Mid-Morning Look: June 08, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look

Friday, June 8, 2018


Equities starting the day modestly lower as markets are grappling with tech weakness after a streak of gains while also assessing geopolitical news as President Trump departs for the G-7 summit. Recently beaten up Consumer Staples (food, beverage, tobacco, etc.) are among the early leaders in the S&P 500 today while energy resumes its slide along with a pullback in retailers after its strong run the last 2-weeks. Technology stocks continued their decline Friday morning, adding to yesterday’s profit taking losses in semi’s, Internet and software sectors after the Nasdaq Comp traded to record highs Wednesday afternoon. G-7 leaders begin a summit meeting Friday that’s expected to be dominated by the reaction to U.S. tariffs on steel and aluminum imports produced by the European Union, Canada and Mexico. U.S. President Donald Trump was feuding with French President Emmanuel Macron and Canadian Prime Minister Justin Trudeau this morning in another “tweet” storm. President Trump responded suggesting Canada and France are using unfair trade practices against U.S. producers. “Please tell Prime Minister Trudeau and President Macron that they are charging the U.S. massive tariffs and create non-monetary barriers. Meanwhile, Macron suggested Trump’s trade moves against allies could turn the club of developed nations into G-6 — Canada, Italy, Germany, France, Japan and U.K. — plus 1.


Treasuries, Currencies and Commodities

· In currency markets, the dollar mixed as the dollar index (DXY) rises 0.2% to around 93.60, as the euro pulls back from weekly highs, though the greenback slips vs. the Japanese yen ahead of the G7 meeting this weekend that will focus on trade; Argentine peso the most recent emerging market currency to hit lows, falling to record decline vs. US dollar (follows drops in Brazilian Realm Mexican Peso, and Turkish Lira outside South America)

· Commodity prices; Precious metals are little changed ahead of FOMC meeting next week – gold is holding above $1,300 an ounce, while energy prices are mixed, with WTI crude extending yesterday’s 2% bounce, while Brent slips

· Treasury markets little changed after back-to-back volatile sessions; yields jumped on Wednesday with the 10-yr rising from 2.91% to 2.97%…but yields fell yesterday after touching highs of 2.99% early morning, dropping as low as 2.86% midday for the benchmark 10-yr before leveling off at 2.93% (where it is holding today). Between trade fears and upcoming FOMC, ECB and BOJ central bank meetings, markets position themselves.


Sector Movers Today

· Consumer finance and lending; PYPL added to best ideas list at Wedbush as believe ongoing/recent monetization efforts, V/MA/banking partnerships, as well as post-EBAY separation potential opportunities, could potentially accelerate top-line growth/margins; AXP shares fall after Susquehanna said they could face a 6.6% decline in EPS, a 1.9% drop in revenue, and volume down 2.7% if the Supreme Court decides that AXP can’t prohibit merchants from directing customers to cheaper payment options

· Oil services; Wells Fargo said given the current pace of activity and delays in pipeline capacity coming online, they believe that Permian completion activity may need to decline by at least 10-12% from 2Q18 levels by the end of 2018 and possibly more (an underappreciated risk) – they adjust rankings as like BHGE, SLB and WFT move up along with land drillers HP and NBR; while completion services names HAL, LBRT and FRAC move down

· E&P sector; CXO downgraded to Market Perform at Bernstein and cut tgt to $130 from $180 suggesting investors wait until Q2 results for a potentially better entry point, noting Permian names are being punished due to congestion in the play which means some companies will have attractive routes out and others will not (upgraded COP to outperform)

· Medical devices and equipment; EDAP shares soar in response to the FDA’s 510(k) clearance for its Focal One high intensity focused ultrasound (HIFU) device for ablating prostate tissue; DGX was upgraded to outperform at William Blair; DXCM was upgraded to overweight at JPMorgan and tgt upped to $115 from $80 as glucose measurement is becoming an essential tool for patients and DexCom, with the launch of the G6, is the “clear market leader” from a technological standpoint

· Semiconductors; AAPL supply chain (AVGO, SWKS, CRUS, QRVO, SYNA, KN) active on report the iPhone maker warned its supply chain of a drop of around 20% in new iPhone component orders; AVGO posted unsurprising Q2 earnings report and Q3 outlook given the company’s April 30 pre-announcement; in equipment space, LRCX pressured a second day following cautious analyst comments as Cowen said lowering NT estimates with demand recovering by late CY18E; MPWR management reiterated its growth and margin formulas at analyst day yesterday as several analysts boost tgt price following meeting (DBAB to $150, Stifel to $147)


Stock GAINERS

· ACOR +24%; after oral arguments hearing on Ampyra Thursday afternoon

· EDAP +81%; in response to the FDA’s 510(k) clearance for its Focal One high intensity focused ultrasound (HIFU) device for ablating prostate tissue

· GE +1%; authorizes regular dividend of 12c (there had been fear of possible cut)

· MNST +3%; management issues a positive outlook at the company’s annual meeting yesterday

· SFIX +9%; posted strong top and bottom line Q3 results that exceeded expectations while FY18 revenue guidance was raised, while EBITDA guidance was tightened

· SVRA +22%; after bullish call from Evercore ISI as initiates with an outperform and $40 tgt as sees over 250% upside in the stock

· ZUMZ +2%; after better-than-expected quarterly results, including the highest comparable store sales gain three years (May comps rose 7.5% vs. 3.8% estimate)


Stock LAGGARDS

· AAPL -1%; after a report in the Nikkei that the company has warned its supply chain of a drop of around 20% in new iPhone component orders

· AVGO -3%; down with broader semi weakness/AAPL call (see above) as earnings were mostly in-line with recent pre-announcement

· AXP -1%; Susquehanna said they could face a 6.6% decline in EPS, a 1.9% drop in revenue, and volume down 2.7% if the Supreme Court decides that AXP can’t prohibit merchants from directing customers to cheaper payment options

· CXO -1%; downgraded to market perform at Bernstein and cut tgt to $130 from $180 suggesting investors wait until Q2 results for a potentially better entry point

· LB -2%; top declining retailer in S&P 500 as retailers pullback after recent rally

· SWKS -3%; among top decliners in S&P 500 as semi space under pressure

 

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.

Live Trading

Open an Account

Paper Trading

Register