Mid-Morning Look: September 5, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look

Wednesday, September 5, 2018

U.S. equities move sharply lower, as the Dow Industrials on track to fall a 4th straight session as U.S.-Canada talks on Nafta are set to resume. Meanwhile, tech heavy Nasdaq Comp falls over 1.5% or 120 points, moving below the 8,000 for the first time in about 2-weeks, led by profit taking in the Internet (NFLX, TWTR, GRUB, AMZN), software (WDAY, MSFT, NOW, RHT), and semi sectors (MU, ON, AMD, CY). US markets following a broad sell-off in Asia and enduring pressure in emerging markets. The Shanghai Index declined -46 points (1.68%) to settle at 2,704 and the Hang Seng Index plunged -729 points or 2.61% to settle at 27,243. Markets turning attention today to trade tensions and Capitol Hill as social media, executives from Facebook, Twitter and Google testify today on social media, Russia meddling. Outside of Canada/US/NAFTA, trade remains at the forefront amid speculation White House will implement 25% tariffs on next $200B of Chinese imports, as soon as Thursday. The Pound spiked vs. the dollar after reports the British and German governments have abandoned key Brexit demands, potentially easing the path for the U.K. to strike a deal with the European Union.

Treasuries, Currencies and Commodities

· In currency markets, the euro and British Pound spiked against the dollar this morning (dollar comes in to the day rising a 4-day win streak) following a media report that the UK and Germany have made progress on a Brexit deal; Columbia peso falls to lowest levels since November 2016; bitcoin prices tumble this morning, down over 4.7% to around $7,000 (lows of day $6,917.47 and off highs $7,386.18) amid a report that Goldman Sachs is pulling back on near-term plans to set up a cryptocurrency trading desk.

· Commodity prices mixed with gold edging slightly back above the $1,200 an ounce level as the dollar is mixed, while energy futures slump as the tropical storm in the Gulf weakens to depression, lowering fear of reduced production/damages; WTI crude drops below $69 per barrel after trading to around highs of $71.50 the day prior

· Treasury markets little changed after slumping the last few days, as yields remain near weekly highs as the 10-yr at 2.90%, 2-yr 2.65% and the 30-yr been inching higher, now at 3.07%; hawkish commentary from Fed speakers and stronger economic data pushing yields higher

Economic Data

· The U.S. trade deficit widened 9.5% to (-$50.1B) in July from (-$45.7B) last month and almost in-line with expectations for (-$50.2B) while exports declined by 1% on the month and imports rose 0.9%; the deficit with China widened to a fresh high of (-$36.8B); petroleum exports were a record $15.8B; petroleum imports of $20.3B were the highest since Dec. 2014

Sector Movers Today

· Airlines; UAL said it sees Q3 consolidated passenger unit revenue to be near the high end of its previously-provided guidance range of up 4%-6% and also sees pre-tax margin (ex-charges) to be near high end previously provided guidance range of 8%-10%; JBLU raises low end of Q3 RASM to 1%-3% from prior view flat-3% which reflects strong close-in demand; HA cuts its Q3 RASM view to flat to down 2%, having previously seen down 1.5% to up 1.5%, as a result of service disruptions, passenger cancellations and booking interruptions (lowers year capacity as well); DAL reaffirms Q3 EPS guidance and sad Aug capacity rose 3.5% and traffic rose 3.6%

· Oil services stocks pressured early after HAL and FRAC offer weaker guidance; HAL said it sees 8c-10c share Q3 impact from Permian slowdown, due to pipeline constraints, and slowness in Middle East are more than expected; FRAC also cut its guidance in 8K guiding Q3 revs $545M-$555M, below the prior $565M-$590M view; note SLB noted a soft frac market thus far in 3Q on Tuesday – group pressured on guidance

· Medical equipment and devices; Barclay’s sector call on life science tools as they downgraded MYGN to underweight (shares at 18-year high), downgrade HOLX to equal-weight (cautious around the near-term outlook for Hologic’s Diagnostics Segment) and upgrade PKI to equal-weight; while initiate BIO with EW and $345 tgt as they take more selective approach

· Healthcare services and providers; HQY reported its F2Q19 results slightly ahead of consensus with a $3M raise to FY revenue guidance, driven by strong performance in Custodial and Interchange revenue, but shares slipped despite better results (HQY up 24% since last report); EXAS tgt raised to $100 at Cowen and raising sales estimates on deeper dive into the PFE Cologuard co-promotion deal that effectively doubles the Cologuard detailing effort; in hospitals, Morgan Stanley said while hospitals may continue to rally on better comps in 2H18 they face “limits to cost-cutting strategies as organic topline growth remains a challenge – raise tgt on HCA to $124 from $115, UHS to $134 from $122

        Stock GAINERS

· CNP +2%; upgraded to overweight at JPMorgan as now model the impact of CNP’s pending acquisition of Vectren and see an attractive outlook for the proforma company

· COUP +6%; after posting stronger than expected 2Q, driven by 39% subscription rev growth and raised guidance across the board

· TSRO +13%; rises as initiates the second stage in its open-label JASPER study assessing PARP inhibitor ZEJULA (rucaparib) plus its PD-1 inhibitor, TSR-042, for the first-line treatment of non-small cell lung cancer

· VRA +14%; Q2 earnings estimates beat and offered upbeat guidance, driven by a higher-than-expected gross margin rate thanks to reduced clearance, improved full-price selling, savings on freight and shipping and better-than-expected SG&A expense


· ADT -6%; after announcing less than 9 months following the company’s IPO, ADT announced that CEO Tim Whall will retire

· BAYRY -3%; lowered its year EPS view to between EUR5.70 and EUR5.90, compared with a restated 2017 figure of EUR6.64 a share to reflect the Monsanto acquisition and the divestment of several businesses; did raise 2018 sales to more than EUR39B vs. prior EU35B

· CAL -9%; Q2 EPS missed by a penny and a slight miss on sales at $706.6M as Famous continued to post higher comps & Brand Portfolio sales also grew, but kids shoes relatively weak

· HAL -4%; said it sees 8c-10c share Q3 impact from Permian slowdown, due to pipeline constraints, and slowness in Middle East are more than expected

· HSGX -68%; after saying its Phase 3 clinical trial of NeoCart did not meet the primary endpoint of a significant improvement in pain and function in a dual threshold responder analysis

· RH -7%; reported revenues were below expectations while delivered another impressive quarter of y/y earnings growth and raised its FY18 earnings guidance for the third time (though reduced its full-year outlook)

· RHI -5%; after Goldman Sachs downgraded to sell from neutral on signs of a maturing cyclical recovery that puts a damper on the firm’s view of the staffing company’s earnings growth over the next two to three years

· SGMO -22%; following results of phase 1/2 gene editing trial; on the heels of updated data from a Phase 1/2 clinical trial, CHAMPIONS, evaluating zinc finger nuclease gene editing candidate SB-913 in patients with mucopolysaccharidosis type II

· TSLA -4%; as trades to lowest levels since early June

· WDAY -10%; exceeded Q2 expectations and provided better than expected guidance and cash flow topped expectations (shares slipped as stock was at 52-week high into print – likely profit taking)


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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