With the Dow Jones Industrial Average set for a slightly higher open, today's Morning Movers...
•...considers the next risk to worry about for the stock market; •...why Express Scripts (ESRX) is soaring, Wynn Resorts (WYNN) is rising, and Kroger (KR) is tumbling; •...and the potential impact of a trade war on Apple (AAPL).
Here's the thing about volatile markets: No sooner than one worry is laid to rest than others start to pop up.
Bloomberg News
That may not be obvious from looking at the markets this morning. S&P 500 futures have advanced 0.2%, while Dow Jones Industrial Average futures have ticked up 26 points, or 0.1%. Nasdaq Composite futures have risen 0.5%.
As we discussed earlier, markets are higher this morning thanks to a softer tone on tariffs from President Donald Trump. As of now--and with this president, we always know things can change quickly-- Canada and Mexico wouldn't have to pay tariffs on steel and aluminum if Nafta gets renegotiated satisfactorily. Ivan Feinseth, chief market strategist of Tigress Financial, contends this is a sign that the negative response to the tariffs worked, despite Gary Cohn's departure. "Pushback from GOP leadership and the negative reaction in the stock market is causing Pres. Trump to rethink his tariff proposal," he writes. "I believe the trade proclamation would be written in a way to allow other countries to offer concessions on U.S. imports in exchange for exclusions from U.S. tariffs."
But with tariffs fading as a risk for now, others are already looking for other warning signs. NatAlliance Securities' Andrew Brenner points to the possibility of higher interest rates as one risk--he notes that two sell-side firms recently said they could see five rate hikes this year --and to headlines warning of big market drops that would make February's correction look like a gentle roll down a hill. "The Fed is clearly on a warpath towards higher rates," Brenner writes. "And if they view the tariffs as temporary, or as a negotiating play to get better trade deals, than they will continue to move forward."
Get ready to whack that next mole. - Ben Levisohn
American Eagle (AEO) is up 0.6% to $20.70 on its fourth-quarter earnings. The apparel retailer said it earned 44 cents a share, matching analysts' estimates, on revenue of $1.23 billion, just above the $1.21 billion consensus. For the first quarter, it expects to earn between 20 cents and 22 cents a share, above the 19 cent per-share consensus.
Burlington Stores (BURL) is up 9.4% to $127 on its fourth-quarter earnings. The off-price retailer said it earned $2.17 a share on revenue of $1.94 billion, while analysts had expected earnings of $2.09 a share on revenue of $1.89 billion. Comparable sales increased 5.9%. For the full year, it expects to earn between $5.73 and $5.83 a share on revenue of $6.63 billion to $6.69 billion, compared to the consensus estimate of $5.28 a share in earnings and $6.45 billion in revenue. It plans to open 30 to 40 new stores. Fellow discounter Ross Stores (ROST) fell on its earnings report yesterday.
Costco (COST) is down 0.7% to $186.05 on its second-quarter earnings. The retailer said it earned $1.42 a share on revenue of $32.99 billion. Analysts were looking for earnings of $1.45 a share on revenue of $32.72 billion. Comparable sales rose 8.4% in the quarter. With Amazon trading near all-time highs, it needed a strong quarter and delivered, writes Susquehanna's Bill Dreher, who calls the company's business model "extremely Amazon resistant."
Devon Energy (DVN) is 2.3% to $31.70 up after increasing its quarterly dividend by two cents, or 33%, to 8 cents a share, and announcing a $1 billion stock repurchase program for the coming year. Devon joins a number of other energy companies returning cash to shareholders, part of some analysts' bullish calls on the sector.
Bloomberg News
Express Scripts (ESRX) is up 17.6% to $86.38 on news that Cigna (CI) will buy the company in a $67 billion cash and stock deal.
Kroger (KR) is down 5% to $24.93 on its fourth-quarter earnings. The grocery store chain earned 63 cents a share, matching consensus estimates, on revenue of $31.3 billion, while analysts were looking for $30.81 billion in revenue. For the full year, it sees earnings per share of $1.95 o $2.15, compared to the $2.10 consensus estimate. Amazon.com's (AMZN) purchase of Whole Foods meant lower grocery prices, with some analysts worried that the discounts will get deeper, although others think the supermarket apocalypse has been overblown.
Navistar (NAV) is down 0.1% to $37 on its fiscal first-quarter results. The engine maker lost 74 cents a share on revenue of $1.91 billion. Analysts expected a loss of 35 cents on revenue of $1.93 billion. For the full year, it expects revenues of $9.25 billion to $9.75 billion, up from $9 billion to $9.5 billion, and in line with the $9.5 billion consensus. Some are worried that it could be one of the victims of a potential trade war over tariffs.
Okta (OKTA) is up 3.2% to $40.40 following its fourth-quarter earnings. The identity management technology firm said it lost a dime a share on revenue of $77.8 million, compared to the 14 cent per-share loss and $74.4 million in sales that analysts had predicted. For the full year, it sees earnings of 62 cents to 67 cents a share on revenues between $343 million and $348 million. Consensus estimates are for earnings of 75 cents a share on revenue of $343.9 million.
Wynn Resorts (WYNN) is up 3% to $273.40 following its first operational update since its new CEO took the helm. The company also announced that two board members would be leaving and that it was raising its dividend. - Teresa Rivas
CF Industries (CF) is down 4% to $40.23 after Bank of America Merrill Lynch cut it to Underperform.
Microchip Technology (MCHP) is up 3.1% to $98.54 after Goldman Sachs upgraded it to Buy.
Splunk (SPLK) has gained 2% to $107.77 after getting upgraded to Buy from Hold at Argus.
Wendy's (WEN) is up 1.9% to $16.95 after Longbow upgraded it to Buy. - T.R.
Apple (AAPL) is unlikely to be damaged by tariffs on steel and aluminum imports. But what about a larger trade war? That's another matter.
Tiernan Ray for Barron's
U.S. stocks have taken a beating since President Donald Trump announced tariffs of 25% on steel and 10% on aluminum.
Apple's exposure, however, is minimal based on the amount of metal contained in its devices -- Loup Ventures estimates the price of iPhones and iMacs would increase up to 0.2%.
"If the tariff is on finished products given the aluminum and steel inputs, this could add roughly $20 million to $30 million of costs to the production of Macs and iPhones in a given year, which is (akin to) a rounding error," Daniel Ives, head of technology research at GBH Insights said in a note on Wednesday.
But if the new tariffs ignite a trade war between the U.S. and China, things could get dicey: More than 20% of Apple's global sales in its most recent quarter came from the region, which includes Hong Kong and Taiwan.
Facebook (FB) and Alphabet (GOOGL) have minimal exposure in China because of a government ban on such services.
Separately, the hunt for the next Apple campus in the U.S. could end up in the Midwest (Illinois or Wisconsin), Southeast (North Carolina or Florida) or Northeast (upstate New York, Massachusetts or Pennsylvania), according to an analysis by Bloomberg and Moody's Analytics. The analysis was based on potential tax incentives, local business environment, workforce talent pool and public transportation.
Apple has ruled out California and Texas, where it already is a major employer, as possible sites. - Jon Swartz
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
