Mid-Morning Look: July 26, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look

Thursday, July 26, 2018

U.S. equities open mixed on Thursday as a Facebook-led tumble on disappointing revenues weighs on tech shares and dragging both the NASDAQ and the S&P 500 lower. Bright spot in technology the semiconductor sector after AMD, XLNX and QCOM reporting better earnings results (QCOM also terminated deal to buy NXPI due to no China approval). Also weighing on sentiment, reports the Chinese government has a plan to retaliate against increases in U.S. tariffs regardless of the volume of goods targeted, according to an official in Beijing. China is ready to respond to measures from U.S. President Donald Trump whether they involve $16 billion or $200 billion of Chinese imports, said the official. The weakness in tech given Facebook revs outlook and the China comments sobering, but the Dow Industrial Average pushing higher, up over 100 points, led by gains in DIS, TRV, JNJ, WBA and PG. Stocks had surged late yesterday after President Trump said he and European Commission President Jean-Claude Juncker agreed to “to work together toward zero tariffs” and “zero subsidies” on non-auto industrial goods during meeting at the White House. That has helped boost some spirits on the trade front, though China remains an issue The ECB kept rates unchanged at its monetary policy meeting today. Another big earnings night coming with AMZN and INTC tonight. Below a recap of some top earnings movers.

Treasuries, Currencies and Commodities

· In currency markets, the dollar gains across the board, while the euro was slightly weaker against as the European Central Bank kept rates unchanged, as expected, emphasizing that it was holding to a plan laid out in June to unwind its asset purchases, but wouldn’t move to commence tightening policy until next summer. The euro falls to lows, down -0.6% vs. the dollar at 1.1660. The USD/CAD extends higher toward 1.31 as greenback continues to gather strength; the Turkish Lira falls on comments by Pence on potential sanctions; dollar back above 111 vs. the yen

· Commodity prices; generally quiet early as gold prices pullback given the broad strength in the dollar this morning while oil prices holding steady around $69.30 per barrel

· Treasury markets up slightly as yields down around 1 bps from yesterday close (but off earlier highs of 2.97%) following the volatile moves in stocks and ECB meeting results; the yield on the 2-yr at new 10-year highs, rising above 2.66%

Economic Data

· Weekly Jobless Claims rose 9K to 217K vs. est. 215K; Prior week claims revised up to 208K from 207K; the 4-week moving average drops 2,750 to 218,000; continuing claims fell 8k to 1.745m in the week ending July 14

· Durable Goods Orders for June rose 1%, below the up 3% estimate; Durable goods new orders revised up to -0.3% for May from -0.4%; new orders ex-trans. rose 0.4% in June after 0.3% rise and new orders ex-defense rose 1.5% in June after 1.4% fall; non-defense capital goods orders ex-aircraft rose 0.6% in June after rising 0.7% in May

· Advanced Goods Trade Deficit for June (-$68.3B) vs. est. (-$67.0B), widening from (-$64.8B) in prior month; Imports rose 0.6% in June to $210.263B from $208.921B in May and exports fell 1.5% in June to $141.931B from $144.155B in May

Sector Movers Today

· Airlines bounce off lows; ALK Q2 EPS beat and in-line revs, while year consolidated capacity view of up 6.1% vs view given last month of up 6.2%-6.5%; AAL cut its full-year earnings guidance to $4.50-$5.00 from prior view of as much as $6.00 because of higher fuel prices, adding it would cut capacity growth this year and defer delivery of 22 Airbus; LUV Q2 EPS beat by 3c while total op revs miss and said sees significant improvement in 3Q RASM vs. 2Q, in range of down 1% to up 1% YoY; ALGT falls as cuts its 2018 profit forecast on fuel/growth outlook

· Housing & Building Products; MHK Q2 results missed by wide margin and on lower guidance (another name guiding lower in the home improvement space after OC yesterday); homebuilder PHM reported 2Q EPS and revenue beats but weaker new home orders of down 1% vs. Bloomberg estimate of up +9.6% weighed on results – group has been pressured this week amid rising Treasury yields (pushing mortgage rates higher, weaker new home sales data – and several companies in building space lowering forecasts

· Metals & Mining; Gold miners disappoint as AEM and ABXboth reported lower than expected Q2 earnings, while GG shares dropped early on sales miss, as group has been hit amid a 10% pullback in gold prices from its peak 2-months ago; uranium stocks rally (UUUU, UEC) after CCJ shuts down McArthur mine indefinitely in the face of persistent low prices

· Autos get another day of soft results as Ford (F) lowers 2018 adjusted EPS outlook $1.30-$1.50 from $1.45-$1.70 saying outside of North America, it was a particularly challenging quarter for Asia Pacific and Europe (Ford’s lower guidance follows that of GM and FCAU yesterday); in auto parts and dealers, several names moving on earnings today: MNRO, GPI, ORLY, PAG

· Consumer Staples; European drinks stocks slid after disappointing Q2 results from BUD; in tobacco, MO Q2 revenue declined (missing views) as the company saw its cigarettes U.S. retail market share decline to 50.2% from 50.9% same quarter a year before; in food, MDLZ reported higher than expected profits in its second quarterly earnings as they continued to boost sales in North America; HSY said its acquisition of SkinnyPop popcorn maker Amplify had helped it boost sales in the US by nearly 6% in its latest quarter, topping estimates

       Stock GAINERS

· AMD +7%; posted slightly better-than-expected earnings as analysts raise their price targets following clean 2Q beat (but weaker Q3 guidance)

· ARNC +9%; as weighs buyout deals from Apollo and Blackstone-Carlyle, WSJ reports https://on.mktw.net/2OdAtBI

· BPI +38%; after 2Q EPS beat the highest analyst estimate; Piper raised price target to $13 from $8

· CMCSA +3%; Q2 EPS and revenue topped the highest estimates amid strong FCF of $4.3B and posted better metrics: 2Q high-speed Internet net change 260k, est. 199k and 2Q voice net change -16k, est. -57k

· CTXS +6%; metrics beat across the board, with large beat on license and Workspaces of $25M

· MDLZ +3%; rises as reported higher than expected profits in its second quarterly earnings as they continued to boost sales in North America

· QCOM +4%; after reporting better earnings and guidance, and terminating its planned acquisition of NXPI and saying it will execute on a $30B share repurchase plan in its place

· SVU +64%; agrees to be acquired by UNFI for $32.50 per share, in a total deal valued at $2.9B which includes debt https://reut.rs/2LCXxLO

· XLNX +11%; double upgrade to Buy at Bank America following solid beat/raise results which addressed prior concerns around limited growth/leverage

· YUMC +14%; after a report that Hillhouse Capital Group, which is one of China’s most prominent tech investors, is in talks to acquire them, according to The Information https://bit.ly/2Ls6Xur


· ACIU -22%; falls in sympathy with BIIB Alzheimer data as its crenezumab is currently in Phase 3 studies for Alzheimer’s disease under a pact with Roche’s Genentech

· ALGN -6%; after lower-than-expected forecast for 3Q despite Q2 top and bottom line beat

· BIIB -10%; although its BAN2401 drug slowed progression of the earliest stages of Alzheimer’s by 30%, doctors and patient advocates said more information is needed from larger, longer studies

· FB -20%; shares dropped from all-time record highs after Q2 revs fell short of consensus on slightly lower than expected MAU and DAU’s while said sees revenue decelerating in Q3, Q4

· MHK -13% after Q2 results missed by wide margin and on lower guidance (another name guiding lower in the home improvement space after OC yesterday)

· NLSN -25%; after Q2 revenue missed estimates, citing weakness in multinational client spending in EM and announced CEO retirement

· NXPI -8% after QCOM terminated its acquisition of the company

· PYPL -3%; delivered in-line 2Q results and raised year view, but guided Q3 revenue $3.62B-$3.67B below est. $3.71B

· SRPT -3% as the FDA placed a clinical hold on micro-dystrophin gene therapy due to a quality issue in research grade drug product


· Aurora Mobile (JG) 9M share IPO priced at $8.50

· Berry Petroleum (BRY) 13.05M share IPO priced at $14.00

· Cango (CANG) 4M share IPO priced at $11.00

· Focus Financial Partners (FOCS) 16.216M share IPO priced at $33.00

· Liquidia Technologies (LQDA) 4.545M share IPO priced at $11.00

· Merit Medical (MMSI) 3.5M share Secondary priced at $54.00

· National Vision (EYE) 14.448M share Secondary priced at $39.75

· Pinduoduo (PDD) 85.6M share IPO priced at $19.00

· Savara (SVRA) 4.25M share Spot Secondary priced at $11.50

· Tenable Holdings (TENB) 10.9M share IPO priced at $23.00

· Tenet (THC) 1.3M share Block Trade priced at $38.75

· Veracyte (VCYT) 5M share Secondary priced at $10.25

· WillScot (WSC) 8M share Secondary 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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