Mid-Morning Look: January 16, 2019

Scott GreenDaily Market Report

Mid-Morning Look

Wednesday, January 16, 19

Index

Up/Down

%

Last

 

DJ Industrials

146.52

0.61%

24,212

S&P 500

10.67

0.41%

2,620

Nasdaq

31.22

0.44%

7,055

Russell 2000

14.75

1.02%

1,459

 

 

U.S. equities with a nice start to the day, as the S&P 500 and Dow Industrials get a boost following better banking results this morning out of Goldman and Bank America, while transports rally behind better results from United (UAL) – two sectors that had slipped recently on weaker results. Markets also ignoring the partial US government shutdown which rolls into its 26th day. S&P 500 and Dow Industrial Average trade to 1-month highs and NASDAQ rising, as all major indices topping key psychologically levels (2,600, 24,000 and 7,000 respectively) for the first time in a month yesterday. Despite the rally in stocks, there still remains trade concerns with China (though positive commentary last week from both sides), and the government shutdown/border wall fight. Fears of the Fed maintaining its rate hike cycle in early 2019 has eased following recent “tamer” PPI inflation data as well as commentary from Fed “hawk” George yesterday who said now “might be a good time to pause” in the rate-hike cycle to allow the Federal Reserve to get its bearings. Earnings kick into full gear next week though still some big baking earnings coming over the next few days. Dollar, oil flat, Treasury yields rising.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar index (DXY) little changed around the 96 level having strengthened vs. the euro and pound the last few days, while the Canadian dollar advances as oil prices continue to march higher, off 18-month lows just a month ago.

·     Commodity prices are little changed with WTI crude holding above $52 per barrel (now more than $10 off December lows), while gold prices edge higher on Brexit uncertainty, but still unable to breach the $1,300 an ounce level

·     Treasury market’s slide as yields bounce off recent monthly lows as the 10-yr up around 3 bps at 2.74% and 30-yr near 3.10% (1 month highs); shorter-term 2-yr 2.56%, 3-yr 2.54% and 5-yr 2.56%. Bonds seeing pullback after recent spike as investors rotate back into riskier assets with major averages pushing higher over the last 2-weeks

 

Economic Data

·     Import Prices for December fell (-1%) MoM vs. est. down (-1.3%) after falling (-1.9%) in November; Import prices fell 0.6% y/y in December; import prices ex-fuels unchanged after falling 0.3% in November; Export prices fell (-0.6%) after falling (-0.8%) in Nov.

·     Monthly Retail Sales and Business Inventories data postponed due to gov’t shutdown

·     U.S. Home Builders’ Confidence index (NAHB) in January rises to 58 vs 56 last month; present single family sales rise to 63 vs 61 last month; future single family sales rise to 64 vs 61 last month; prospective buyers traffic rises to 44 vs 43 last month

 

 

Macro

Up/Down

Last

 

WTI Crude

0.08

52.20

Brent

0.20

60.84

Gold

4.40

1,22.80

EUR/USD

-0.0014

1.1399

JPY/USD

0.19

108.87

10-Year Note

0.03

2.738%

 

 

Sector Movers Today

·     Regional banks: CMA said Q4 EPS of $1.95 beats by 8c while Q4 net interest income of $614M increases from $599M in Q3 and $545M a year ago; net interest margin of 3.70% improves from 3.60% in Q3 and 3.27% a year ago; FULT Q4 EPS misses the lowest analyst estimates as shares fell, while HAFC also drops following its earnings miss; PNC Q4 EPS of $2.75 missed by 5c on weaker NIM of 2.96% and higher provision for credit losses of $148M; SCHW with slight Q4 EPS beat as posts DARTS of 466K; USB Q4 EPS of $1.10 beats estimates by 4c, as total revenue of $5.82B up 3.9% as NII increased 4% on rising interest rates on assets, earning assets growth, and higher yields on reinvestment of securities, partially offset by higher rates on deposits and funding mix

·     Consumer finance and lending; Consumer finance stocks including NAVI and OMF were upgraded by JPMorgan to neutral from underweight on valuation ahead of 4Q results; NLY was upgraded to Overweight from Neutral at JPMorgan on their incrementally constructive outlook on rates -focused agency mortgage REITs, while downgraded SC to underweight on relative valuation

·     IT Hardware; Morgan Stanley downgraded the IT Hardware industry view to In-Line from Attractive, noting that hardware spending plans downticked more than any other technology category and across U.S. and European CIOs in the firm’s recent checks. Slowing growth makes it more difficult to own hardware-heavy data center stocks in the near-term, Downgraded HPE to Equal Weight and cut target to $15 from $21, and also downgraded NTAP to Underweight and cut target to $58 from $72, citing view that revenue growth is likely to slow materially. Has a preference for hardware stocks with a higher software mix, upgraded NTNX to overweight and raised price target to $58 from $57 and upgraded TDC to Overweight with raised tgt to $55

·     Auto sector; Ford (F) said its profits could improve this year despite expected flat global auto sales but added that it expects profits for 2018 will come in at the lower end of previous guidance; auto suppliers active after ADNT preliminary Q1 results missed estimates, and it flagged rising labor costs in Mexico and pressures from weaker global currencies for the year (guided Q1 revs $4.148B on Ebitda about $175M vs. est. $4.17B/$235M)

·     E&P sector; Barclays busy today as initiates FANG at overweight in large cap space and XEC at EW and APA at underweight/also upgraded CXO to OW, and downgraded DVN to EW. In small/midcap initiate SM at OW; downgrade CDEV and CPE saying the confluence of increased capital discipline, strong capital efficiency, and fortified balance sheets provide the foundation for improved returns and sustainable FCF, and support their Positive sector view

 

Stock GAINERS

·     BAC +6%; Q4 results topped expectations on both the top and bottom lines, despite continued sluggish growth in its loan portfolio and a rocky quarter

·     FDC +20%; as rival payments processor FISV agreed to buy the company in an all-stock deal that values the company at roughly $39B or $22.74 per share https://on.mktw.net/2RLUnbN (shares of ACIW, WP, GPN, WEX, FLT were among movers on the deal)

·     GS +6%; Q4 EPS of $6.04 easily topped ests of $4.30 as net interest income rose and operating expenses and income taxes declined (Q4 net interest income of $991M increased 16% from Q3 and 10% YoY while operating expenses of $5.15B fell 8% from Q3 and rose 9% YoY

·     UAL +7%; reported strong 4Q earnings, beating adjusted EPS number as results were driven by domestic unit revenue, up 6% YoY

·     WYNN +4%; positive mention at Stifel (raise tgt to $141) as continue to see a compelling long-term case to own shares based on diminished headline risks, continued Macau share gain

 

Stock LAGGARDS

·     ADNT -6%; following preliminary Q1 results that missed estimates, and after it flagged rising labor costs in Mexico and pressures from weaker global currencies for the year/guided Q1 revs $4.148B on Ebitda about $175M vs. est. $4.17B/$235M

·     APTX -71%; after phase 2 study of its treatment for painful diabetic peripheral neuropathy did not meet its primary endpoint

·     EA 3%; following news they are cancelling their open-world Star Wars game/weakness in video game space comes on the heels of the ATVI news last week

·     EFII 17%; preannounced negatively saying will miss both its sales & EPS estimates; sees Q4 EPS 45c-47c on revs $255M-$257M, below consensus of 60c/$280.71M as results were impacted by weakening economic conditions experienced across its direct businesses

·     ERJ -4%; lowers FY18 revenue view to approximately $5.1B from $5.4B-$5.9B (est. $5.51B); delivered 91 total executive jets in 2018

·     FISV -6%; slides after $38B purchase of FDA in payment processor sector

·     INCY 2%; a day after being added to conviction buy list at Goldman Sachs and tgt raised, INCY was downgraded to neutral at UBS citing the recent run-up (+36% since 12/24; +24% YTD) while company fundamentals remained unchanged

·     JWN -6%; reported Holiday sales post close saying FY EPS is tracking toward the low-end of plan and is no longer going to meet its target of operating margins inflecting higher this year

·     SNAP -9%; as CFO Tim Stone departs just 8-months into the job to pursue other opportunities/also said expects to report revenue and Adjusted EBITDA results that are “slightly favorable to the top end” of its previously reported quarterly guidance

 

Syndicate

·     Acceleron (XLRN) 5.35M share secondary priced at $43.00

·     Energizer (ENR) 4.1M share Secondary priced at $46.00

·     Everbridge (EVBG) 2.3M share Secondary priced at $55.25

·     Stemline (STML) 8.9M share Secondary priced at $9.00

_________________________________________________________________

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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