Monday, September 24, 2018
U.S. stocks slipped in early trading, pulling back from all-time record highs late last week for the S&P 500 index and Dow Industrials, after U.S. tariffs on $200B worth of Chinese goods went into effect overnight, prompting China to launch retaliatory tariffs on $60B worth of U.S. products and cancel talks with the U.S. which had been scheduled for this week. European markets down as well while the Hang Seng declined over 1.5% while Japan’s Nikkei and China’s Shanghai Composite were closed on holiday. Outside of trade, the FOMC will hold a two-day policy meeting starting Tuesday, with economists forecasting another rate hike. Consumer discretionary and tech shares led the retreat, while energy shares gained along with oil prices as OPEC maintains production. Healthcare sector also outperforms. M&A activity keeping stocks well bid this morning, as CMCSA shares slide after outbidding FOXA for Sky PLC in $38B offer, in music space, Pandora acquired by SIRI for over $3B, and a big tie-up in the gold mining space as GOLD and ABX for $18B gold mining giant. The dollar is broadly lower, while Treasury yields inch higher ahead of the FOMC this week.
Treasuries, Currencies and Commodities
· In currency markets, the dollar slipped and euro advanced (touched highs 1.185 before paring gains) after ECB President Mario strengthened his message on inflation from that of a few weeks ago, saying he sees a “relatively vigorous” pickup in underlying euro-area inflation, signaling that the ECB is well on track to raise interest rates late next year. The UK Sterling edged slowly back up towards $1.32 on Monday, calming after falling the most in day last Friday after fears the Brexit from the EU is not going well after UK PM May comments.
· Precious metals bounce given the pullback in the dollar while Energy futures surged, with Brent trading to its best levels in over 4-years after major energy producers (OPEC) declined to commit to increasing crude output this weekend at its meeting in Algiers to address expected supply disruptions (note last week, WTI crude advanced 2.6%). OPEC and non-OPEC members delivered no formal plan to boost output to offset an estimated 2 million barrels a day of oil that will be lost due to U.S. sanctions on Iran’s exports set to take effect Nov. 4
· Treasury markets slip as yields bounce after ECB Draghi’s comments on inflation. Market also prepares for busy week of supply with over $250B on the auction block, including $106B in short/intermediate dated notes; the yield on the 10-year up at 3.07%
Sector Movers Today
· Energy stocks (APA, EOG, NFX, HFC) were among the top gainers this morning as oil prices jumped across the board (WTI crude and Brent at 4-year highs) after OPEC and non-OPEC members delivered no formal plan to boost output to offset an estimated 2 million barrels a day of oil that will be lost due to U.S. sanctions on Iran’s exports set to take effect Nov. 4
· Biotech movers; SRPT FDA’s decision to lift a clinical hold for its early-stage gene therapy trial in Duchenne muscular dystrophy (DMD) is in line with expectations; ANAB slips after topline results from a Phase 2a clinical trial evaluating IL-33 inhibitor etokimab in patients with severe eosinophilic asthma; NKTR, BTAI expands ongoing research collaboration into a new clinical partnership; EPZM said the FDA has lifted partial clinical hold that paused U.S.-based enrollment of new patients in its tazemetostat clinical trials; NITE price tgt raised by several analysts after co reports positive proof of concept data from dose escalation study in XIRIUS trial; ALXN Soliris shows treatment effect in late-stage rare CNS disorder; AGTC upgraded at Wells Fargo
· Medical equipment and devices; 52-week highs for EW, ABT, HUM, PFE, BSX, TMO; ABT shares active after a study showed that its MitraClip device cut the length of hospital stays and led to longer lives for heart-failure patients who were suffering from reverse blood flow through their mitral valves; TMO tgt raised to $275 at Barclay’s; DGX announced it has acquired ReproSource, a national leader in specialty fertility diagnostic services; BIO tgt raised to $420 and added to franchise picks list at Jefferies saying its droplet digital PCR (ddPCR) franchise is under-appreciated by investors
· Metals & Materials; gold miners active after GOLD and ABX agreed to an all-share merger that will create an $18.3 billion gold-mining giant. Under the terms of the deal, each Randgold shareholder will receive 6.1280 new Barrick shares for each Randgold share held and Barrick holders will own around 66.6% of the combined business – gold miners were active across the board amid the tie-up
· Restaurants; BMO Capital downgraded BLMN, CHUY, EAT all to market perform from outperform and downgraded EAT and TXRHto underperform from market perform as the firm said they expect decelerating industry trends beginning in 4Q18 as recent commodity deflation drives a widening food-at-home/food-away-from-home gap, likely creating valuation and earnings risk across the group
· ABT +3%; after a study showed that its MitraClip device cut the length of hospital stays and led to longer lives for heart-failure patients who were suffering from reverse blood flow through their mitral valves
· AMRN +285%; after its Vascepa, when taken as an add-on to cholesterol-lowering statin therapy, reduced the number of major cardiovascular events such as heart attack or stroke in about 25% of patients in the study. The topline results from the Vascepa cardiovascular outcomes trial, REDUCE-IT, met its primary endpoint
· APA +3%; as energy stocks outperform given the surge in oil prices today
· EPZM +19%; said the FDA has lifted partial clinical hold that paused U.S.-based enrollment of new patients in its tazemetostat clinical trials
· GOLD +6%; and ABX agreed to an all-share merger that will create an $18.3 billion gold-mining giant. GOLD shareholder will receive 6.1280 new ABX shares
· P +6%; after SIRI agreed to acquire Pandora in a stock deal valued at $3.5B with an implied deal price $10.14 per share/SiriusXM reiterates 2018 guidance
· SYMC +5% after its audit committee said that after its audit committee completed its investigation, the company doesn’t expect a restatement of results.
· XON +30%; in response to its progress in developing a microbial platform to produce cannabinoids for medical use
· BILI -6%; Morgan Stanley downgraded the stock to equal weight from overweight and cut its price target to $11 from $13.50/also the Chinese game platform also has an IPO lockup expiring today
· CMCSA -8%; topped FOXA in a weekend auction for Sky PLC, winning the British broadcaster with a $38.8B bid that ends a month’s long takeover battle. Comcast’s offer of £17.28 a share, or about $22.59 a share, surpassed Fox’s highest bid of £15.67 after three rounds of bidding Saturday, in a rare auction held by British regulators.
· DAL -3%; amid early weakness in transports, specifically airlines as oil prices spike
· GE -3%; shares extend recent declines, falling to lowest levels since July 2009
· KORS -5%; after reports is nearing an agreement to buy Gianni Versace SpA, Bloomberg said
· NTNX -7%; was downgraded to negative at Susquehanna while company also announced filing to sell 2.45M shares of common stock for holders
· PPG -3%; downgraded to neutral at Credit Suisse saying the ~15%+ rally in PPG shares since the June low of ~$100 share is justified, but in our view it has run its relative course
· TLRY -3% fell to lows of $97.12 before paring losses, more than 66% from its all-time high of $300 just mid-last week, as volatility in the cannabis sector continues
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.