Mid-Morning Look: September 13, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look

Thursday, September 13, 2018

U.S. equities surge to start the day, led by a fierce rebound in tech stocks, as the Nasdaq Composite jumps more than 1% amid a recovery in semiconductor stocks. The S&P 500 index is looking to make it a 4th straight day of gains as stocks rise broadly as CPI data showed U.S. inflation unexpectedly cooled in August (similar to yesterday’s PPI data), while central banks overseas issued policy in-line with market expectations. The Bank of England keeps rates unchanged at 0.75% (no change expected after raising rates last meeting). The European Central Bank also kept its benchmark interest rates unchanged. Commentary from the ECB and a Brexit report helped boost the euro and Pound respectively, as the U.S. dollar falls. Turkey’s central bank sharply increased its benchmark lending rate as it looks to stem a heavy decline this year in the lira. Hurricane Florence weakened to a Category 2, now classified as simply a hurricane rather than a major one but its forecast to deliver as much as 30 inches of rain raising major flood warnings. Markets pulled back from highs mid-morning after President Trump said in a tweet “The Wall Street Journal has it wrong, we are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing. We will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet?”

Treasuries, Currencies and Commodities

· In currency markets, the dollar falls broadly; the British pound surges this morning on new Brexit report, trading as high as 1.3124, fresh 6-week highs; the euro rises to highs of 1.17, its best level since the end of August on hawkish commentary from ECB Draghi after they kept rates unchanged (also said the euro-area economy is still solid enough to cope with global risks); the dollar advances vs. the safe-haven Japanese yen; bitcoin prices rebound around 3% to $6,500

· Commodity prices mixed with gold prices at highest levels in 2-weeks though oil prices edge lower after the recent push back above $70 per barrel yesterday on bullish weekly inventory data reports. An OPEC report hitting oil as the IEA said in its monthly report that crude oil output in OPEC climbed in August by 420,000 barrels a day, to average 32.63 million barrels a day.

· Treasury markets gain as yields fall from earlier highs after a second inflation report in as many days shows prices not rising as much as economists expect; the 2-yr yield falls back to 2.74% from earlier highs above 2.76% while the 10-yr yield stands at 2.955% after highs above 2.97% prior to the data

Economic Data

· Weekly Jobless Claims fell 1K to 204K, below last week’s upwardly revised 205K but below the 210K estimate; the 4-week moving avg. slipped by 2K to 208K; continuing claims fell 15k to 1.696m in the week ending Sept. 1

· Consumer price index (CPI) rose by 0.2% in August to mark the fifth straight increase, but came in below the 0.3% increase forecast by economists while the increase in the cost of living over the past 12 months slowed to 2.7% from a six-year high of 2.9% (first drop in the yearly rate since last fall). The core CPI inflation reading, which strips out food and energy edged up 0.1% last month, missing the 0.2% estimate while YoY core prices rose 2.2%, below the 2.4% estimate

Sector Movers Today

· Bank movers; GS looks to snap 11-day losing streak; ZION won its fight with the government to remove it from the list of systemically important financial institutions that are subject to heightened regulation. The Financial Stability Oversight Council announced it would grant Zions the waiver it requested; STIwas downgraded to neutral at Piper on concerns STI is getting ahead of itself; Fidelity said it will start two additional zero-expense-ratio mutual funds, stepping up its push to lure cost-conscious individual investors (shares of AMTD, SCHW, ETFC active)

· Chemicals; VNTR said it would not rebuild its Pori facility while also confirmed TiO2 prices are experiencing their normal H2 seasonal weakness and that input cost inflation (ores and energy) are tracking at the upper end of Q3 expectations – RBC downgraded VNTR on expectations of softer than expected TiO2 margins and significant amount of capex and spending…firm also lowered estimates on peer CC; AVY was upgraded to buy at Loop Capital

· Education sector; Citigroup downgrade the China after-school tutoring segment, as they believe the govt is launching another round of regulation. They maintain Buy on EDU given its non-K12 tutoring exposure (~55% of net profit) and attractive valuation, while downgrade TAL to Neutral, Puxin to Neutral/2H, and FEDU to sell and open Negative Catalyst Watches for these players

· Semiconductors; group looks to rebound from recent pullback on lower shipments guidance last week from KLAC and analysts getting overly cautious, especially on DRAM, memory, with several downgrades weighing of late (LRCX, MU, MXIM); QCOM was reinstated with an overweight and $95 tgt at Barclay’s (separately, QCOM initiates $16B accelerated share repurchase); many of the names that have fallen over the past week (INTC, MU, KLAC) rebounding while AMD continues its upward surge at new 12-year highs

· Retailers; TGT said it would hire 120,000 seasonal workers, 20% more than last year; OXM posted in line Q2 EPS on lighter revs though Q2 comp growth of +7% comps were the strongest since 1H15/also mid-point of year EPS view below estimates; TLRD Q2 comps beat consensus expectations while inventory declined 17%; FRED shares fell after 2Q comparable store sales down 3.5% vs 3.0% decline in the year-earlier period

       Stock GAINERS

· DVA +4%; upgraded to Neutral from Underweight at JPM as now believes is it much more likely that California Governor Brown will veto the recently passed SB1156

· NIO +16%; extends yesterday gains on second day of trading after IPO

· OXM ; posted in line Q2 EPS on lighter revs though Q2 comp growth of +7% comps were the strongest since 1H15/also mid-point of year EPS view below estimates

· PI +38%; stock rockets after internal audit completed and posts a smaller-than-expected Q2 loss per share and revenue beat while forecasts current-quarter revenue above estimates, narrower-than-expected loss (had delayed filing Q2 results/10-Q prior)

· QCOM +3%; was reinstated with an overweight and $95 tgt at Barclay’s (separately, QCOM initiates $16B accelerated share repurchase)

· TLRD +10%; Q2 comps beat consensus expectations while inventory declined 17%


· ACOR -12%; after the FDA delayed by three months a decision on its drug-device combination therapy, Inbrija, for Parkinson’s disease symptoms

· KR –8%; as reported sales growth that missed expectations and a quarterly drop in margins, while comp store sales of 1.6% missed the 1.8% estimate, while maintains year outlook

· MO -3%; as gives back some of yesterday’s gains in tobacco space

· PGNX -20%; after the cancer drug company said one of its imaging agents was not sensitive enough to detect prostate cancer in a clinical study

· PVTL -17% after the company delivered results and a forecast that were generally better than expected, and raised guidance though the software company missed on billings

· TXRH -1%; downgraded at BTIG to sell (4th analyst downgrade in a week)

· WAGE -14%; filed two 8Ks yesterday after the market close which disclosed: 1) the departure of Executive Chairman; 2) the reaffirmation of the previously stated impact of potential restatement on historical financial results


· Cision (CISN) 12M share Secondary priced at $16.00

· Floor & Decor (FND) 10M share Spot Secondary priced at $37.25

· Galapagos NV (GLPG) 2.575M share Spot Secondary priced at $116.50

· Hamilton Lane (HLNE) 2.88M share Spot Secondary priced at $47.75

· International Flavors (IFF) 11.516M share Secondary priced at $130.25

· Kornit Digital (KRNT) 1.42M share Block Trade priced at $20.75

· SemGroup (SEMG) 1.2M share Block Trade priced at $23.75

· Xenon Pharmaceuticals (XENE) 4.5M share Spot Secondary priced at $14.00


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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