Morning Call: Concern about U.S. military action against Syria weighs on stocks; Jun E-mini S&Ps down -0.94%; Dollar index down -0.08% at a 2-week low.
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Overnight Markets and News

Jun E-mini S&Ps (ESM18 -1.03%) this morning are down -0.94% and European stocks are down -0.43% on concern about U.S. military escalation in Syria. President Trump spoke with UK Prime Minister May and French President Macron and cancelled a planned trip to South America as he intensifies preparations for a U.S. response to an alleged chemical weapons attack by the Syrian government on its own people. Russia warned that any U.S. missiles fired at Syria over a suspected chemicals weapons attack will be shot down and the launch sites targeted, raising the possibility of a U.S.-Russian confrontation. Also, Eurocontrol, an air traffic agency in Europe, asked airlines to apply caution on flights to the eastern Mediterranean region because of possible air strikes in Syria over the next 72 hours. Asian stocks settled mixed: Japan -0.49%, Hong Kong +0.55%, China +0.56%, Taiwan +0.43%, Australia -0.48%, Singapore +0.39%, South Korea -0.32%, India +0.18%.

The dollar index (DXY00 -0.14%) is down -0.08% at a 2-week low. EUR/USD (^EURUSD +0.23%) is up +0.21% at a 2-week high. USD/JPY (^USDJPY -0.39%) is down -0.35% as the slide in stocks boosts the safe-haven demand for the yen.

Jun 10-year T-note prices (ZNM18 +0-075) are up +6 ticks.

China Mar CPI rose +2.1% y/y, weaker than expectations of +2.6% y/y. Mar PPI rose +3.1% y/y, weaker than expectations of +3.3% y/y and the slowest pace of increase in 17 months.

UK Feb manufacturing production unexpectedly fell -0.2% m/m, weaker than expectations of +0.2% m/m and the largest decline in 11 months. Feb industrial production rose +0.1% m/m, weaker than expectations of +0.4% m/m.

Japan Mar PPI rose +2.1% y/y, stronger than expectations of +2.0% y/y.

Japan Feb core machine orders rose +2.1% m/m and +2.4% y/y, stronger than expectations of -2.5% m/m and unch y/y.

U.S. Stock Preview

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous -3.3% to 388.1, purchase sub-index -2.1% to 252.3, refi sub-index -4.9% to 1,130.1), (2) Mar CPI (expected unch m/m and +2.4% y/y, Feb +0.2% m/m and +2.2% y/y) and Mar CPI ex food & energy (expected +0.2% m/m and +2.1% y/y, Feb +0.2% m/m and +1.8% y/y), (3) EIA weekly Petroleum Status Report, (4) Treasury auctions $21 billion of 10-year T-notes, (5) Mar monthly budget statement (expected -$186.0 billion, Feb -$215.2 billion), (6) minutes of the Mar 20-21 FOMC meeting.

Notable Russell 1000 earnings reports today include: Fastenal (consensus $0.61), Bed Bath & Beyond (1.40).

U.S. IPO's scheduled to price today: Alzheon (ALZH), Zuora (ZUO).

Equity conferences this week: J.P. Morgan Retail Round-Up Conference on Wed.

Market Comments

June S&P 500 E-minis (ESM18 -1.03%) this morning are down sharply by -25.00 points (-0.94%). Tuesday's closes: S&P 500 +1.67%%, Dow Jones +1.79%, Nasdaq +2.22%. The S&P 500 on Tuesday closed higher on comments from Chinese President Xi Jinping that eased fears of a U.S.-Chinese trade war when he pledged a "new phase of opening up" Chinese markets. There was also strength in energy stocks after crude oil prices rose by +3.30% to a 2-week high. Stocks were undercut by the rise in the U.S. Mar core PPI to +2.7% y/y, stronger than expectations of +2.6% y/y, which bolsters the case for additional Fed rate hikes.

June 10-year T-notes (ZNM18 +0-075) this morning are up +6 ticks. Tuesday's closes: TYM8 -4.50, FVM8 -3.25. Jun 10-year T-notes on Tuesday closed lower on reduced safe-haven demand after soothing trade comments by Chinese President Xi Jinping sparked a sharp rally in stocks. T-notes were also undercut by the +2.7% y/y increase in U.S. Mar core PPI, higher than expectations of +2.6% y/y and the largest year-on-year increase in 6-1/3 years, which was hawkish for Fed monetary policy.

The dollar (DXY00 -0.14%) this morning is down -0.071 (-0.08%) at a 2-week low. EUR/USD (^EURUSD +0.23%) is up +0.0026 (+0.21%) at a 2-week high and USD/JPY (^USDJPY -0.39%) is down -0.37 (-0.35%). Tuesday's closes: Dollar Index -0.251 (-0.28%), EUR/USD +0.0035 (+0.28%), USD/JPY +0.43 (+0.40%). The dollar index on Tuesday fell to a 1-1/2 week low and closed lower. The dollar was undercut by the CBO's hike in its U.S. budget deficit estimate to -$804 billion for the fiscal year through Sep, up from a Jun estimate of -$563 billion, and the hike in its 2019 U.S. budget deficit estimate to -$981 billion from -$689 billion. There was also strength in EUR/USD which climbed to a 1-1/2 wee high on hawkish comments from ECB Governing Council member Nowotny who said "now is the time for a gradual normalization of monetary policy."

Metals prices this morning are mixed with Jun gold (GCM18 +0.59%) +5.5 (+0.41%), May silver (SIK18 +0.08%) -0.011 (-0.07%) and May copper (HGK18 -0.06%) -0.004 (-0.13%). Tuesday's closes: Jun gold +5.80 (+0.43%), May silver +0.067 (+0.41%), May copper +0.600 (+1.95%). Metals prices on Tuesday closed higher with May silver at a 1-week high and May copper at a 3-week high. Metals prices were boosted by the decline in the dollar index to a 1-1/2 week low and by reduced concerns about a U.S. and China trade war, which is positive for economic growth and industrial metals demand. Copper prices received a boost from the -2,650 MT decline in LME copper inventories to a 2-week low of 369,525 MT, a sign of tighter supplies.

May crude oil prices (CLK18 +1.08%) this morning are up +53 cents (+0.81%) at a fresh 2-week high and May gasoline (RBK18 unch) is -0.0026 (-0.13%). Tuesday's closes: May crude +2.09 (+3.30%), May gasoline +0.0567 (+2.86%). May crude oil and gasoline on Tuesday climbed to 2-week highs and closed higher. Crude oil prices were boosted by the slide in the dollar index to a 1-1/2 week low, an easing of U.S.-Chinese trade war concerns, and expectations for Wednesday's weekly EIA crude inventories to decline by -1.5 million bbl.

Overnight U.S. Stock Movers


Fortinet (FTNT +3.23%) was downgraded to 'Equal-Weight' from 'Overweight' at Morgan Stanley.

Citigroup (C +1.54%) was upgraded to 'Buy' from 'Hold' at HSBC with a price target of $85.

eBay (EBAY +1.83%) was upgraded to 'Overweight' from 'Sector-Weight' at KeyBanc Capital Markets with a price target of $50.

Synaptics (SYNA +4.59%) was upgraded to 'Buy' from 'Neutral' at Mizuho Securities USA with a price target of $55.

Imperva (IMPV +0.46%) was rated a new 'Buy' at D.A. Davidson with a price target of $56.

Compass Minerals International (CMP +0.32%) gained nearly 0.5% in after-hours trading after it reported it sold 4.3 million tons of highway deicing products in Q1, a +22% y/y increase.

Analogic (ALOG +1.16%) dropped over 11% in after-hours trading after it announced that it had agreed to be acquired by Altaris Capital Partners LLC for $84 a share in cash, well below Tuesday's closing price of $96.05 a share.

Spectrum Pharmaceuticals (SPPI +41.90%) rose 3% in after-hours trading, on top of Tuesday's 41% surge, after it reported encouraging results in a Phase 2 study of its EGFR Exon 20 Mutant non-small cell lung cancer.

Invitae (NVTA -1.54%) rose over 3% in after-hours trading after holder Baker Bros Advisors LP filed a 13G with the SEC, which signals ownership of more than 5% of the company's outstanding stock.

Purple Innovation (PRPL +3.53%) was rated a new 'Outperform' at Wedbush with a price target of $11.

Babcock & Wilcox Enterprises (BW +0.80%) plunged over 30% in after-hours trading after it cut guidance on its 2018 adjusted Ebitda to $20 million to $40 million from a projection of $75 million to $95 million in March.