Mid-Morning Look
Friday, May 11, 2018
U.S equities are mostly higher, as the Dow Jones Industrial Average’s steady climb continues, rising over 100 points to its highest level since mid-March, and on track for a 7th straight day of gains as markets shake off recent worries about trade and geopolitics (Iran). The tamer inflation reading yesterday (CPI) sparked a rally as it gives the FOMC the ammo it needs to keep rates on a steady course of hikes vs. more aggressive to head off inflation risks. The S&P 500 index holding above its 100-day moving average after crossing it yesterday while the Nasdaq Composite Index traded flat at 7,404. All three benchmarks are poised to enjoy a weekly gain of at least 2% as the dollar pulls back from recent multi-month highs and as oil holds near its best levels in over 4-years.
Treasuries, Currencies and Commodities
· In currency markets, after the U.S. dollar touched 5-month highs earlier in the week, it has since declined three straight days, with the dollar index down a point from highs (dollar index to 92.40, down -0.25% today after highs of 93.41 on Tuesday). The Canadian dollar sinks vs. the greenback as Canadian data showed weaker-than-expected employment numbers
· Commodity prices are little changed early after a volatile week, with oil prices only down slightly, pulling back from November 2014 highs reached yesterday above $71 per barrel for WTI crude, while gold prices hold around 2-week highs after rallying yesterday on a dollar pullback
· Treasury markets little changed, with yields inching higher (bigger move higher on short end of curve with 2-yr yield up around 2.54%), as the 10-year holds around 2.97%, down from earlier week highs at 3.03%. Yield curve has flattened following the weaker-than-expected inflation report on consumer prices yesterday.
Economic Data
· Preliminary May Michigan Sentiment unchanged at 98.8, in line with last final reading of April while also above the 98.3 prelim estimate; the current economic conditions index fell to 113.3 vs. 114.9 last month; the expectations index rose to 89.5 vs. 88.4 last month.
· Import Prices for April rose 0.3% MoM below the 0.5% estimate but up after falling (-0.2%) in March. Import prices ex-fuels rose 0.2% after rising 0.1% in March. Export prices rose 0.6% after rising 0.3% in March
Sector Movers Today
· Healthcare/Biotech sector in focus today as President Trump’s is expected to give a speech on drug prices today. Shares of Pharmacy benefit managers and companies with drugs exposed to a Medicare program known as Part B (ESRX, MCK, ABC, and CAH) may come under pressure as further details of President Trump’s drug plan come to light on plan to lower prices.
· Retailers; KSS was downgraded to neutral at Credit Suisse saying it is more weather-sensitive than its peers, creating 1Q same-store sales risk; into earnings, JPMorgan says they are cautious on discretionary names that had a significant ramp in comps into the record 4Q holiday given unfavorable Spring weather, EPS weighting to the back half; GME said its CEO is resigning for personal reasons after just three months on the job, the second time the company lost its chief; dollar stores DG and DLTR downgraded at MoffettNathanson; FL downgraded at OTR Global
· Consumer Staples; in protein space, PPC Q1 results top on both lines of its report as adjusted EBITDA rose 18.9% Y/Y to $272M on stronger volume and said it’s slightly ahead of synergy targets for operational improvements initiatives; COTY was downgraded to hold at Deutsche Bank following COTY’s results and management’s generally uninspiring commentary this week; WTW 7.5M share Secondary priced at $69.00; ANFI surges on earnings results
· Telecom movers; UNIT 1Q results matched expectations across key categories, while also said it would acquire CTL fiber divestitures, and reiterated expectations to achieve 50% revenue diversification from Windstream by mid-2019 and increased 2018 AFFO/share guidance; VZ was upgraded to overweight at JPMorgan after meetings as came away with a better understanding that Verizon’s organic approach to wireless has the company on an increasingly stable footing
· Internet; TTD shares among top gainers after strong Q1 results and issued better Q2 outlook and raised its full year revenue and adjusted EBITDA guidance; YELP reported mixed 1Q results with the best quarter of net new PAA growth of all time yet a disappointing quarter in terms of sequential local ad dollar growth; BIDU was upgraded to market perform at Bernstein
Stock GAINERS
· AKCA +11%; FDA’s Endocrinologic and Metabolic Drugs Advisory Committee (EMDAC) voted in favor (12-8) of supporting the approval of volanesorsen (WAYLIVRA) for the treatment of patients with familial chylomicronemia syndrome
· FSCT +7%; after Q1 results that beat EPS and revenue estimates with a 42% Y/Y revenue growth and guided Q2 revs $61M-$64M vs. est. $59.3M
· GLOB +15%; reported strong top-line quarterly results and raised 2018 revenue and EPS guidance
· PPC +2%; Q1 results top on both lines of its report as adjusted EBITDA rose 18.9% Y/Y to $272M on stronger volume
· TTD +34%; among top gainers after strong Q1 results and issued better Q2 outlook and raised its full year revenue and adjusted EBITDA guidance
· VZ +3%; upgraded to overweight at JPMorgan saying n-t potential for a fixed broadband offering will help drive early cash flow on 5G investments
Stock LAGGARDS
· BSX -2%; as CBS’ 60 Minutes will feature a report this Sunday, May 13, on the 48K lawsuits facing Boston Scientific related to its transvaginal mesh device
· FLS -6%; after reporting weak Q1 orders and margins and reaffirming 2018 guidance
· GME -6%; said its CEO is resigning for personal reasons after just three months on the job, the second time the company lost its chief
· NVDA -3%; shares came into earnings at record highs, pullback on better results
· NWSA -6%; after quarterly results received mixed by the Street
· PSDO -21%; downgraded at RBC Capital following disappointing March-qtr results and FY18 guide
· SYMC -32%; downgraded by analysts citing the audit committee investigation announced in yesterday’s earnings report/company also issued guidance for next quarter well below consensus
· YELP -8%; as 1Q results were slightly ahead of the consensus on revenue and Adj. EBITDA, 2Q18 guidance bracketed the consensus, and full year guidance, although raised slightly
Syndicate
· IntercontinentalExchange (ICE) 3.8M share Block Trade priced at $70.50
· James River Group (JRVR) 3.3M share Spot Secondary priced at $36.50
· KBR (KBR) 1.7M share Block Trade priced at $16.80
· HUYA (HUYA) 15M share IPO priced at $12.00
· ProPetro Holding (PUMP) 12M share Spot Secondary priced at $19.10
· Virtu Financial (VIRT) 15M share Secondary priced at $28.00
· Weight Watchers (WTW) 7.5M share Secondary priced at $69.00
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