Market Review: March 13, 2019

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Closing Recap

Wednesday, March 13, 2019





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks back to 4-month highs, helped by tamer inflation data the last two days (CPI and PPI), a drop in the US dollar and strength in tech, materials and energy shares. Oil prices also touched its best levels in 4-months, lifted on bullish weekly inventory data. The Dow Industrials Average had been steadily higher until late afternoon when the U.S. and Canada became the last two major countries to ban the Boeing (BA) 737 Max 8 and Max 9 aircraft from its airspace after Sunday’s Ethiopian Airlines crash, which resulted in the deaths of 157 people. Boeing shares dropped below Monday’s low print before rebounding. The S&P pushed above the 2,800 level and the NASDAQ above the 7,650 (3-day gains for them) while treasury yields held around yesterday lows. The ongoing Brexit drama, a cut to the U.K.’s growth forecast recently has the Pound active, while markets still await a resolution the China/US trade issue.

Economic Data

·     Durable Goods Orders for January rise 0.4%, well above the estimated decline of (-0.4%) while Durable goods new orders revised up to 1.3% for December from 1.2%; new orders ex-trans. fell 0.1% in Jan. after 0.3% rise and new orders ex-defense rose 0.7% in Jan. after 2.2% rise. Non-defense capital goods orders ex-aircraft rose 0.8% in Jan. after falling 0.9% in December

·     Producer Prices (PPI) for February rose 0.1%, tamer than the expected 0.2% increase, while core prices (ex: food & energy) also rose 0.1% MoM, below the 0.2% estimate; Wholesale inflation has risen a mild 1.9% in the past year, down from 2% in the prior month while final demand ex food, energy rose 2.5% y/y vs est. up 2.6%



·     Oil prices rise, with WTI crude higher by $1.39, or 2.4% to settle at $58.26 per barrel, its best level in four-months following bullish inventory data and a weaker dollar. It was the third straight session of gains for oil after both the EIA and API reported larger-than-expected weekly drawdown in stockpiles. U.S. government data revealed a surprise weekly decline of 3.9 million barrels in U.S. crude stockpiles and a fall of 100,000 barrels in domestic production. On Tuesday, the U.S. Energy Information Administration trimmed its forecasts for U.S. crude production for this year and next and lifted its 2019 forecasts for U.S. and global benchmark oil prices, according to its Short-term Energy Outlook report. Gold prices extended recent gains, jumping $11.20 or 0.9% to settle at $1,309.30 an ounce (more than $30 off 2-week lows below $1,280) the first settlement above $1,300 in two-weeks following a further decline in the dollar.



·     The U.S. dollar remained weak vs. most currencies as softer inflation data (CPI yesterday and PPI today) helped boost expectations the Fed will stay the course on interest rates, but in a rush to raise them given the tamer inflation environment. Meanwhile, the British pound remained in focus as lawmakers geared up for a second of three key Brexit votes next week. The dollar erased early gains vs. the yen, falling to lows around 111, while the euro spiked late day, up 0.4% to highs around 1.1330. The pound rises over 1%, trading to 1.322 late day as U.K. lawmakers prepare to vote on whether leave the country out of the European Union with no agreement


Bond Market

·     Treasury markets were steady after rising yesterday, with the yield on the 10-year hitting its lowest levels since early January on Tuesday (fell below 2.60% briefly), while today held around 2.62%. Not much volatility today, with the 10-year staying in a 2 bps range. The U.S. Treasury sold $16B in 30-year notes at a yield of 3.014% (lowest yield since July 2018) vs. 3.006% when-issued prior, with the bid-to-cover at 2.25 vs. 2.27 prior auction and indirect bidders awarded 57.8% of the auction and 28.1% to primary dealers.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; ADDYY weighed on footwear/sports apparel after its 2019 sales forecast for currency-neutral sales growth of 5% to 8% trails estimates slightly/expected results from Adidas in North America and Europe lag expectations, while double-digit growth is anticipated out of Asia; EXPR shares fell after mixed Q4 results (EPS beat/sales miss) and guides Q1 EPS loss well below consensus; VRA shares rise after Q4 results, with comps falling (-11.2%) in quarter, but better than the expected (-14.5%) est. while gross margin improved 50 bps compared to a year ago after reduced clearance activity/sees FY20 revenue of $420M-$440M vs. $407M est.; ZAGG Q4 results beat on lower taxes and earlier product deliveries while guided 2019 revenue up 1%-4% organically, but 1H19 down 13% due to a difficult compare and soft iPhone demand

·     Consumer Staples; SAFM was upgraded to neutral at JPMorgan (and raise tgt to $127) saying shares have been outperforming as a result of higher chicken prices and the increased chances of China opening its borders to U.S. broilers; in restaurants; CMG tgt raised to street high $700 from $620 at BTIG citing confidence in the concept’s traffic driving initiatives including the national launch of Chipotle Rewards announced Tuesday; WING tgt raised to $74 at Wedbush

·     Casino & Leisure movers; in cruises, CCL was upgraded to buy from neutral at Goldman Sachs and raised its tgt to $65 saying that the valuation was near trough absolute and relative levels to the S&P 500 and closest peer (RCL) even as management set a more conservative bar for FY19; gun maker AOBC was downgraded to neutral from outperform at Wedbush and cut tgt to $11 from $13.50 as company faces toughest comps on the Trump era and a hazardous FY20 guide; SKIS rises on strong rev growth – says organic revenue and EBITDA both rose ~10% in FQ3; total revenue was up 42%, including a 54% increase in ski instruction revenue



·     Energy stocks got another boost as oil prices push higher to 4-month highs. Inventory data was mostly bullish for oil as the EIA posted a weekly draw of -3.8M barrels of WTI crude vs. est. for build of 3M barrels which followed a weekly drawdown of -2.6M barrels reported by API last night. The EIA also said Cushing crude fell -672K barrels, while gasoline –fell -4,62M barrels vs est. -3,000M and distillates rose +383K barrels vs. est. draw of -2,000M barrels

·     Stock movers; CLNE shares jump after reporting a smaller than expected Q4 loss and better than expected revenues of $96.2M, up from $89.3M in the year-earlier quarter; PEIX Q4 loss more than doubled to $34.5M and revenues fell 15% Y/Y to $334M as demand weakened and ethanol prices fell; Jefferies raised coking coal prices as they continue to exceed consensus despite Chinese import restrictions and weak Chinese steel markets (ARCH, BTU, HCC)

·     Utilities & Solar; PCG will not face criminal charges related to devastating wildfires in Northern California’s Wine Country that killed 46 people in 2017 according to a statement by the Sonoma County District Attorney’s office



·     Bank movers; Brookfield Asset Management Inc. agreed to buy a 62% stake in OAK valued at a 12% premium as Brookfield will pay either $49 a share in cash, or 1.077 Brookfield Class A shares for Oaktree Class A shares ; CMA was downgraded to neutral at Wedbush and lowered 2019 and 2020 EPS driven by a lower net interest income forecast and the belief earnings growth will be more challenging in 2020; in the insurance space, PGR reported combined ratio for the February of 90.9% vs. 87.8% YoY with net premiums earned $2.60B vs. $2.20B y/y/net premiums written $3.11B vs. $2.70B y/y

·     Consumer finance and lending; AXP held its analyst day today; NOAH shares fell (downgrades at Deutsche Bank) after Q4 total transaction value of RMB 25.2B fell 11% from RMB 28.2B a year earlier; Oppenheimer raised tgts on WEX and FLT saying while shares of both have recovered significantly from the late-December bottom they see further appreciation potential, particularly considering short- and long-term growth outlooks for both companies; BR shares jumped after Raymond James upgraded to an outperform with $118 tgt

·     REITs; sector continues to outperform as the IYR trades to fresh 52-week highs today, helped by a recent decline in borrowing costs/Treasury yields; Morgan Stanley downgraded SLG and BXP while upgraded PGRE as the firm remains cautious on NYC Office REITs. Said while a 25% discount to NAV may seem attractive, their deep dive into 200 NYC deals reveals why this metric could be misleading.



·     Pharma movers; in the cannabis space, ACB said billionaire investor Nelson Peltz will be a strategic advisor, as they will work to explore potential partnerships and the company’s global expansion strategy; AMPH was downgraded at Needham and Piper citing valuation saying shares are reflecting significant contribution from Primatene Mist and new generic launches; the FDA has granted fast track designation to an investigational drug for treating emergency opioid overdose made by OxyContin maker Purdue Pharma LLP; AERI received FDA approval for its once-daily eye drop Rocklatan to reduce elevated intraocular pressure

·     Biotech movers; ESPR upgraded to neutral at JPMorgan and up tgt to $47 from $38 as views the company’s Daiichi Sankyo Europe collaboration as a key derisking milestone; GH Q4 revs and 2019 sales forecast both topped estimates, as the stock touched new highs; SLDB files for $200M mixed shelf offering; CARA shares rise as sales beat consensus on narrower Q4 EPS loss

·     Medical equipment and devices; IRTC was named a new short by Kerrisdale, saying it sees 50% downside; SIEN reported a wider-than-expected 4Q18 GAAP loss per share on revenue in line with its 1/7/19 preannouncement/and estimates at least 25% y/y growth for breast implants in 2019; BSX received CE Mark and initiated a limited market release of the WATCHMAN FLX Left Atrial Appendage Closure (LAAC) Device in Europe

·     Healthcare services and providers; RAD said that its CEO and other top executives are leaving the company amid a restructuring aimed at cutting costs/eliminating about 400 full-time positions, or more than 20% of corporate jobs; CVS was named a new outperform and $76 tgt at Bernstein as sees the company as a long-term winner in health care due to Aetna’s solid government growth outlook and an attractive retail strategy; QHC shares dropped after earnings loss wider; shares of HIIQ and EHTH among names that plunged late day after reports from Politico that Congress is investigating short term health insurance providers


Industrials & Materials

·     Industrial & Machinery; CAT said Feb. rolling 3-month retail machine sales rose 7% vs Jan. 9% rise, Dec. up 10% while North America machine sales up 13% after rising 20% in January and Asia/Pacific sales Feb. unchanged after falling 4% in January; NAV shares dropped after Volkswagen said not to continue with preparation of Traton IPO

·     Transports surged early, rising 1.7% or 175 points (as airlines rebound: AAL, ALK, LUV) along with broader market rally; package delivery names also strong early (FDX rises ahead of earnings next week), along with gains in rails and truckers – however, the airline space pared gains late day after President Trump said the FAA is to ground BA 737 Max 8, Max 9 planes, the last major country to do so after the fatal Ethiopian crash this weekend

·     Metals & Materials; UBS said steel producers could disappoint the Street with their 1Q results as recent price action by the mills signals weaker fundamentals into 2H’19/says that steel spot prices seem to have "temporary support," but mills have offered $20-$60/ton discount on flat products to lock-in 1Q contracts (X, STLD, NUE, AKS)


Technology, Media & Telecom

·     Internet; SPOT has filed an antitrust complaint with EU regulators against AAPL, claiming the tech giant unfairly limits competitors to its own Apple Music streaming service, Reuters reports; MELI 2.1M share Secondary priced at $480.00; MOMO was upgraded at Morgan Stanley and raised its tgt to $44 citing the company’s Q4 results; FB and Instagram had outages today

·     Software movers; TEAM shares rise as Q4 revenue of $14.3M, up 257% y/y, outperformed expectations of $13.5M while adjusted EBITDA of $2.3M missed and introduced 2019 revenue guidance of $105M-$115M and EBITDA that was positive; markers await earnings from ORCL and ADBE tomorrow night after the close

·     Media & Telecom movers; AT reiterates EPS on a quarter-by-quarter basis might vary from historical trends due to last summer’s WarnerMedia acquisition/expects WarnerMedia results to be stronger in the second half; SWCH shares rally after better results though guided year revs $436M-$445M – below est. $450M; media/telco stocks VIAB, AMCX, DISCA, IPG a drag in the S&P early after The Verge reported that AT&T has confirmed the reshaping of its DirecTV Now streaming service by removing several channels.

·     Hardware & Component news; ROKU shares fall more than 10% after being downgraded by two analysts (Loop Capital and Macquarie) following outperformance in shares since December (up 130% YTD)


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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