Mid-Morning Look: January 29, 2019

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Mid-Morning Look

Tuesday, January 29, 2019

Index

Up/Down

%

Last

 

DJ Industrials

76.31

0.28%

24,597

S&P 500

-2.71

0.10%

2,641

Nasdaq

-26.11

0.37%

7,059

Russell 2000

1.31

0.06%

1,474

 

 

U.S. equities open mixed as the Dow Industrial Average rallies behind better earnings results from MMM while the S&P 500 and Nasdaq open little changed ahead of a busy day of earnings (with many potential macro market moving catalysts this week as well). Industrials leading the gains early (ROK, PCAR, MMM, LLL, HRS) after investors applaud results/guidance, while tech slides. Investors await the start of a two-day Federal Reserve policy meeting and results on trade talks. Chinese trade officials arrived yesterday as two vice ministers will help pave the way for talks between Xi’s top aide Liu He, Robert Lighthizer and Steven Mnuchin Jan. 30-31st. Trade tensions remain high following the US filing charges against Huawei and its executive Meng Wanzhou with wire fraud, breaking Iran sanctions and IP theft ahead of the trade talks with China. Big day of earnings with AAPL reporting after the close tonight while fellow Dow components MMM, VZ and PFE active on results this morning. The FOMC also started its 2-day policy meeting today with results tomorrow – though no changes are expected at this time. The UK’s two financial regulators are negotiating agreements with European authorities so that they can continue to share information in the event of a no-deal Brexit. Consumer confidence tumbles again in January due to government shutdown. Oil prices rebound amid sanctions on Venezuela as gold prices jump.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar index steady at 95.75 ahead of the Fed meeting and trade talks, while Treasury prices rise and yields fall. Markets also awaiting the schedule for economic data after the government shutdown ended last Friday (one-month of results need to be released at some point over the next week or so). Commodity prices rise, led by a gain in oil after falling to 2-week lows yesterday, oil futures rebounded after the U.S. Treasury sanctioned Venezuela’s oil firm PdVSA, raising the risk of disruptions to oil supply. Gold prices jump again, moving further above the $1,300 an ounce level on expectations the Fed will be more “dovish” in its commentary following tomorrow’s meeting results.

 

Economic Data

·     Consumer Confidence for January fell to 120.2 from 126.6 last month and est. 124.0; the present situation confidence fell to 169.6 vs 169.9 last month and consumer confidence expectations fell to 87.3 vs 97.7 last month

·     US home prices continued to ease in November with 20 major markets recording their slowest ascent in nearly four years, according to the latest S&P CoreLogic Case-Shiller report

 

 

Macro

Up/Down

Last

 

WTI Crude

1.70

53.69

Brent

1.62

61.55

Gold

6.30

1,315.60

EUR/USD

-0.0006

1.1422

JPY/USD

0.08

109.43

10-Year Note

-0.014

2.73%

 

 

Sector Movers Today

·     Software movers; German software giant SAP shares fell after earnings and outlook and plans restructuring after signs of weakness emerge; Raymond James upgraded positive on software as maintain Strong Buy ratings on MSFT and NOW, large cap secular winners in Cloud and infrastructure SaaS and upgrade underappreciated small cap growth stories RPD and CBLK to Strong Buy while downgrade analytics vendor AYX on valuation/upgrade CDN vendor LLNW to Market Perform; ATVI was downgraded to Perform at Oppenheimer due to lack of confidence in consecutive year over year sales growth in 2019-2020, management and studio transitions take time, near-term headwinds

·     Semiconductors; semi-equipment stocks AMAT and LRCX were upgraded to outperform at RBC Capital as think expectations are now reset after the Lam Research conference call combined with Apple’s pre-announcement; NVDA was upgraded to buy at UBS as believe the ~20% miss to FQ4:19 (Jan ’19) revenue and -15% stock move finally sets the stage for a new positive revision cycle starting this summer, while Needham and Morgan Stanley downgraded shares; CREE was downgraded at JMP Securities; IDTI and RMBS also active on earnings

·     Housing & Building Products; WHR with mixed Q4 results as EPS beat and revs missed while guided FY19 adjusted EPS $14.00-$15.00 well below the consensus $15.92/said margins took 200bps hit in year; furniture maker ETH reported in-line Q2 EPS of 46c while sales of $197.2M missed estimates as operating income falls; in housing, PHM reported in-line Q4 earnings but posted an 11% drop in orders (below ests. between 3%-5%) and said it is not giving 2019 guidance because of housing uncertainty

·     Casino & Leisure movers; in leisure space, HOG shares fell as reported 4Q EPS and sales that trailed estimates and 4Q motorcycle shipments of 43,489, which fell short of its forecast given in Oct. for total shipments of 45,800-50,800; PII posted Q4 EPS beat and in-line revs but year guidance of $6.00-$6.25 trailed street estimate $6.95; in lodging, MGP 17M share Spot Secondary priced at $29.25; in guns (AOBC, RGR), the FBI NICS background check data showed a decline of 7.8% for December, slightly better than the declines of 10-11% in the previous three months

·     Aerospace & Defense; LLL shares rose after Q4 EPS and sales topped consensus; LMT Q4 EPS mostly in-line on better sales of $14.41B while mid-point of year EPS guidance ($19.15-$19.45) misses the $19.35 estimate; HRS Q2 EPS/sales beat and boosted its views for revenue, adjusted EPS and free cash flow outlooks; WWD jumps as 1Q topped analyst estimates and FY 2019 guidance met what the Street was expecting

·     Materials; CE shares slipped after saying it expects weak Q4 demand in Asia to continue through the first half of this year, joining a growing chorus of U.S. companies that see Chinese demand slowing; POL Q4 EPS/sales topped estimates while said saw softening conditions in certain end markets and geographies; LPX estimates lowered at Longbow given the continued downward pressure on OSB prices in 4Q and weaker housing demand.

 

Stock GAINERS

·     GLW +8%; core Q4 EPS and sales topped consensus as guides FY19 display glass market volume up by mid-single digit percentage

·     MMM +3%; posted Q4 EPS and revenue above consensus views ($2.31/$7.95B vs. est. $2.28/$7.86B)/lower its year EPS outlook to $10.45-$10.90 from prior view $10.60-$11.05

·     ROK +10%; posted Q2 EPS/rev beat and reaffirmed year outlook

·     SANM +21%; reported Q1 earnings and sales that exceeded the most optimistic of analyst estimates while guidance for the following quarter also topped views

·     VYGR +36%; in reaction to its out-licensing deal with NBIX under which the latter will own development and commercialization rights to gene therapy programs for Parkinson’s disease

·     XRX +8%; among top S&P performers early after mixed Q4 results (EPS beat/revs miss) and guidance tops estimates ($3.70-$3.80 vs. $3.53 est.)

 

Stock LAGGARDS

·     EAT -9%; in-line Q2 EPS view on better sales and guidance – said revs guidance primarily driven by comparable restaurant sales for fiscal 2019 that are now are estimated to be up 1.75% to 2.5%

·     GME -25%; terminated efforts to pursue a sale of the company, given “the lack of available financing on terms that would be commercially acceptable to a prospective acquirer.”

·     HOG -7%; reported 4Q EPS and sales that trailed estimates and 4Q motorcycle shipments of 43,489, which fell short of its forecast given in Oct. for total shipments of 45,800-50,800

·     SQ -6%; downgraded to underperform at Raymond James saying its organic growth likely peaked in Q3, while growth in the “all-important subs and services line” is set to slow

·     VZ -3%; Q4 results beat EPS estimates but missed on revenue (55c vs. est. 47c) while postpaid wireless additions, 1.2M

·     WHR ; mixed Q4 results as EPS beat and revs missed while guided FY19 adjusted EPS $14.00-$15.00 well below the consensus $15.92/said margins took 200bps hit in year

 

Syndicate

·     Pulmatrix (PULM) 1.561M share Spot Secondary priced at 17c

·     MGM Growth (MGP) 17M share Spot Secondary priced at $29.25

·     Cancer Genetics (CGIX) 15.217M share Spot Secondary priced at 23c

·     Dynex Capital (DX) 7M share Spot Secondary priced at implied $5.90

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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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