Mid-Morning Look: February 04, 2019

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Mid-Morning Look

Monday, February 04, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-58.34

0.23%

25,009

S&P 500

-0.98

0.04%

2,705

Nasdaq

44.04

0.61%

7,307

Russell 2000

3.38

0.22%

1,505

 

 

U.S. equities open the week mixed with the Nasdaq Composite rising early, topping the 7,300 level ahead of Google earnings tonight while weakness in healthcare and energy drag the Dow and S&P lower. Stocks are coming off strong gains in January as the Dow and Nasdaq posted their sixth straight weekly gains, and the S&P 500 racked up its fifth gain in six weeks while also scoring its largest one-month increase since 1987. Earnings were quiet today, though CLX shares jump on better results, while oil prices slip and gold retreats as the dollar bounces. There were also a handful of M&A deal announcements this morning (more below). U.S. Treasury prices edge lower, pushing the two-year yield up 2 bps to 2.71% and the 10-year yield higher by 3 bps to 2.72%. A big week of earnings, economic data, Fed speakers and State of the Union by President Trump potential market moving catalysts, while markets also keep a watchful eye on any trade related headlines with China.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar is off to a strong start this week vs. major currencies after having slipped last week given the softer tone from the FOMC regarding future rate hikes, though stronger economic data continues to support the greenback; the safe haven Japanese yen rises over 0.55% at 110.15 – highest since late December

·     Commodity prices are mostly lower amid the rebound in the dollar; oil prices take a breather after a strong January (up 18%) and gains late last week, while gold pulls back after touching multi-month highs last week on the dovish Fed. WTI futures hit the highest level since November this morning, with a barrel for March delivery rising as high as $55.75 before sliding as the recent rally has been driven by political uncertainty, and OPEC cuts

·     Treasury prices struggle early as yields bounce, with the 10-year up more than 3 bps to 2.725% ahead of several speeches from senior Federal Reserve officials after the U.S. central bank recently signaled it would pursue a more patient path when deciding on further rate move; the 10-year yield up at 2.52%

 

Economic Data

·     Factory Goods Orders for November fall (-0.6%), below the expected rise of 0.3%, while Factory orders for Oct. unrevised at -2.1%; New orders ex-defense for Nov. fall 1.1% after falling 0.6% in Oct.; Capital goods non-defense ex aircraft new orders for Nov. fall 0.6% after rising 0.5% in Oct.

 

 

Macro

Up/Down

Last

 

WTI Crude

-1.62

53.64

Brent

-1.15

61.60

Gold

-4.30

1,317.80

EUR/USD

-0.0021

1.1436

JPY/USD

0.53

110.03

10-Year Note

0.034

2.725%

 

 

Sector Movers Today

·     Internet; GOOGL the last of the FAANG stocks to report, with results due after the close tonight; TWTR positive mention at Baird ahead of earnings saying they are expecting revenues toward the high end of implied guidance and believe TWTR audience growth could surprise to the upside, boosted modestly by elections; ANGI reinstated buy at Goldman Sachs

·     Semiconductors; ON Q4 EPS beat by 5c while guides Q1 revs modestly below consensus views; XLNX was removed from Goldman Sach’s Conviction List while maintaining a Buy rating, noting that the stock is up 51% since it was added to the Conviction List on January 5, 2018; MXWL to be bought by TSLA for $4.75 per share, a 55% premium to Friday’s closing price in deal valued at about $217M https://on.mktw.net/2RAsdMx ; Yesterday, the SIA announced December monthly sales of $36.2 billion, a MoM decrease of 9%, below the average December MoM increase of 4% due to lower DRAM, Flash, and microprocessor sales

·     Biotech movers; ICPT upgraded to Strong Buy at Raymond James and raising price target to $184 heading into Phase 3 REGENERATE data for Ocaliva in NASH (expected in February); HALO signs a global collaboration and license agreement with ARGX granting the latter non-exclusive rights to use its ENHANZE drug delivery technology to develop a range of product formulations for current and future offerings; BHVN advances migraine candidate BHV-3500

·     Media & Telecom movers; GCI said its board has unanimously rejected MNG Enterprises Inc.’s hostile buyout bid for the newspaper publisher of $12 a share as it believes the bid is not credible, and not in the best interest of shareholders; LEXEA disclosed in a regulatory filing that a member of EXPE made a proposal in which Expedia would acquire Liberty Expedia on Feb. 1 in a stock swap; MTCH initiated sell and $45 tgt at Goldman Sachs saying although the long-term outlook is promising, we see MTCH’s valuation as high relative to its growth; SFLY reinstated sell and $40 tgt at Goldman Sachs

 

Stock GAINERS

·     CLX +6%; Q2 results beat, helped by better gross margins of 43.7% which topped the Bloomberg estimate of 42.2% and expanded 70bps from year ago level

·     ELLI +8%; after DealReporter late Friday said the co is said to explore a sale is triggering assessments of how much the mortgage software company may be worth

·     ICPT +2%; upgraded to Strong Buy at Raymond James and raising price target to $184 heading into Phase 3 REGENERATE data for Ocaliva in NASH (expected in February);

·     LEXEA +2%; disclosed in a regulatory filing that a member of EXPE made a proposal in which Expedia would acquire Liberty Expedia on Feb. 1 in a stock swap

·     MXWL +50% ; to be bought by TSLA for $4.75 per share, a 55% premium to Friday’s closing price in deal valued at about $217M https://on.mktw.net/2RAsdMx

·     PZZA +11%; said New York-based investment firm Starboard Value LP made a $200M investment, with an option to make an additional $50M investment. https://on.mktw.net/2S8gbz7

·     SONO +7%; after JPM earlier floated the maker of smart speakers as a good “strategic fit” for Apple. “Sonos would give Apple access to high income households to play catch up with Amazon and Google in the home,” they said

·     SYY +4%; posted better-than-expected profit for Q2 as sales rose to $14.8B from $14.4B, matching consensus while sales at the company’s U.S. foodservice operations rose 4.2% to $10.1B

·     ULTI +19%; to be bought for $331.50 per share by an investor group led by Hellman & in an all cash deal in a deal that represents a value of about $11 billion https://on.mktw.net/2t4BmU3

 

Stock LAGGARDS

·     ALKS -4%; announced that it received a Complete Response Letter from the U.S. FDA regarding its New Drug Application for ALKS 5461 for the adjunctive treatment of major depressive disorder

·     ALXN -2%; Q4 EPS handily topped views ($2.14 vs. $1.82) on better revs of $1.13B while 2019 EPS view is well ahead of consensus though rev guidance short of views

·     GCI -4%; after its board has unanimously rejected MNG Enterprises Inc.’s hostile buyout bid for the newspaper publisher of $12 a share as it believes the bid is not credible, and not in the best interest of shareholders

·     MTCH -1%; initiated sell and $45 tgt at Goldman Sachs saying although the long-term outlook is promising, we see MTCH’s valuation as high relative to its growth

·     OKTA -1%; downgraded at KeyBanc following the run-up in shares and on valuation

·     ON -2%; reported in-line 4Q18 top-line results, but worse 1Q19 guidance as macro weakness (particularly in China) weighed.

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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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