Market Review: March 19, 2019

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Closing Recap

Tuesday, March 19, 2019





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks slipped, as a late day slide erased big gains earlier (Dow was up as much as 200 points) ahead of the Fed meeting tomorrow, with the S&P 500 index topping the 2,850 level for the first time since October (before pulling back), and the tech heavy Nasdaq Comp also trading to October highs (up as much as 0.7%) before sliding, though the SmallCap Russell 2000 underperformed broader markets. Stock pulled back following comments on trade between the U.S. and China as 1) Bloomberg reported that some U.S. officials are concerned that China is pushing back against American demands in trade talks as progress slows toward a deal that could give Trump a boost for his 2020 reelection bid, which sent markets lower. Separately, a positive report showed, 2) the WSJ reported that U.S. trade representative Robert Lighthizer and treasury secretary Steven Mnuchin will travel to Beijing the week of March 25 as trade talks enter final stages, the Wall Street Journal reported. The euro strengthened, the dollar fell while sterling struggled amid talk European Union leaders are planning to offer the U.K. a conditional Brexit extension. Technology and Healthcare were among the best gainers while banking stocks were strong early before fading with broader markets (Dow components GS had 7-day win streak and JPM 4-day win streak into today) as group ends as one of the top sector decliners. Transports underperformed, led by weakness in truckers after a weaker outlook and rails dropped following an analyst downgrade of UNP. Defensive sectors such as Staples, utilities and REITs were weak the majority of the trading session.



·     WTI crude oil slipped 3c to settle at $59.03 per barrel, down from fresh four-month highs of $59.57 earlier while bouncing off intraday lows of $58.62. The move came ahead of weekly inventory data tonight (API) and tomorrow (DOE) and ahead of the FOMC announcement. Prices had gained yesterday after a committee of the OPEC+ group reaffirmed at a meeting that it will continue production cuts until at least June. Other factors that have weighed on oil prices include the recent cancellation of the April OPEC meeting, shut in Venezuela exports, and Iran sanctions. Note oil prices have risen by over 25% since the start of 2019. Gold prices rise $5.00 or 0.4% to settle at $1,306.50 an ounce, rising a second session as it benefits from the expected dovish tone of the FOMC tomorrow as the dollar slides. Gold prices have now bounced from lows below $1,290 an ounce just 2-weeks ago.


Currencies & Treasuries

·     Treasury prices end little changed, erasing earlier losses as the yield on the 10-year traded as high as 2.63% before settling back lower to just above 2.60% (vs. yesterday close 2.605%), while the 2-year yield was at 2.46% and the 30-year about 3.02%. No major swings the last few days ahead of tomorrow’s FOMC policy meeting results where no rate changes are expected but they may lower their growth projections given the recent economic data.

·     The U.S. dollar index (DXY) slips again (touched lows of 96.29), well off the recent 2019 highs of 97.71 as markets widely anticipate the FOMC to keep rates steady yet when they release details of their policy meeting tomorrow, while coming across dovish following the recent downturn in U.S. economic data. The Euro and British Pound advance, while the yen slips; the greenback also slips against the Canadian, Aussie dollar


Economic Data

·     Factory Goods Orders for January rise 0.1%, below the 0.3% estimate, while Factory orders for December unrevised at 0.1% gain; New orders ex-trans fell 0.2% in Jan. after falling 0.5% the prior month and new orders ex-defense for Jan. rise 0.2% after rising 0.5% in Dec.; Durables orders for Jan. rise 0.3% after rising 1.3% in December






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; DSW shares drop after Q4 results, as margins fall short (24.4% of sales vs. 25.2% consensus and 26.8% a year ago), while operating margin during the quarter was -3.0% vs +0.7% consensus/also reported unexpected Q4 EPS loss; FIVE was upgraded to buy at Loop Capital and raise target to $145 from $120, as impressed by Five Below’s recent ability to “comp the comp”; MIK shares active after mixed results and guidance (Q4 EPS beat, comps in-line while guides Q1 and year profit view below consensus)

·     Consumer Staples; REV shares fell after disappointing Q4sales and a delayed 10-K filing that may reveal a “material weakness” in its financial reporting; PFGC agreed to acquire privately held Eby-Brown Co., a distributor of prepackaged candy, snacks, specialty beverages and tobacco products in the convenience industry/reaffirms FY Adjusted EPS growth of 10% to 16%; MNST shares slide after Wells said a deep dive of Nielsen data through March 9 suggest growth remains muted; tobacco stocks PM and MO declined after FDA commissioner Gottlieb said may need to consider pulling pod-based products

·     Restaurants; DPZ was upgraded, and YUM downgraded at JPMorgan saying DPZ now deserves an OW rating more than YUM as both ratings changes are a function of stock price movements and resulting multiple changes/says DNKN, MCD and WEN growth metrics are much lower; TACO shares dropped following quarterly results/guidance

·     Casino & Leisure movers; CWH downgraded to neutral at Goldman Sachs warning on a lack of upward catalysts in the near term for the camping and RV specialist/top- line growth continues to decelerate back into the mid-single digit range from the 9.5% growth achieved in 2018; Stifel said they expect CCL to deliver a F1Q19 EPS beat driven by stronger than expected yield growth, we do not expect CCL to raise full-year yield guidance; AGS 4M share secondary priced at $25.50

·     Auto’s; auto supplier LEA was downgraded to hold at Deutsche Bank reflecting their concerns about the growth and margin trajectory of E-Systems, and also ahead of 1Q19 company earnings that could be weaker than investors expect; TSLA active on reports the SEC told a judge that CEO Elon Musk never sought pre-approval for any tweets about the company since a court-approved deal that required him to have the automaker pre-approve any tweets of material impact



·     E&P sector; Mizuho said industrial opportunity has never been better, OPEC/Venezuela is helping, and the companies are holding the line on better strategy. It could get better still, but progress is being made. Uncertainty around APC and PXD is too great for their comfort as they downgrade both to neutral from buy but upgraded NBL to buy saying the upcoming free cash flow inflection at this point that inflection is too close to ignore

·     Other movers; WHD 8.5M share Spot Secondary priced at $36.25; TUSK was downgraded to neutral at Credit Suisse as PR headwinds (US gov’t shutdown, delay in front-end engineering work) means TUSK will burn through $140M of backlog and leave the island; TA was upgraded to neutral at Credit Suisse on the potential for accelerated value surfacing.

·     MLP sector; WMB will establish a new platform to optimize its midstream operations in the western Marcellus and Utica basins through a $3.8 billion joint venture with Canada Pension Plan Investment Board; Wells Fargo with several rating changes as they upgraded TRP, TCP, and CNXM while downgraded shares of CEQP and CNXM upgraded TRP (large-cap c-corp., steady cash flows), TCP (undervalued mostly take-or-pay pipeline company), and CEQP (midstream reformer) to Outperform; downgraded CNXM (northeast E&P exposure) and HESM (valuation–one of the best performing MLPs YTD) to Market Perform.



·     REITs; JLL to acquire HF in $2B deal and HF holders will receive $24.63 in cash and 0.1505 JLL shares for each share of they own/values HF at $49.16 per share ; CLI was upgraded to buy at BTIG saying the latest unsolicited offer for the company’s office assets from Bow Street could be just the start; CCI was downgraded to hold at Deutsche Bank as remains positive on business but cut rating on full valuation

·     Services; BCOR agrees to acquire Dallas-based wealth management company 1st Global in a $180M stock deal; WAGE released its Form 10Q’s for 1Q18-3Q18 and updated guidance for the year followed by its first investor conference call in nearly 18 months (Stifel said consensus estimates were overly optimistic while JMP Securities said outlook better than expected); ECPG 1.5M share Block Trade priced at $30.65



·     Pharma movers; ALT shares rise as reported additional positive data from its flu treatment and said it was seeking development and commercialization partnerships; cannabis maker TLRY said quarterly sales grew to $15.5M, up from $5.1M in the year-ago period and the average net selling price per gram of pot increased to $7.52 from $7.13 in the year-ago quarter; ABBV said the FDA places hold on clinical trials of venetoclax as a treatment for multiple myeloma; AKBA delays its 10-K filing citing the Keryx BioPharma merger

·     Biotech movers; VRTX was downgraded at Leerink saying an "impasse" with government payers in Europe that has led to a slower ramp of its cystic fibrosis drugs; IMGN was downgraded at JPMorgan saying while there appears to be an encouraging signal in the subset with FRα highs for mirvetuximab, we see the failure of FORWARD I as a meaningful setback for the mirv development program; UROV falls after topline results from pivotal phase 3 EMPOWUR study; EOLS rises after the wrinkle-treatment maker said it got a $100M credit line ahead of the U.S. commercial launch of its Botox competitor, Jeuveau

·     Healthcare services and providers; SYNH reported an in-line 4Q:18/initial 2019 guidance while SEC investigation into revenue recognition is still outstanding, company still felt comfortable filing its 10K yesterday evening; HQY Q4 EPS/revs topped consensus but actually guided year EPS below consensus despite the beat ($1.23-$1.29 vs. est. $1.31); managed care stocks outperformed across the board (CI, UNH, HUM) as Bloomberg noted health insurers want Congress to repeal or further delay the Obamacare-imposed excise tax on their industry, set to extract almost $150 billion over a 10-year period. A one-year moratorium will expire on Dec. 31, and while full repeal may be too expensive for a divided Congress to enact, an extension of the existing pause is likely; SIEN shares fell after FDA warnings letter related to its silicone gel breast implants, citing the failure to comply with post-approval study requirements


Industrials & Materials

·     Transports; FDX expected to report earnings tonight after the close; UNP was downgraded to hold from buy at Loop Capital noting that the polar vortex and Nebraska flooding has the network reeling despite the stock market reaction being muted; CVTI shares dropped after guiding Q1 EPS to range of 18c-26c, below the 36c estimate citing late 2018 inventory growth in advance of the perceived impact of tariffs and the gov’t shutdown; airlines rebounded after multiple days of weakness on rising oil prices and the Boeing 737 Max plane investigation

·     Metals & Materials; fertilizer estimates cut at Citigroup as they lower Q1 EPS for CF, MOS, NTR as the start to the spring has been slow due in part to tough weather conditions in much of the Midwest, driven by weather, not a change in fundamentals; TROX tgt was raised to Street high $19 at BMO Capital; metals prices (steel, aluminum, copper) outperformed


Technology, Media & Telecom

·     Internet; BKNG was downgraded at Telsey and tgt lowered to $1,800 from $2,100 saying that the online travel agency (OTA) was facing competitive threats from Alphabet’s Google and Airbnb; video gamers active (ATVI, TTWO) with the announcement of GOOGL’s AMD-based cloud gaming initiative coming Tuesday called Stadia; GRUB shares slipped after KeyBanc said that diner retention, initial diner spend, and peak diner spend all appear to be deteriorating, which suggests lifetime value in newer cohorts is declining; SHOP fell after RBC Capital said in a note it thinks Instagram’s new Checkout feature could compete with Shopify for GPV

·     Semiconductors; NVDA CEO gave the keynote address at the GPU Technology Conference late Monday, as presented progress for its newest chips/announced that AMZN will now be using its T4 data-center chips, the biggest name that had not yet publicly signed on with Nvidia; MU estimates lowered at Rosenblatt Securities saying it still faces "challenging" conditions for its DRAM and NAND memory chips as it cuts its earnings and revenue expectations; AMD outperforms as Morgan Stanley said has a significant opportunity from cloud gaming chips

·     Software movers; ZUO was upgraded to buy at Canaccord and raise tgt to $28 ahead of earnings this week, saying Zuora will sustain revenue growth above the Mendoza line for software companies, which nowadays is about 30% for the next 3-5 years; ORCL announces that SPOT has selected its Java SE Subscription in a multi-year agreement; SPLK tgt raised to $140 from $121 at Morgan Stanley saying that the revenue growth potential may still be underappreciated

·     Hardware & Component news; AAPL reports an update of its iMac line with up to 8-core Intel 9th-generation processors for the first time and Vega graphics options. Pricing starts at $1,299 for the 21.5 inch retina display option.


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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