Market Review: February 25, 2019

Auto PostDaily Market Report

Closing Recap

Monday, February 25, 2019





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks finished the day higher, but pared gains late day, with major US averages rising after President Donald Trump noted substantial progress in the trade talks with China and will extend the deadline for the imposition of new tariffs (on $200B of goods) on the country beyond the current cut-off of March 1st. Stock gains were led by Financials, Industrials and healthcare, while defensive sectors such as Staples, and Utilities lagged. With only a few days left of trading in February, stocks are on pace for good returns yet again. According to Bloomberg, with three days left in February, the S&P 500 has posted a 3.7% for the month and is on track for back-to-back gains at the start of a year for just the 28th time since 1950. In all but two of the prior cases, the index rose over the next 10 months, with the advance averaging 14%. Healthcare got a boost following a few M&A deals (more below) while energy stocks dipped as WTI crude fell over 3% after President Trump tweeted oil prices are getting too high. President Trump also said he plans to meet China’s President Xi Jinping next month, while offering few specifics such as the date or how long he’s going to let the tariff deadline slide. Overseas regarding Brexit, European Council President Donald Tusk said a delay would be “rational” and that he discussed the consequences with U.K. Prime Minister Theresa May over the weekend.

Economic Data

·     Wholesale Inventories rose 1.1% in December to $661.8B vs. $654.7B in prior month (largest monthly gains since Oct 2013), well above the estimate for a 0.4% rise while wholesale sales fell (-1%) in December after falling (-1.2%) the prior month and vs. estimate (-0.3%)

·     January Chicago Fed national index -0.43 vs est. 0.10 while December was revised to 0.05 from 0.27; forty-six indicators deteriorated from December to January; 35 of the 85 monthly individual indicators made positive contributions, while 50 indicators affected the index negatively

·     Dallas Fed Manufacturing for Feb at 13.1, above the est. 4.7 and above the 1.0 reading in the prior month; six-month outlook at 17.7 vs 11.7 prior month



·     Commodity prices ended mostly lower, dragged down by energy prices, with WTI crude sliding $1.78 or 3.1% to settle at $55.48 per barrel (lowest since 2/14) while Brent dropped $2.36 to settle at $64.76 per barrel, falling after President Trump tweeted this morning that “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!” Prior to the “tweet” oil prices had been edging higher as both benchmarks (WTI and Brent) had been near multi-month highs amid apparent progress on U.S.-China trade talks, which buoyed commodities and other assets perceived as risky. Recall last week, WTI rose roughly 3% while Brent had gained 1.3%, its second weekly gain in a row. Gold prices slipped modestly late session, falling -$3.30 or 0.3% to settle at $1,329.50 an ounce, erasing earlier gains as the dollar mounted an afternoon rally.


Currencies & Treasuries

·     The U.S. dollar was mixed on Monday, falling late day vs. the British Pound and euro, while rising against the safe-haven Japanese yen as markets still very much watching the headlines over U.S.-China trade relations. The US dollar traded to a 1-week highs vs. the Japanese yen around the 111 level while the British pound gained late day after local news reports said that U.K. Labour Party leader Jeremy Corbyn said his party would either support or bring a parliamentary amendment proposing a second referendum on the U.K. leaving the European Union. The Brexit deadline is March 29, not even five weeks away and no deal has been struck yet. Prime Minister Theresa May has, meanwhile, said her Brexit deal, which was voted down in Parliament earlier this year, will be voted on again on March 12, only 17 days before the Brexit deadline

·     Treasury market’s slipped as U.S. stocks advance, with the 10-year yield rising back above 2.67% and the 2-year around 2.51% ahead of a busy week of economic data. The U.S. Treasury sold $40B in 2-year notes at a yield of 2.503% vs. 2.504% when issued prior with a bid-to-cover at 2.50 vs. 2.56 in prior auction and indirect bidders awarded 38.6% of auction (and 38.8% to primary dealers). The US Treasury sold $41B in 5-year notes at a yield of 2.489% vs. 2.491% when-issued prior, with the bid-to-cover (demand) at 2.40 vs. 2.41 prior auction and indirects bidders awarded 57.7% of the auction.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; CRI Q4 EPS and sales both topped consensus while guides year net sales to grow between 1% to 2% and a rise of adjusted diluted EPS between 4% and 6%; FL estimates raised at Credit Suisse for Q4 same-store sales growth to +6.0% from +4.2% ahead of the earnings report due out at the end of the week; ETSY earnings tonight after the close

·     Consumer Staples; KHC along with other food related stocks (GIS, K, CPB) remained pressured after KHC shares plunged last Friday on weaker earnings, lower guidance (along with individual issues for the company); LABL to be acquired by an affiliate of private equity firm Platinum Equity LLC for $50.00 in cash per share, in a transaction valued at $2.5B including the assumption of $1.5B of debt ; in restaurant sector, earnings expected tonight from FRGI, PBPB, and SHAK

·     Housing & Building Products; HD and LOW expected to report earnings this week in the home improvement retail sector; KBH was downgraded at Raymond James saying shares having rebounded 25% YTD to 1.4x our adjusted book value estimate, we feel this is an appropriate time to step back and evaluate the data as its starts to come in over the next few weeks; ETH discloses that written orders in FQ3 through President’s Day were up 5% Y/Y

·     Casino & Leisure movers; in boating space, BC was upgraded at JPMorgan following recent encouraging data points on the marine industry, macro backdrop, and BC-specific growth drivers, as see a more favorable setup to own BC in 2019; IMAX was downgraded at Canaccord to hold ahead of Q4 results, citing weak box office trends, particularly in China; towables were active (WGO, CWH, LCII, THO) after Bloomberg reported total RV shipments in January fell 40%



·     Energy stocks were mixed despite oil prices sliding on President Trump’s comments about oil prices being too high; NBR cuts quarterly dividend to 1c from 6c; KOS shares rise despite miss on EPS and revs earlier; in utilities, SunTrust raised tgts on AEE, AEP, CMS, CNP, DUK, EXC, PNM, SO, and XEL citing forward prices, spark spread, dark spread, and gas/coal spread trends; domestic electric consumption growth; ES downgraded to underperform from neutral at Bank America given dilution from the recent $2.5B equity raise



·     Financials; large cap banks outperformed led by WFC, JPM, C, MS and BAC; Bank America announced rebranding of its businesses as the WSJ reported the company will phase out the Merrill Lynch name from some of its businesses; PJC agrees to buy Weeden & Co. L.P., a broker-dealer focused on providing institutional clients with execution services, for upfront consideration of $42M/price consists of $24.5M in cash and $17.5M in restricted and retention stock; CBOE was upgraded to overweight at JPMorgan saying while trading volumes remain awful in flagship products such as VIX Futures and Options and have been softening in SPX, they see leading indicators on the rise. In consumer finance; PYPL was downgraded at Buckingham Research saying the risk/reward profile for the stock looks balanced after a recent rally citing several rising fundamental concerns, and the potential for Venmo.



·     Pharma movers; CMTA agreed to be bought by Ipsen (IPN) in a deal valued at up to $1.31B as Ipsen said it would initially pay $25 a share in cash for Clementia, and a further $6 a share contingent on Palovarotene drug receiving FDA approval ; AZN said that its heart drug Brilinta met primary endpoint at a phase 3 clinical trial, showing a statistically significant reduction in major adverse cardiovascular events compared to aspirin alone; MNK shares edged higher ahead of earnings tomorrow morning

·     Biotech movers; RHHBY entered a definitive merger agreement to acquire ONCE for $114.50 per share and that the deal is expected to close in Q2 (shares of QURE, CRSP, BMRN, EDIT among those moving in sympathy); FOLD said the FDA granted Breakthrough Therapy Designation to AT-GAA for the treatment of late onset Pompe disease; BOLD was upgraded to buy and $40 tgt at Chardan on (1) potential 2H19 visibility of Audentes as a credible player in large orphan indications, e.g. Pompe disease, and (2) the ongoing re-pricing of post-PoC AAV-based gene therapy (GT) companies; CRSP also rises as the company and development partner VRTX announce that the first beta thalassemia patient has been dosed with CTX001, a gene therapy based on the CRISPR/Cas9 gene editing approach

·     Devices, healthcare services and providers; GE agreed to sell its biotechnology business to DHR for $21 billion in cash, moving to pay down debt by parting with one of its fastest growing businesses.; EHTH announced revisions to 4Q18 EPS (upward) and 2019 EPS guidance (downward) due to changes in tax rate and the inadvertent exclusion of D&


Industrials & Materials

·     Industrial & Machinery; GE shares jumped as it agreed to sell its biotechnology business to DHR for $21 billion in cash, moving to pay down debt by parting with one of its fastest growing businesses. ; TEX shares active as Q4 EPS and revenue topped consensus and guided year EPS $3.60-$4.20 vs. est. $3.41; MDR posted a surprise Q4 loss that came in far short of analyst estimates saying results were hurt by several significant non-recurring charges, including a $2.2B goodwill impairment charge

·     Metals & Materials; GOLD made a hostile bid for NEM in a stock deal that would value Newmont at nearly $18 billion/under terms of the bid, Newmont shareholders would receive 2.5694 Barrick shares for each Newmont share they own (valued at $33.50) Reuters reported China’s imports of U.S. soybeans nearly doubled in January from the previous month as cargoes booked after a Sino-U.S. trade truce arrived in the world’s top oilseed importer, according to Chinese customs data (China brought in 135,814 tonnes of U.S. soybeans in January, up 95 percent from 69,298 tonnes in December)


Technology, Media & Telecom

·     Internet; Chinese ADRs rising after the tariff delay from President Trump, sending Shanghai index up over 5% last night: HUYA, JD, BABA, BIDU among those moving higher; SNAP tops $10 level for the first time since early September; TWTR said Evan Williams has decided to step down from the board at the end of the month after 13 years

·     Semiconductors; the Philly semi index (SOX) rises as high as 1,390 level, up over 1.7% to best levels since early October on hopes of trade deal with China keeping sentiment going; STM and MTSI are set to expand their production of next-generation semiconductors to support the development of 5G networks, the companies said; INFN was upgraded to buy at MKM Holdings saying the company’s commentary about new bookings were better than we expected

·     Software movers; MSFT was named to best ideas list at Wedbush; WDAY shares active after William Blair said Workday closed a an HR deal with CAT (100k employees) and a recent deal with UPS (450K employees); PLAN rises after posting a narrower-than-expected Q4 EPS loss and beat on revenue, posting record results

·     Telecom, Hardware & Component news; Huawei Technologies unveiled this weekend a $2,600 folding smartphone which it said was primed for next generation 5G mobile connections; WIN shares plunged after saying to prepare bankruptcy after losing default case recently


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