US Morning Briefing 17th of July 2019

Lots of earnings reports, but little movement

The S&P 500 futures trade roughly in-line with fair value, as mostly positive earnings results have yet to generate much buying interest. The stock market, though, remains near record highs as it appears to be waiting for the big tech companies to report and for further guidance on monetary policy and trade. 

Bank of America (BAC 28.92, -0.07, -0.2%), United Airlines (UAL 94.28, +0.36, +0.4%), Cintas (CTAS 255.00, +15.56, +6.5%), and Abbott Laboratories (ABT 83.50, +0.34, +0.4%) were some of the more notable companies to beat earnings estimates since yesterday’s close, but reaction to most has been muted as much of the good news may have been priced in already. Netflix (NFLX 367.58, +1.59, +0.4%) and IBM (IBM 367.58, +1.59, +0.4%) will report after today’s close. 

On the data front, investors will receive Housing Starts (Briefing.com consensus 1.270 million) and Building Permits (Briefing.com consensus 1.30 million) for June at 8:30 a.m. ET and the Fed’s Beige Book for July at 2:00 p.m. ET. The weekly MBA Mortgage Applications Index declined 1.1% following a 2.4% decline in the prior week. 

U.S. Treasuries have edged higher, pushing yields lower across the curve. The 2-yr yield is down one basis point to 1.85%, and the 10-yr yield is down three basis points to 2.09%. The U.S. Dollar Index is down 0.1% to 97.32. WTI crude is up 0.8% to $58.10/bbl. 

In U.S. Corporate news:

  • Bank of America (BAC 28.92, -0.07): -0.2% despite beating earnings estimates. 
  • United Airlines (UAL 94.28, +0.36): +0.4% after beating earnings estimates and raising the low end of its FY19 EPS guidance. 
  • CSX Corporation (CSX 73.56, -5.99): -7.5% after missing top and bottom-line estimates and lowering its FY19 revenue growth guidance. 
  • Cintas (CTAS 255.00, +15.56): +6.5% after beating earnings estimates. 
  • Abbott Laboratories (ABT 83.50, +0.34): +0.4% after beating estimates estimates and raising its FY19 EPS and organic sales guidance. 
  • Qualcomm (QCOM 79.80, +4.13): +5.5% on reports that the Department of Justice requested to pause the antitrust ruling against Qualcomm, according to Reuters

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended Wednesday on a mixed note, with South Korea’s Kospi (-0.9%) showing relative weakness. Japan’s Nikkei -0.3%, Hong Kong’s Hang Seng -0.1%, China’s Shanghai Composite -0.2%, India’s Sensex +0.2%, South Korea’s Kospi -0.9%, Australia’s ASX All Ordinaries +0.4%.
    • In economic data:
      • Singapore’s June trade surplus SGD2.45 bln (last surplus of SGD3.96 bln). June Non-Oil Exports -7.6% m/m (expected -3.9%; last 5.8%); -17.3% yr/yr (expected -9.9%; last -16.3%)
      • Australia’s June MI Leading Index -0.1% (last -0.1%)
    • In news:
      • Samsung and SK Hynix lost near 2.0% apiece amid concerns the dispute between Japan and South Korea could worsen.
      • U.S. Assistant Secretary of State for East Asian and Pacific Affairs, David Stilwell, indicated that the U.S. will not intervene, but it has encouraged the two sides to continue talking.
      • Singapore reported a sharp drop in June exports, with exports of electronics falling 31.9% yr/yr.
      • Yonhap reported that the U.S. and South Korea are preparing for a joint military exercise. The preparations have been criticized by North Korea’s Foreign Ministry.
  • European markets trade just below their flat lines. STOXX Europe 600 UNCH, Germany’s DAX -0.1%, U.K.’s FTSE 100 -0.2%, France’s CAC 40 -0.1%, Italy’s FTSE MIB -0.1%, Spain’s IBEX 35 -0.4%.
    • In economic data:
      • Eurozone’s June CPI +0.2% m/m (expected 0.1%; last 0.1%); +1.3% yr/yr (expected 1.2%; last 1.2%). June Core CPI +0.4% m/m (expected 0.3%; last 0.3%); +1.1% yr/yr (expected 1.1%; last 0.8%)
      • U.K.’s June CPI 0.0% m/m (expected 0.3%; last 0.3%); +2.0% yr/yr, as expected (last 2.0%). June Core CPI +1.8% yr/yr, as expected (last 1.7%). June Input PPI -1.4% m/m (expected -1.0%; last 0.0%) and Output PPI -0.1% m/m (expected 0.1%; last 0.3%). June House Price Index +1.2% yr/yr, as expected (last 1.5%)
      • Italy’s May Industrial New Orders +2.5% m/m (expected -1.4%; last -2.2%); -2.5% yr/yr (expected -4.2%; last -0.2%). May Industrial Sales +1.6% m/m (expected -0.5%; last -1.1%); +0.3% yr/yr (expected -2.5%; last -0.8%)
    • In news:
      • The European Parliament approved the appointment of Ursula von der Leyen to lead the European Commission, though only by nine votes.
      • French Finance Minister Bruno Le Maire expressed hope that G7 finance ministers and central bankers would agree on a minimum corporate tax, but he acknowledged that creating consensus on this issue would be difficult.
      • Mr. Le Maire continued defending his government’s decision to impose a 3.0% tax on revenues of big tech companies.

U.S. equity futures:

  • S&P 500 Futures +1 @ 3008
  • DJIA Futures +11 @ 27339
  • Nasdaq Futures +8 @ 7951

Overseas: 

  • Europe: DAX -0.1%, FTSE -0.2%, CAC -0.1%
  • Asia: Nikkei -0.3%, Hang Seng -0.1%, Shanghai -0.2%

Commodities: 

  • Crude Oil +0.44 @ 58.06
  • Nat Gas +0.016 @ 2.322
  • Gold -6.90 @ 1404.30
  • Silver -0.01 @ 15.67
  • Copper -0.01 @ 2.69

U.S. Summary:

  • Earnings/Guidance:
    • Abbott Labs (ABT) beats by $0.02, reports revs in-line; guides Q3 EPS in-line; raises FY19 EPS and organic sales guidance
    • ASML (ASML) beats by EUR 0.18; reports revs in line; sees Q3 revs below consensus
    • Bank of America (BAC) beats by $0.03, reports revs in-line; NIM increases 3 bps; Loans +4% yr/yr
    • BHP Group (BHP) says copper equivalent production for the 2020 financial year is expected to be slightly higher than the 2019 financial year despite a ~7% decline in petroleum volumes largely due to natural field decline
    • BNY Mellon (BK) beats by $0.05, reports revs in-line
    • Cintas (CTAS) beats by $0.14, reports revs in-line; guides FY20 EPS and revs in-line although mid-point of EPS guidance is above consensus
    • Comerica (CMA) misses by $0.06, reports revs in-line
    • CSX (CSX) misses by $0.03, misses on revs; lowers FY19 revenue growth guidance to 1-2% decline from low single-digit growth; Reaffirms operating ratio guidance
    • Ericsson (ERIC) misses by $0.21, beats on revs
    • Fidelity National (FNF) beats by $0.06, beats on revs
    • Interactive Brokers (IBKR) misses consensus Q2 GAAP  EPS and revenue estimates
    • Littelfuse (LFUS) issues downside prelim Q2 revenue and EPS guidance below consensus
    • Nu Skin (NUS) issues downside guidance for Q2 and adjusts full year guidance primarily due to reduced revenue outlook in Mainland China
    • Omnicom (OMC) beats by $0.08, reports revs in-line
    • Pinnacle Finl (PNFP) beats by $0.15, beats on revs
    • PNC (PNC) beats by $0.06, reports revs in-line
    • Seattle Genetics (SGEN) misses by $0.06, beats on revs
    • Textron (TXT) beats by $0.07, misses on revs; raises FY19 EPS in-line
    • United Airlines (UAL) beats by $0.12, reports revs in-line; raises low end of FY19 EPS, in-line; Sees Q3 unit revenue +0.5-2.5% (vs. +2.5% in Q2), adj. unit cost ex-fuel +1-2%, adj. pre-tax margin 10-12%, capacity +2-3%
    • U.S. Bancorp (USB) misses by $0.07, misses on revs
  • General News:
    • WTO has ruled some US tariffs on Chinese imports are not in compliance. The ruling could allow more retaliation by China, according to FT
    • US and Japan aim to agree to trade deal on agriculture and autos by September, according to Reuters
    • Iran denies Sec. of State Pompeo’s assertion that it is prepared to negotiate its missile program, according to Reuters
    • EU opens investigation into possible anti-competitive conduct of Amazon (AMZN); Amazon and Germany have reached deal to end antitrust investigation, according to Bloomberg
    • API reports crude inventories for the week ending July 12 had a draw of 1.401 million barrels; gasoline inventories had a draw of 0.476 million barrels
    • Apple (AAPL) is testing AirPod production in Vietnam in effort to shift away from China, according to Nikkei
    • Qualcomm (QCOM) higher on reports of DOJ request to appeals court on antitrust ruling, according to Reuters
  • M&A:
    • Chardan Healthcare Acquisition Corp (CHAC) announces business combination with BiomX in stock deal
    • InterActiveCorp (IAC) confirms it will invest $250 mln in Turo,  the world’s largest peer-to-peer car sharing marketplace
    • Visa (V) acquired Payworks, a Munich-based provider of next-generation payment gateway software for the Point of Sale; terms not disclosed
    • Yatra (YTRA) to be acquired by Ebix (EBIX) for $4.90/share in stock
  • Syndicate:
    • Anterix (ATEX) prices upsized underwritten public offering of 2.22 mln shares of common stock at a price to the public of $45.00 per share
    • AVROBIO (AVRO) prices underwritten public offering of 6.5 mln shares of its common stock at a public offering price of $18.50 per share
    • Forty Seven (FTSV) commences public offering of $75.0 mln of shares of its common stock
    • Repligen (RGEN) prices concurrent underwritten public offerings of 1.38 mln shares of common stock at $87.00 per share and $250 mln aggregate principal amount of 0.375% Convertible Senior Notes due 2024
  • IPOs:
    • Priced to trade:
      • DouYu (Nasdaq: DOYU)) prices 67.39 mln ADS IPO at $11.50, the low-end of the expected $11.50-14.00 range
    • Expected this week:
      • Afya (Nasdaq: AFYA): Major education company based in Brazil. 13.7 million initial shares. Initial price range $16.00-18.00.
      • Fulcrum Therapeutics (Nasdaq: FULC): Clinical-stage biopharmaceutical company developing treatments for rare diseases. 4.5 million initial shares. Initial price range $16.00-18.00.
      • Genmab (Nasdaq: GMAB): Denmark-based biotech company specializing in antibody therapeutics for treatment of cancer. 27.8 million initial slares. Initial price range $18.00.
      • Health Catalyst (Nasdaq: HCAT): Provider of data and analytics technology to healthcare organizations. 6.0 million initial shares. Initial price range $20.00-23.00.
      • Medallia (NYSE: MDLA): Developer of enterprise software that captures experience data from signal fields emitted by customers and employees. 14.5 million initial shares. Initial price range $16.00-18.00.
      • Mirum Pharmaceuticals (Nasdaq: MIRM):  Biopharmaceutical company commercializing late-stage pipeline of therapies for liver diseases. 5.0 million initial shares. Initial price range $14.00-16.00.
      • Sunnova Energy (NYSSE: NOVA): Residential solar and energy story service provider. 17.7 million initial shares. Initial price range $16.00-18.00.
      • Phreesia (NYSE: PHR): Developer of technology platform that enables healthcare providers to optimize efficiency and profitability. 7.8 million initial shares. Initial price range $15.00-17.00.

Gapping Up/Down

  • Gapping up:  ORN +14.3%, SGEN +9.2%, QCOM +5.6%, CTAS +5.5%, ASML +5.2%, PBYI +4.3%, CHAC +4.1%, MFGP +2.8%, AMX +2.5%, AVRO +1.8%, CTRP +0.9%, BHP +0.8%, HWC+0.7%, MUX +0.6%
  • Gapping down: NUS -19.8%, INO -13.3%, SENS -10.7%, CSX -7.3%, HLF -6.9%, ERIC -6.2%, BYSI -5.8%, HTHT -3.8%, FTSV -3.7%, APRN -3.4%, LFUS -2.9%, MNK -2.3%, ATEX -2.3%,CMA -2%, BRKR -1.6%, IBKR -1.6%, WUBA -1.1%, WB -0.6%

Analyst Research:

  • Upgrades:
    • Hershey Foods (HSY) upgraded to Neutral from Sell at Goldman Sachs; tgt raised to $142
    • M/A-COM Tech (MTSI) upgraded to Overweight from Neutral at Piper Jaffray; tgt raised to $21
    • Seattle Genetics (SGEN) upgraded to Overweight from Neutral at Piper Jaffray; tgt raised to $75
  • Downgrades:
    • Alliance Resource (ARLP) downgraded to Neutral from Buy at B. Riley FBR; tgt lowered to $20
    • CSX (CSX) downgraded to Equal-Weight from Overweight at Stephens; tgt lowered to $79
    • Lear (LEA) downgraded to Sector Perform from Outperform at RBC Capital Mkts; tgt lowered to $135
    • Levi Strauss (LEVI) downgraded to Sell from Neutral at Goldman Sachs; tgt lowered to $19
    • PVH (PVH) downgraded to Sell from Neutral at Goldman Sachs; tgt lowered to $82
    • Ralph Lauren (RL) downgraded to Sell from Neutral at Goldman Sachs; tgt lowered to $103
    • Santander Consumer USA (SC) downgraded to Neutral from Buy at Janney
    • Steelcase (SCS) downgraded to Neutral from Buy at Seaport Global Securities
    • Shell Midstream Partners (SHLX) downgraded to Underperform from Neutral at Mizuho; tgt lowered to $19
  • Others:
    • Enterprise Products (EPD) initiated with an Overweight at Piper Jaffray; tgt $37
    • Energy Transfer (ET) initiated with an Overweight at Piper Jaffray; tgt $22
    • Noble Midstream Partners (NBLX) initiated with a Neutral at Piper Jaffray; tgt $35
    • Oasis Midstream Partners (OMP) initiated with an Overweight at Piper Jaffray; tgt $28
    • Opera Ltd (OPRA) initiated with a Buy at B. Riley FBR; tgt $14.50
    • Plains All American (PAA) initiated with an Overweight at Piper Jaffray; tgt $31
    • Pluralsight (PS) initiated with an Overweight at KeyBanc Capital Markets; tgt $40
    • Tallgrass Energy (TGE) initiated with a Neutral at Piper Jaffray; tgt $24
    • 2U (TWOU) initiated with an Overweight at KeyBanc Capital Markets; tgt $56

Upcoming Events:

  • Econ Data:
    • 07:00 ET: MBA Mortgage Applications Index for week ending July 13 (Actual  -1.1%; Prior -2.4%)
    • 08:30 ET: Housing Starts for June (Briefing.com consensus 1270K; Prior 1269K)
    • 08:30 ET: Building permits for June (Briefing.com consensus 1300K; Prior 1294K)
    • 10:30 ET: EIA Crude Oil Inventories for week ending July 13 (Prior -9.5M)
    • 14:00 ET: Fed’s Beige Book
  • Earnings:
    • Monday (July 15)
      • Pre-Market: C, OGI
      • After-Hours: JBHT, WTFC
    • Tuesday (July 16)
      • Pre-Market: CP, CBSH, DPZ, FHN, FRC, GS, JNJ, JPM, PLD, SNV, WFC
      • After-Hours:  CTAS, CSX, FNF, FULT, HWC, HOPE, PNFP, SGEN, UAL
    • Wednesday (July 17)
      • Pre-Market:  ABT, ASML, BAC, BK, CMA, ERIC, OMC, PNC, PGR, TXT, USB, WIT
      • After-Hours: ADTN, AA, BXS, CATY, CNS, CCK, CCI, EGBN, EBAY, IBM, KMI, LLNW, NFLX, PLXS, SLG, TCBI, TBK ,UMPQ, URI
    • Thursday (July 18)
      • Pre-Market: ADS, ALLY, BMI, BBT, BX, GTLS, DHR, DOV, EWBC, GATX, GPC, HOMB, HON, IIIN, MTB, MS, NUE, PM, POOL, PPG, SASR, SAP, SNA, SON, STI, UNP, UNH, WBS, WNS
      • After the close: OZK, BEDU, COF, CHWY, CRWD, ETFC, EXPO, FFBC, ISRG, MRTN, MSFT, PBCT, RECN, SKX, WAL
    • Friday (July 19)
      • Pre-Market:  AXP, ALV, BLK, CFG, CLF, GNTX, IBKC, KSU, MAN, NVR, RF, SLB, SXT, STT, SYF
      • After-hours:  None of note

Asia & Europe detail:

Asia: Nikkei -0.3%, Hang Seng -0.1%, Shanghai -0.2%

Equity indices in the Asia-Pacific region ended Wednesday on a mixed note, with South Korea’s Kospi (-0.9%) showing relative weakness. Samsung and SK Hynix lost near 2.0% apiece amid concerns the dispute between Japan and South Korea could worsen. U.S. Assistant Secretary of State for East Asian and Pacific Affairs, David Stilwell, indicated that the U.S. will not intervene, but it has encouraged the two sides to continue talking. Singapore reported a sharp drop in June exports, with exports of electronics falling 31.9% yr/yr. Yonhap reported that the U.S. and South Korea are preparing for a joint military exercise. The preparations have been criticized by North Korea’s Foreign Ministry.

  • In economic data:
    • Singapore’s June trade surplus SGD2.45 bln (last surplus of SGD3.96 bln). June Non-Oil Exports -7.6% m/m (expected -3.9%; last 5.8%); -17.3% yr/yr (expected -9.9%; last -16.3%)
    • Australia’s June MI Leading Index -0.1% (last -0.1%)

—Equity Markets—

  • Japan’s Nikkei: -0.3%
  • Hong Kong’s Hang Seng: -0.1%
  • China’s Shanghai Composite: -0.2%
  • India’s Sensex: +0.2%
  • South Korea’s Kospi: -0.9%
  • Australia’s ASX All Ordinaries: +0.4%

—FX—

  • USD/JPY: UNCH at 108.27
  • USD/CNH: UNCH at 6.8796
  • USD/INR: +0.3% to 68.86

Europe: DAX -0.1%, FTSE  -0.2%, CAC -0.1%

European markets trade just below their flat lines. The European Parliament approved the appointment of Ursula von der Leyen to lead the European Commission, though only by nine votes. French Finance Minister Bruno Le Maire expressed hope that G7 finance ministers and central bankers would agree on a minimum corporate tax, but he acknowledged that creating consensus on this issue would be difficult. Mr. Le Maire continued defending his government’s decision to impose a 3.0% tax on revenues of big tech companies.

  • In economic data:
    • Eurozone’s June CPI +0.2% m/m (expected 0.1%; last 0.1%); +1.3% yr/yr (expected 1.2%; last 1.2%). June Core CPI +0.4% m/m (expected 0.3%; last 0.3%); +1.1% yr/yr (expected 1.1%; last 0.8%)
    • U.K.’s June CPI 0.0% m/m (expected 0.3%; last 0.3%); +2.0% yr/yr, as expected (last 2.0%). June Core CPI +1.8% yr/yr, as expected (last 1.7%). June Input PPI -1.4% m/m (expected -1.0%; last 0.0%) and Output PPI -0.1% m/m (expected 0.1%; last 0.3%). June House Price Index +1.2% yr/yr, as expected (last 1.5%)
    • Italy’s May Industrial New Orders +2.5% m/m (expected -1.4%; last -2.2%); -2.5% yr/yr (expected -4.2%; last -0.2%). May Industrial Sales +1.6% m/m (expected -0.5%; last -1.1%); +0.3% yr/yr (expected -2.5%; last -0.8%)

—Equity Markets—

  • STOXX Europe 600: UNCH
  • Germany’s DAX: -0.1%
  • U.K.’s FTSE 100: -0.2%
  • France’s CAC 40: -0.1%
  • Italy’s FTSE MIB: -0.1%
  • Spain’s IBEX 35: -0.4%

—FX—

  • EUR/USD: +0.1% to 1.1219
  • GBP/USD: UNCH at 1.2408
  • USD/CHF: +0.1% to 0.9893
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