms not disclosed  
    • Tech Data (TECD) enters definitive agreement to be acquired by funds managed by affiliates of Apollo Global Management for $130/share  
  • Syndicate:
    • Avita Medical (RCEL) announces institutional placement of A$120 mln  
    • BioCryst Pharma (BCRX) announces public offering of $55 mln of its common stock  
    • Ceridian HCM (CDAY) announces secondary public offerings of 5.0 mln shares by affiliates of Thomas H. Lee Partners and of 5.0 mln shares by Cannae Holdings
    • CyberArk (CYBR) announces private offering of $500 mln aggregate principal amount of convertible senior notes due 2024  
    • Establishment Labs (ESTA) files for $200 mln mixed securities shelf offering   
    • Halozyme Therapeutics (HALO) proposes offering of $400 mln aggregate principal amount of convertible senior notes due 2024  
    • j2 Global (JCOM) prices offering of $500 mln aggregate principal amount of 1.75% convertible senior notes due 2026 in a private offering   
    • NextCure (NXTC) files for 3.2 mln share common stock offering   
    • Reata Pharmaceuticals (RETA) announces public offering of 2.0 mln shares of Class A common stock  
    • Replimune (REPL) proposes public offering of up to 5,000,000 shares of its common stock  
    • RingCentral (RNG) files for Class A Common Stock shelf offering; discloses issuance of 2,170,785 shares of its Class A common stock to Avaya in connection with strategic partnership   
    • Sea Limited (SE) announces proposed offering of US$1 bln in aggregate principal amount of convertible senior notes due 2024  
    • ShockWave Medical (SWAV) announces public offering of $75.0 mln of shares of its common stock  
  • IPOs:
    • Priced to trade: N/A
    • Expected to trade this week:
      • YayYo (Nasdaq: YAYO): Developer of an online ride-share vehicle booking platform to service ride-sharing economy. 2.5 million shares. Initial price range $4.00-4.00

Gapping Up/Down

  • Gapping upCDLX +25%, TWOU +14.8%, DDOG +13.7%, GOOS +9.5%, ADPT +6.3%, ADT +5.8%, TECD +4.4%, IO +4.3%, LK +3.3%, VRAY +3.2%, HUYA +3.1%, YY +3%, OMER +2.9%, MTSI +2.9%, CBPX +1.7%, HCAT +1.5%, HIIQ +1.4%, RUN +1.3%, REAL +1.2%, AMRN +1.1%
  • Gapping downCPRX -11.4%, BCRX -8.9%, TSEM -8.5%, HALO -7.6%, HALO -7.6%, SWKS -6.4%, CSIQ -5.8%, SDC -4.8%, SSTI -4.7%, REPL -4.3%, SE -4.2%, HTHT -4.1%, TLRY -4%, SWAV -3.9%, I -3.3%, SCSC -2.1%, RNG -1.9%, MTOR -1.9%, ET -1.3%, VREX -1.2%, NXTC -1.1%, BEST -0.7%, VIPS -0.6%, AAL -0.5%

Analyst Research:

  • Upgrades:
    • G-III Apparel (GIII) upgraded to Buy from Neutral at BofA/Merrill
    • Infinera (INFN) upgraded to Neutral from Underweight at JP Morgan; tgt $7
  • Downgrades:
    • Alcoa (AA) downgraded to Underperform from Neutral at BofA/Merrill; tgt $21
    • Chesapeake Energy (CHK) downgraded to Equal-Weight from Overweight at Morgan Stanley; tgt lowered to $1.25
    • Diplomat Pharmacy (DPLO) downgraded to Equal Weight from Overweight at Barclays; tgt lowered to $3
    • e.l.f. Beauty (ELF) downgraded to Hold from Buy at Jefferies; tgt $20
    • Intelsat (I) downgraded to Neutral from Overweight at JP Morgan
    • Lonestar Resources (LONE) downgraded to Hold from Buy at SunTrust
    • Mosaic (MOS) downgraded to Underweight from Neutral at JP Morgan; tgt lowered to $18
    • Neon Therapeutics (NTGN) downgraded to Neutral from Buy at BofA/Merrill
    • Nuvectra (NVTR) downgraded to Mkt Perform from Outperform at Raymond James
    • Qorvo (QRVO) downgraded to Hold from Buy at Canaccord Genuity; tgt raised to $110
    • Senseonics (SENS) downgraded to Hold from Buy at Canaccord Genuity; tgt lowered to $1
    • Skyworks (SWKS) downgraded to Hold from Buy at Canaccord Genuity; tgt raised to $102
    • Wright Medical Group (WMGI) downgraded to Neutral at Credit Suisse
  • Others:
    • Alaska Air (ALK) initiated with a Neutral at UBS
    • American Airlines (AAL) initiated with a Sell at UBS
    • American Eagle (AEO) initiated with an Equal Weight at Barclays; tgt $17
    • Apple (AAPL) initiated with a Outperform at RBC Capital Mkts; tgt $285
    • Burlington Stores (BURL) initiated with an Overweight at Barclays; tgt $239
    • Capri Holdings (CPRI) initiated with an Equal Weight at Barclays; tgt $37
    • Dick’s Sporting Goods (DKS) initiated with an Equal Weight at Barclays; tgt $45
    • Foot Locker (FL) initiated with an Equal Weight at Barclays; tgt $48
    • G-III Apparel (GIII) initiated with an Equal Weight at Barclays; tgt $27
    • Gap (GPS) initiated with an Underweight at Barclays; tgt $14
    • Hanesbrands (HBI) initiated with an Equal Weight at Barclays; tgt $16
    • Kontoor Brands (KTB) initiated with an Equal Weight at Barclays; tgt $35
    • L Brands (LB) initiated with an Underweight at Barclays; tgt $16
    • National Vision (EYE) initiated with an Overweight at Barclays; tgt $34
    • NIKE (NKE) initiated with an Overweight at Barclays; tgt $111
    • Nordstrom (JWN) initiated with an Equal Weight at Barclays; tgt $36
    • PVH (PVH) initiated with an Equal Weight at Barclays; tgt $100
    • Ralph Lauren (RL) initiated with an Overweight at Barclays; tgt $130
    • RH (RH) initiated with an Overweight at Barclays; tgt $198
    • Ross Stores (ROST) initiated with an Overweight at Barclays; tgt $124
    • Sonos (SONO) initiated with Outperform at RBC Capital Mkts
    • Take-Two (TTWO) initiated with a Buy at UBS; tgt $140
    • Tapestry (TPR) initiated with an Equal Weight at Barclays; tgt $27
    • The Children’s Place (PLCE) initiated with an Equal Weight at Barclays; tgt $85
    • TJX (TJX) initiated with an Overweight at Barclays; tgt $66
    • Ulta Beauty (ULTA) initiated with an Equal Weight at Barclays; tgt $251
    • Under Armour (UAA) initiated with an Equal Weight at Barclays; tgt $19
    • Urban Outfitters (URBN) initiated with an Equal Weight at Barclays; tgt $30
    • V.F. Corp (VFC) initiated with an Overweight at Barclays; tgt $103
    • Wayfair (W) initiated with an Underweight at Barclays; tgt $76
    • Williams-Sonoma (WSM) initiated with an Overweight at Barclays; tgt $77

Upcoming Events:

  • Econ Data:
    • 07:00 ET: MBA Mortgage Applications Index (Prior -0.1%)
    • 08:30 ET: CPI for October (Briefing.com consensus 0.3%; Prior 0.0%)
    • 08:30 ET: Core CPI for October (Briefing.com consensus 0.2%; Prior 0.1%)
    • 10:30 ET: EIA Crude Oil Inventories (Prior +7.2M)
    • 14:00 ET: Treasury Budget for October (Prior -$63.2B)
  • Earnings:
    • Monday (November 11)
      • Pre-Market: FOLD QRTEA 
      • After-Hours: APYX DXC FOE FGEN FTK FNV GO HBM ICUI TME TERP TDW UGI
    • Tuesday (November 12)
      • Pre-Market: AAP AEIS ACM BPMP CNNE CBS CVET CRON DHI DSKE DF DPLO EGRX EBIX EPC EDIT ERJ GTT IAA IIVI INFN XON KEM MPAA OSTK PSN RDNT ROK SAGE SE TSN
      • After-Hours: TWOU ADPT ADT DOX APEI CARB CDLX CPRX CBPX BREW DDOG HALO HCAT HIIQ HTHT HUYA MTSI MCRN OMER PTE KWR SCSC SENS SSTI SWKS SDC RUN TLRY TVTY VREX VRAY YY
    • Wednesday (November 13)
      • Pre-Market: BEST CAE GOOS CMCM ENR FVRR LK MTOR SPB SSYS TSEM VIPS
      • After-Hours: BZH CHNG CBPO CSCO CPA HI HOLI NTAP PSNL PRSP TGP TNK TTEK TCOM
    • Thursday (November 14)
      • Pre-Market: BAM CHC CTRA GDS IGT NBEV NICE RUBY SINA TUFN VIAB WMT WB WIX ZEAL UPLD VSAT VRTU DIS YELP ZG ZGNX
      • After-Hours: AMAT AXNX DLB FTCH FSM GLOB HP KLIC NVDA VFF WPM
    • Friday (November 15)
      • Pre-Market: JCP JD
      • After-Hours: None of note
    • Full Earnings Calendar 

Asia & Europe detail:

Asia: Nikkei -0.9%, Hang Seng -1.9%, Shanghai -0.3%

Equity indices in the Asia-Pacific region ended the midweek session on a lower note. Property names remained weak in Hong Kong while bank stocks also underperformed. Nissan lowered its guidance. The Wall Street Journal reported that tariffs are the main stumbling block to a partial trade deal with China, echoing what had been admitted by top administration officials in recent days. The Reserve Bank of New Zealand left its official cash rate at 1.00% despite expectations for a 25-bps cut.

  • In economic data:
    • South Korea’s October Unemployment Rate 3.5% (last 3.4%)
    • Australia’s Q3 Wage Price Index +0.5% qtr/qtr, as expected (last 0.6%); +2.2% yr/yr (expected 2.3%; last 2.3%). November Westpac Consumer Sentiment 4.5% (last -5.5%)
    • New Zealand’s October FPI -0.3% m/m (last 0.0%)

—Equity Markets—

  • Japan’s Nikkei: -0.9%
  • Hong Kong’s Hang Seng: -1.8%
  • China’s Shanghai Composite: -0.3%
  • India’s Sensex: -0.6%
  • South Korea’s Kospi: -0.9%
  • Australia’s ASX All Ordinaries: -0.8%

—FX—

  • USD/JPY: -0.1% to 108.91
  • USD/CNH: UNCH at 7.0214
  • USD/INR: +0.4% to 72.05

Europe: DAX -0.7%, FTSE -0.5%, CAC -0.4%

Major European indices trade in negative territory with Spain’s IBEX (-1.8%) continuing its display of relative weakness after the Socialist party agreed to form a government with Podemos. Bank stocks have been at the forefront of today’s retreat. An election poll conducted by YouGov and Sky suggests that Conservatives are on track to win 42% of the vote while Labour is projected to receive 28%.

  • In economic data:
    • Eurozone’s September Industrial Production +0.1% m/m (expected -0.3%; last 0.4%); -1.7% yr/yr (expected -2.3%; last -2.8%)
    • Germany’s October CPI +0.1% m/m, as expected (last 0.1%); +1.1% yr/yr, as expected (last 1.1%)
    • U.K.’s October CPI -0.2% m/m (expected -0.1%; last 0.1%); +1.5% yr/yr (expected 1.6%; last 1.7%). Core CPI +0.1% m/m (expected 0.2%; last 0.2%); +1.7% yr/yr, as expected (last 1.7%). October Input PPI -1.3% m/m (expected -1.2%; last -0.9%) and Output PPI -0.1% m/m (expected 0.1%; last -0.1%)

—Equity Markets—

  • STOXX Europe 600: -0.5%
  • Germany’s DAX: -0.7%
  • U.K.’s FTSE 100: -0.5%
  • France’s CAC 40: -0.4%
  • Italy’s FTSE MIB: -1.4%
  • Spain’s IBEX 35: -1.8%

—FX—

  • EUR/USD: UNCH at 1.1008
  • GBP/USD: UNCH at 1.2829
  • USD/CHF: -0.3% to 0.9897