Mid-Morning Look: August 09, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look

Thursday, August 9, 2018

U.S. stocks posting modest gains in early trading, with both the S&P 500 and Nasdaq Composite trading near all-time highs as investors focus on strong corporate earnings and continue to put aside fears regarding the trade disputes between China and the U.S. The CBOE Volatility index (VIX) remains near 7-month lows amid lack of fear/hedging in markets. The Nasdaq Comp outperforms, on track for an 8th consecutive session led by record highs in both AAPL and AMZN and continued better earnings in the software sector, while semiconductors slide amid a cautious analyst comment about the sector overheating. Treasury prices are higher, as the 10-year yield slips to 2.94%. Oil prices attempt to rebound after yesterday’s 3% decline to 7-week lows. For the week, the Dow is set to gain 0.5%, the S&P 500 is on pace to advance by 0.7% and the NASDAQ is on track for a weekly return of 1.2%. There were also two failed mergers announced today, with SBGI and TRCO deal terminated along with the Albertsons deal to acquire RAD falling apart. Busy week for major averages, but earnings for the quarter staring to wrap up with more than 85% of the S&P 500 components reporting thus far.

Currencies and Commodities

· In currency markets, the US dollar was mostly higher, rising vs. major currency rivals the euro and little changed vs. the Pound (after touching best levels in over a year); the Russian ruble slid to its lowest level since late 2016 amid US sanctions; The New Zealand dollar fell after the Reserve Bank of New Zealand took a more dovish stance on its policy outlook and left interest rates unchanged. Sterling had fallen to a one-year low on Wednesday amid worries over a so-called ‘hard Brexit’. The Turkish Lira also at new record lows vs. the dollar on sanctions from the US.

· Commodity prices; Precious metal prices look to rise for a third consecutive session, with gold higher early despite strength in the dollar and better economic data today; oil prices look to rebound after falling to fresh 7-week lows yesterday on bearish weekly inventory data and fears of the trade/tariff impact to commodity prices

Economic Data

· Producer price index (PPI) was flat in July, below the expected 0.2% increase, while core PPI, rose 0.1%, also below the 0.2% estimate. The core rate strips out food and energy. The flat PPI reading pulled the 12-month rate of wholesale inflation down to 3.3% from 3.4% while the 12-month rate of core PPI advanced to 2.8% in July, the highest since March.

· Initial jobless claims fell by 6,000 to 213,000 in the week ended Aug. 4, below the 220K estimate while the 4-week moving average fell by a smaller 500 to 214,250; continuing claims rose by 29,000 to 1.76 million.

· Wholesale Inventories for June rose 0.1% in June, slightly above the unchanged estimate, as wholesale inventories increased to $632.4B vs. $632B in prior month; wholesale sales fell 0.1% in June after rising 2.1% the prior month

· The 30-year fixed mortgage rate for week ended today fell to 4.59% from 4.60%, Freddie Mac said, while the 15-year rate avg 4.05%, down from 4.08% a week earlier and 5/1-year ARM rate avg 3.9%, down from 3.93% a week earlier.

Sector Movers Today

· Media & Telecom movers; SBGI shares fell on reports TRCO is seeking $1B in its breach-of-contract lawsuit against the broadcaster, after walking away from a $3.9B merger deal. The long-running $3.9B buyout hit a deadline yesterday where the companies could walk, and Tribune made the choice to do so; VIAB mixed Q3 as EPS beat, but revs short of consensus on weak ad sales and filmed entertainment but says it is confident in delivering FY18 EPS growth; FOXA delivered a strong quarter to end the fiscal year driven by 11% domestic affiliate growth and a healthy contribution from the robust film slate; WIN rises on earnings and refinancing talks

· Semiconductors; Morgan Stanley downgrades the semiconductor industry from in line to cautious due to chip inventory levels saying the sector is “showing signs of overheating.” Further, elevated inventory and stretched lead times have no margin for error as any lead time adjustment or demand slowdown could drive a meaningful correction and risk/reward is the poorest it has been in 3 years – firm cut ON to underweight and AMAT to equal-weight while upgraded APH to overweight given less pronounced cyclical risk and reflecting its best in class execution and a tripling in its total available market (TAM) due to sensors

· E&P sector; FANG reported 2Q last night and production came in above consensus and management raised the FY18 guide by ~4 Mboe/d at the midpoint/beat was largely driven by the acquisition of ~12.1 mboe/d from last Oct/EPS missed while EBITDA beat; APA falls after announced a plan to form a midstream unit with Kayne Anderson Capital Advisors (appeared to disappoint those who were expecting cash proceeds from the roughly $1 billion invested in the Alpine High asset to date); SND reported better than expected Q2 earnings and revenues, which surged 83% Y/Y to $54M/says overall frac sand tons sold during Q2 totaled 839K, the highest in its history; MUR raises FY18 production view 1,000 BOE/d to 168,500-170,500 BOE/d and boosts full year capital expenditure guidance by 6% from $1.11B to $1.18B

· Retailers; LB July Comp sales flat vs. est. up 1% and net sales $849.7M for 4 weeks ended Aug. 4; expects to report 2Q EPS toward the high end of previous guidance range of 30c-35c; COST reports July total company comparable sales up 8.3% vs. est. 7.4% and the company reported net sales of $10.59B for the retail month of July; ZUMZ rises as July comp sales up 9.1% and July net sales of $83M and raises Q2 EPS to 13c-14c, from prior 4c-9c; BKE net sales for 4-week fiscal month ended Aug. 4 increased 12.3% to $68 million and Q2 comp sales +1.4%; PRTY reports revenue growth of 2.3% in Q2, on a constant currency basis and brand comparable sales up 0.1%.

· Hardware & Component news; STX downgraded to sell at Goldman Sachs as believe HDDs remain a cyclical industry, and one facing secular challenges in many parts of the market from the growth of SSDs that are based on NAND flash; PCTI downgraded by two analysts as company’s Q3 outlook and the downward adjustment to full year guidance came in well below estimates; ROKU rises following better than expected 2Q results, FY guidance and the launch of The Roku Channel off platform; TIVO rises as the company missed Q2 revenue expectations, but reiterated that it was exploring strategic alternatives to boost shareholder value

       Stock GAINERS

· CTL +8%; after Q2 results topped views and raised its FY outlook after strong synergies in H1 from Level 3 merger

· CVNA +16%; as 2Q revenue of $475.3M vs. est. $424.2M and raised the revenue and unit sales guidance for the year

· DNB +17%; has agreed to a $5.4 billion buyout by an investor group led by CC Capital, Cannae and Thomas H. Lee-affiliated funds, getting $145 in cash for each share https://on.mktw.net/2KEMXzp

· ROKU +19%; following better than expected 2Q results, FY guidance and the launch of The Roku Channel off platform

· SAIL +16%; strong 2Q18 results, exceeding Street’s expectations and raising FY18 guidance driven by a healthy mix of International growth, upsell momentum, and strong execution across both license and subscription products

· SGMO +13%; as reports progress in preliminary data from the Phase 1/2 clinical trial evaluating SB-525, a cDNA gene therapy candidate for Hemophilia A

· SND +16% after reported better than expected Q2 earnings and revenues, which surged 83% Y/Y to $54M/says overall frac sand tons sold during Q2 totaled 839K, the highest in its history

· SRPT +9%; after better earnings and makes $30M equity investment and enters license and option agreement with Lacerta Therapeutics to develop CNS-targeted treatments

· TIVO +5%; as the company missed second-quarter revenue expectations, but reiterated that it was exploring strategic alternatives to boost shareholder value

· UPLD +15%; after boosting FY revenue guidance to $139.6M-$142.6M, from prior view $121.8M-$124.8M seen in June (upgraded to buy at Roth)


· BKNG -6%; guided Q3 profit $36.70-$37.70, well below the $38.60 consensus view, the 2nd straight quarter of disappointing outlook (after better Q2 results)

· CPA -6%; as earnings missed estimates and management cut guidance for the year amid higher jet fuel prices, coupled with a weaker Brazilian real and Argentine peso

· ELF -23%; after reducing its 2018 year sales growth view to up low single digits from up 6%-8% citing current trends within select national retailer partners (downgraded by four analysts)

· PRGO -8%; after earlier cutting its 2018 EPS and sales forecasts and announcing plans to separate its prescription pharmaceuticals business

· RAD -11%; after Albertsons pulled the plug on its multibillion-dollar takeover of the pharmacy retailer. Last month, Institutional Shareholder Services had said that Rite Aid investors should vote down its $24 billion merger https://reut.rs/2KJY5Lg

· STMP -2%; after yesterday’s 10-Q report included a United States Postal Service risk factor that could impact revenue and operating results.

· STX -7%; after Goldman Sachs downgraded to sell with $44 tgt amid concerns about the outlook for the hard-disk drive market


· Amalgamated Bank (AMAL) 6.7M share IPO priced at $15.50

· Central Garden & Pet Co. (CENT) 5M share Secondary priced at $37.00

· ElectraMeccanica (SOLO) 2.353M share Secondary priced at $4.25

· GrafTech (EAF) 23M share Secondary priced at $20.00

· Kilroy Realty (KRC) 5M share Spot Secondary priced at $72.10

· NV5 Global (NVEE) 1.27M share Spot Secondary priced at $79.00

· PlayAGS (AGS) 5.5M share Secondary priced at $29.25

· RedHill Biopharma (RDHL) 4.167M share Secondary priced at $6.00

· Spring Bank Pharmaceuticals (SBPH) 3M share Spot Secondary priced at $12.50

· Warrior Met Coal (HCC) 2.205M share Spot Secondary priced at $25.50

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.

Live Trading

Open an Account

Paper Trading