Mid-Morning Look: January 31, 2019

Auto PostDaily Market Report

Mid-Morning Look

Thursday, January 31, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-42.99

0.17%

24,971

S&P 500

17.46

0.65%

2,698

Nasdaq

91.78

1.28%

7,274

Russell 2000

9.00

0.61%

1,495

 

 

U.S. equities are mixed with tech rallying behind better FB earnings results and commentary while the Dow is falling after Microsoft, Visa and DowDuPont lag. All beat their earnings estimates but trade lower on revenue misses and/or cautious commentary. European markets are mixed, while Asia markets advanced and Canadian stocks jump for a sixth-straight session as global commodities prices rose. Oil, gold, silver, and copper all gained on Thursday. A further fall in Treasury yields (10-year down at 2.64% and 2-year below 2.505) is gaining traction after the dovish Fed commentary yesterday when they kept rates unchanged and said they would be “patient.” Gold stocks spiked following the FOMC’s rate decision. Software stocks jump behind NOW results while payment companies mixed after earnings from Visa, MA and PYPL. Industrials get a boost from GE after revenue beat while defense companies (NOC, RTN) slip early after weaker outlooks. Tonight earnings from AMZN. President Trump is expected to meet with China’s Vice Premier Liu He in the Oval Office this afternoon as talks between senior officials began in Washington yesterday. In currency markets, the dollar index (DXY) remains little changed after falling sharply on Wednesday following a less hawkish Fed which supports risk-on attitude. Treasury yields extend recent declines as 10-year drops to 2.65% while commodity prices (gold and oil) both posting strong gains as gold tops best levels in over a year.

 

Economic Data

·     Weekly Jobless Claims rose 53k to 253K, topping the 215K estimate which marks the highest level for initial claims since Sept. 2017, when it was 254K (prior week revised to 200K from 199K); the 4-week moving avg. rises 5K to 220.25K in the week ending Jan. 26; actual, unadjusted, initial claims at 250.19K from 269.76K in prior week; continuing claims rose 69K to 1.782M

·     Employment Cost Index (ECI) for Q4 rose 0.7% vs est. up 0.8% while prior quarter ECI unrevised at 0.8%; ECI rose 2.9% y/y, most since Sept. 2008; Wages rose 0.6% q/q; up 3.1% y/y

·     New Home Sales for November jumped to 657K reading, up 16.9% MoM and handily topping the 570K estimate (prior month revised to 562K from 544K);

·     Chicago PMI report falls to 56.7 from 63.8 prior month and below the est. 61.5 as the Business barometer rose at a slower pace, signaling expansion while Prices paid unchanged, new orders rose at a slower pace, and employment rose at a faster pace

·     The 30-year fixed mortgage rate for week ended today rose to 4.46% from 4.45%, Freddie Mac said; 15-year rate avg 3.89%, up from 3.88% a week earlier

 

 

Macro

Up/Down

Last

 

WTI Crude

0.74

54.97

Brent

0.49

62.14

Gold

13.00

1,328.50

EUR/USD

0.0006

1.1485

JPY/USD

-0.31

108.73

10-Year Note

-0.032

2.643%

 

 

Sector Movers Today

·     Aerospace & Defense; the group was mixed yesterday, getting a jump from record numbers out of BA while GD shares fell on weak guidance; today, RTN Q4 EPS beat primarily driven by operational improvements and lower taxes primarily associated with tax reform and backlog at the end of Q4 was a record $42.4B while guided 2019 EPS $11.40-$11.60, missing analyst estimates of $11.72 and sales forecast $28.6B-to $29.1B missed $29B view; NOC also with weaker guidance for the year as forecast 2019 Mark-to-Market adjusted EPS forecast $18.50-$19, trailing estimate of $19.37 while its sales forecast of ~$34B was in-line; OSK was upgraded to buy at Bank America as the company’s higher EPS outlook bakes in excessively conservative assumptions, in their view as they raise estimates

·     Consumer finance and lending; Dow component Visa (V) reported solid headline numbers with revenues and EPS ahead of expectations but mkt focus was the slowdown in the closely-watched cross-border growth rate and the rate of credit volume growth which fell/Visa warned consumer spending could be crimped in the first three months of the year; PYPL shares fell after outlook miss, but CEO says Venmo has hit a ‘significant transition point; MA rises after Q4 adjusted EPS of $1.55 beats by 3c and Q4 net revenue of $3.8B, up 15% Y/Y, in line with consensus/Q4 adjusted operating margin 52.3% vs. 51.0% a year ago

·     Packaging; BERY is considering a cash offer for British packager RPC Group in a challenge to a 3.3 billion pound ($4.33 billion) bid from the U.S. Company’s former parent, Apollo Global. https://reut.rs/2Sfp9tS ; PKG delivered a modest Q4 beat and its Q1 guide was ahead of consensus as well; BLL Q4 results mixed as EPS missed by 1c on better sales of $2.8B while reaffirmed its 2019 Ebitda and FCF views

·     Housing & Building Products; housing stocks (KBH, LEN, TOL) and home improvement stocks (HD, LOW) rally initially after strong monthly New Home Sales data which rose 16.9% MoM to 657K reading for November; USCR downgraded to hold at SunTrust saying while management has built a best-in-class business, and valuation looks compelling after a challenging year, we see more headwinds on the horizon as new bookings will likely be lower margin as mix shifts; CBPX announced that its Buchanan, NY plant will be shut down throughout February due to equipment failure which Deutsche Bank estimate this will impact volume growth negatively by ~6.5%

·     Semiconductors; QCOM better December profitability and guided March roughly in line with consensus as handset unit softness is offset by higher ASPs/GMs/guide is better than the low expectations given the well-known handset and macro weakness; CRUS the latest in the Apple supply chain to issue weak guidance as Q4 sales were guided to $220M, well below consensus est of $275M; INTC named Robert Swan as CEO (Swan has been acting as interim chief executive for the past seven months); CREE trades to 52-week highs after earnings/guidance

·     Software movers; Dow component MSFT reported in-line results and unchanged FY19 guidance, though showed some cloud weakness; NOW rises after 4Q beat with solid performance across the platform; subscription revenue and subscription billings beat on a CC basis by 1% and 6%, respectively, with subscription revenue up 33% y/y (35% CC) and subscription billings up 38% y/y (40% CC), accelerating from 35% Qoq; WDAY rises after William Blair said recent channel work leads him to believe that Workday recently closed a core human resources deal with ACN/if correct, this would likely be a top 5 customer measured by headcount

 

Stock GAINERS

·     CHTR +14%; as EBTIDA beat ($4.16B vs cons $4.1B), and Net Adds broadly in-line. Internet beat at 289k residential vs cons 257k and Video essentially in-line with residential (36k) vs cons (33k)

·     FB +13%; reported revenue & EPS that were 3% and 9% above consensus & guided 2019 revenue growth above consensus while MAUs/DAUs were essentially in line

·     GE +15%; Q4 revenue topped estimates, rising 5.4% Y/Y to $33.3B (beating estimates by $1.07B) and announced a settlement of $1.5 billion with the Department of Justice, related to its old subprime mortgage business

·     NOW +7%; 4Q beat with solid performance across the platform; subscription revenue and subscription billings beat on a CC basis by 1% and 6%, respectively, with subscription revenue up 33% y/y (35% CC) and subscription billings up 38% y/y (40% CC), accelerating from 35% Qoq

·     UPS +6%; posted mixed Q4 results as Q4 Eps beat by 4c on in-line revs of $19.96B while the midpoint of its profit guidance range is below estimates (sees FY19 EPS of $7.45 to $7.75 vs. $7.71 consensus)

·     VLO +6%; as reported better-than-expected Q4 earnings thanks to pipeline projects that tapped some of the cheapest oil sources in North America

·     WDAY +4% after William Blair said recent channel work leads him to believe that Workday recently closed a core human resources deal with ACN/if correct, this would likely be a top 5 customer measured by headcount.

 

Stock LAGGARDS

·     CBPX -2%; announced that its Buchanan, NY plant will be shut down throughout February due to equipment failure which Deutsche estimate this will impact volume growth negatively by ~6.5%

·     CRUS -5%; the latest in the Apple supply chain to issue weak guidance as Q4 sales were guided to $220M, well below consensus est of $275M

·     DWDP -7%; reported Q4 revenues flat, hurt by lower customer demand for its appliances and automotive products as well as the drop in oil prices while warned that it expects operating earnings in 2019 will be “slightly down” and sales will be  “about flat;”

·     HRB -6%; downgraded to sell at Goldman Sachs and cut tgt to $22 as believe U.S. tax reform structurally alters the tax preparation landscape

·     MEOH -2%; reported 4Q earnings with a major miss (EPS of $1.15 vs. est. $1.88) due to lower realized price, higher costs, and lower produced methanol volumes

·     TSCO -6%; year guidance for full-year revenue of $8.31B to $8.46B and EPS of $4.60-$4.75 missed the mi-point of $8.42B/$4.71 consensus

·     TSLA -3%; CFO departs/came in with mixed results as revenues beat street expectations, while the bottom line came in a bit short

·     X -3%; reported a big Q4 EBITDA miss and provided Q1:19 EBITDA guidance well below consensus/on a QoQ basis, EBITDA is guided 58% lower to $225MM

div[class*=WordSection]>p {line-height: inherit !important;}div[class*=WordSection] a:not([href]) {color: inherit !important;}

_________________________________________________________________

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.

Live Trading

Open an Account

Paper Trading

Register