Mid-Morning Look: August 02, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look

Thursday, August 2, 2018

U.S. stocks are mixed, trading much like yesterday’s action as technology shares extend their rebound, with AAPL trading new all-time highs for a second day after its earnings beat Tuesday night, but the Dow Industrial Average and S&P remains weak, given a pullback in industrials and materials on rising trade policy fears. Late yesterday, President Trump directed U.S. Trade Rep. Robert Lighthizer to consider increasing proposed tariffs on $200B in Chinese goods to 25% from 10%, senior administration officials said. Officials reiterate the process is ongoing with hearings scheduled later this month. Officials say U.S. has given China many opportunities over past year to address concerns – China of course responded that would retaliate with their own response. The S&P is on track to decline for the 5th day in six. Bonds hold steady, with the 10-year yield at 3%, while oil prices rebound and gold falls. The dollar strong ahead of tomorrow’s monthly non-farm payroll report (recall ADP posted strong jobs data yesterday). In Europe, the Bank of England boosted its benchmark rate from 0.5% to 0.75% (unanimous decision), which was widely expected. Earnings overload again today, with details of some top movers below.

Treasuries, Currencies and Commodities

· In currency markets, the dollar rises vs. most rival; with the dollar index (DXY) topping the 95 level today, up over 0.3%, rallying vs. the euro, the pound and emerging markets;

· Commodity prices mixed as gold prices remain pressured following the hawkish commentary from the Fed yesterday at its monetary policy meeting, while oil rebounds after back-to-back days of declining prices, as WTI crude bounces off the $67 per barrel level

· Treasury markets holding steady, with the 10-yr yield trading just under the 3% level after topping it yesterday for the first time since mid-June; 2-yr yield slips to 2.66% while the 30-yr yield unchanged at 3.13% after in-line economic data today

Economic Data

· Weekly Jobless Claims rose 1K to 218K, slightly below the 220K estimate (prior week claims unrevised at 217K); the 4-week moving avg. fell 3,550 to 214.5K in the week ending July 28; continuing claims fell 23k to 1.724m in the week ending July 21

· Factory orders for June rose 0.7%, in-line with estimates while May unrevised at 0.4%; new orders ex-trans. for June rise 0.4%; new orders ex-defense for June rise 0.9% after falling 0.1% in May. Capital goods non-defense ex aircraft new orders for June revised down to 0.2% gain from 0.6% advance; rose 0.7% in May; Capital goods non-defense ex aircraft new orders, 3-month rolling average annualized change for June a rise of 10.2% after rising 5.2% in May

· The 30-year fixed-rate mortgage averaged 4.60% in the August 2 week, according to mortgage provider Freddie Mac. The 15-year fixed-rate mortgage averaged 4.08%, and the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.93%. All three products rose six basis points during the week. It was the second straight weekly gain for the popular 30-year-fixed.

Sector Movers Today

· Casinos weak; after the group dropped Wednesday following lower RevPAR guidance from CZR on its conference call and Macau July GGR was MOP 25.33bn (~US$3.13bn), +10.3% y/y, below Bloomberg consensus of 12% and was at lower end of their estimate (10%-12%), group hurt again last night after big earnings miss from WYNN, with a 40c EPS miss and lower revs as Macau revs fall 14.9% for quarter; MGM also posts Q3 revenue miss of $2.86B vs. est. $2.97B and said Q3 net revenues at its Las Vegas Strip resorts to be lower by approximately 8% to 10%

· Restaurants; RRGB shares plunge after Q2 EPS missed by 20c and cuts FY18 EPS view to $1.80-$2.20 from $2.40-$2.80 well below est. $2.54; CHEF Q2 EPS and revenues topped consensus; YUMC Q2 EPS and revs topped views but Q2 comp sales fell an unexpected -1% vs. est. up 2.5%; HABT shares rise as beat on top and bottom line for Q2 and raises FY18 revenue view to $393M-$396M from $389M-$393M; DIN upgraded to strong buy at Raymond James on strengthening Applebee’s, discount valuation; DFRG 11.25M share Secondary priced at $8.00; WEN was downgraded to neutral from buy at Kalinowski Research; SBUX will start coffee deliveries in China next month as part of a new tie-up with BABA; YUM profits strong in 2Q, but some weakness in same-store sales and backs year outlook

· Insurance; mixed results as LNC missed quarterly earnings as investment income came in modestly weaker, while MET revs and EPS topped consensus; ALL Q2 net income per share of $1.90 easily beating the consensus estimate of $1.51 behind the better results was a lower combined ratio and higher premiums in its P&C business, stronger than expected life insurance results and lower corporate expenses; VOYA posts all-round 2Q18 beat in multiple segments

· Chemicals; DWDP shares active after quarterly results; potash related names active after NTR and CF reported quarterly results; CF rises as announced a new $500mm buyback, while reaffirming its commitment to debt pay-down and as Q3 EPS of 63c tops highest estimates while said it expects a tightening nitrogen supply-and-demand balance; NTR shares jumped early after raising its full-year profit outlook; WLK slides as 2Q EPS and Ebitda missed estimates that were mainly driven by its Vinyl business; FMCQ2 EPS/revs beat, but Q3 guidance short of estimates

· Medical equipment; DXCM shares surged after narrower Q2 EPS loss and raised its year revenue outlook by more than $60M; PKI beats top and bottom line for Q2; EXASshares plunge as reported disappointing 2Q18 results and 3Q18 guidance based on unexpected slowing in test volume growth ascribed to 1) patient resistance to potential out of pocket expense and 2) lower compliance rate in second half of June. Test volumes of 215,000 missed the lower end of guidance for 220,000-230,000 and our estimate of 229,500

· Medical devices; IRTC guides 2018 revs $138M-$141M vs. consensus $133.79M; CNMD Q2 EPS and revs topped consensus views while raises full-year 2018 constant-currency sales guidance; MASI Q2 top and bottom line results beat expectations and raises FY18 EPS view to $3.07-$2.90 from $3.01-$2.88 and ups revs for the year as well

· Internet security; CSCO has agreed to pay $2.35 billion for security startup Duo Security, n authentication service that focuses on two-factor authorization https://on.mktw.net/2n4JH6U ; shares of OKTA active as comparable rival; FTNT 2Q revenue/EPS above Street estimates though a shift to ASC 606 standards contributed $5.2mn/7c of the beat; FEYE reported better than expected 2Q results; 3Q guidance and FY18 outlook were mostly in-line with expectations

        Stock GAINERS

· CF +9%; announced a new $500M buyback, while reaffirming its commitment to debt pay-down and as Q3 EPS of 63c tops highest estimates while said it expects a tightening nitrogen supply-and-demand balance

· CLX +4%; mixed results as EPS beat though sales fall short, while margins top estimates/FY guidance better at $6.32-$6.52 vs. est. $6.37

· DXCM +21%; analysts very positive in standout quarter after co. raised full year guidance to $925M (+29% y/y growth) from a range of $850-860M (18-20% y/y growth) after strong Q2

· FOXF +19%; posted solid quarter and raised ’18 guidance well ahead of consensus, with strong organic growth plus the benefit of the Tuscany acquisition

· FTNT +12%; 2Q revenue/EPS above Street estimates though a shift to ASC 606 standards contributed $5.2M/7c of the beat

· HUBG +11%; as Q2 earnings were well above consensus views/prompt Loop upgrade to buy

· REGN +6%; handily topped Q2 EPS/revs with $5.45/$1.61B revs vs. est. $4.70/$1.57B

· SQ +6%; results that beat estimates and raising its 2018 adjusted revenue forecast

· TSLA +10%; reported Q2 losses that were greater Street’s expectations, but revenues beat expectations, and cash burn slowed while posting better gross margins of 21% vs. estimates 16%

· W +7%; 2Q revenue topped estimates and grew faster than expected (Q2 revs $1.66B vs. est. of $1.60B)

Stock LAGGARDS

· EPZM -27%; will discontinue a Phase 2 trial of tazemetostat in patients with relapsed and/or refractory diffuse large B-cell lymphoma (DLBCL) after an interim assessment showed the activity didn’t warrant further development of the drug in DLBCL as a monotherapy

· CTSH -7%; missed estimates for quarterly revenue and forecast a weak third quarter, hurt by lower-than-expected spending from clients in the financial industry

· EXAS -15%; reported disappointing 2Q18 results and 3Q18 guidance/test volumes of 215,000 missed the lower end of guidance for 220,000-230,000 and our estimate of 229,500.

· FND -15%; on mixed Q2 results as EPS beat, but miss on revs while trips its FY outlook (Q2 comps rose 11.4%)

· HFC -7%; as Q2 EPS missed by 18c, though revs beat

· RRGB -21%; after preliminary 2Q results missed estimates and cutting its year EPS forecast

· TEVA -8%; after missed Q2 analyst expectations for revenue amid falling U.S. sales and price erosion for generics (MYL, BHC, PRGO active)

· TRIP -13%; quarterly revs missed views while its core click-based and transaction sales for hotels declined 7% vs. a 6% increase last year

· WYNN -6%; with a 40c EPS miss and lower revs as Macau revs fall 14.9% for quarter

Syndicate

· BioCryst (BCRX) 9.09M share Spot Secondary priced at $5.50

· Cushman & Wakefield (CWK) 45M share IPO priced at $17.00

· Del Frisco’s (DFRG) 11.25M share Secondary priced at $8.00

· Moelis (MC) 5M share Spot Secondary priced at $60.40

· Sonos (SONO) 13.889M share IPO priced at $15.00

· TherapeuticsMD (TXMD) 12.745M share Secondary priced at $5.10

· Viper Energy Partners (VNOM) 9M share Spot Secondary priced at $31.25

 

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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