Mid-Morning Look: August 13, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look

Monday, August 13, 2018

After trading lower in the overnight session given concern/impact from the recent Turkish Lira and stock market declines, U.S. equities are rebounding led by gains in technology, health care companies and retailers. Asian markets fell overnight, while European markets were slightly lower. The Nasdaq Composite outperforms early, looking to rally after having its 8-day win streak snapped on Friday after concerns about financial upheaval in Turkey which has sent that’ country’s currency, the lira, plunging. On Monday Turkey’s central bank announced measures to help that country’s banks manage their liquidity, but the Turkish lira and Turkey’s stock market continued to slide anyway. While the exposure to Turkish markets is not the direct concern, the potential contagion to European banks has raised fears. Also note both the Dow and the S&P are coming off three-day declines; Friday represented the biggest one-day drop for the Dow since July 11, while the S&P had its worst session since June 27 on Friday. Commodity prices (gold and oil) decline early, while the dollar is mixed.

Treasuries, Currencies and Commodities

· In currency markets, the euro moves to the highs, up at 1.1428 vs. the dollar (off overnight lows 1.1365 – which was lowest levels since July of last year). The Turkish Lira fell another 6% vs. the US dollar, bringing its 10-day decline to over 37% on sanction concerns. The Russian ruble bounces off 52-week lows vs. the dollar from Friday, little changed on the day. The British Pound bounces off lows, near best levels of day (still down at 1-year lows vs. dollar), while yen little changed.

· Gold prices drop to 17-month lows, falling sharply as the dollar surged late Friday vs. most rival currencies, dulling the interest in the precious metal. Gold prices fell more than 1%, dropping to lows around $1,200 an ounce

· Energy futures dropping along with the broader weakness in commodity prices as the dollar moved to its best levels since June of last year. OPEC crude production rose in July, despite sliding output in Libya, Iran and Saudi Arabia. The bloc’s output averaged 32.32 million barrels a day in July, up 41,000 barrels a day from June, the group said, Bloomberg reported.

· Treasury markets reverse earlier gains, as yields bounce off morning lows (10-yr dropped below 2.85% before moving back to 2.88%), as market impacted by move in Turkish stocks and Lira, raising fear of contagion to European banks.

Sector Movers Today

· Machinery: ETN upgraded to overweight from neutral and raise tgt to $92 from $85 and downgraded AGCO to underweight from neutral PT $55 from $60 as the German wheat crop is expected to be down >20% this season; remains overweight on CAT, PH, TEX; CAT July rolling 3-month retail machine sales rose 24% vs June 25% rise, while North America machine sales up 27% after rising 22% in June and Latam sales July up 16% after rising 29%

· Casino & Leisure movers; boating stocks active (BC, MBUU, MCFT) after Wedbush said recent checks suggest the boat segment/industry has returned to “a more normal growth rate in July,” after “somewhat of a slow start” (raised tgt on BC to $77 from $70); in casinos (MLCO, WYNN), Bernstein notes Into Q2, Macau GGR has shown deceleration, particularly in VIP. In Q2, GGR grew by 17% y/y, down from 21% in Q1 and 21% growth in 2H’17.

· Chemicals movers; BAYRY shares fall after its recently acquired Monsanto Co. was ordered to pay $289.2M in a landmark lawsuit over whether exposure to two of its weed killers caused cancer.; APD announced over the weekend that it will form an $8B JV along with Saudi Aramco and ACWA in Jazan Economic City (JEC), of which it will own at least 55%; ALB shares were pressured

       Stock GAINERS

· APD +3%; announced over the weekend that it will form an $8B JV along with Saudi Aramco and ACWA in Jazan Economic City (JEC), of which it will own at least 55%

· DBD +8%; after said it in constructive & productive talks with lenders and Diebold Nixdorf says it hopes to reach a resolution in the near-term regarding its future financial flexibility

· MYL +2%; RBC Capital is shifting to a bullish view on generics and upgrading MYL, AMRX and ENDP to Outperform, first OP rating on a generic stock in more than a year

· NLSN +10%; as activist investor Elliott Management Corp. has taken a big stake in the media company and plans to push the TV-ratings company to sell itself. The New York hedge fund owns more than 8% of Nielsen, worth at least $640 million https://on.mktw.net/2KOu3Gu

· SYY +7%; after reported a Q4 profit and revenue that topped expectations and trades above the July 26 record closing price of $71.74

Stock LAGGARDS

· ALNY -8%; receives FDA approval for the first ever RNAi therapeutic treating patients with a rare disease known as hereditary ATTR amyloidosis (in-line with views) but shares slip amid a restrictive label viewed as disappointing, prompting analyst tgt cuts and cuts expected sales

· BEDU -24%; China education names fall (TAL, RYB) after the Financial Times noted weakness followed draft legislation from Beijing that could limit business growth through acquisitions

· DY -21%; prelim Q2 EPS $1.05-$1.08 on revs $799.5M vs. est. $1.19/$844.46M; lowers FY19 adj. EPS view to $2.62-$3.07 from $4.26-$5.15 (est. $4.68) and lowers FY19 revenue view to $3.01B-$3.11B from $3.23B-$3.43B (est. $3.34B

· HOLX -3%; after the company said its Cynosure division will suspending marketing and distribution of its Vitalia TempSure device for heating of vaginal issue, while it considers the FDA concerns over “vaginal rejuvenation” procedures using energy-based devices

· JKS -16%; after reporting 2Q gross margin shortfall and providing shipment forecast that implies shipment volume grows 85% y/y in 4Q vs 5% in 1Q-3Q according to Goldman

· PLNT -2%; was downgraded at JPMorgan after rally in shares

· TSG -8%; after cutting its full-year earnings outlook; sees FY18 adj. EPS $1.99-$2.22 below prior guidance of $2.33-$2.47

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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