Mid-Morning Look: August 20, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look

Monday, August 20, 2018


Equities are mixed as Consumer Discretionary and Healthcare stocks help propel gains in the Dow and S&P 500 index, while the tech heavy NASDAQ slips to around the 7,800 level (off earlier highs 7,837). Stocks move higher along with a rally in bonds as yields slip ahead of potential market moving catalysts this week, but quiet today on the macro front. Markets await the meeting of central bankers later this week at Jackson Hole, while also keeping an eye on the situation in Turkey and trade relations with China, Canada, Mexico and others. The dollar is mixed vs. counterparts, giving an early boost to commodity prices with gold, copper and oil prices higher. Stocks news relatively quiet outside of a few M&A reports as earnings continues to wind down for the quarter.


Treasuries, Currencies and Commodities

· In currency markets, the U.S. dollar slips from overnight highs around 96.40 to trade little changed at 96.10 for the dollar index; the US dollar erases gains against the euro, moving to highs of 1.144 (off lows 1.1394), while the yen is little changed at 110.45; the Pound is up slightly, near highs 1.2772 (off lows 1.2724)

· Commodity prices; Precious metals rebound as the dollar pulls back from overnight highs; gold prices back up above the $1,190 an ounce level, higher by about $9, as looks to rebound from 18-month lows last week. Oil prices similar situation, rising off last week lows around $65 per barrel, getting a lift from the dollar decline (bearish inventory data sunk prices last week)

· Treasury market’s rise as yields decline from last week; the 10-year yield has been trending lower this month. It’s down another 2.5 basis points today to 2.83% after starting August at just above 3%; the 2-yr yield under 2.60% and the 30-yr yield under 3%. Over the weekend, Jeff Gundlach noted a massive increase in short interest in 10- and 30-year Treasury bond futures. “Highest for both in history, by far,” he says. “Could cause quite a squeeze.”


Sector Movers Today

· Retailers; NKE was upgraded by two analysts as Piper raised to overweight and Susquehanna to positive citing share gains from competitor Adidas AG, as well as specialty retailers like FL and HIBB (tgt raised to $93 at both firms); JWN extended Friday’s gains after better earnings results lifted shares to fresh 52-week highs; 52-week highs for consumer names: COST, JWN, K, HRL, MKC, DG, ORLY, AAP, ADM, CTAS

· Metals & Materials; gold miners; KGC was downgraded to sector perform at RBC Capital on valuation; NGD was upgraded to hold from sell at Canaccord as the recent selloff created a more balanced risk-reward trade-off for the shares; copper prices rebound off recent yearly lows, lifting some stocks (FCX); steel stocks with modest gains early; potash names mentioned positively in Barron’s (CF, NTR, MOS) saying shares got a lift in early August after second quarter earnings but the stocks still have a way to go

· Hardware & Component news; BBOX shares rise amid agreement to sell its Federal Government IT Services Business to a private equity firm for a cash purchase price of $75M; INFY was downgraded to equal-weight at Morgan Stanley while firm also accepted the resignation of its CFO; HPE announced as the first technology vendor in Asia Pacific (outside of China) to deliver next-generation on-premise hybrid cloud solutions with Alibaba Cloud’s Apsara Stack

       Stock GAINERS

· AMRX +10%; after announces 10-year licensing and supply agreement with Jerome Stevens Pharmaceuticals, Inc. for Levothyroxine

· CMCM +18%; as Q2 revenue beat consensus and guides quarterly revenue will resume sequential growth trends (sees Q3 revenue 1.29B yuan (US$194.9M)-1.35B yuan (US$204.0M) vs. Q2 revenue of 1.10B yuan)

· CPBO +15%; after a consortium composed of David (Xiaoying) Gao, GL Capital Group, Bank of China Group Investment Limited and CDH Investments offered to buy the company in an all-cash deal valued at about $3.9B/$118 a share https://on.mktw.net/2BsySWj

· EL +3%; on mixed quarterly results as EPS and sales beat, though year guidance fell short of consensus views

· NKE +2%; was upgraded by two analysts as Piper raised to overweight and Susquehanna to positive citing share gains from competitors (tgt raised to $93 by both firms)

· SODA +10%; as PEP agreed to buy SODA for $3.2B, paying $144 a share in cash, an 11% premium to Friday’s closing price https://bloom.bg/2OLQXR0

· SSC +64%; after the company said it has won a $24 billion, three-year deal to provide fixed income lease financing-based products to fund upgrades of China’s buses and make them electric by 2021 as mandated by the government.

Stock LAGGARDS

· INFY -3%; was downgraded to equal-weight at Morgan Stanley while firm also accepted the resignation of its CFO

· LCI -57%; as it announced that its agreement to distribute products from Jerome Stevens Pharmaceuticals (JSP) will not be renewed after it expires in March 2019

· NWSA -2%; downgraded to underweight at Morgan Stanley on Foxtel OTT risks, after cuts to estimates/value for its Australian pay-TV unit

· TSLA -; erases loss of as much as 5%; price tgt cut to $195 at JPMorgan, a reduction of $113 as the firm reverting to valuing Tesla shares on the basis of fundamentals alone, arguing that funding for a deal to go private has not been secured

 

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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