Mid-Morning Look: January 22, 2019

Scott GreenDaily Market Report

Mid-Morning Look

Tuesday, January 22, 19

Index

Up/Down

%

Last

 

DJ Industrials

-166.46

0.66%

24,542

S&P 500

-24.14

0.90%

2,646

Nasdaq

-77.25

1.08%

7,079

Russell 2000

-19.42

1.31%

1,463

 

 

U.S. equities open the abbreviated holiday week lower after the International Monetary Fund lowered its global growth forecast and China reported downbeat economic data (GDP) as U.S. stocks take a pause after four straight weeks of gains (and current 4-day win streak). Industrials lead losses early following a weaker outlook from SWK as well as mixed commentary from others ahead of a busy week of earnings. Financials slip for the first time in over two weeks, while energy slides on HAL earnings. The partial U.S. government shutdown rolls into its 32nd day with no agreement on the horizon as the two parties remain far apart on wall funding issue for Mexican border. Weaker than expected existing home sales data for December also weighs on market sentiment early, falling to lowest levels in 3-years. The dollar is mixed, slipping off earlier highs but up vs. the Canadian dollar on lower oil. Gold prices dip a little while Treasury prices gain on the weaker start for stocks, with yields dropping across the board (the 10-year yield dips below 2.75% from 2.78% late last week. Regarding Brexit, the European Union said it’s still waiting for Theresa May to come up with something new to break the stalemate.

 

Economic Data

·     Existing-Home Sales for December fell (-6.4%) to a 4.99M rate, below the Bloomberg est. of 5.24M while November was revised to 5.33M from 5.32M; there was 3.7 months’ supply in Dec. vs. 3.9 in November and 4.3 months’ supply seasonally adjusted in Dec. vs. 4.0 in Nov. seasonally adjusted; inventory fell 10.9% to 1.55M homes; median home price rose 2.9% YoY to $253,600

 

 

Macro

Up/Down

Last

 

WTI Crude

-1.85

51.95

Brent

-2.05

60.65

Gold

-1.50

1,281.10

EUR/USD

-0.0005

1.136

JPY/USD

-0.25

109.41

10-Year Note

-0.036

2.75%

 

 

Sector Movers Today

·     Retailers; several rating changes in retail space today as Goldman Sachs downgraded TIF to neutral (tgt to $104 from $136) citing increasing evidence of a toughening macro environment for luxury goods demand; also at Goldman, GPS was downgraded to sell on the belief that a more aggressive portfolio rationalization at Gap brand will prove to be insufficient to reinvigorate the business while upgraded UAA to conviction buy list citing positive margin trends. At Cowen, NKE was upgraded to outperform and raise tgt to $90 as views Nike’s gross margin improvement and speed initiatives as key catalysts to near-term and multiyear upside to margin while firm downgraded PVH to Market Perform and cut tgt to $119 saying it suffers from consensus long bias and multiyear growth estimates appear lofty; PETS shares fall as FQ3 results that missed consensus on both the top and bottom-line while mgmt called out the competitive landscape and continued aggressive and discounted pricing; BJ was upgraded to outperform at Wells Fargo

·     Bank movers; the XLF ETF slips for first day in 12-days; UBS shares slipped after the Swiss bank’s Q4 EPS and revenue falls short of consensus estimates and the lender sees geopolitical tensions affecting Q1 client activity; FITB Q4 adjusted EPS of 69c beat by 5c and said remains on track for NorthStar targets on ROTCE, ROA, and efficiency ratio/Q4 net interest income of $1.09B rose 4% from $1.05B in Q3 and up 13% from the year-ago quarter; net interest margin of 3.29% improves from 3.23% in Q3; STT was downgraded to neutral at Goldman Sachs given accelerating pressures across STT’s core customer base and think risks to fee growth remain; other earnings results from FNB, MBFI, ONB – tonight expected from: AMTD, COF, CSFL, FBK, FMBI, GSBC, HBNC, HOPE, LTXB, NAVI, RNST, SFNC, TBK, TRST, UCBI, UCFC, WSFS, WTFC, ZION

·     Housing & Building Products; SWK shares dropped after Q4 EPS/revs narrowly beat consensus but forecast year profit of $8.45-$8.65, below the $8.80 estimate; homebuilders were active after monthly existing home sales data showed the lowest figures in around 3-years, falling (-6.4%) to a 4.99M rate, below the Bloomberg est. of 5.24M (shares of builders KBH, TOL, LEN as well as home improvement retail LOW, HD slipped early)

·     Metals & Materials; BHP iron ore production guidance has been maintained following a weaker quarter (-5.8% QoQ) due to the train derailment event in November; ABX reported prelim FY 2018 gold production of 4.53M oz., in line with company guidance of 4.5M-5M oz., and full-year gold sales of 4.54M oz; BG issued a profit warning blaming problems in Brazil where its soybean and sugar businesses have been hit by falling prices

·     Steel sector; STLD Q4 EPS of $1.31 beat estimates by 10c on slight miss to revs and Ebitda;; in research, Jefferies downgraded US Steel (X) to hold saying poor Q4 earnings and Q1 guides will begin to reflect the extent of recent steel margin weakness; ATI dropped after 4Q EPS missed estimates and the company said it expected a negative impact in 2019 for both of its units due to retirement benefit expenses

 

Stock GAINERS

·     EBAY +8%; as Elliott Management Corp., who owns more than 4% of shares, sent a letter to the board of EBay outlining steps it says are “urgently needed” to boost its value

·     FITB +2%; Q4 adjusted EPS of 69c beat by 5c Q4 net interest income of $1.09B rose 4% from $1.05B in Q3 and up 13% from the year-ago quarter

·     MDWD +34%; after reporting its NexoBrid Phase 3 study for eschar removal of severe thermal burns met primary and all secondary endpoints

·     PCG +13%; on news it has lined up $5.5B in debtor-in-possession financing from JPMorgan Chase, Bank of America, Barclays and Citigroup, according to an SEC filing

 

Stock LAGGARDS

·     ALXN -4%; after the European Patent Office voted unfavorably on its recently filed formulation patents for Soliris, which Stifel said is an incremental negative for the stock.

·     ARNC -17%; says it is no longer pursuing a sale of the company as it did not receive a proposal for a transaction that would be in best interests of shareholders

·     BG -2%; issued a profit warning blaming problems in Brazil where its soybean and sugar businesses have been hit by falling prices

·     CRSP -11%; downgraded to sell at Citigroup and slashed tgt to a Street low of $21 from $28 as believe CRSP’s near-term valuation driver and lead program in related blood disorders substantially lags more advanced competitors

·     EDIT -20%; falls as announces interim CEO after current President and CEO Bosley said will step down effective March 1st

·     JNJ -1%; Q4 EPS and sales topped consensus while predicted slower sales growth next year despite beating analysts’ expectations to close 2018

·     MO -5%; downgraded to underweight at Morgan Stanley and tgt cut to street-low $45 from $54 based on view of accelerated cigarette industry volume declines, a deceleration in EPS growth

·     PETS -6%; FQ3 results that missed consensus on both the top and bottom-line while mgmt called out the competitive landscape and continued aggressive and discounted pricing

·     SWK -14%; shares dropped after Q4 EPS/revs narrowly beat consensus but forecast year profit of $8.45-$8.65, below the $8.80 estimate

·     UBS -5%; after Q4 EPS and revenue falls short of consensus estimates and the lender sees geopolitical tensions affecting Q1 client activity

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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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