Mid-Morning Look: January 23, 2019

Scott GreenDaily Market Report

Mid-Morning Look

Wednesday, January 23, 19

Index

Up/Down

%

Last

 

DJ Industrials

125.74

0.52%

24,530

S&P 500

3.51

0.11%

2,635

Nasdaq

7.69

0.11%

7,030

Russell 2000

6.67

0.46%

1,464

 

 

U.S. equities rise to start the day, paring some of yesterday’s slowing global growth concerns (after weaker China GDP data and lower growth view from the IMF) as a round of strong earnings results from Dow components IBM, UTX and PG are helping boost markets early. The earnings/guidance helped overshadow the ongoing concerns related to trade and the government shutdown. In other news, card space active as SYF shares jumped over 10% as posted stronger-than-expected Q4 financial results along with several updates about its relationship with Walmart. Markets also with small hope of a possible resolution to the gov’t shutdown as the Senate is expected to vote Thursday on two separate bills – one backed by President Trump that includes $5.7 billion for his border wall and another that would simply extend funding for shuttered agencies. Commodity prices lower initially, but perking up as the US dollar falls over the last 30-minutes vs. major counterparts.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar index (DXY) trading in a tight range, down slightly at the 96.25 level, trading up slightly vs. the yen, but slips vs. the euro and British Pound (which moved above $1.30 against the dollar as the opposition Labour party signaled it could support legislation to delay Britain’s departure from the EU)

·     Gold prices slip, falling over $4 and dropping below the $1,280 an ounce level after weeks of hovering (but not topping) the $1,300 an ounce level amid a dovish Fed and weaker stock markets globally amid slowing growth concerns.

·     Treasury market’s barely moving after jumping yesterday (sending yields lower), with the 10-year around the 2.76% with no major market moving economic data today (few 2nd tier reports).

·     Oil prices down slightly with weekly inventory data pushed out one day due to Monday’s holiday.

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.24

52.77

Brent

-0.20

61.30

Gold

-4.60

1,278.90

EUR/USD

0.0005

1.1366

JPY/USD

0.44

109.81

10-Year Note

0.002

2.761%

 

 

Sector Movers Today

·     Auto sector; RBC Capital with several changes in auto/supplier sector – firm said global auto production is now estimated to fall 0.7% y/y in 2019, vs prior 0.4% and sees N.A., Europe, China – to post declines this year (firm downgraded ADNT, MTOR, DLPH while upped GTX); TSLA was also downgraded at RBC saying company seems to be more tactful with messaging which is a long-term positive, but means downward pressure to growth expectations. Overnight the European Union is prepared to hit 20 billion euros ($22.7 billion) of U.S. goods with tariffs should President Donald Trump follow through on a threat to impose duties on EU cars and auto parts.

·     Housing & Building Products; DHI was upgraded to buy and TOL downgraded to neutral at Mizuho as they remain constructive on housing and see favorable support dynamics for the Homebuilder sector, with mortgage rates at 6-month lows heading into the key spring selling season, favorable demand / GDP growth for 2019, and the stocks trading at / near book value. Raymond James downgraded CBPX to market perform and is cutting estimates (EXP, USG) for the wallboard manufacturers, this time in order to more properly account for bearish U.S. industry volume data from the Gypsum Association; LOW was cut to hold at Loop Capital following review of the macro drivers, Lowe’s current state of affairs, and the strategic changes by company

·     Pharma movers; MRK downgraded to market perform at BMO Capital for the first time in two years based on Merck’s over-dependence on Keytruda, the Street’s high expectations, and their views on upcoming competitor trials, believe the risk/reward in MRK is balanced here; TEVA was upgraded by both Piper (to neutral) and UBS (to buy) saying shares too cheap to ignore

 

Stock GAINERS

·     ARAY +14%; reported 2Q results which included 29% growth in gross orders driven by the first meaningful orders in China related to newly released licenses

·     CMCSA +5%; after Q4 EPS beat by 2c, raised its dividend and announced 4Q high-speed Internet subscribers +351,000 with smaller sub losses in 4Q video net change

·     IBM +8%; reported better revenues in the three important business units of Cognitive, GBS and Tech Services, particularly since FX was an incremental headwind/Q4 services signings were strong as well with guidance mixed

·     PG +4%; tops estimates on both lines of its FQ2 report and issues strong guidance/Q2 organic growth was up 4% in Q4 to top the consensus estimate for a 2.6% gain

·     SYF +9%; saved its card partnership with Sam’s Club, a deal threatened last year when WMT (Sam’s parent) said it would shift its co-brand and private-label portfolios to COF

·     TEVA +3%; upgraded by both Piper (to neutral) and UBS (to buy) saying shares are too cheap

·     UTX +4%; Q4 EPS of $1.95 and revs $18.04B well above consensus views benefiting from strong demand for aircraft parts, with strong year guidance

·     WAT +11%; after $4B share buyback, Q4 EPS beating by 23c on higher sales of $715M and a better FY EPS outlook of $9.20-$9.45 vs. est. $9.19

 

Stock LAGGARDS

·     COF -6%; with Q4 miss (core EPS $1.87, below consensus $2.39)

·     DOX -7%; after being named a new short idea by Spruce Point saying has about 25%-50% downside to $30-$45/share, according to the report

·     KMB -3%; reported quarterly profit that missed views amid rising material costs, while revs beat/its year profit outlook of $6.50-$6.70 missed the $6.79 estimate 

·     PTCT -9%; as 6.72M share Spot Secondary priced at $30.20

·     QUOT -14%; as lowers Q4 revenue view to $106.5M-$107.5M from $115.0M-$120.0 and also lowered FY18 revenue view

·     TSE -9%; cuts Q4 EPS/full-year EPS views saying rapidly declining feedstocks prices, particularly in the latter half of Q4, are expected to result in an unfavorable pre-tax net timing impact

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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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