Mid-Morning Look: February 11, 2019

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Mid-Morning Look

Monday, February 11, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-1.98

0.01%

25,104

S&P 500

2.72

0.10%

2,710

Nasdaq

19.39

0.27%

7,317

Russell 2000

3.81

0.25%

1,510

 

 

U.S. equities start the week off higher (but have since pared gains, slipped off best levels) ahead of expected high-level trade talks between Chinese vice Premier Liu He, Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer in Beijing on Thursday as they look to make progress after failed attempts prior (March 1st deadline to extend tariffs). Lower-level negotiations are set to begin Monday, but a resolution isn’t expected before a truce on tariffs expires in early March. Separately this week, lawmakers continue to negotiate a spending bill to prevent another partial government shutdown as President Trump gave a Feb 15th timeframe for Congress to provide the new bill that includes spending for the border wall. The Dow Industrial Average and Nasdaq Composite both come into the week riding 7-week winning streaks, but prices have slipped from early highs. Media stocks slide early, with mixed moves in tech while transports outperform behind gains in rails, car rental and airlines. Another busy week of earnings to focus on, but trade should dominate headlines. There were no major US economic data points to focus on today.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar surging amid weakness in rival currencies, with the euro falling below the 1.13 level for first time in 3 weeks, down -0.4% at 1.1276 while the dollar index approaches the 97 level; dollar higher across the board vs. Canadian dollar (on oil pullback), British Pound and Japanese yen as well as several emerging market currencies. Commodity prices are suffering following the further advance in the dollar as oil and gold both sink. Treasury prices drop as yields bounce (10-year at 2.65%) with stocks rising early. Nat gas prices are higher by about 10c to $2.681 mln Btu’s after plunging the last few weeks.

 

 

Macro

Up/Down

Last

 

WTI Crude

-1.17

51.55

Brent

-0.87

61.23

Gold

-6.50

1,312.00

EUR/USD

-0.0038

1.1284

JPY/USD

0.66

110.40

10-Year Note

0.022

2.655%

 

 

Sector Movers Today

·     Auto sector; TSLA was upgraded to buy at Canaccord Genuity and tgt raised to $450 from $330 as believe the last two quarters and recent guidance for Q1 have removed significant concerns for both production capability and profitability of the critical Model 3; tire maker GT was downgraded by two analysts (Argus and Longbow) as believes a supply/demand imbalance in the Americas will continue to limit Goodyear’s pricing power over the next several years; MPAA reported a revenue beat ($119.6M vs. $116M street) and slight EPS miss 35c vs. 38c est.)

·     Software movers; CVLT was downgraded to neutral at Piper citing unachievable consensus estimates for FY20 which calls for 11.5% growth in software license revenue, though the market is only growing 4.7%; EA adds to Friday’s 16% gains citing the surprise start to Apex Legends’ new Battle Royale (Fortnite competitor), upgraded at Bank America to buy with $110 tgt, while other analysts also raise tgt prices citing Apex strength; AYX was downgraded at Wedbush saying valuation isn’t enticing after the recent rally put shares near the $72 price target; AVYA falls as Q1 revenue of $738M below guidance of $750M-$775M (-1.9% Y/Y) saying was impacted by a few discrete items versus its outlook including the federal government shutdown

·     E&P sector; CHK on track for an 8th straight decline despite a bounce in nat gas prices today; KEG guided Q4 revenues between $115M-$120M vs. estimate of $125.8M, citing lower completion activity, primarily coiled tubing activity and rig completion activity in the Permian Basin and seasonal effects; In equipment and drillers; DO boosted spending even though it doesn’t expect deepwater-rig fees to recover until next year at the earliest; RIG added approximately $907M in contract backlog since its last report, bringing the company’s backlog to $12.2B

 

Stock GAINERS

·     CAR +6%; upgraded to buy at Goldman Sachs and lifts its price target to $35 as sees Avis as a better investment at current levels than HTZ

·     CSIQ +3%; was upgraded to neutral from sell at UBS and raise tgt to $23 from $14

·     EA +4%; adds to Friday’s 16% gains citing the surprise start to Apex Legends’ new Battle Royale (Fortnite competitor), upgraded at Bank America to buy with $110 tgt, while other analysts also raise tgt prices citing Apex strength

·     NUVA +14%; after the Financial Times reported late Friday that SNN has held talks to acquire NUVA in a deal that would be worth more than $3B. https://yhoo.it/2WRzlbv

·     QSR +2%; beats expectations for EPS while comp sales for Tim Horton’s and Burger King rise 1.9% and 1.7% respectively

·     RRC +4%; announces proved reserves increase 18% to 3.1 Tcfe from extensions, discoveries and additions, through drill bit driven by 3 Tcfe from the Marcellus Shale

·     TSLA +3%; upgraded to buy at Canaccord Genuity and tgt raised to $450 from $330 as believe the last two quarters and recent guidance for Q1 have removed significant concerns for both production capability and profitability of the critical Model 3

 

Stock LAGGARDS

·     ATVI and TTWO -2%; falling as EA outperforms following its surprise strong start to Apex Legends’ new Battle Royale

·     AVYA -12%; Q1 revenue of $738M below guidance of $750M-$775M (-1.9% Y/Y) saying was impacted by a few discrete items versus its outlook including the federal government shutdown

·     BBBY -3%; downgraded to sell at Loop Capital as believe recent stock price appreciation is unwarranted given mgmt much better-than-expected F2019 financial guidance is unrealistic

·     GT -2%; downgraded by two analysts (Argus and Longbow) as believes a supply/demand imbalance in the Americas will continue to limit Goodyear’s pricing power

·     L -6%; as Q4 was hurt by CNA cat losses, investment results; Q4 revenue of $3.29B vs.$3.56B a year ago

·     TOSBF -1%; is preparing to slash its operating profit forecast for the year through March to between $182M-$273M, about half the projection made in November, the Nikkei Asian Review’s reported

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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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