Mid-Morning Look: August 06, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look

Monday, August 6, 2018

U.S equity markets mixed to start the week, as the Dow Industrials stumble after rising for a 5th straight week on Friday, while the Nasdaq Composite upward momentum from mid-last week continues after Apple earnings/guidance topped street views, sending shares to record highs and the first trillion dollar valuation for a company. The S&P 500 index little changed as markets watched for fresh new developments over tariffs between the U.S. and its global counterparts, while markets also prepare for another very busy week of corporate quarterly results. Sanctions also playing a part in markets (and currencies), with Trump admin reimposing some sanctions on Iran seeking behavior changes, while sanctions on Turkey officials sends the Lira to record lows vs. the dollar. The dollar is higher along with energy prices while gold prices slip back to 1-year lows. A very busy week of earnings also upcoming.

Treasuries, Currencies and Commodities

· In currency markets, the dollar index (DXY) is higher, nearing its 2018 high of 95.65 from July 19th, rising against the British Pound, while little changed vs. the euro and yen; the Pound falls -0.5% vs. the dollar to 1.2928 – The pound dipped to an 11-month low after UK trade secretary Liam Fox said over the weekend that the UK was now more likely than not to crash out of the EU without a deal next March. The Turkish Lira drops to fresh record lows vs. the dollar past 5.19 as sanction fears gain; Bitcoin prices drop over 6%, falling back below the $7,000 level

· Commodity prices are mixed as oil prices edge higher, with WTI crude back above $69 per barrel (off 6-week lows mid-last week of around $67 per barrel), while gold prices continue to slide to 1-year lows, down another $6 below $1,220 an ounce

· Treasury market’s rise as yields fall with the 10-yr yield down over 2 bps at 2.923%, while the 2-yr slips to 2.64% (down about 4 bps from 10-year highs a week ago); no major economic data to move bond markets today of FOMC speakers

Sector Movers Today

· Semiconductors; TSM reported that there was a virus outbreak on 08/03, which affected a number of computer systems and fab tools in Taiwan (Largest exposure to TSMC include: AAPL (~20%), NVDA (~8%), AVGO (~8%), QCOM (~6%), AMD (~5%), and MRVL (~3%)); INTC was downgraded at Barclays and cut tgt to $53 from $62 amid intensifying margin pressure; AMD tgt raised to $25 at Bank America while also raising FY19 EPS target to 75c vs. consensus view of 62c citing AMD’s “generational opportunity” to exploit Intel (INTC) 10nm delays to gain market share

· E&P sector; WPX upgraded to strong buy at Raymond James saying it remains a high quality operator with significant exposure to top tier assets in the Delaware and Williston basins, a projected oil/EBITDA CAGR of ~30/40% through 2020, and a conservative leverage profile; DVN was upgraded to buy at UBS as it continues to take positive steps, focusing its inventory on its highest return assets, divesting ENLK/ENLC at a better than expected price, and having a material repurchase plan; KOS agreed to acquire Deep Gulf Energy from its private equity owner for $1.23 billion, expanding the deepwater oil and gas firm’s operations into the Gulf of Mexico https://reut.rs/2KBsmfc

· Industrial movers; Engineering stocks get another solid report as JEC Q3 results beat estimates and the company forecast strong earnings for FY 2019; the positive results follow good numbers from FLR late last week as well (also active on report (KBR, MDR, GVA, ACM, PWR, MTZ); PH and PCAR both upgraded to outperform from in-line by Evercore ISI saying the overall strong results in the 2Q earnings season show that there’s much left to play for in “Act 2” of the machinery cycle (says new top 5 in the sector are CAT, CMI, URI, TKR, DE/PCAR)

· Paper & Packaging; Australian packaging company Amcor Ltd said it would acquire U.S. rival BMS in an all-stock deal valuing the U.S. company at $5.25 billion. Bemis shareholders would get 5.1 Amcor shares for each Bemis share, or $57.75, per share https://reut.rs/2OgGhtA

       Stock GAINERS

· BLUE +4%; and REGN plan a five-year collaboration to develop new cell therapies for cancer/REGN to invest $100M in BLUE

· CTWS +10%; and SJW Group announced an amendment to their merger agreement to an all-cash deal from all stock, and the in which the buyout bid increased to $70 a share. The amended agreement has a value of $1.1 billion https://on.mktw.net/2MbsNly

· ICPT +11%; upgraded to buy from sell at Goldman Sachs and tgt to $157 from $46 ahead of late-stage results for Ocaliva in the liver disease known as non-alcoholic steatohepatitis

· JEC +5%; Q3 results beat estimates and the company forecast strong earnings for FY 2019;

· SEAS +15%; as 2Q adjusted Ebitda and revenue beat even the most optimistic estimates, while Q2 attendance rose 5% YoY

· SRDX +13%; raised its 2018 rev view to $79M-$81M from $75M-$79M and above consensus $76.8M while also raising its year profit outlook

· TSN +4%; quarterly profit beats estimates, but trade spats threaten sales (notes profit boosted by beef sales while chicken and pork sales lag)

· WEB +10%; as Siris Capital to buy outstanding shares of Web.com for $28 per share in cash, up from a previous offer of $25, Web.com reports as the go-shop period of the previously-announced merger has expired https://yhoo.it/2vGzL7K

Stock LAGGARDS

· ACAD -7%; downgraded to neutral at Piper saying sees safety concerns on the company’s Nuplazid, a treatment for hallucinations and psychosis associated with Parkinson’s disease, continuing to weigh on shares

· BID -5%; Sotheby’s income down 23% as commission margins take a hit for Q2

· NWL -10%; after cuts full-year forecast as it divests brands/has been selling assets as part of plans to raise $10 billion following pressure from activist investors Carl Icahn and Starboard Value LP

· OVID -26%; in apparent response to its announcement of “positive” efficacy results from a Phase 2 clinical trial assessing lead drug OV1010 in patients with Angelman syndrome

· PX -5%; as merger with Linde is facing an unexpected hurdle from the U.S. antitrust regulator that could derail the deal, according to Bloomberg. The FTC indicated it wants the companies to sell more assets before it approves the deal https://reut.rs/2AL17zk

· RAD -12%; after issued a profit warning thanks to generic drug “efficiencies” that will hurt the company by about $80 million

· TSM -1%; reported that there was a virus outbreak on 08/03, which affected a number of computer systems and fab tools in Taiwan

 

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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