Mid-Morning Look: January 15, 2019

Scott GreenDaily Market Report

Mid-Morning Look

Tuesday, January 15, 19

Index

Up/Down

%

Last

DJ Industrials

32.40

0.14%

23,942

S&P 500

14.71

0.57%

2,597

Nasdaq

75.93

1.09%

6,981

Russell 2000

-0.63

0.04%

1,432

U.S. equities rise early, getting a boost from tech and materials after China said it would increase stimulus measures to combat slowing growth. The S&P 500 opened higher for the first time in 3 trading days, with the index topping the 2,600 level for the first time since December 17th. Financials mixed on earnings as JPM and WFC both slip after results following a good move yesterday in the sector. Economic data was mixed today as the Empire State manufacturing index fell 7.6 points to 3.9 in January, the lowest reading in more than a year, below the economist estimate of 10.0, but the Producer Price Index (PPI) core reading unexpectedly fell (-0.1%) vs. an expected 0.2% rise, reducing inflation fears and helping keep expectations on track for the FOMC to hold steady on not raising rates. Transports higher after DAL results in airline sector while managed care stocks benefit from Dow component UNH earnings beat and affirmed guidance for the year. The Nasdaq Composite pushed to highs of 7,005 (briefly), moving above its 50-day MA of 6,996- first move above the 50-day since early December. Now that earnings done for day (only UAL after the close tonight), attention turns to Europe with UK Brexit vote from Parliament later tonight.

Treasuries, Currencies and Commodities

·     In currency markets, the dollar touches session lows vs. the Canadian dollar as WTI crude oil rises; the British Pound slips early ahead of UK Brexit vote set for later today. The dollar rises vs. the Japanese yen while the euro slips vs. the buck. Treasury prices little changed after yields inched higher on Monday as the 10-yr under 2.71% and 30-yr 3.06%

·     Commodity prices; gold prices rose a third day, supported by softer-than-expected PPI inflation data in the U.S., but still unable to breach $1,300-an-ounce. Gold also a boost ahead of the Brexit vote later today as geopolitical uncertainty swirls globally. Oil prices jump in early action with prices moving up more than 1% ahead of inventory data tonight.

Economic Data

·     Producer prices (PPI) posted the biggest decline in December in five months, falling (-0.2%) vs. est. (-0.1%) as the overall gauge declined more than forecast amid lower oil prices, signaling potential inflation pressures in the economy are contained. Excluding food and energy, core PPI fell an unexpected (-0.1%) vs. est. for a 0.2% rise. On an annual basis, core producer-price gains held steady at 2.7% — missing forecasts for 2.9% — while the broad gauge rose 2.5%, also unchanged from the prior reading.

·     The Dec Empire State manufacturing index fell 7.6 points to 3.9 in January, the lowest reading in more than a year, below the economist estimate of 10.0. The headline index has fallen a cumulative 18 points since November (last month was revised to 11.5 from 10.9)

 

Macro

Up/Down

Last

WTI Crude

1.27

51.77

Brent

1.19

60.18

Gold

1.40

1,292.70

EUR/USD

-0.0033

1.1435

JPY/USD

0.38

108.54

10-Year Note

-0.006

2.704%

Sector Movers Today

·     Bank movers; JPM Q4 EPS missed by over 20c on revs $26.8B vs. est. $26.9B while Q4 provisions for credit losses high at $1.55B/similar to Citi and Jefferies, FICC sales and trading weak at $1.86B below the $2.29B Bloomberg estimate; WFC Q4 EPS of $1.21 beats consensus estimate of $1.20 vs. $1.13 in Q3 and $1.16 in the year-ago quarter as reflects growth in loans and deposits; credit performance remained strong; effective income tax rate was lower vs. Q3; Charge-Offs jump from $680MM to $721, highest since Q1; SNV Q4 EPS missed by 1c on $13M in charge-offs; FRC shares rise early as earnings and revs beat despite higher charge-offs and provisions

·     Monthly Master Trust credit card data: 1) JPM December net credit losses 2.35% vs. 2.26% last month while reports December delinquencies 1.17% vs. 1.19% last month; 2) SYF December charge-off rate 4.86% vs. 4.64% last month and the 30-plus day delinquencies 2.87% vs. 2.91% last month; 3) DFS charge-offs (NCOs) rise to 3.41% vs. 3.24% MoM while Dec delinquencies 2.43%, unchanged from November; 4) ADS December net charge offs 5.4% vs. 5.5% last month and Dec delinquency rate 5.7% vs. 5.7% last month

·     Chemicals/Materials sector; lithium stocks ALB and LTHM downgraded to neutral from buy at Nomura as expect price data points to surprise negatively in coming months, although they see ALB’s and LTHM’s own ASP’s doing better than the overall market. These data points could drive ALB and LTHM trading multiples lower; coatings space active after SHW guided FY prelim. EPS about $18.53 below prior guidance of $19.05-$19.25 and est. $19.11 while prelim consolidated net sales were up about 2% y/y vs. prior guidance of mid-single digit increase

·     Metals & Materials; most metals are rising today as China pledged further tax cuts and loan issuance in the country beat expectations. China’s PBOC cut the Reserve Requirement Ratio (RRR) rate, and plans to monetary policy more forward-looking, flexible and targeted, Reuters reported (steels, aluminum, copper names edge higher)

Stock GAINERS

·     APRN +22%; said it expects to be profitable on adjusted EBITDA basis

·     ARRY +1%; on positive late-stage data on triplet therapy for certain type of colorectal cancer/Piper said reports impressive BEACON Overall survival of 15.3 months at ASCO-GI

·     BGFV +10%; as sees FY18 EPS (10c)-(8c) vs. est. loss (10c) on revs $987.6M vs. est. 982.85M; same store sales decreased 2.7% for the fiscal 2018 full year

·     EW +8%; agreed to settle all outstanding patent disputes with BSX in all venues/Edwards made a one-time payment to Boston Scientific of $180M, no further royalties will be owed by either party

·     FRC +8%; shares rise early as earnings and revs beat despite higher charge-offs and provisions

·     INCY +5%; added to Americas Conviction List at Goldman Sachs and raise tgt to $111 saying at current level provides pipeline and M&A optionality in the context of a solid commercial franchise driven by Jakafi

·     NFLX +5%; is raising its U.S. prices by 13%-18%, as the price of the most popular plan will be increased to $13 per month from $11 per month

·     PLAY +2%; raises FY18 net income to $112M-$114M from $106M-$113M and raises FY19 revenue view to $1.259B-$1.263B from $1.243B-$1.255B

·     VHC +26%; won an appeals court ruling that could mean hundreds of millions of dollars in patent royalties after a years-long battle with AAPL over secure communications

Stock LAGGARDS

·     ALNY -4%; as 5M share Spot Secondary priced at $77.50

·     CVS -1%; after WMT said to leave CVS Health Corp.’s network that administers drug benefits in a dispute over costs that could roil the business of filling prescriptions

·     DAL -; said unit revenue, a measure for airlines’ pricing power, is expected to be flat to up two percent, due to impacts from the timing of Easter, increasing FX-headwinds and govt’ shutdown

·     EIX -4%; downgraded at Bank America to underperform as the expected PG&E bankruptcy filing highlights a continually challenging operating environment for California utilities

·     JPM -1%; Q4 EPS missed by over 20c on revs $26.8B vs. est. $26.9B while Q4 provisions for credit losses high at $1.55B/similar to Citi and Jefferies, FICC sales and trading weak at $1.86B below the $2.29B Bloomberg estimate

·     PCG -26%; as analysts throw in the towel, over five downgrades the last few days on recent news to file for bankruptcy following the $30B in liabilities from California wildfires

·     SHW -5%; as FY prelim. EPS about $18.53 below prior guidance of $19.05-$19.25 and est. $19.11

·     TLRY 10%; as 2018 IPO lock-up period ends today; note on July 15 had come out with an initial price of $17 a share

_________________________________________________________________

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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