Thursday, July 19, 2018
U.S. equities slide after a rough morning for quarterly earnings and guidance, sending several sectors lower, and putting the Dow Industrial Average on track to snap its 5-day win streak, while pulling the Nasdaq Comp off all-time highs. After helping lead markets higher yesterday, the transport index is paring some of its 2.3% gains after earnings, while financials are getting hit across the board on mixed results from FITB, BK, BBT, TRV, and ADS. Dow component IBM reported slightly better results, lifting shares ahead of MSFT numbers tonight in tech. Life science stocks rise after DHR results and spin-off of unit; consumer staples mixed with tobacco falling on PM guidance, while defensive utilities edge higher on lower bond yields. MLPs get some good news, lifting shares of DM, EEP after FERC modifies gas pipeline tax law rule. Metals and mining falling sharply, led by a decline in aluminum names after AA cut its annual guidance, hurting several names.
Treasuries, Currencies and Commodities
· In currency markets, the dollar resumes upward momentum, with the dollar index (DXY) setting a new 2018 high of 95.65 on better jobs figures (reinforcing upward momentum of rate hikes) and following Federal Reserve Chairman Jerome Powell’s upbeat assessment of the domestic economy during his testimony on monetary policy the last two days. The Chinese yuan hit a one-year low vs. the dollar while the British pound fell below the $1.30 level for the first time Since September 2017 following weaker UK retail sales data; dollar modest gains vs. euro and yen, but solid gains vs. the Canadian dollar on trade fears.
· Commodity prices are mixed as oil prices rebound, with WTI crude trading off more than 1-month lows and back near $70 per barrel, while gold prices extend its slump, falling to fresh 1-year lows, dropping under $1,220 an ounce as the dollar surges to 2018 highs
· Treasury market’s advance, reversing earlier declines as yield slip across the board; the 10-year yield back down below 2.86%, off earlier highs above 2.89%, while the 2-yr holds 2.6% as investors rotate out of equities early and back into bonds despite stronger jobless claims data
· Weekly jobless claims fell 8K to 207K, below the 220K estimate and falling to its lowest levels since 1969; the 4-week moving average slipped by 2,750 to 220,500; prior week claims revised up to 215K from 214K; continuing claims rose 8K to 1.751M in the week ending July 7
· Philly Fed manufacturing index for July bounced 5.8 points to 25.7 in July, after tumbling 14.5 points to 19.9 in June, and topping the 21.5 estimate. Components were mixed as employment numbers fell to 16.8 from 30.4, with the workweek at 13.7 from 24.2. Meanwhile, new orders climbed to 31.4 from 17.9 and prices paid increased to 62.9 from 51.8
Sector Movers Today
· Payments & Services; Morgan Stanley upgrades the payments and processing sector to an attractive view on likelihood of accelerating EPS growth, expansion to B2B payments and enhanced M&A potential, though downgrades ONDK to underweight and LC to equal-weight, while raising targets for several others in space (V, MA, PYPL, SQ, WEX, GPN, EVTC, FDC, GDOT, TNET, and PAY and cutting PTs on MGI and LC); SQ was upgraded to outperform at Credit Suisse with $81 tgt as believes its growing product eco-system is increasing its ability to penetrate larger merchants and growth investing should support strong revenue trends
· Banks: BBT Q3 EPS and NIM in-line with ests, while sees loans in Q3 up 2%-4% QoQ; BK mostly in-line Q EPS and revs but said FX and real estate costs impacted expense growth by 2%; BXS Q2 EPS beat by 2c on better NIM 3.71%; BHLB 5c EPS beat with 3.5% NIM; EGBN reports in-line Q2 EPS of $1.08; CATY 1c EPS beat with NIM of 3.83% topping views; UMPQ EPS missed by 4c, below lowest estimates; in research, FULT upgraded at Piper, MS upgraded at Bernstein, LTXBupgraded at Stephens and BHLB upgraded at Compass Point; FITB falls after guidance
· Cards; AXP shares slumped after Q2 revenue trailed analyst expectations and spending rose, though AXP boosted its forecast for full-year revenue growth to at least 9%, up from prior view of at least 8% (EPS view unchanged); COF to report earnings tonight; ADS reported mixed Q2 results as EPS beat but revs slightly below views and cut its annual rev outlook ($8.2B vs. $8.35B est.)
· MLP sector get a big boost (DM, EEP, SEP, BWP, TCP) after the Federal Energy Regulatory Commission announced last night that it took final action to facilitate the pass through of the tax reductions provided by the Tax Cuts and Jobs Act signed into law on December 22, 2017, and ensure natural gas pipeline rates remain just and reasonable; KMI moves after earnings
· Solar movers; Goldman Sachs reiterates its cautious view on the solar sector ahead of 2Q earnings, which mark the first set of results after China’s policy shift in late May; sees heightened risk of margin misses and weaker 3Q guidance, with 2H outlooks on demand appearing particularly challenged for China-levered stocks, including JKS, CSIQ; sees tougher 2H comps and slowing demand in select key markets for SEDG; RUN downgraded to neutral from buy (PT $15) on valuation; remains sell-rated on JKS, SEDG, FSLR
· Healthcare services; TDOC tgt raised to Street high $80 at Citigroup as sees the deal for Advance Medical as accelerating Ebitda margins over the long term; LH is dealing with a broad cyberattack after ransomware hit one of its genetic-testing units over the weekend, and the impact spread in the ensuing days, according to the WSJ; drug supply chain active (MCK, ABC, CAH, ESRX) after a proposal to curb regulations allowing drug rebates was sent to the Office of Management and Budget late Wednesday.
· CMCSA +2%; after dropping pursuit of FOXA assets
· CSCO +1%; after AMZN’s top cloud-computing executive has officially denied that Amazon Web Services plans to start selling network switches to other businesses
· DHR +6%; reported earnings, raised its FY18 earnings view and announced its intention to spin off its Dental segment into an independent, publicly-traded company
· DM +24%; after FERC took final action to facilitate the pass through of the tax reductions provided by the Tax Cuts and Jobs Act signed into law on December 22, 2017
· DOV +4%; after Q2 top and bottom line beat and raised low end of year guidance
· IBM +2%; slightly beat consensus revs/EPS, with surprise beat in systems revenue and management’s outlook for mainframe growth in Q3 despite a tougher comparison
· AA -8%; cut its 2018 Ebitda view, citing current market prices, tariffs on imported aluminum, increased energy costs, and some operational impacts
· ABBV -6%; negative mention by Citron Research saying Gottlieb’s comments for biosimilars and the removal of safe harbor is a DIRECT hit on Abbvie’s abuse of Humira
· CCK -1%; as EPS missed, guided below the Street for 3Q, and reduced its full-year EPS guidance by ~4%, but free cash flow outlook was reiterated
· DPZ -3%; after sales growth trails estimates trades lower after Q2 sales fall short of expectations; Q2 comp sales growth at domestic company-owned stores of +5.1% vs +6.4% consensus
· EBAY -9%; with mixed Q2 results, as the company’s marketplace and StubHub gross merchandise volume trends were soft and issued lower-than-expected guidance
· MRSN -38%; says the FDA placed the Phase 1 study of XMT-1522, a Dolaflexin ADC targeting HER2-expressing tumors, after the company reported a Grade 5 Serious Adverse Event of patient death in dose level 7.
· NXPI -3%; after QCOM CEO told the NYT that the company was likely caught in the trade war with China ahead of a July 25 deal termination date for deal.
· PM -4%; after strong 2Q earnings but FY EPS guidance that missed estimates driven by currency and weaker 2Q iQos Heat Sticks sales. Altria Group fell 1.9% in pre-market trading.
· AC Immune (ACIU) 10M share Secondary priced at $11.75
· Allakos (ALLK) 7.2M share IPO priced at $18.00
· Cara Therapeutics (CARA) 4.5M share Secondary priced at $19.00
· Carbonite (CARB) 5.463M share Secondary priced at $37.50
· Constellation Pharmaceuticals (CNST) 4M share IPO priced at $15.00
· Establishment Labs (ESTA) 3.715M share IPO priced at $18.00
· Evolus (EOLS) 4M share Secondary priced at $20.00
· First Western Financial (MYFW) 2M share IPO priced at $19.00
· Medigus (MDGS) 2.838M share Secondary priced at $3.50
· Plymouth Industrial REIT (PLYM) 1.0897M share Spot Secondary priced at $15.60
· Redfin (RDFN) 4.206M share Secondary priced at $23.50
· Sportsman’s Warehouse (SPWH) 2.82M share Block Trade priced at $4.93
· Tilray (TLRY) 9M share IPO priced at $17.00