Mid-Morning Look: June 12, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look

Tuesday, June 12, 2018

Equities are little changed as markets continue to digest this week’s macro events. U.S. stocks opened with muted gains as the Dow Industrial Average looks to make it a fifth straight daily gain, as attention now turns from the historical meeting between U.S. President Donald Trump and North Korean leader Kim Jong Un last night to the upcoming central-bank meetings this week that could impact equity, currency and bond markets. The Federal Reserve’s two-day policy meeting kicks off later Tuesday, with a 25-bps hike widely expected tomorrow afternoon, while the European Central Bank and the Bank of Japan are scheduled to issue updates to their monetary-policy plans on Thursday and Friday, respectively. Inflation data points today add to expectations of gradual rate hikes by the FOMC, as inflation in the U.S. continued to advance in May. The consumer price index rose 2.8% in the last 12 months, the largest year-over-year gain since February 2012, as gasoline prices and shelter costs kept rising (monthly PPI data tomorrow morning). One of top news stories today is the expected decision in Washington related to the AT&T $84B bid for TWX and whether the deal is allowed to proceed (has implications for wide ranging future potential anti-trust M&A deals). Overnight President Trump and Kim Jong Un ended with an agreement for North Korea to seek “complete denuclearization of the Korean Peninsula,” but little details beyond that.

Treasuries, Currencies and Commodities

· Currency markets await results from the upcoming three central bank meetings in successive days, with the FOMC tomorrow, the ECB Thursday and the BoJ on Friday. The dollar rising in recent days/weeks vs. emerging markets amid trade concerns, while the euro has bounced; the greenback has risen steadily vs. the safe-haven yen amid denuclearization talks between the U.S. and North Korea and improved; dollar index little changed at 93.55

· Precious metals little changed/down slightly as defensive assets ease in the wake of the U.S.-North Korea developments, muting demand for haven metals; also expected rate hikes from the FOMC tomorrow and likelihood the ECB announces policy change to start paring QE also weighs

· Energy futures bounced off lows yesterday and holding modest gains early ahead of weekly inventory data tonight (API) and tomorrow morning (EIA); real catalyst in 2-weeks at OPEC meeting starting June 22nd; prices have pulled back over the last month from 3 ½ year highs

· Treasury markets slip for a second straight day ahead of several central bank decisions; the hotter CPI reading pointing to more rate hikes; the 10-yr yield inches up slightly to 2.97% while the shorter-term 2-yr yield up at 2.54%

Economic Data

· Consumer price index (CPI) increased 0.2% in May, in-line with economist estimates, while the core reading which strips out food and energy also rose 0.2% last month (also in-line); The consumer price index has risen 2.8% in the past 12 months, up from 2.5% in April. That’s the fastest rate since early 2012. The yearly increase in the core rate edged up to 2.2%.

· The National Federation of Independent Business small-business optimism index rose 3 points in May to a reading of 107.8, its second-highest level in 45 years and strongest level of the recovery. That’s just a touch under the record level of 108 reached in July, 1983.

Sector Movers Today

· Retailers; URBN active following the company’s filing that indicated its quarter-to-date comps are tracking up mid-teens and ahead of expectations; LE shares jump after Q1 revs of $299M up 12% and tops the $285M estimate, though comp sales fell sharply; OXMearnings tonight; FIT rises early after rising 14.5% yesterday on positive Citron comments (FIT shares up 7 of last 8 days)

· Casino, Lodging & Leisure; SEAS downgraded to sell at Citigroup saying currency moves could pressure international attendance while new competition from Star Wars attractions could hurt SeaWorld’s results; in lodging, Nomura rolled forward tgt price drivers to 2019E EBITDA from 2H18E/1H19E EBITDA and in some cases marking our target multiples to market – they see the most upside in Buy-rated stocks: HLT (25%), MAR (19%), HGV (31%), STAY (17%), PLYA (28%)

· MLP’s; Barclays downgraded TRGP to equal-weight and DCP to underweight while upgrading ENBL to equal-weight as they pull back growth rates for G&P volumes in the Permian as they believe natural gas takeaway constraints and limitations on flaring may likely force a slowdown of completions, posing a risk to inlet volumes in the region

· Asset managers; monthly AUM data released: 1) BEN preliminary month-end assets under management of $732.8B at May 31, 2018, compared to $732.5B at April 30, 2018; 2) AB preliminary AUM increased to $541B during May 2018 from $538B at the end of April; 3) LM preliminary assets under management were $747.2B as of May 31, 2018, down 0.7% from $752.3B at the end of April; 4) APAMprelim AUM as of May 31, 2018 totaled $115.0B; 5) CNS prelim AUM of $59.3B as of May 31, 2018, was an increase of $769M from April 30; 6) IVZ monthly AUM of $977.3B was an increase of 0.5% MoM; 7) TROW May Preliminary AUM $1.04T as of May 31/says Client transfers for the quarter-to-date period ended May 31 was $2.5B


· GLMD +206%; soars after a phase 2b trial of its treatment of non-alcoholic steatohepatitis achieved the endpoints necessary to support a phase 3 trial and an FDA marketing application

· LE +22%; after Q1 revs of $299M up 12% and tops the $285M estimate, though comp sales fell sharply

· PLAY +13%; following the company’s better than expected 1Q results, reflecting stronger comps and restaurant margins

· RH +28%; rises on strong quarterly results as one analyst noted 7.5% in gross margin expansion and a positive 1% comp in spite of the 4% promo headwind last year/company guided 2Q18 comps to 8% – 10%, well ahead of expectations

· SAGE +8%; now plan to expedite development of its SAGE-217 drug in two areas of depression, major depressive disorder and postpartum depression after meeting with FDA

· TSLA +3%; estimates raised at KeyBanc after checks with sales centers indicate Model 3 deliveries are tracking ~50% higher than their prior estimates for the quarter

· TWTR +5%; tgt raised to $50 from $39 at JPMorgan saying it believes advertising momentum is strengthening, particularly among large marketers


· CASY -6%; as Q4 EPS, revs ($2.09B vs. $2.12B) and comps (2% vs. 3.1% est.) miss views

· ENZ -10%; after Q3 results missed both top and bottom line estimates

· LMT -2%; as defense names ease after positive summit between US and North Korea

· SEAS -2%; as Citigroup downgraded to sell saying currency moves could pressure international attendance while new competition from Star Wars attractions could hurt SeaWorld’s results

· STX -2%; as hard disk drive makers leading lower (WDC also down early)

· SYK -3%; adds to yesterday declines after reports midday yesterday from the WSJ that they could be looking at rival BSXhttps://on.wsj.com/2Jx08H7


· At Home Group (HOME) 8M share Spot Secondary priced at $37.90

· Flagstar Bancorp (FBC) 8M share Secondary priced at $34.50

· Hercules Capital (HTGC) 6M share Spot Secondary priced at $12.15

· Intelsat (I) 13.477M share Secondary priced at $14.84

· Jernigan Capital (JCAP) 4M share Spot Secondary priced at $18.50

· Kadmon (KDMN) 30.303M share Spot Secondary priced at $3.30

· MicroVision (MVIS) 14.4M share Secondary priced at $1.25

· Medpace (MEDP) 3M share Spot Secondary priced at $42.25

· Warrior Met Coal (HCC) 5M share Secondary priced at $28.65


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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