Morning News Call Reuters U.S

MORNING NEWS CALL REUTERS U.S. Edition Thursday, March 23, 2017

TOP NEWS ANALYSIS • Hospital, Medicaid insurer shares set for volatility as health vote nears The slumping U.S. healthcare stocks at the center of efforts to dismantle the Trump Tantrum looms on Wall Affordable Care Act are expected to stay volatile as Republican legislation Street if healthcare effort stalls heads into a vote that could signal how protracted their battle to repeal the law will be. The Trump Trade could start looking • With Sears' future in doubt, vendors begin pulling back more like a Trump Tantrum if the Suppliers to Sears Holdings Corp told Reuters they are doubling down on de- new U.S. administration's healthcare fensive measures, such as reducing shipments and asking for better payment bill stalls in Congress, prompting terms, to protect against the risk of nonpayment as the company warned about worries on Wall Street about tax cuts its finances. and other measures aimed at pro- • Major oil companies open their wallets in Gulf of Mexico bidding moting economic growth. Royal Dutch Shell plc, Chevron Corp and Exxon Mobil Corp signaled the oil Investors are dialing back hopes that industry's return to the Gulf of Mexico's deep waters with high bids in a govern- U.S. President Donald Trump will ment auction up 76 percent over a year ago. swiftly enact his agenda, with a • Westinghouse's clients gear up for bankruptcy fight-sources Thursday vote on a healthcare bill a The U.S. utilities that are clients of Toshiba Corp's nuclear power plant con- litmus test which could give stock struction subsidiary, Westinghouse Electric Co LLC, have hired advisers to investors another reason to sell. prepare for its potential bankruptcy, according to people familiar with the mat- "If the vote doesn’t pass, or is post- ter. poned, it will cast a lot of doubt on • London banks need to move key functions to EU to keep access -ECB the Trump trades," said the influen- The European Central Bank expects London-based banks seeking to keep tial bond investor Jeffrey Gundlach, access to the European Union's single market once Britain leaves the bloc to chief executive at DoubleLine Capi- move key functions, branches and dealing operations, the ECB's top supervi- tal. sor said. U.S. stocks rallied after the Novem- ber presidential election, with the S&P 500 posting a string of record BEFORE THE BELL highs up to earlier this month, on U.S. stock index futures were little changed ahead of U.S. President Donald bets that the pro-growth Trump Trump's first significant policy test, as he looks to get a healthcare bill passed agenda would be quickly pushed by in U.S. congress. New home sales, jobless claims and Kansas City Fed manu- a Republican Party with majorities in facturing data are slated for release. European shares pared earlier losses as both chambers of Congress. markets took the latest terror attack in London largely in their stride, while The S&P 500 ended slightly higher Asian stocks closed higher. Gold futures fell, while the dollar edged higher. on Wednesday, the day before a Oil prices rebounded, after touching their lowest level since November over- floor vote on Trump's healthcare pro- night, on data that showed U.S. crude inventories grew more than expected. posal scheduled in the House of Representatives. On Tuesday, stocks had the biggest STOCKS TO WATCH one-day drop since before Trump won the election, on concerns about Deals of the day opposition to the bill. • Superior Industries International (SUP). The aluminum wheel maker has Investors extrapolated that a stalling launched an offer to buy Uniwheels for around $715 million after winning the bill could mean uphill battles for oth- support of the Warsaw-listed company's biggest shareholder. Superior Indus- er Trump proposals. Trump and Re- tries said it had agreed to buy the 61.3 stake in Uniwheels held by Uniwheels publican congressional leaders ap- Holding Malta for 226.50 zlotys per share and was offering 235.83 zlotys each peared to be losing the battle to get for the remaining shares - below the current stock price. Superior Industries enough support to pass it. said the deal would create one of the world's largest suppliers of such wheels Any hint of further trouble for to the automotive industry. Trump's agenda, especially his proposed tax cut, could precipitate a Results stock market correction, said Byron • Accenture Plc (ACN). The consulting and outsourcing services provider re- Wien, veteran investor and vice ported a 4.7 percent increase in quarterly net revenue, helped by strong de- chairman of Blackstone Advisory mand for its digital and cloud services. Net income attributable to Accenture Partners. fell to $838.8 million or $1.33 per share in the second quarter ended Feb. 28, “The fact that they are having trouble from $1.33 billion or $2.08 per share, a year earlier. Net revenue rose to $8.32 with (healthcare repeal) casts a MORNING NEWS CALL - U.S. EDITION March 23, 2017 billion from $7.95 billion. Accenture's digital, cloud and security-related ser- shadow over the tax cut and the tax vices make up more than 40 percent of total revenue. cut was supposed to be the principal fiscal stimulus for the improvement In other news in real GDP," Wien said. "Without • Alphabet Inc (GOOGL). Google said on Wednesday it would offer an audio- that improvement in GDP, earnings only option on its Duo video calls service to help users communicate using aren’t going to be there and the mar- poor-quality connections, and was adding a feature to permit file sharing in ket is vulnerable." group chats on its Allo messaging App. Google said audio-only calls on Duo Strategists have been cautioning for would be available from Wednesday in Brazil, and would be rolled out to users weeks that markets are pricing in a around the world in the coming days. scenario where nothing goes wrong • Bebe Stores Inc (BEBE). The contemporary women's retailer said it is ex- with Trump's agenda. Investors are ploring strategic alternatives following four years of losses. Bebe Stores said it paying $18.10 for every dollar in has retained B. Riley & Co as its financial adviser. Bebe is planning to shut earnings expected on the S&P 500 stores and seek a turnaround as an online brand to avoid filing for bankruptcy, over the next 12 months, near the Bloomberg had reported on Tuesday, citing people familiar with the situa- most expensive U.S. stocks have tion. The company's stock has lost about 89 percent of its value in the last two been since 2004. years. "This is really about the fact that the • Daseke Inc (DSKE). The trucking company plans to double its pretax earn- market is pricing in too much certain- ings over the next three years as it seeks aggressive growth through acquisi- ty on a number of accounts," said tions to consolidate a fragmented area of the industry, the company’s presi- Julian Emanuel, executive director of dent, chief executive and founder said on Wednesday. "We can be several U.S. equity and derivatives strategy times larger in five to 10 years from now," Don Daseke told Reuters. "There at UBS Securities. "Even if you got are over 400 companies that have over 100 trucks that would be prospects for the positive vote, there's still the re- us to discuss consider acquiring, merging with them, over the next several sidual knowledge that the agenda years." Daseke’s acquisition targets typically range in revenue from $40 million will be difficult to get through the to $250 million with around 200 to 1,500 employees, the company’s founder Senate." said. While investors and strategists have • PPG Industries Inc (PPG). The paint maker PPG has made a "very compel- said they do not see an immediate ling" offer for Akzo Nobel and was shocked when its Dutch rival turned it down, threat to the eight-year-old bull mar- PPG's chief executive Michael McGarry said on a visit to Amsterdam to drum ket, there is a risk of a 5-to-10 per- up support for a proposed tie-up. McGarry said he would meet Akzo share- cent drop. Only a bear market -a 20 holders during the visit and was prepared to meet Akzo's boards "any time, percent decline- would put an end to any place" to discuss its 22.7 billion euro takeover offer. He disputed Akzo's the bull. view that the two companies' cultures were ill-matched. Asked to comment on "It looked like a mini tantrum," said a possible hostile bid, McGarry said he wanted to "work together" with Akzo. David Kotok, chief investment officer • PTC Therapeutics Inc (PTCT). Two U.S. lawmakers sent a letter on of Cumberland Advisors. "Trump has Wednesday to the company, seeking information about the drugmaker's pric- made the House vote his own now ing strategy for its recently acquired muscle-wasting disorder drug. "We urge so he has a lot at stake. My guess it you to keep the price of this relatively common steroid at its current importa- will pass the House. If not, markets tion cost," Senator Bernie Sanders and Representative Elijah Cummings wrote will be shocked and it won't be in a letter to PTC Chief Executive Stuart Peltz. The lawmakers also requested pleasant." to know if the company intends to pursue an additional approval of deflazacort Michael Arone, chief investment as an orphan drug to treat juvenile arthritis. strategist at the US SPDR Business • Regeneron Pharmaceuticals (REGN). Britain's GlaxoSmithKline and Re- at State Street Global Advisors in generon are embarking on a joint project with UK Biobank, the world's most New York said that it the healthcare detailed biomedical database, to hunt for new clues linking genes and disease. bill fails, "a correction of 5 percent is By analyzing genetic variations and health in 500,000 middle-aged and older not unreasonable given how far Britons, the partners said they hoped to identify promising leads for new medi- we’ve come in such a short period of cines. The aim is to analyze DNA from an initial 50,000 samples by the end of time." 2017, using Regeneron's large gene sequencing center in New York. Complet- ing a gene sweep for all 500,000 participants is expected to take three to five FOCUS ON LEGISLATION years. Investors are now more focused on • Sears Holdings Corp (SHLD). Suppliers to the retailer told Reuters they are the actual mechanics of the legisla- doubling down on defensive measures, such as reducing shipments and ask- tive process, said Brian Daingerfield, ing for better payment terms, to protect against the risk of nonpayment as the Macro Strategist at NatWest Mar- company warned about its finances. The company's disclosure turned the fo- kets. cus to its vendors as tension is expected to mount ahead of the key fourth- "I noticed this was the first day (on quarter selling season amid rising concern about a potential bankruptcy, they Tuesday) I was getting inquiries said. The managing director of a Bangladesh-based textile firm said his com- about the healthcare law and the pany is using only a handful of its production lines to manufacture products for vote count," Daingerfield said. Wall Sears' 2017 holiday sales. Last year, nearly half of the company's lines in its Street views the healthcare vote "as

2 MORNING NEWS CALL - U.S. EDITION March 23, 2017 four factories were producing for Sears. a test of Trump's ability to unify the • Ultragenyx Pharmaceutical Inc (RARE). The company said its drug to treat party," he said. "It has a symbolic patients with seizures did not meet the main goal in a mid-stage study. The significance." company said the study did not show statistical significance in reducing the After the healthcare bill, the market frequency of seizures among patients treated with the drug compared to a pla- will look for movement on tax and cebo, during an eight week treatment period. infrastructure. The president has • Wells Fargo & Co (WFC). Starting on Monday, the bank’s depositors can said he wants the health bill passed withdraw money using a smartphone at any branded ATM, the latest sign of by the mid-April Easter holiday and a U.S. lenders moving away from traditional brick-and-mortar banking. Jonathan schedule from the administration Velline, Wells Fargo's head of ATM and branch banking, said that the bank aims for tax reform being passed by decided to apply the smartphone technology to all of its 13,000 cash machines August. Only then will they begin to after piloting the idea in select locations across the country. tackle infrastructure spending. "U.S. equities have been priced for perfection since the start of 2017 ANALYSTS' RECOMMENDATION and (Tuesday) was a rude reminder • Spectra Energy Partners LP (SEP). Morgan Stanley resumes coverage that the legislative process is imper- with underweight rating as fading capex opportunities raise questions about fect on even its best days," said in a the long-term growth outlook. research note Nicholas Colas, chief • Supervalu Inc (SVU). RBC raises rating to outperform from sector perform market strategist at Convergex, a as the company's wholesale unit is not getting credit for its customer win pipe- global brokerage company based in line. New York. • The Kroger Co (KR). RBC raises rating to outperform from sector perform in anticipation of a return to food inflation and re-emergence of Kroger's competi- -- By Megan Davies and Rodrigo tive advantages. Campos • Verifone Systems Inc (PAY). Imperial Capital raises target price to $20 from $18 as the company has already demonstrated some positive results to investors during the past two years of business operation transformation.

ECONOMIC EVENTS 08:30 Initial jobless claims: Expected 240,000; Prior 241,000 08:30 Jobless claims 4-week average: Prior 237,250 08:30 Continued jobless claims: Expected 2.035 mln; Prior 2.030 mln 10:00 New home sales-units for Feb: Expected 0.565 mln; Prior 0.555 mln 10:00 New home sales change mm for Feb: Expected 0.7 pct; Prior 3.7 pct 11:00 KC Fed Manufacturing for Mar: Expected 11; Prior 11 11:00 KC Fed Composite Index for Mar: Prior 14

S&P 500 COMPANIES REPORTING RESULTS Conagra Brands Inc (CAG). Expected Q3 earnings of 44 cents per share Micron Technology Inc (MU). Expected Q2 earnings of 86 cents per share

CORPORATE EVENTS 08:30 Scholastic Corp (SCHL). Q3 earnings conference call 09:30 Conagra Brands Inc (CAG). Q3 earnings conference call 09:30 Herman Miller Inc (MLHR). Q3 earnings conference call 10:00 Centennial Resource Development Inc (CDEV). Q4 earnings conference call 11:00 Commercial Metals Co (CMC). Q2 earnings conference call 12:30 Verifone Systems Inc (PAY). Annual Shareholders Meeting 15:00 Ciena Corp (CIEN). Annual Shareholders Meeting 16:30 Micron Technology Inc (MU). Q2 earnings conference call 17:00 Envestnet Inc (ENV). Q4 earnings conference call 17:00 GameStop Corp (GME). Q4 earnings conference call 17:00 KB Home (KBH). Q1 earnings conference call

EXDIVIDENDS Equity Residential (EQR). Amount $0.50

3 MORNING NEWS CALL - U.S. EDITION March 23, 2017

Independent Bank Corp (INDB). Amount $0.32 International Flavors & Fragrances Inc (IFF). Amount $0.64 Invesco Mortgage Capital Inc (IVR). Amount $0.40 New Residential Investment Corp (NRZ). Amount $0.48 Portland General Electric Co (POR). Amount $0.32 Retail Properties of America Inc (RPAI). Amount $0.17

(All analysts' estimates are according to Thomson Reuters I/B/E/S)

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