Mid-Morning Look: November 08, 2018

Terrie AmengualDaily Market Report

Mid-Morning Look

Thursday, November 8, 2018

After surging yesterday and ending at the highs (major averages rose over 2% across the board), U.S. equities are little changed on Thursday, further digesting the mid-term election outcomes while awaiting commentary from the Fed later today at its policy meeting. There are no changes expected by the Fed, with no press conference either, though a rate hike is widely expected at the December meeting. The Dow Jones Industrial Average and the S&P 500 are each trying to extend their three day win streaks, an impressive surge that has helped push the averages above key technical resistance levels. Anxiety in the semiconductor chip space weighing on tech after cautious warnings from QCOM and MCHP (though these shares are higher). Housing stocks getting battered early after softer results from builder DHI and cautious outlook, while the 30-year fixed mortgage rate for week ended today rose to 4.94% from 4.83%, a new 8-year, which is also weighing on sentiment. Generic Pharma names slide after results from ENDP and PRGO disappoint while media stocks rally behind better earnings from NWSA, DISCA and ahead of DIS tonight. The dollar is higher, while commodity prices slide (oil on track for 8th straight day of declines). Another busy night of earnings upcoming before it begins to slow next week.

Treasuries, Currencies and Commodities

· In currency markets, the U.S. dollar edges higher, with the index up about 0.2% around 96.20, ahead of this afternoon’s Fed policy meeting (no press conference and no change expected); the euro little higher, while the buck rises vs. the yen, pound and Swedish krona

· Precious metals slump, on track to fall for a fourth time in five days as the U.S. dollar gained ahead of the latest policy update from the Federal Reserve; gold down around $1,225 an ounce

· Energy futures lower, riding an 8-day losing streak coming into today following another week of bearish inventory data as US crude and gasoline stockpiles rose by far more than expected; prices have failed to rally into this weekend’s gathering of OPEC ministers in Abu Dhabi

Economic Data

· Weekly Jobless Claims fell 1K to 214K, in-line with estimates while the prior week was revised up slightly to 215K; the 4-week moving avg. stood at 213.75K; continuing claims fell 8k to 1.623m in the week ending Oct. 27

· The 30-year fixed mortgage rate for week ended today rose to 4.94% from 4.83%, a new 8-year highs while the 15-year rate avg 4.33%, up from 4.23% a week earlier

· The delinquency rate for mortgage loans on 1-to-4 unit residential properties rose to 4.47% in the third quarter from 4.36% the prior quarter

Sector Movers Today

· Retailers; LB Oct. comp sales rose 4%, topping the 0.4% estimate with Victoria’s Secret comp sales flat, better than the down 4.2% est and better Bath & Body Works comp sales of up +11%; CROX rises after Q3 results easily surpassed consensus sales estimates as E-commerce sales jetted up 23.2% during the quarter, while wholesales sales were up 9.3% and retail comparable store sales rose 15.0%; COST Comparable sales were up 10.4% for U.S., 2.4% for Canada and up 8.6% for total company; ULTA raises low end of year comp sales view to 7%-8% from 6%-8%; SBH Q4 results better than expected though sees year comp sales flat

· Consumer Staples; MNST Q3 earnings and sales topped consensus but shares slipped as the company revealed and energy drink dispute with KO on its conference call; BREW shares slipped after Q3 sales missed estimates on lower shipments, with in-line earnings; Hershey Trust sold 4.5M shares of HSY at $107 per share; PYX plunges as 2Q revs declined 12% to $394.9M YoY due to a decrease in volumes mainly attributable to the timing of shipments, unfavorable comps and a strong U.S. dollar while Q2 gross profit decreased 29% to $49.2M; ADM upgraded at Argus based on the company’s recent strong performance and expectations for full-year improvement; KDP results featured organic sales growth in all segments, margin expansion and debt reduction

· Specialty pharma stocks fall, led by weakness in ENDP after 3Q beat and raise was pressured by weaker gross margins/Mizuho said 3Q beat on new launches and lower tax while phase 3 data for CCH Cosmetic in cellulite was below reports from a Phase 2b study; PRGO also falls on results as Q3 EPS beat/sales missed and guided year EPS and sales below views citing revised expectation for RX segment (comes after better results from TEVA, BHC, MNK recently)

· Chemicals; ALB Q3 earnings topped expectations due in part to price hikes, but results were hurt by unanticipated production problems/says unexpected shutdowns at three of its lithium manufacturing sites resulted in volume shortfalls during the quarter; KRO shares fell after 3Q EPS missed lowest estimates due to lower titanium dioxide volumes; DWDP said it is targeting 3%-5% organic revenue growth in 2018-21

· Industrial & Machinery; weakness in agricultural machinery early with CAT and AGCO lower; MTZ will replace UNFI in the S&P MidCap 400; FLS among a top S&P gainer early after its top and bottom line earnings beat consensus; SPR was upgraded to buy at Bank America saying it has navigated several challenges better than expected & by 3Q18 SPR has made up all delivery delays occurring in 2018 YTD; HRI 3Q results and full-year forecast both topped expectations, with the company flagging improved pricing helped by strong market demand

       Stock GAINERS

· ARRS +11%; agreed to be acquired by COMM in deal valued at about $7.4B including debt paying $31.75 per share https://on.mktw.net/2Ds8E6F

· CARG +14%; rises as posted beat and raise with upside coming from U.S. Marketplace Subscriptions; CVNA also rises in online car sales as revenue beat (+137% y/y growth);

· CYBR +17%; reported stronger than expected 3Q results across the board and margins outperformed as well/total revenue grew 31% YoY and license revenue accelerated up 12% QoQ

· FLS +9%; among a top S&P gainer early after its top and bottom line earnings beat consensus

· HRI +10%; raised its full-year adjusted Ebitda view, citing the continued robust market demand along with HRI’s improved operating efficiencies

· LB +2%; as Oct. comp sales rose 4%, topping the 0.4% estimate with Victoria’s Secret comp sales flat, better than the down 4.2% est and better Bath & Body Works comp sales of up +11%

· SBH +20%; Q4 results better than expected though sees year comp sales flat

· TRIP +18%; reported mixed Q3’18 results with revenue below consensus and EBITDA above the Street/revenue per hotel shopper grew 5% y/y

Stock LAGGARDS

· CTRP -17%; as Q3 results beat EPS and revenue estimates with a 20% Y/Y revenue growth to $1.37B but guides Q4 revenue growth at 15% to 20% Y/Y compared to the 17.4% est.

· DHI -7%; results shy of expectations as demand slows; sees Q1 revs $3.3B-$3.5B vs. est. $3.66B; says rising prices weighing on housing demand

· MNST -7%; Q3 earnings and sales topped consensus but shares slipped as the company revealed and energy drink dispute with KO on its conference call

· PYX -17%; as 2Q revs declined 12% to $394.9M YoY due to a decrease in volumes mainly attributable to the timing of shipments, unfavorable comparisons, and a strong U.S. dollar while Q2 gross profit decreased 29% to $49.2M

· QCOM -6%; warned that revenues in the December quarter could fall as it faces slower demand from China and the impact of its modems being left out of the latest iPhones

· ROKU -17%; beat on top and bottom line with analysts generally positive after results/one analyst noted shortfall in platform revenue

· SQ -7%; quarterly results beat but issued weaker-than-expected earnings guidance for Q4

· VYGR -5%; after getting an FDA addendum indicating that its planned Phase 2 study in Parkinson’s is viewed as an “early phase exploratory stud.”

· WYNN -12%; as strength in Macau helped the casino operator post upbeat Q3 revenues but that was overshadowed by the company’s warning of a slowdown in its biggest market Macau since Golden Week in October

· ZAYO -24%; plunges as bookings were $7.3M, down from $8M last quarter; churn remained elevated at 1.2%. Organic growth slowed to 2%, from 3% LQ and 5% in FY3Q18

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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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