Market Review: March 08, 2019

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Closing Recap

Friday, March 08, 2019





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks couldn’t muster a late day rally, as major averages conclude the week with a 5-session losing streak, pressured amid softer global economic data (growth concerns), Brexit and ongoing trade fears. Today’s decline came after a significantly weaker monthly jobs report as only 20k jobs were added in February compared to the 180K economist estimate, while private payrolls added 25K vs. est. 170K (while wages were higher and unemployment slipped). Also pressuring markets, China’s exports fell sharply last month, tumbling 20.7% from a year earlier in February, after jumping 9.1% in January (sending the Shanghai index down 4.4%), and German manufacturing orders plunged 2.6% month-to-month in January, well below the expected gain of 0.5%. The Dow Transport index dropped for an 11th straight day, holding above the 10K level, but the streak marks the longest since 1972! Tech tried to bounce, with the semiconductor index (SOX) rallying to trade flat late day after falling 2% earlier, while Internet names were pressured as Senator Warren looks to break up companies. Utilities, Consumer Staples and Materials were among the day top sector performers, while Energy, Transports, and Healthcare names lagged. Treasury prices ended highs as yields close at weekly lows and the dollar rises on the week.

Economic Data

·     Monthly Jobs data came in well below consensus as hiring in the U.S. slowed in February, adding just 20,000 new jobs, the smallest increase in 17 months and well below the 180K estimate; only added 25K private payroll jobs vs. the 175K estimate, and 4K manufacturing jobs. The jobless rate fell to 3.8% in February from 4%, and was below the 3.9% estimate. Dec/Jan jobs were upwardly revised

·     Average Hourly earnings rose 0.4%, more than the expected 0.3% estimate while the 12-month rate of hourly wage gains climbed to 3.4% from 3.2%, the largest increase since April 2009. Hours worked each week fell 0.1 hour in February to 34.4 hours.

·     Housing starts for January rebounded from a big drop at the end of 2018, rising 18.6% to an annual pace of 1.23M, topping the 1.195M est.; single-family starts increased an even faster 25% in January to a 926,000 rate. Building Permits rose 1.4% to an annual rate of 1.35M, beating the 1.287M estimate/Dec housing starts were revised down to a 1.04M from 1.08M



·     Oil prices end the day lower, with WTI crude sliding 59c or 1% to settle at $56.07 per barrel, but was well off the session lows of $54.52 earlier, while Brent dropped 56c to $65.74 per barrel. Oil tumbled more than 3% initially after disappointing economic data out from China and the US fueled concerns about the outlook for the global economy and demand for crude this year. WTI crude hit 3-week lows before rebounding to end the week with a 0.5% gain.

·     Gold prices closed out the day higher, rising $13.20, or 1% to settle at $1,299.30 an ounce, which helped push the futures contract into positive territory for the week (but only by a dime). Gold had snapped a 7-day losing streak mid-week, falling recently from 10-month highs around $1,350 an ounce before settling at lows under $1,280 earlier this week. Gold got a bump the last two days on a weaker growth outlook from the ECB and a significantly weaker jobs report today in the U.S., sparking news fears about the global economy.



·     The U.S. dollar ends the day lower….but posted big gains for the week vs. other currencies. The dollar index (DXY) traded to its best levels of 2019 yesterday (97.71) before paring gains today following the surprisingly weak monthly jobs report, as it raises doubts about the strength of the US economy. Nonfarm payrolls for the month rose only 20,000, compared with a consensus forecast of 175,000. The euro ended near the highs of the day today, but still fell over 1% this week following its monetary policy meeting results/lower growth outlook yesterday. The buck also gave up recent gains vs. the Aussie dollar, Canadian dollar and Japanese yen. In the U.K., Prime Minister Theresa May will have a last chance at asking the European Union for a better Brexit deal, ahead of the presumably final vote in the British Parliament next week on March 12. The U.K. is set to leave the EU on March 29 – the Pound was down about 1.5% on the week.


Bond Market

·     Treasury markets end the week higher, with yields closing out near the lows of the week, as the 10-year fell below 2.62% (about 13 bps move on the week), while the 2-year slipped to 2.46% and the 30-yr battled the 3% level. Treasury yields have slumped this week on weak global data (US jobs, China, Germany) and the lower ECB growth forecasts.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; BIG Q4 EPS beat by wide margin on better comp sales (3.1% vs. est. 1%) and in-line sales, though Q1 guidance weak (65c-75c vs. est. 95c) – but in-line year view; GME was downgraded to underperform at Bank America; COST mixed results as EPS topped estimates on in-line revenue and comp sales miss (5.4% vs. est. 5.7%)

·     Consumer Staples; the defensive staples sector was one of the few that held up well in today’s downdraft; FIZZ plunges after being downgraded to sell at Guggenheim after having "drastically reduced" his LaCroix sales growth expectations and cut his gross margin and EPS estimates; beverages were generally lower (KO, MNST), while tobacco names were better (MO, PM); shares of restaurants LOCO and CHUY declined after earnings/guidance results

·     Casino & Leisure movers; CZR active after Carl Icahn discloses holding a 15.53% stake in the casino company, including shares held via convertible bonds/previous reported position in the casino operator was 9.78%; SEAS was upgraded to outperform at Macquarie; AOBC Q4 top/bottom line beat, but Q1 guidance of 11c-15c and revs $162M-$172M missed estimates of 20c/$170.1M, sending shares lower; MTN Q2 EPS and sales topped views helping lift shares despite cutting FY19 guidance



·     Energy stocks; sector crushed, led by big declines across the board as oil tumbled more as a round of disappointing economic data out from China and the US fueled concerns about the outlook for the global economy and demand for crude this year. The Baker Hughes weekly rig count showed the total count fell -11 rigs to 1,027 while oil rigs fell -9 rigs to 834 and gas rigs fell -2 to 193; XOM was downgraded at Cowen to Market Perform from Outperform and slashes its 12-month stock price target to $75 from $100 as thinks while XOM’s investments in natural gas may mean more cash in the future, current shareholders are likely to see dividend growth slow

·     Utilities & Solar; PPL was downgraded at RBC Capital citing the stock’s year-to-date outperformance relative to other U.S. utilities as well as lingering Brexit uncertainty; PCG to further extend shareholder proposal deadline to March 12 from March 8 as continues to be actively engaged in talks with its shareholders on board refreshment process



·     Pharma movers; Cannabis company TLRY shares slid after Jefferies initiated with an underperform rating and $61 tgt saying their 10-year discounted cash flow-driven valuation suggests the stock is "too expensive for its outlook." INSY share fell after Q4 results came in shy of consensus, including a 48% drop in sales; TGTX active following meetings with the Independent Data Safety Monitoring Boards (DSMBs) for its Phase 3 UNITY-CLL and Phase 2b UNITY-NHL studies/the DSMBs recommended the continuation of both trials without modifications

·     Biotech movers; AMAG shares dropped after saying its PROLONG trial evaluating Makena (hydroxyprogesterone caproate injection) treatment didn’t show a statistically significant difference between the treatment and placebo arms; TNXP rises on the heels of a new European patent covering method of use for candidate TNX-601 for treating neurocognitive dysfunction

·     Healthcare services and providers; CVS and WBA reverse higher midday after shares have sunk over the last few weeks on; HZNP was upgraded at Morgan Stanley in the wake of the stock selloff due to a DOJ inquiry, as believe the market undervalues HZNP ahead of its mix shift to orphan/rheum diseases.


Industrials & Materials

·     Industrial & Machinery; NAV Q4 revenue beat and boosts year rev guidance to $10.75B-$11.25B from prior $10.5B-$11B (est. $10.74B); NVEE shares tumbled as reported Q4 revenues of growth of 22.7% Y/Y to $116.1M, and organic growth of 5% Y/Y/gross margin declined by 120 bps to 46.6%; and operating margin was flat at 8.7%

·     Transports; Dow transport falling for an 11th straight day – its longest streak since 1972; the index, considered a good barometer of the US economy, has sunk over the last 2-weeks led by declines across the board in rails, airlines (AAL down an 9th straight day), truckers and package delivery (FDX ahead of earnings soon) – but index still up roughly 10% YTD

·     Metals & Materials; among the hardest hit sectors given the bout of weaker economic data out of China over the last week (GDP/export data); Indonesia’s government approves a one-year export allowance for copper concentrate for FCX, Ministry of Energy and Mineral Resources officials say; steel, iron ore, aluminum, and copper names have slumped


Technology, Media & Telecom

·     Internet; NFLX was downgraded to neutral at Buckingham citing the stock’s sensitivity to any market pullback, "investor angst" regarding "increasingly credible" competition from the Disney+ (DIS) streaming service and concerns that his model for Netflix’s long-term global membership growth may be optimistic given the rising competition; large cap tech under fire after the NY Times reported Massachusetts Democratic Senator Elizabeth Warren plans to release a proposal aimed at breaking up the largest technology companies, including AMZN, GOOGL and FB; EB shares fell after Q1 revenue guidance missed and said customer integration from a 2017 acquisition would lead to slower revenue growth; ETSY downgraded at BTIG on price

·     Semiconductors; MU estimates lowered at Piper as we suspect ASP erosion and market oversupply, specifically in DRAM, are likely to persist into the second half of the year; MRVL Q4 results came in slightly better than its negatively preannounced estimates while guidance came in below consensus as the storage market continues to work through lower demand inventory; ON provided guidance at analyst day/the 2022 goal of $7.1 billion in sales implies 6% compound annual sales growth, while EPS is forecast at $3.

·     Software movers; OKTA posted strong F4Q results and raised the FY20 outlook by more than the beat but shares dipped on lower profitability, though the L-T outlook remains firmly intact; UPLD tgt raised by several analysts following Q4 results/guides year revs $194.8M-$198.8M above the $190.1M estimate; WAGE was upgraded to outperform at Wells Fargo lifting shares; CTXS shares dropped midday after saying its network was hacked

·     Media & Telecom movers; QRTEA was double upgraded to buy at Citigroup saying while Qurate’s new model may be less profitable, it’s also "inherently less risky" because it demonstrates the company can grow revenue; COHR tgt raised to $165 at Stifel driven by a recovery in its OLED display business, which has experienced several quarters of declining revenue and is expected to remain weak for 2019


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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