Mid-Morning Look: February 28, 2019

Auto PostDaily Market Report

Mid-Morning Look

Thursday, February 28, 2019

Index

Up/Down

%

Last

 

DJ Industrials

9.09

0.03%

25,994

S&P 500

-3.12

0.12%

2,789

Nasdaq

-21.68

0.29%

7,532

Russell 2000

-7.55

0.48%

1,573

 

 

U.S. equities opened to the downside as geopolitical fears (North Korea summit, Pakistan/India tensions), ongoing trade concerns (with China, EU) and weaker China manufacturing data overshadowed a stronger-than-expected GDP print in the US in Q4 (reported at 2.6% topping the 2.2% estimate) and a better manufacturing reading out of Chicago. Also adding to market concerns, a handful of disappointing earnings/guidance results that are pushing several stocks lower (BOX, BKNG, and HPQ among them). China’s manufacturing contracted again, with the PMI slipping to 49.2 this month, below consensus and holding under the 50 level while new export orders component slumped to 45.2 from 46.9 (the data weighed on commodity related prices and stocks). President Donald Trump walked away from his second summit with North Korea’s Kim Jong Un, who refused to walk away from his nuclear program. GDP data was reported at 2.6%, well above the 2.2% est. (and lower figures by some economists after recent weaker LEI and trade deficit figures). Regarding trade, recall yesterday U.S. Trade Representative Robert Lighthizer raised doubts about progress, telling lawmakers that “much still needs to be done” before the sides can reach an agreement

 

Treasuries, Currencies and Commodities

·     Commodity prices are lower on the better economic data in the US, while weaker data out China (PMI manufacturing) disappoints; oil prices little changed while gold on track for its 4th straight day of declines; Treasury market’s fall as yields rise with the 10-year yield rising over 6 bps to around 2.71% and the 2-year yield up over 2.53%, while the dollar index (DXY) bounces broadly off overnight lows vs. other currencies given the strong GDP reading for Q4 and better Chicago PMI data (only 3 points off all-time high best reading above 67).

 

Economic Data

·     Strong view of the economy for Q4 as Gross domestic product (GDP) grew at a 2.6% annual pace in topping consensus of 2.2% (though some estimates had recently been revised lower). The U.S. had expanded at a robust 3.4% clip in Q3 and 4.2% in Q2. GDP ended up at 2.9% for the full year, matching 2015 as the biggest increase since the end of the 2007-2009 Great Recession.

·     Other parts of the GDP data showed personal consumption rose 2.8% in 4Q (vs. est. 3%) after rising 3.5% prior quarter, while the GDP price index rose 1.8% in 4Q after rising 1.8% prior quarter (vs. est. 1.7%) and core PCE q/q rose 1.7% in 4Q after rising 1.6% prior quarter (est. 1.6%)

·     Weekly Jobless Claims rose 8K to 225K, slightly above the 220K estimate while the prior week was revised to 217K from 216K; the 4-week moving avg. was at 229K, while continuing claims rose 79k to 1.805m in the week ending Feb. 16

·     Chicago PMI for February rises to 64.7 from 56.7 last month and above the 57.5 estimate as new orders, prices paid and employment all rose at a faster pace 9it was the highest reading since the end of 2017 and just 3-points off its all-time highs above 67)

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.09

56.85

Brent

-0.40

65.99

Gold

-2.80

1,318.40

EUR/USD

-0.0005

1.1364

JPY/USD

0.37

111.36

10-Year Note

0.061

2.71%

 

 

Sector Movers Today

·     Pharma movers; ENDP rises in specialty pharma after giving an initial 2019 Ebitda forecast of $1.24B-$1.34B vs. est. $1.32B; HZNP shares jumped in response its successful Phase 3 clinical trial, OPTIC, evaluating teprotumumab in patients with active thyroid eye disease (TED) as the study met the primary endpoint; RKDA rises as its new business unit, Arcadia Specialty Genomics, will focus on optimizing and standardizing cannabis plant content, quality, climate resiliency and yield; TGTX with positive results from a Phase 2b clinical trial, UNITY-NHL, evaluating umbralisib in patients with treatment-resistant non-Hodgkin lymphoma (NHL)/study met primary endpoint

·     Biotech movers; CELG shares declined while BMY rises after the company’s top shareholder (Wellington) said it was not supportive of BMY’s $74B deal to acquire the biotech company; separately, another large BMY holder, Starboard, says Celgene deal not in best interest of BMY shareholders; NVAX shares plunge as announces results from Prepare, a global Phase 3 clinical trial using ResVax, saying the trial did not meet primary objective; ICPT shares jumped after Q4 results as Ocaliva sales of $52.9M top consensus views though posts larger quarterly loss

·     Retailers; JCP reported an 8c EPS beat of 18cthough sales of $3.67B missed views while comp sales were slightly better; LB shares dropped as Q4 sales of $4.85B missed estimates and profit guidance for Q1 and the year fell short of consensus following weaker Victoria Secret results; CROX shares slipped after Q1 revenue of $280M-$290M fell short of the consensus $293.25M, overshadowing the beat on the top and bottom line for Q4; FIT shares fell after Q4 results topped views but Q1 and the full-year disappointed (sees Q1 EPS (24c) to (22c) on revs $250M-$268M vs. est. loss (16c)/$268M)

·     Consumer finance and lending; SQ shares active after top- and bottom-line beats in 4Q18, but management’s guidance for 1Q19 and FY19 mixed amid higher-than-expected spending/the deceleration in adj. revenue organic growth, decelerating GPV from large sellers, and muted FY guidance below consensus weighed on shares early; WU said it will sell its Speedpay unit for $750M in an all-cash deal to ACI Worldwide, with net proceeds of about $575M

 

Stock GAINERS

·     HAIN +7%; after being upgraded to overweight at JPMorgan based on increased confidence in HAIN’s ability to drive margin growth over the next few years (raised tgt to $20)

·     HZNP +25%; in response its successful Phase 3 clinical trial, OPTIC, evaluating teprotumumab in patients with active thyroid eye disease (TED) as the study met the primary endpoint

·     JD +8%; unexpected Q4 profit and Q1 revenue outlook is in-line from 118B yuan to 122B yuan compared to the 118.94B yuan consensus (annual active customer accounts increased to 305.3M)

·     MNST +12%; rally in beverage space as strong international sales drove better Q4 results and EPS beat driven by SG&A expense leverage offset by lower gross margin

·     RKDA +35%; as its new business unit, Arcadia Specialty Genomics, will focus on optimizing and standardizing cannabis plant content, quality, climate resiliency and yield

·     TGTX +16%; after positive results from a Phase 2b clinical trial, UNITY-NHL, evaluating umbralisib in patients with treatment-resistant non-Hodgkin lymphoma (NHL)/study met primary endpoint

·     TTOO +28%; as the FDA granted Breakthrough Device designation for its diagnostic panel T2Resistance Panel

·     UHS +5%; reported a slightly better-than-expected quarter with top-line, adjusted EBITDA and adjusted EPS beating consensus by +1%, +1%, + 2%, receptively

 

Stock LAGGARDS

·     AAOI -13%; as proposes $70M convertible senior note offering

·     BKNG -9%; downgraded by a few analysts after reported Q4’18 bookings essentially in-line and EPS above the Street but Q1’19 guidance was is below expectations (sees Q1 adjusted EPS $10.90-$11.20 vs. est. $12.78 and revs down 2% to flat YoY);

·     BOX -21%; after Q4 results disappoint and issued an outlook that was weaker than expected/miss on F4Q billings and a below consensus outlook for FY20 (sees FY20 adjusted EPS (3c)-1c on revs $700M-$704M below est. 3c/$733.5M)

·     CELG -9%; shares declined while BMY rises 2% after the company’s top shareholder (Wellington) said it was not supportive of BMY’s $74B deal to acquire the biotech company

·     CERN -3%; downgraded at Morgan Stanley as see risk to Cerner’s long-term growth trajectory as future opportunities rely on competitive market segments and new/unproven strategic initiatives

·     CWH -10%; after filing for a 15-day extension to file its annual report to the SEC due to the necessity to adjust the manner in which reserves related to the cancelation provisions of certain finance and insurance related offerings

·     FIT -12%; after Q4 results topped views but Q1 and the full-year disappointed (sees Q1 EPS (24c) to (22c) on revs $250M-$268M vs. est. loss (16c)/$268M)

·     HPQ -16%; after missing on 1Q net revenue and reported flat y/y printing net revenue, prompting a two-notch downgrade to underperform at Bank America as sees “too much volatility” in supplies growth, forecasts that appear too high, and a risk to incremental PC slowdown

·     SYNH -26%; after announcing the delay of 4Q:18 earnings report (expected today) and the delay of its 10-K filing by 15 days (Mizuho said remain on the sidelines until we receive more clarity into what the SEC concerns are with the company’s policies)

·     TDOC -6%; Q4 results came in ahead of consensus, while the ’19E revenue and EBITDA guide fell short of expectations as a result of a number of TDOC’s recent larger wins scheduled to launch mid-year as opposed to Jan 1

 

Syndicate

·     Alder Biopharmaceuticals (ALDR) 11.3M share Secondary priced at $11.50

·     Equinix (EQIX) 2.6M share Secondary priced at $416.00

·     Kaleido Biosciences (KLDO) 5M share IPO priced at $15.00

·     Kosmos (KOS) 50M share Block Trade priced at $6.58

·     Skyline (SKY) 10.8M share Spot Secondary priced at $20.46

_________________________________________________________________

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