Mid-Morning Look: May 4, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look

Friday, May 4, 2018

 Equities opened the day weaker following a disappointing headline nonfarm payroll report, as the U.S. added 164K jobs in April, missing the 193K estimate, though unemployment dipped below 4% (18-year low). However, major averages have since rallied, with the Dow Industrials up over 200 points (300 off the lows) and the S&P 500 index bouncing off its 200-day moving average key technical support level of 2,615, to rise more than 30 points off its lows as investors digest the report and implications. Hourly wages increased by a smaller 0.1%, helping alleviate n/t inflation concerns, while the headline miss lessens the expectations of a more aggressive FOMC rate hike stance. Markets also watching trade, as day two of the U.S. official’s trip to China so far not creating any waves in the market place. Overnight, reports indicated that the U.S. handed China a lengthy list of demands on trade, ranging from immediately cutting a trade imbalance by $100 billion a year to halting all Chinese government support for advanced technologies. Corporate earnings also plentiful, as roughly 400 of the 500 names in the S&P index have reported thus far for the quarter on better earnings beats (though guidance has been a little disappointing). Busy week of news and earnings, as major averages look to close out week strong!

Treasuries, Currencies and Commodities
·      In currency markets, the dollar at it again early, rising to session, weekly and 2018 highs, jumping despite a weaker than expected monthly jobs report; the euro fell to a fresh 2018 low of 1.1911 before paring its losses; the yen little changed vs. the dollar at 109.19 (off highs of 110 earlier this week); the British pound dropped to lows below 1.35 vs. the buck, dropping below its 200day MA support of 1.354 (first time below the 200day since April 2017), but since rebounds

·      Commodity prices: gold prices little changed, bouncing off lows after opening near end of recent trading range (closer to $1,300 an ounce) as the dollar extends its recent rally. Energy futures look to build on recent gains ahead of President Trump decision on Iran next week

·      Treasury markets gain early as yield extend its weekly decline, with the 10-year yield falling below the 2.92% level after a softer monthly jobs report headline. However, yields have bounced off lows as report also showed a drop in unemployment to under 4% trading flat at 2.944%

Economic Data
·      Nonfarm Payrolls for April rose 164K jobs, below the 193K estimate, while March payrolls were upwardly revised to 135K from 102K and net revisions, 30k from prior two months; the labor participation rate 62.8% vs prior 62.9%, as the unemployment rate drop to 3.9% from 4.1% (came in below the 4% estimate); average hourly earnings rise a less than expected 0.1% vs. est. 0.2%. Nonfarm private payrolls rose 168K vs. prior 135K and below est. 190K

Sector Movers Today
·      Consumer Staples; in dietary space, WTW posted Q1 top/bottom line beat and raised its EPS outlook for the year saying they added 1M more members from last year; HLF also with a quarterly beat and raise quarter (watch NTRI, GNC); lastly, MED shares jump after Q1 EPS beat and raised its outlook for the year by 40c on top and bottom line

·      Restaurants; SHAK Q1 EPS beat by 7c on better revs and boosted its year sales and comp sales outlook; TACO Q1 EPS and sales just below consensus and midpoint of year guidance misses; LOCO reported in-line quarterly earnings; WING shares jump after Q1 EPS beat by 5c, driven by stronger same-store sales and restaurant margin from lower expenses

·      Optical sector; relief rally continues in space, as group higher despite ACIA reporting Q1 miss and lower guidance for Q1 following the recent ZTE ban from the U.S. that clipped the sector; shares of LITE, CIEN, FNSR, OCLR moving as well (recall better LITE results this week)

·      Engineering & Construction; FLR shares dropped over 20%, the top decliner in the S&P 500 index after reported an unexpected 13c loss due to a project write down and slashes its year profit outlook to $2.10-$2.50 from $3.10-$3.50 (est. $3.30) – shares downgraded at Baird (results and guidance weighed on E&C sector KBR, JEC)

·      Medical equipment and devices; PODD trades to 52-week highs after quarterly results and raised guidance, before shares reversed lower; BRKR results beat consensus estimates both on the top and bottom lines, including 4% organic revenue growth that is tracking ahead of full year guidance of 3%; MTD shares were under pressure despite beat and raise quarter

·      Healthcare services and facilities; MDRX Q1 bookings missed consensus, the $304M posted was up 6.3% YoY, while software bookings rose 54% while client services declined 32%; AMN shares plunge after Q1 results & guidance that showed slower growth in its nurse staffing business (shares downgraded at Baird after results); DVA shares get a boost after Q1 EPS and sales beat aided by better margins and stabilizing rates

Stock GAINERS

·      AAPL +1%; after CNBC reported that Warren Buffett’s Berkshire bought around 75M shares of the company during Q1

·      CBS +3%; results well ahead of expectations w/revs of $3.76B and EPS, operating income beats

·      CRC +23% as reports an unexpected quarterly profit on strong production and raises cap-ex

·      LYV +10%; after Evercore/ISI upgraded to buy following Q1 results and guidance

·      P +14%; after earnings results (upgraded at SunTrust) as reported a better than expected quarter with topline upside and a more narrow loss. Ad revenue declined by 4% y/y (vs. consensus -11%)

·      PTLA +25%; as the FDA approves its Andexxa, a reversal agent for patients on anticoagulation therapy who are experiencing uncontrolled or life-threatening bleeding

·      SHAK +12%; Q1 EPS beat by 7c on better revs and boosted its year total sales and comp sales

·      SRCL +9%; strength continues in waste on earnings (follows better RSG, WCN, ADSW results)

·      SRPT +8%; posted 1Q Exondys 51 sales of $64.6M (just below views) would reaffirms confidence in 2018 revenues and future DMD franchise growth

·      WTW +4%; posted Q1 top/bottom line beat and raised its EPS outlook for the year

 
Stock LAGGARDS

·      AMN -19%; after Q1 results & guidance that showed slower growth in its nurse staffing business

·      ANET -10%; quarterly beat and raise quarter overshadowed by lower margin guidance 62%-64%

·      BPL -7%; reported earnings which missed estimates for a sixth straight quarter

·      FLR -20%; reported an unexpected 13c loss due to a project write down and slashes its year profit

·      FLT -3%; Q1 revenue trailed expectations and disclosed a data breach in its gift-card business

·      GOGO -10%; after withdrawing its yearly forecasts

·      ZAYO -5%; on disappointing Q3 headline results, which was driven by a greater churn in Allstream as well as a variety of one-time adjustments/departure of COO

Syndicate

·      BayCom (BCML) 2.85M share Secondary priced at $22.00

·      Carbon Black (CBLK) 8M share IPO priced at $19.00

·      Construction Partners (ROAD) 11.25M share IPO priced at $12.00

·      InflaRx (IFRX) 3M share Secondary priced at $34.00

·      Spirit of Texas Bancshares (STXB) 2M share IPO priced at $21.00

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Market commentary provided by Hammerstone Markets, a division The Hammerstone Group, a firm separate from and not affiliated with Regal Securities L.P.  Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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