Mid-Morning Look: March 06, 2019

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Mid-Morning Look

Wednesday, March 06, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-71.19

0.28%

25,735

S&P 500

-10.62

0.39%

2,778

Nasdaq

-44.46

0.59%

7,531

Russell 2000

-9.53

0.61%

1,558

 

 

U.S. equities drifting for a third straight day, and now failing for the sixth time in the last seven trading days, as markets eagerly await news on trade with China (expected by month end) or monetary policy to provide the market with a fresh catalyst (ECB meeting tomorrow). The pound slipped on speculation U.K. Prime Minister Theresa May doesn’t have enough votes to get her Brexit deal through Parliament next week, while the dollar down slightly after slightly weaker private payroll report and as the U.S. trade gap surged to $621B in 2018, its’ highest in a decade. Transports are currently lower, riding an 8-day losing streak coming into the day. Energy producers led losses on the S&P 500 Index as reports showed the U.S. trade deficit widened in 2018 to a 10-year high alongside bearish weekly inventory data which pressured oil prices lower. Retailers in focus again after earnings from URBN, ANF, CHS, ROST, JILL, while semiconductors slide, led by losses in Micron.

 

Treasuries, Currencies and Commodities

·     In currency markets, the British Pound slides for a 6th straight day as the dollar rises; the U.S. dollar slips (on track to snap 5-day win streak) after weaker economic data; the Australian dollar sank after disappointing economic data spurred bets on interest-rate cuts; the Canadian Loonie tumbles after the Bank of Canada warns there is “increased uncertainty” about future rate hikes

·     Commodity prices active as gold futures look to snap their 7-day losing streak (longest in ten-years), while oil prices volatile to the downside following weekly inventory data (bearish news overnight from API with 7.3M barrel build).

·     Treasury market’s rally on weaker US data and as stocks pullback since the open, sending yields lower across the board with the 10-year below 2.70% and the 2-year at 2.52%

 

Economic Data

·     Private payroll report light as ADP said U.S. firms’ added 183K jobs in February, slightly below the 190K estimate (compared with a revised 300K in January); small firms added 12,000 jobs in February, medium-sized businesses added 95,000 to large companies added 77,000

·     U.S. Trade Deficit widened to (-$59.8B) in December from (-$50.3B) last month and compared to the (-$57.9B) estimate; the Dec. trade deficit largest since Oct. 2008; imports rose 2.1% in Dec. to $264.89b from $259.36b in Nov and exports fell 1.9% in Dec. to $205.12b from $209.06b in Nov

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.92

55.64

Brent

-0.46

65.40

Gold

0.30

1,285.00

EUR/USD

0.0003

1.1311

JPY/USD

-0.19

111.70

10-Year Note

-0.016

2.701%

 

 

Sector Movers Today

·     Semiconductors; Apple supplier DLGNF reported Q4 EPS above expectations; VECO downgraded at Stifel to hold after shares hit tgt price; AMBA mixed results as Q4 EPS and sales topped views but guided F1Q sales/EPS below consensus (upgraded at Craig Hallum); MCHP narrowed its Q4 outlook; MU shares dropped after Cleveland Research said weaker than expected pricing feedback for Q1 and Q2 led firm to lower his EPS and revenue assumptions for FY19

·     Transports; CSX downgraded to hold at Stifel primarily on valuation, as believe CSX has the lowest revenue growth potential in the next two years among railroads; UNP said it sees higher Q1 costs and lost business due to the weather (speaking at JPM conference); ECHO was upgraded at Morgan Stanley saying believe TL rate behavior over the last 6 months points to a potential structural bull case of rates rebasing higher

·     Pharma movers; BMY said in a letter to shareholders that they have conducted a thorough strategic process and is confident that acquiring Celgene is best path forward; VRTX said the triple combination of VX-445, tezacaftor and ivacaftor met primary endpoints); BPTH said it plans to change Phase 2 clinical program in acute myeloid leukemia (AML) to include Venetoclax combination treatment with prexigebersen (BP1001), sending shares higher; MYL was upgraded to overweight at Morgan Stanley in generics and downgraded TEVA to equal-weight

·     Industrial & Machinery; ALSN was downgraded to hold at Stifel saying with shares trading above the midpoint of its recent trading range, they struggle to see why shares would outperform; GE shares fell after JPMorgan said they are no longer willing to engage in a debate where the Bull case is that Power is “not that bad”, the stock can be valued on $1+ in FCF, and GECS is merely a zero/as long as this sentiment prevails, the stock can’t find a bottom; Credit Suisse upgrades AYI to outperform and downgraded LII to neutral as catalysts include improving Lighting commentary (volume and price), stock valuation, and ETN’s announcement to spin its $1.7B Lighting business and says based on market share concentration, they see more opportunity for industry consolidation within lighting markets than in HVAC markets.

·     Retailers; apparel stocks active after earnings from ANF and URBN; ANF Q4 results and year net sales forecast topped estimates/Q4 comps of 3% beat the 1.3% estimate; URBN lower after its soft outlook for Q1 highlighted a deteriorating trend in January and a hard fall in February according to MKM Partners/URBN blamed weather and some product issues for a weak start to the first quarter; BBY was upgraded to outperform by Wolfe Research; DLTH shares fall after Davidson downgraded on weather and competition factors; ROST Q4 results top views and announces more than $2B share buyback, though Q1 and year guidance falls short

 

Stock GAINERS

·     AMBA +5%; mixed results as Q4 EPS and sales topped views but guided F1Q sales/EPS below consensus (upgraded at Craig Hallum)

·     ANF +20%; Q4 results and year net sales forecast topped estimates/Q4 comps of 3% beat the 1.3% estimate

·     AON +4%; as shares of WLTW decline -6%; as AON says it is no longer pursuing a WLTW acquisition

·     AVAV +17%; after quarterly earnings beat, upsized guidance/raises FY19 EPS view to $1.60-$1.80 from $1.30-$1.50/Q3 backlog $132.5M vs. $113.3M last year

·     BPTH +90%; as plans to change Phase 2 clinical program in acute myeloid leukemia (AML) to include Venetoclax combination treatment with prexigebersen (BP1001)

·     LYB +5%; upgraded to buy at Goldman Sachs with the potential for the ethylene chain to establish a new trough in the coming quarters

·     ZAYO +8%; said its board and management are currently evaluating strategic alternatives and decides to postpone its analyst day to allow time to review

 

Stock LAGGARDS

·     BF -6%; after results which showed a 2C Q3 EPS beat on lighter sales of $904M while reaffirmed its outlook, though Jefferies said the organic growth view looks ambitious

·     GE -5%; after JPMorgan said they are no longer willing to engage in a debate where the Bull case is that Power is “not that bad”, the stock can be valued on $1+ in FCF, and GECS is merely a zero/as long as this sentiment prevails, the stock can’t find a bottom

·     HZNP -4%; received a civil investigative demand from the U.S. Department of Justice over certain payments to pharmacy benefit managers that may be in violation of the Anti-Kickback Statute

·     JKS -8%; refutes allegations made by Hanwha Q Cells this week which filed actions against JinkoSolar

·     NIO -16%; downgraded to underperform at Bank America after the company reported quarterly results and cut its first-quarter delivery forecast

·     TNDM -5%; after saying it will use its Tandem Device Updater, a remote software update tool, to fix a glitch in its Control-IQ technology software

·     VMW -3%; downgraded to sell from neutral at Goldman Sachs saying that “much of the potential upside” from new products and the Amazon Web Services partnership is already priced in

 

Syndicate

·     Ascendis Pharma (ASND) 4.167M share Secondary priced at $120.00

·     CymaBay (CBAY) 8M share Spot Secondary priced at $12.50

·     Freshpet (FRPT) 4M share Spot Secondary priced at $38.90

·     Invitae (NVTA) 9M share Secondary priced at $19.00

·     Iqvia (IQV) 5M share Spot Secondary priced at $141.00

·     Sarepta (SRPT) 2.6M share Spot Secondary priced at $144.00

·     Sea Limited (SE) 90M share Secondary priced at $22.50

·     Veracyte (VCYT) 2.7M share Block Trade priced at $20.10

_________________________________________________________________

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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