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Morning Call 7/11

|Includes: AIR, ARQL, BA, BCRX, FB, NTRA, SPOT, SRE, TWTR, VOXX, VSAR-OLD, Versum Materials (VSM), WDFC



Conference calls.

Morning Call: Global Stock Amd Commodity Markets Slide As U.S. And China Trade Tensions Escalate; Sep E-Mini S&Ps Down -0.63%; Sep COMEX Copper Down -2.69% At An 11-3/4 Month Low. - 34 minutes ago

Overnight Markets And News

Sep E-mini S&Ps (ESU18 -0.68%) this morning are down -0.63% as global stock markets slide as the trade war between the U.S. and China escalates. The U.S. said it plans to impose additional 10% tariffs on $200 billion of Chinese products after China failed to respond to concerns over unfair trade practices and China's abuse of American intellectual property. U.S. Trade Representative Lighthizer said "China has not changed its behavior that puts the future of the U.S. economy at risk and rather than address our legitimate concerns, China has begun to retaliate against U.S. products. There is no justification for such action." China's Commerce Ministry said it would be forced to retaliate as the latest move by the U.S. was "totally unacceptable." European stocks are down -1.13%, led by weakness in commodity producers and mining stocks with Sep COMEX copper (HGU18 -2.71%) down -2.69% at an 11-3/4 month low, on concern the escalation of trade tensions will harm economic growth and demand for commodities. Asian stocks settled mostly lower: Japan -1.19%, Hong Kong -1.29%, China -1.76%, Taiwan -0.74%, Australia -0.68%, Singapore -0.79%, South Korea -0.59%, India +0.07%. Asian stocks markets sold-off and the yuan fell to a 1-week low against the dollar after the U.S. said it will impose 10% tariffs on $200 billion of Chinese products.

The dollar index (DXY00 +0.19%) is up +0.25%. EUR/USD (^EURUSD -0.25%) is down -0.26%. USD/JPY (^USDJPY+0.19%) is up +0.21%.

Sep 10-year T-note prices (ZNU18 +0-070) are up +7 ticks on increased flight-to-safety demand as global equity markets decline.

Japan Jun PPI rose +0.2% m/m and +2.8% y/y, right on expectations with the +2.8% y/y gain the largest year-on-year increase in 6 months.

Japan May core machine orders fell -3.7% m/m, a smaller decline than expectations of -4.9% m/m.

The Japan May tertiary industry index unexpectedly rose +0.1% m/m, stronger than expectations of -0.3% m/m.

U.S. Stock Preview

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous down -0.5% to 363.6 with the purchase sub-index up +0.5% to 245.5 and the refi sub-index down -2.0% to 996.0), (2) Jun PPI final demand (expected +0.2% m/m and +3.1% y/y, May +0.5% m/m and +3.1% y/y) and Jun PPI ex food & energy (expected +0.2% m/m and +2.6% y/y, May +0.3% m/m and +2.4% y/y), (3) revised May wholesale inventories (prelim-May +0.4%) and May wholesale trade sales (expected +0.5%, Apr +0.8% m/m), (4) EIA weekly Petroleum Status Report, (5) Treasury auctions $22 billion of 10-year T-notes, (6) New York Fed President John Williams (voter) speaks to business and community leaders in Brooklyn, NY.

Notable Russell 1000 earnings reports today include: Fastenal (consensus $0.66), MSC Industrial Direct (1.39), Bank of the Ozarks (0.89).

U.S. IPO's scheduled to price today: none.

Equity conferences during the remainder of this week: none.

Market Comments

Sep S&P 500 E-minis (ESU18 -0.68%) this morning are down -17.75 points (-0.63%). Tuesday's closes: S&P 500 +0.35%, Dow Jones +0.58%, Nasdaq 100 +0.09%. The S&P 500 on Tuesday rose to a 3-3/4 month high and closed higher on optimism for strong Q2 S&P 500 company earnings results as PepsiCo jumped more than 3% after it reported better-than-expected Q2 profits. Stocks were also boosted by confidence in the U.S. labor market as Labor Department data showed 3.561 million U.S. workers in May left jobs to seek better positions, the most since the data began in 2000. Energy stocks showed strength as crude oil prices climbed +0.35%.

Sep 10-year T-notes (ZNU18 +0-070) this morning are up +7 ticks. Tuesday's closes: TYU8 -3.50, FVU8 -3.25. Sep 10-year T-notes on Tuesday closed lower mainly on supply pressures as the Treasury auctions $69 billion of T-notes and T-bonds this week and as Tueday's 3-year T-note auction saw weak results.

The dollar index (DXY00 +0.19%) this morning is up +0.234 (+0.25%), EUR/USD (^EURUSD -0.25%) is down -0.0031 (-0.26%) and USD/JPY (^USDJPY +0.19%) is up +0.23 (+0.21%). Tuesday's closes: Dollar Index +0.074 (+0.08%), EUR/USD -0.0007 (-0.06%), USD/JPY +0.15 (+0.14%). The dollar index on Tuesday closed higher on weakness in EUR/USD after the German Jul ZEW expectations of economic growth index fell -8.6 to a 5-3/4 year low of -24.7. The rally in the S&P 500 to a 3-3/4 month high reduced the safe-haven demand for the yen and sent USD/JPY up to a 1-1/2 month high.

Metals this morning are weaker with Aug gold (GCQ18 -0.36%) -4.8 (-0.38%), Sep silver (SIU18 -0.70%) -0.132 (-0.82%) at a 1-week low, and Sep copper (HGU18 -2.71%) -0.077 (-2.69%) at an 11-3/4 month low. Tuesday's closes: Aug gold -4.20 (-0.33%), Sep silver -0.052 (-0.32%), Sep copper -0.0105 (-0.37%). Metals on Tuesday closed lower on a stronger dollar and the rally in the S&P 500 to a 3-3/4 month high, which curbs the safe-haven demand for precious metals. There was also concern the trade war between the U.S. and China will reduce industrial metals demand.

Aug WTI crude oil prices (CLQ18 -0.63%) this morning are down -42 cents (-0.57%) and Aug gasoline (RBQ18 -1.53%) is -0.0328 (-1.52%). Tuesday's closes: Aug crude +0.26 (+0.35%), Aug gasoline +1.18 (+0.55%). Aug crude oil and gasoline on Tuesday closed higher on the increase in the crack spread to a 2-week high, which gives added incentive to refiners to purchase crude to refine into gasoline. Crude oil prices were also supported by expectations for Wednesday's EIA weekly crude oil inventories to fall -3.75 million bbl. Crude oil prices were undercut by a stronger dollar.

Overnight U.S. Stock Movers

U.S. Cellular (USM -0.10%) was downgraded to 'Underweight' from 'Neutral' at JPMorgan Chase.

Boeing (BA +1.53%) slid -0.2% in after-hours trading after JetBlue said it was ordering 60 of Airbus's A220 jets, a rival of Boeing.

Facebook (FB -0.59%) was rated a new 'Buy' at Nomura Instinet with a price target of $228.

WD-40 (WDFC +1.22%) lost 2% in after-hours trading after it forecast full-year EPS of $4.05 to $4.10, the midpoint below consensus of $4.09.

Sempra Energy (SRE +1.44%) fell more than 2% in after-hours trading after it announced a proposed $1.1 billion public offering of common stock and mandatory convertible preferred stock offering.

AAR Corp (AIR +0.96%) dropped nearly 6% in after-hours trading after it said it sees fiscal 2019 EPS continuing operations of $2.50 to $2.80, the midpoint below consensus of $2,75.

Spotify (SPOT +1.69%) was rated a new 'Buy' at Nomura Instinet with a price target of $210.

Natera (NTRA +6.05%) slid 6% in after-hours trading after it announced the launch of a proposed follow-on public offering of $75 million in shares of its common stock.

Twitter (TWTR -0.88%) was rated a new 'Reduce' at Nomura Instinet with a price target of $31.

BioCryst Pharmaceuticals (BCRX unch) rallied 10% in after-hours trading after the merger with Idera Pharmaceuticals was called off after BioCryst shareholders voted against it. Idera Pharmaceuticals IDRA fell -5% on the news.

VOXX International (VOXX +6.31%) tumbled more than 13% in after-hours trading after it reported Q1 fiscal sales of $100.9 million, weaker than consensus of $114 million.

ArQule (ARQL -8.07%) dropped 8% in after-hours trading after it said that it had commenced an underwritten public offering of its common stock, although no size was mentioned.

Versartis (VSAR -2.44%) jumped 12% in after-hours trading after it said its Phase 1 trial of its AVB-S6-500 met its safety and tolerability endpoints for the trial.

Next Story

Morning Call: Optimism in S&P 500 Q2 earnings lifts stocks; Sep E-mini S&Ps up +0.13% at a 3-3/4 month high; USD/JPY up +0.43% at a 1-1/2 month high. - Tue Jul 10, 6:41AM CDT

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