Market Review: March 18, 2019

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Closing Recap

Monday, March 18, 2019





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks finished modestly higher on lighter than normal volume, led by gains in energy, financials and technology ahead of the FOMC central bank meeting mid-week. Oil prices extended gains, with WTI crude topping the $59 per barrel mark (first time since November), helping boost the sector while Healthcare and Telecom sectors lagged. With today’s gains, the benchmark S&P 500 index is less than 4% away from its all-time highs reached last September. Expectations that the Fed will be dovish once again at its upcoming meeting (and not raise rates) has helped boost interest in riskier assets, reversing concerns in December that the Fed may hike rates too quickly which would slow economic growth. In stock news, Dow component Boeing slipped on news of further investigations into its fatal 737 crash last week, while consumer finance stocks jumped after FIS agreed to buy WP in a $43B deal. The yield on the 10-year Treasury stayed around the 2.60% level all day, while gold slipped and the dollar was mixed.



·     Oil futures extended recent gains, with WTI crude settling above the $59 per barrel level, getting a boost after OPEC and its allies said Sunday they were deepening their production cuts beyond the 1.2 million barrels per day agreed to in December. But Saudi Arabia and Russia appeared to disagree on whether the reductions should be extended into the second half of the year. The group is not likely to decide whether to extend its oil-production cuts until June, closer to their scheduled expiration, Saudi energy minister Khalid al-Falih said (meets June 25-26 in Vienna). Crude-oil production from seven major U.S. shale plays is forecast to climb by 85,000 barrels a day in April to 8.592 million barrels a day, according to a report from the EIA.

·     Gold prices reversed late day, sliding -$1.40 to settle at $1,301.50 an ounce (off earlier highs of $1,306.70 an ounce) as the dollar rebounded off earlier losses to trade little changed. Likelihood for currencies and precious metals to trade sideways into the FOMC meeting this Wednesday. Markets also keeping a watchful eye on geopolitical developments, including the U.K.’s efforts to reach a deal on leaving the European Union.



·     The U.S. dollar rebounded off earlier lows before slipping late day, ending down slightly ahead to the Federal Reserve’s March meeting on Wednesday. The ICE U.S. Dollar Index (DXY) fell as lows as 96.37 before recovering to 96.60, little changed on the day after the greenback recorded its worst week since early December with a 0.7% drop last Friday. No change in interest rates is expected this week from the FOMC, but any forecasts on growth and rates will be closely watched. The British Pound slipped before paring losses after the speaker of the House of Commons, John Bercow, ruled that Prime Minister Theresa May’s government couldn’t ask for yet another vote on May’s Brexit deal on Tuesday unless the deal had changed. The reasoning is that the government can’t bring the same motion twice, according to local reports.


Bond Market

·     Treasury yields showed little direction ahead of the upcoming Federal Reserve meeting this week, which could give clues on whether the central bank will tweak its balance-sheet runoff. The yield on the benchmark 10-year held around the 2.60% level after falling to 2.58% late last week, lowest level since the beginning of the year. Though no rate moves are expected, markets expect the FOMC to shift its dot plot, which includes the Fed’s interest-rate forecasts, to reflect its emphasis on a more patient policy outlook.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; OSTK shares fell after wider-than-expected loss, surprise revenue decline/total revs fell to $452.5M from $456.3M (below est. $474.1M)/said orders declined 4%, as sales and marketing expenses declined 13%, and that promotional activities increased; DG was upgraded at Barclay’s and mentioned positively at Wells Fargo as see the sell-off in DG (post earnings) as an attractive buying opportunity and remain positive on DLTR trades to its 200-day MA resistance of $77.60 (hasn’t been above 200-day since late November)

·     Consumer Staples; KHC slipped after receiving a compliance letter from Nasdaq related to its late 10-K filing/company says it expects to file the 10-K within a few weeks; NUS set up a special group over a local media report that a woman died after drinking the brand’s juice product instead of seeking medical help after getting a cold, Nu Skin says on its Chinese website; CMG new 52-week highs today)after Piper raised its tgt to Street high $725 today

·     Housing & Building Products; in flooring, LL CFO resigned after about two-and-a-half years, to take up a new role in a Florida-based company while posted Q4 sales of over $268M, below consensus views and sees revenue growth in mid-single digits

·     Auto’s; auto suppliers ADNT and DLPH were both upgraded at KeyBanc as they believe the challenged NT earnings backdrops for both are now largely contemplated; President Trump said he wants an immediate start to talks between GM and the United Auto Workers, extending to a third day his calls for the carmaker and union to reopen an Ohio factory; TSLA shares fell midday, confirmed earlier media report that co will drop its mid-range Model 3 battery option



·     Energy stocks active after OPEC commentary as the Joint Ministerial Monitoring Committee of oil producers reported a sizable improvement in compliance with production cuts implemented at the start of this year and recommended that OPEC cancel its ministerial meeting scheduled for April. The JMMC, pegged compliance with the production pact at almost 90% in February, up from 83% in January. OPEC members had agreed to trim 800,000 barrels a day from October’s production levels for six months through June of this year, with Russia and other allied producers cutting another 400,000 barrels a day to total 1.2 million barrels in cuts.



·     Bank movers; financials held up well as broader markets slid (JPM higher and GS trades above the $200 level); COLB downgrading to neutral at Davidson saying upside appears limited with positive catalysts lacking and relative franchise strengths muted; mortgage finance names rally for a second day (RDN, ESNT); regional banks (KRE) outperformed ahead of the FOMC meeting

·     Consumer finance and lending; FIS said it will buy e-commerce and payments group WP in a cash and stock deal that is valued at $43B/under terms of the deal, which includes the assumption of debt, WP holders will receive 0.9287 FIS shares and $11 in cash ; XRX said it’s exploring a possible "strategic transaction" for its customer financing business; QD 4Q total revenues increased by 20.9% year-on-year to RMB1.8B (US$268.6M)/Q4 net income increased by 42.1% y/y to RMB767.5M ($114.4M); Consumer finance names PAYX, GPN, FLT, PYPL touching 52-week highs today after the WP M&A deal earlier



·     Pharma movers; LPTX surged in reaction to positive data on lead candidate DKN-01 in women with advanced gynecological cancers presented at the Society of Gynecologic Oncology Annual Meeting; DERM shares rise following successful results from a Phase 2b dose-ranging study of lebrikizumab in patients with moderate-to-severe atopic dermatitis (AD)/all three doses evaluated beat placebo at week 16 as measured by an AD severity scale called EASI; PHAS shares jump on positive Phase 1 data on PB2452, a reversal agent for AZN’s anticoagulant Brilinta (ticagrelor) as results were just published online in the New England Journal of Medicine; ELAN was upgraded to buy from neutral at Bank America

·     Biotech movers; ARPO shares fell after its lead candidate AKB-9778 failed a Phase 2b clinical trial in patients with moderate-to-severe non proliferative diabetic retinopathy; PTE shares dropped after disclosing in a filing that the SEC had requested documents between the company and some insiders; PBYI shares rallied as its licensing partner Specialised Therapeutics Asia received marketing authorization from Australia’s Therapeutic Goods Administration to commercialize Nerlynx (neratinib) in Australia

·     Medical equipment and devices; DGX was downgraded to neutral at Credit Suisse; SRDX said it was working with the FDA to clarify how the agency’s Friday warning about paclitaxel-coated balloons and paclitaxel-eluting stents would affect the company’s clinical trial evaluating SurVeil; EW shares among top gainers in the S&P after data presented at the American College of Cardiology Annual Scientific Sessions showed its Phase III clinical trial, PARTNER 3, evaluating SAPIEN 3 mitral valve showed its superiority to surgery; MDT shares slipped as results as Evolut trial lags Edwards’ Sapien 3


Industrials & Materials

·     Aerospace & Defense; BA shares slipped following reports of increased scrutiny by regulators and prosecutors over whether the approval process for the company’s 737 Max jetliner was flawed

·     Industrial & Machinery; JCI was upgraded to outperform and raise tgt to a street high of $42 at Wells Fargo saying the timing is now better for the story to play out/expectations and sentiment are pretty low, even as fundamentals are picking up; IR was downgraded to market perform at Wells Fargo saying their bull-bear analysis indicates risk reward is skewed to the downside ($123 bull case scenario – 16% upside potential and $79 bear scenario – 25% downside risk)

·     Metals & Materials; HUN lowered its Q1 adjusted Ebitda 10% or so below its Q4 results, down from a previous view of in like with 4Q citing slower seasonal pickup in North America and a softer European economy for the guidance cut/also expects Q1 performance products results will come in flat to down from Q4 2018, vs. its previous guidance of flat to up; NWL to sell process solutions business for $500M to One Rock Capital

·     In the steel sector, STLD guided Q1 EPS 88c-92c, below the $1.08 estimate (follows softer guidance from NUE last week); Barron’s was also positive on the sector saying several steel company shares including X, CMC, and STLD could rally along with a rise in the commodity’s price, but investors also should use caution on the stocks because of historical volatility


Technology, Media & Telecom

·     Internet; FB downgraded to hold at Needham citing uncertainty after its CEO Zuckerberg disclosed a vision that is more sensitive to investors’ privacy concern; Lyft set its IPO size at 30.77 million shares and the price range at $62-$68 in an amended prospectus, seeking to raise as much as $2.09 billion; AMZN trades up as much as $1,748 (topped its 200-day MA of $1,730)

·     Semiconductors; SYNA said its CEO Richard Bergman has departed, effective immediately and guided Q3 revs to the lower end of the prior guidance that put revenue from $340M-$380M and EPS from $0.70 to $1.00 (vs. est. $356.4M/83c)/downgraded at Mizuho; NVDA active ahead of a presentation by CEO Jensen Huang, with investors eyeing potential announcements of upcoming chips and other products

·     Media & Telecom movers; MSGN shares were active after the NY Post reported late Friday John Malone, the billionaire owner of Liberty Sirius XM and Liberty Braves Group, may be eyeing a bid ; media names such as DIS, FOXA were under pressure today; Intelsat (I) shares fell after Morgan Stanley cut its price target saying that its outlook suggests worsening pressures to Media and margins

·     Software, Hardware & Component news; AAPL launches the new iPad air and iPad mini, sized at 10.5 inches and 7.9 inches, respectively/new iPad mini starts at $399 for Wi-Fi model & $529 for Wi-Fi plus Cellular model/10.5-inch iPad Air starts at $499 for Wi-Fi model & $629 US for Wi-Fi + Cellular model; OKTA was upgraded to buy at Goldman Sachs and raised the price tgt to $94 following recently better Q4 earnings results


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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