Market Review: March 12, 2019

Auto PostDaily Market Report

Closing Recap

Tuesday, March 12, 2019





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks end the day mixed as the Dow Industrial Average dropped amid weakness in Dow component Boeing, with the company responsible for -160 Dow down points after news that several countries have now grounded the jets after the 787Max 8 plane suffered its second fatal crash in 6-months. The Dow Industrials managed to overcome weakness yesterday, but today’s decline was too great with many politicians calling for a full grounding of the planes until a thorough evaluation can be made. Meanwhile, the Nasdaq Comp and S&P 500 both extended gains from yesterday after both topped their respective 200-day moving averages, with tech leading the way again (NASDAQ traded as high as 7,611 before paring gains) as markets were helped by a slightly tamer inflation reading earlier (CPI).

·     Outside of Boeing and the CPI data, market attention turned to Europe, as U.K. Parliament rejects PM May’s Brexit deal late day by a margin of 391-242. Lawmakers will now have the chance to vote on whether they want a hard, no-deal Brexit on Wednesday, followed by a vote on a possible extension of the March 29 Brexit deadline on Thursday. Earlier today, the British pound fell as Attorney General Geoffrey Cox and a key group of pro-Brexit hardliners dealt a blow to UK PM Theresa May’s revised Brexit deal. Cox said the legal risk to the U.K. of the revised Brexit deal is unchanged. But he says the deal does "reduce the risk" of the U.K. being locked in the Irish backstop, which avoids a hard border in Ireland.

Economic Data

·     Consumer price index (CPI) climbed 0.2% in February following three straight months of no change, and was in-line with economist estimates while core prices CPI ex food and energy) rose 0.1%, slightly below the 0.2% estimate. The increase in the cost of living over the past 12 months, however, fell to 1.5% from 1.6%



·     Oil prices gained again, nearing 4-month highs earlier, as WTI crude rose 8c to $56.87 (well off intraday highs of $57.55), the result of further tightening Venezuelan supplies (after a power black-out for several days/political unrest) and signs that OPEC would continue cutting output into the second half of the year. Oil prices gained yesterday following reports that Saudi Arabia planned to extend efforts to reduce crude exports. Markets will also watch for weekly inventory data tonight (API) and tomorrow morning (EIA). According to the IEA today, by 2024, OPEC capacity to pump crude will actually shrink because of declines in Iran and Venezuela.



·     The U.S. dollar was lower most of the session with the dollar index (DXY) holding below the 97 level (off recent 52-week of 97.71 last Thursday), following a slightly tamer CPI reading (on core reading), while the euro, Loonie (on rising oil) advanced. The British pound was volatile dropping over 1.2% to lows around $1.30 and off highs of $1.3288. The Pound fell after the U.K. Attorney General Geoffrey Cox said the legal risk to the U.K. of the revised Brexit deal is unchanged. But he says the deal does "reduce the risk" of the U.K. being locked in the Irish backstop, which avoids a hard border in Ireland. Earlier, the pound had touched highs on news that U.K. Prime Minister Theresa May secured legal changes to the deal addressing the Irish backstop.


Bond Market

·     Treasury yields fell back below yesterday lows following a softer inflation reading (CPI), rising less than expected, which helped ramp up expectations that the Fed can hold off on raising rates. The yield on the 10-year fell around 4 bps to 2.60% (lowest since Jan 4) and the 2-year down 2 bps to 2.45%. Prices gained further after the U.S. Treasury sold $24B in 10-year note reopening at 2.615% vs. 2.623% when issued prior, with the bid-to-cover at 2.59 vs. prior 2.35 and indirect bidders awarded 69.4% of auction and primary dealers 21.5%. Treasuries initially came under pressure in overnight trading after U.K. Prime Minister Theresa May said she had secured changes to Britain’s deal to leave the European Union, reducing fears of a failed deal.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; DKS reports Q4 comp sales fell (-3.7%), missing the consensus estimate for a (-3.3%) drop, though adjusting for a calendar shift, comp sales were down (-2.2%)/gross margins of 27.9% fell short of last year’s 29.1%; shares of HIBB declined in sympathy; share of ADDYY dropped after Dick’s said new private label replaces license deal with Reebok

·     Consumer Staples; UNFI were both downgraded to Underweight from Equal Weight at Barclays as sees intensifying competition in the grocery distribution space, which could pressure margins/revenue; KO was downgraded to hold at HSBC on valuation; MNST was downgraded to market perform at BMO Capital as current valuation, both absolute (29x NTM P/E) and relative to peers (815 bps premium vs. beverage peers), may be as good as it gets given cloudier growth outlook and dwindling likelihood of the long-hoped-for buyout by KO; tobacco stocks initially moved lower on the announcement of new FDA head Sharpless (MO, PM)

·     Restaurants; CMG launched its loyalty program, Chipotle Rewards, with a quarter-of-a-million dollar giveaway saying it will use Venmo to award 25,000 fans each day through March 15, 2019; DFRG posted an unexpected profit in Q4 on an adjusted basis while comp sales rose 0.1% during the quarter and restaurant-level EBITDA increased 7.0% to $24.9M

·     Services; ADT shares dropped after delivered a solid 4Q beat and the 2019 revenue guidance was above the street but the EBITDA and FCF guidance fell below consensus expectations due to the $40M of investments, $17M of one-time benefit in 1Q18, challenges in the Canadian business, as well as lower margins for the commercial business; CASY earnings miss relative was largely tied to fuel profit according to Raymond James, with a motor fuel margin shy of our projection (though a record-high F3Q margin) coupled with a decade-low same-store sales decline

·     Auto’s; TSLA tgt was cut to $260 from $283 at Morgan Stanley and lowers estimates while cutting Q1 Tesla deliveries forecast by 23% to factor in "sluggish" U.S. sales and potential impediments to international deliveries; NSANY premium brand Infiniti said on Friday it will exit Western Europe early next year, as it restructures its global operations and turns its attention to sales in the world’s top two auto markets.



·     Energy stocks bounced for a second straight session, with WTI crude trading around 4-month highs ahead of weekly inventory data tonight (API) and tomorrow (EIA), with broad gains in E&P, and drillers. oil drillers outperform for a second day with RIG, DO, NE, ESV rising (recall Barron’s positive on drillers this past weekend); energy was one of the few bright spots in a mixed market as the recent move in oil prices help support stocks.



·     Bank movers; WFC CEO Tim Sloan testified in front of Congressional panel detailing efforts of how to turn the bank around and pushed back and noted the lender is working to address 14 open consent orders from regulators; SNV added to Bank America US 1 list after meetings with the CEO, CFO and other management; ETFC Feb. daily average revenue trades 298,395, up 6% m/m and down 10% y/y while derivatives represented 30% of DARTs during Feb./added 54,706 gross new brokerage accounts in Feb., ending month with about 4.9m accounts, up 29,992 m/m

·     Asset managers; AB said that preliminary assets under management increased to $547 billion during February 2019 from $538 billion at the end of January. The 1.7% increase was due to market appreciation, as well as total firm wide net inflows; IVZ prelim AUM $945.7B as of February 28, up 1.6%; APAM Feb AUM totaled $108.2B. Separate accounts accounted for $56.1B of total firm AUM, while Artisan Funds and Artisan Global Funds accounted for $52.1B; LM preliminary assets under management of $762.8B at Feb. 28, 2019 rise 2.2% from $746.7B at the end of January; BEN reports preliminary AUM $714.2B as of February 28 which compared to $678.3B at January 31; TROW preliminary AUM $1.07T at February 28; JHG was upgraded to overweight at JPMorgan as see some improvements in performance as being particularly impactful to Janus earnings due to a bigger-than-peer performance fee revenue



·     Pharma movers; sector active with several companies speaking at Barclay’s and Cowen conferences today; ZFGN shares slide as announced the suspension of the planned ZGN-1258 investigational new drug application filing for Prader Willi syndrome after observing preclinical muscle toxicity in rats at four and six months; LPCN shares rallied in response to positive 16-week results from an open-label liver fat imaging study of NASH candidate LPCN 1144; AKBA reported positive topline results from two Phase 3 clinical trials evaluating vadadustat in Japanese patients with anemia due to chronic kidney disease (CKD); LLY was resumed overweight and $140 tgt while being added to its analyst focus list

·     Biotech movers; sector rallied with IBB up 1% midday after National Cancer Institute’s Ned Sharpless named to replace Gottlieb as new FDA head; NBIX said its NBI-74788 as a medicine for adult patients with classic congenital adrenal hyperplasia (CAH) showed at least a 50% reduction in disease biomarkers in more than half of the patients receiving the medicine for 14 days; CDMO advanced after reported a smaller than expected Q3 EPS loss on slightly better revs

·     Services, medical equipment and devices; OSIR agreed to be acquired by SNN for $19 per share in cash, in deal valued at $660M as expands in high growth regenerative medicine market (shares of NUVA declined following the announcement)


Industrials & Materials

·     Aerospace & Defense; BA declined again (actually down a 7th straight day) amid follow through from its second fatal 646 Max 8 plane crash over the weekend as the UK Civil Aviation Authority has grounded 737 MAX planes and while the mounting number of countries that have grounded the company’s 737 MAX 8 jets grows (the UK, Malaysia, Germany and Norway are the latest, joining Australia, Singapore and several countries in Latin America); Boeing suppliers, parts names remain volatile as well (SPR, HXL)

·     Industrial & Machinery; RBC said North America farm equipment retail sales reported today by the AEM for February showed mixed results with combines up y/y but higher-HP tractors lower (CAT, AGCO, DE); CIR and SNHY were downgraded to sector weight at KeyBanc while upgraded ETN to overweight as believe early-year multiple expansion presents an opportunity to become more selective with our recommendations amid a less-certain industrial growth backdrop; MG shares fell as reported 4Q18 adjusted EPS of 6c, well below the 22c estimate and adjusted EBITDA of $16.1M was also below the $20.5M estimate

·     Transports; CP was downgraded at Bernstein saying it has been a good stock over the last year and remains a great company but think 2019 will represent a peak rate of near term earnings growth for CP, making it difficult for the stock to re-rate to a higher multiple; JBLU February load factor fell to 81.5% from 82.6% a year ago, as growth in seat supply outpaced demand/capacity rose 7.5% to 4.80B on available seat miles, while traffic increased 6.0%. The International Air Transport Association (IATA) cut its annual forecast for traffic growth in the air cargo market to 2% citing trade frictions, Brexit and anti-globalization rhetoric from prior est. 3.7% – airlines also weak as investors digested the impact of a second deadly crash of a 7Boeing 37 Max 8 aircraft

·     Metals & Materials; metals outperformed on the day, with solid gains from steel producers (X, AKS, STLD), copper (FCX), aluminum (AA, CENX) further climbing off January lows potash names active after IPI Q4 earnings topped consensus


Technology, Media & Telecom

·     Internet; SFIX posted earnings results that beat estimates and issued a better-than-expected sales forecast for the current quarter/said that active clients rose to 3 million during the quarter, an increase of 18% compared with the same period; MELI announced a capital raise of $1.85B composed of $1B in convertible notes, $100MM in convertible preferred stock issued with $750M in stock to be purchased by PYPL; online travel stocks (EXPE, BKNG, TRVG) slipped after Boeing’s crisis over the safety of its 737 Max deepened with several European countries announcing bans on flying the planes.

·     Semiconductors; Semi’s bounced off lows as the Philly semi index (SOX) trades to yesterday highs of 1,355 (note index jumped 2.4% following the $7B takeover deal announced by NVDA for MLNX; meanwhile, software names were mixed ahead of some key earnings later this week – COUP shares dropped after mixed results/guidance

·     Media & Telecom movers; ESTC shares weak after RBC noted AWS announced on its corporate blog that it plans to launch a new open distribution of Elasticsearch called “Open Distro for Elasticsearch”, available through an Apache 2.0 license; ATUS 13.5M share Block Trade priced at $21.35; DIS and FOXA said the deadline for holders of 21CF STOCK to elect the form of consideration they wish to receive will be 5pm ET on March 14; MDCA was downgraded at BMO

·     Hardware & Component news; FFIV announced its plan to acquire private software company NGINX for $670 million cash on Monday after the close – KeyBanc said based on F5’s guidance, we believe NGINX is adding $40M-$60M in FY20 revenue ($26M in CY18 total revenue); FFIV was downgraded at JPMorgan following the deal; HPE was downgraded to sell at UBS and cut tgt to $13 from $17 as see on-premises hardware sales being pressured by the growth in public cloud, and the stock is expecting better; ROKU files to sell up to $100M shares of stock


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