Mid-Morning Look: June 14, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look

Thursday, June 14, 2018

U.S. equities open higher, with technology shares outperforming (NASDAQ touches new fresh record highs) and also helped after May retail sales rose by a stronger than expected 0.8% for the biggest gain since November. Central banks have dominated news the last two days with the U.S. Fed boosting rates by 25 bps to 1.75%-2% range and raised its outlook for four rate hikes this year from prior view of three. This morning, the European Central Bank decided to keep interest rates unchanged, as expected, and laid the groundwork for ending its asset purchase program by pledging that rates in the EuroZone would not start to rise at least until next summer. The euro plunged more than 1% after the commentary while U.S. yields inched lower to around 2.94%. Trade fears remain prevalent after reports U.S. President Donald Trump will meet with his top trade advisers on Thursday to decide whether to activate threatened tariffs on billions of dollars in Chinese goods, a senior Trump administration official said. Still get the Bank of Japan policy meeting tomorrow, but not as many fireworks expected.

Philly semiconductor index (SOX) at highs, up over 1% topping 1,428 – helping lead the Nasdaq Composite higher which is trading at fresh intraday record highs, topping yesterday’s 7,757.04. Financials are the biggest underperformer in the S&P 500 index with banks slipping as much as 1.1%, as the 10-year yields briefly dipped to as low as 2.926% before rebounding. U.S. retail sales jumped 0.8% in May, point to strong second-quarter GDP (which was also helped by recent better trade deficit figures).

The ECB’s Governing Council said it would continue to purchase €30 billion ($35.2 billion) a month of bonds through the end of September, as planned. Then, if data is in line with the ECB’s medium-term inflation outlook, it intends to reduce purchases to 15 billion euros a month through the end of December and then end them. The ECB also revised GDP Forecasts: 2018 cut to 2.1% from 2.4%, while 2019 remained unchanged at 1.9% and 2020 unchanged at 1.7%.

Treasuries, Currencies and Commodities

· In currency markets, all about the euro today, quickly reversing earlier gains and cratering more than 1% as the ECB laid out plans to taper its program of monthly bond purchases later this year, aiming to bring them to a halt by the end of 2018; the euro falls more than 1.1% to $1.1635, the dollar is little changed vs. the yen while gains vs. the British Pound; Bitcoin bounces 2% after falling to February lows yesterday, holding at $6,400

· Precious metals edging higher, up about $4 as it hold above $1,300 an ounce despite the news the FOMC boosted rates yesterday and raised outlook for four rate hikes this year from three

· Energy futures are mixed as WTI crude on track for its 4th gain in a row, extending climb above 2-week high, while Brent prices slip as sentiment remained upbeat following a weekly inventory report on domestic supplies showed the largest one-week drop since the end of March. All eyes on upcoming OPEC meeting starting next Friday the 22nd

· Treasury market’s gain as yields extended their decline as the European Central Bank laid out a schedule for paring back is asset-purchase program. The ECB indicated that it would end in December and signaled that it would join the Federal Reserve in tightening its benchmark interest rates at least until the summer of 2019; 10-yr yield falls back below 2.95% after rising briefly yesterday above the 3% level after the Fed rate hike, while the 2-yr yield at 2.55%

Economic Data

· Retail sales for May month-over-month rose a greater than expected 0.8%, topping the 0.4% estimate while the prior month was upwardly revised to 0.4% from 0.3%; retail sales less autos rose 0.9% in May, topping the 0.5% estimate. Retail sales have risen a solid 5.9% over the past 12 months, and sales are rising at a more than 5% yearly pace even if gas is excluded.

· Weekly Jobless Claims fell 4K to 218K and below est. 223K; the 4-week moving avg. falls 1,250 to 224,250; continuing claims fell by 49,000 to 1.69 million in early June to touch the lowest level since the end of 1973

· Import prices for May rose 0.6% MoM after rising 0.6% in April and topping the 0.5% estimate; import prices rose 4.3% y/y in May while import prices ex-fuels rose 0.2% after rising 0.2% in April. The increase in import prices over the past 12 months rose to 4.3% from 3.6%. If fuel is omitted, the increase in import prices over the past year was a more modest 1.9%.

Sector Movers Today

· Internet; ETSY raises 2018 revenue growth to 32%-34% from prior view 22%-24% after saying transaction fee charged when a seller makes a sale will change to 5% from 3.5%, and it will also apply to the cost of shipping; also raises GMS growth view to 16%-19%; GRUB tgt raised to $130 from $100 at Oppenheimer, saying it sees large opportunities for off-platform growth; Pandora (P) said it has a new partnership with Snapchat parent SNAP

· Media & Telecom; M&A dominating media/telco space last two days after CMCSA offered FOX $35 a share in cash for assets that it had agreed to sell DIS/the offer is a 19% premium over Disney’s offer and values Fox at $65 billion ($52.4B offer from DIS) https://bloom.bg/2LOdPhm ; the moves comes after the government approved AT&T’s (T) $85B deal bid for TWX

· Metals & Mining; in steel space, NUE guides Q2 EPS $2.05-$2.10 above the est. $1.72, reiterating its view of substantial growth on higher average selling prices and increased profitability across all its steel mill product groups (X, AKS higher); in research, KeyBanc said the steel sector’s valuation remains fair based on 2019 estimates, even as equities seem cheap on this year’s assumptions, and downgraded STLD on valuation while remains overweight on RS due to its exposure to potential infrastructure spending and M&A opportunities; TMST is also rated overweight

· Brokers; ETFC said daily average revenue trades for May were 253,649, a 1% increase from April and 20% increase YoY/added 40,261 gross new brokerage accounts in May, and ended the month with about 3.9 million brokerage accounts; SCHW core net new assets brought to the company by new and existing clients in May 2018 totaled $19.4 billion. Net new assets excluding mutual fund clearing totaled $18.4 billion


· AXL +1%; boosted its 2018 sales view to $7.1B-$7.2B, up from about $7B forecast in January

· DBX +14%; outperforms to new record highs as 2018 IPOs have been strong (PVTL yesterday)

· ETSY +34%; raises 2018 revenue growth to 32%-34% from prior view 22%-24% after saying transaction fee charged when a seller makes a sale will change to 5% from 3.5%, and it will also apply to the cost of shipping; also raises GMS growth view to 16%-19%

· NITE +11%; after the FDA granted regenerative medicine advanced therapy (RMAT) designation to the company’s lead product, NSR-REP1, for treatment of choroideremia

· NUE +2%; guides Q2 EPS $2.05-$2.10 vs. est. $1.72, reiterating its view of substantial growth on higher average selling prices and increased profitability across all its steel mill product groups

· P +4%; after SNAP reports Pandora, the largest music streaming service in the U.S., will team up with the company as the music streaming launch partner for Snap Kit

· RCL +4%; agreed to acquire a 66.7% stake in Silversea Cruises based on enterprise value of ~$2B

· TLGT +17%; gets FDA approval of its topical corticosteroid ointment, Diflorasone Diacetate 0.05%


· MIK -15%; Q1 comp sales rose 0.4%, missing the consensus estimate of +0.8%, citing decline in revs to shuttering of all 94 full-size Aaron Brothers art and framing stores

· MPAA -5%; Q4 EPS missed by 12c on weaker margins and as mid-point of year sales guidance ($465M-$474M) missed estimates ($471.5M);

· MYL -4%; said the FDA will issue a complete response letter this month on its application for a generic version of GlaxoSmithKline’s asthma medicine Advair Diskus

· ORCL -3%; downgraded to neutral from overweight at JPMorgan and lowers the price target from $55 to $53 citing valuation

· TLRD -23%; mid-point year guidance ($2.35-$3.50 vs. $2.49 est.) and weaker margins hurt shares

· WAT -5%; downgraded to underperform at Cleveland Research saying recent research indicates slowing liquid chromatography (LC) trends thus far in 2Q despite a management outlook that assumes an acceleration in growth


· Aqua Metals (AQMS) 8.77M share Spot Secondary priced at $2.85

· Asure Software (ASUR) 2.5M share Spot Secondary priced at $17.50

· Charah Solutions (CHRA) 7.35M share IPO priced at $12.00

· U.S. Xpress Enterprises (USX) 18.056M share IPO priced at $16.00


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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