Mid-Morning Look: June 26, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look

Tuesday, June 26, 2018

U.S. stocks trading higher early, looking to recover after the worst single day decline in about two-months for the S&P 500 and Nasdaq Composite, as the White House tried to calm investor fears over trade tensions. GE a top story today after announcing a spinoff plan of its healthcare division, while homebuilders advanced following better-than-expected quarterly results from Lennar. Stocks bounced off yesterday’s lows after Peter Navarro, President Trump’s top trade adviser, said that the White House is not planning to restrict foreign investment as part of its trade actions against China or any country. U.S. Treasury prices are flat, leaving the yield on the benchmark 10-year note unchanged at 2.88%, while oil prices rebound, though gold prices drop to 6-month lows. Financials extend recent decline as financial sector ETF (XLF) falls for an 11th straight session. The Dow Industrials moved above its 200-day MA level as 24,292 (yesterday the Dow snapped its streak of 501 consecutive trading days of closes above its 200-day moving average — the 3rd longest streak since the 5-day trading week began in 1952, according to Bespoke), but still barely higher on the day. The tech heavy Nasdaq Composite outperformed early, but has since pared those gains.

Treasuries, Currencies and Commodities

· In currency markets, the dollar index rebounding after a few days of selling pressure, with the dollar index (DXY) up around 94.60, leading gains vs. the yen, Pound and euro, while little changed vs. emerging market currencies; Bitcoin prices slump over 1% at $6,150

· Precious metals fall again, with gold prices touching fresh 6-month lows as the dollar rebounds, dropping below the $1,260 an ounce level. The move comes after prices closed at their lowest settlement of the year at $1,268.90 an ounce and the contract so far is tracking a nearly 3% June drop. Gold prices also leveraged to rising rates, as the FOMC provided a hawkish outlook at its last meeting after raising rates a second time this year.

· Energy futures advanced early ahead of inventory data later tonight (API) and tomorrow (EIA), getting a boost as uncertainty about Libyan oil supplies intensified after a militia leader handed over control of some of the country’s biggest crude-exporting terminals to National Oil Corporation based in the east; the news currently offsetting last week’s OPEC decision to boost output in the second half of the year

· Treasury markets holding steady, with the 10-yr yield up less than 1 bps, still holding under 2.90% while the 2-yr yield at 2.535% ahead of a $34 billion of 2-year Treasury notes will go on the block 1:00 PM EST; the 30-yr yield holding just above the 3% level

Economic Data

· Consumer Confidence for June fell to 126.4 from 128.8 last month and came in below the 128.0 estimate; the present situation confidence fell to 161.1 vs. 161.2 last month and the consumer confidence expectations fell to 103.2 vs. 107.2 last month

· Richmond Fed Manufacturing reading for June at 20 tops the 15 estimate; shipments +17 vs. 15 prior, while capacity utilization +15 vs. 19 prior

· S&P CoreLogic Case-Shiller 20-City Index up 6.56% YoY in April, mostly in-line with the 6.80% estimate after rising 6.49% in prior month. S&P/Case-Shiller 20-city NSA index at 210.17 after 208.5 in March

Sector Movers Today

· Housing & Building Products; homebuilder LEN posted better than expected quarterly results, while new home orders beat consensus expectations, and the company came in at the high end of its gross margin guidance for the quarter (KBH reports later this week); HOME was upgraded to Overweight at Morgan Stanley and raise price target to $47 as have increased confidence in HOME’s ability to generate high teens sales growth LSD/MSD comps and margin gains

· Large Cap banks closely watch ahead of DFAST capital payout news for banks on Thursday after all 35 banks passed Fed stress tests last Thursday; The XLF falls for an 11th straight session as financials remain under pressure; shares of BAC, MS, JPM, GS all down at 2018 lows along with weakness in regionals as well

· Casino & Lodging; Goldman Sachs downgraded MGM to neutral and removed from conviction buy list citing the delays experienced at Park MGM along with a slower than anticipated recovery at Mandalay Bay, while the firm reiterated buy on WH and added it to conviction buy list saying well positioned to benefit from RevPAR outperformance in the mid-scale and economy segments

· Oil services; BMO Capital lowered estimates for HAL and SLB to account for lower U.S. growth assumptions and higher international costs as activity ramps in a highly competitive price environment/follows recent report from two weeks ago suggesting 2019E EPS risk of 23%/21% for HAL/SLB vs. consensus (cuts HAL tgt to $59 from $63 and SLB to $71 from $75)

· Metals & Mining; in steel, SCHN reported in-line Q3 revenue of $652M; NUE said 21 of its 24 end markets are stabilizing or improving; VALE and BHP, the owners of Brazilian mining company Samarco Mineracao SA, agreed with Brazilian authorities to suspend for two years a $41B civil claim over the catastrophic 2015 collapse of a tailings dam while talks continue; copper and metals in general remain pressured by rising trade tensions with China and the U.S.


· BWP +8%; settle with investors who argued that Loews Corp. was driving down the share price by intentionally stalling a decision on whether to buy out the remaining stake it didn’t own in co

· EXEL +8%; to replace CPRT in the S&P MidCap 400

· GE +6%; announced in company update that it will sell 20% of its health business and spin off the rest to its shareholders, while the stake in BHGE will be sold over the next two to three years

· LEE +18%; on news it will manage Berkshire’s newspapers/in pact with BH Media Group/to manage Berkshire Hathaway’s newspaper and digital operations in 30 markets

· LEN +6%; posted better than expected quarterly results, while new home orders beat consensus expectations/company came in at the high end of its gross margin guidance for the quarter

· PBYI +15%; after saying a committee of the European Medicines Agency adopted a positive trend vote recommending marketing approval of neratinib

· SPPI +11%; is exploring options including a sale of the business amid takeover interest from other drugmakers, Bloomberg reported https://bloom.bg/2lyNKI3


· AKAO -21%; after the company said it received Complete Response Letter from the U.S. FDA for a study evaluating a treatment for bloodstream infection

· AKAM -3%; said that currency-related headwinds will trim its full-year revenue forecast to $2.675B-$2.705B from a prior view of $2.69B-$2.72B

· HOG -2%; extends yesterday decline after President Trump accused them of using his trade war with the European Union as an excuse to move production overseas

· INCY -5%; downgraded to sector perform at RBC Capital saying in the n-t they would expect shares to trade in line until there is more visibility on meaningful new revenue opportunities

· MGM -1%; downgraded to neutral at Goldman and removed from conviction buy list citing the delays experienced at Park MGM along with a slower than anticipated recovery at Mandalay Bay


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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