Mid-Morning Look: March 19, 2019

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Mid-Morning Look

Tuesday, March 19, 2019

Index

Up/Down

%

Last

 

DJ Industrials

138.57

0.53%

26,052

S&P 500

11.45

0.40%

2,844

Nasdaq

26.63

0.35%

7,741

Russell 2000

-1.48

0.09%

1,562

 

 

U.S. equities marching higher yesterday and again this morning as investors await the FOMC policy decision tomorrow afternoon when its 2-day meeting kicks off. Stocks come into the day around 5-month highs, with the S&P less than 4% away from its record highs set back in September, as investors cheer the latest quarterly earnings, are optimistic on trade between the U.S. and China and as the Fed remains dovish into its meeting today/tomorrow (keeping rates under wraps). The Dow Industrial Average looking to make it a 5th straight day of gains (components AAPL and MSFT came into the day riding 7-day win streaks), though the SmallCap Russell 2000 Index slides. In addition to the FOMC meeting, the Bank of England on Thursday is also expected to reinforce the view that they are in no hurry to raise policy rates. Energy, materials and financials are the early leaders among the S&P 500 industry sectors, while the defensive-oriented utilities, staples and real estate sectors are weak. The CBOE Volatility index (VIX) trades down to 5-month lows (around 12.30 level).

 

Treasuries, Currencies and Commodities

·     Oil prices touched their highest level this year after OPEC and its partners agreed to go beyond their pledged supply curbs in the coming months, but prices have slipped since after WTI crude touched highs of $59.57 per barrel ahead of inventory data tonight and tomorrow. Gold prices resume their recent bounce ahead of the FOMC today and as the dollar slips further. Treasury markets are mixed, with the two-year yield flat at 2.45% but the 10-year yield is 3 bps higher to 2.63%; the U.S. Dollar Index -0.2% to 96.37 ahead of the FOMC meeting results tomorrow (also BoE central bank meeting Thursday). Palladium prices touched a record high after Russia placed new pressure on supplies.

 

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

 

 

Macro

Up/Down

Last

 

WTI Crude

0.16

59.25

Brent

0.24

67.78

Gold

8.30

1,309.80

EUR/USD

0.0013

1.1349

JPY/USD

-0.03

111.40

10-Year Note

0.018

2.623%

 

 

Sector Movers Today

·     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

·     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

·     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.

·     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

 

Stock GAINERS

·     ALT +21%; as reported additional positive data from its flu treatment and said it was seeking development and commercialization partnerships

·     AMD +6%; leads tech higher and the semiconductor sector/Morgan Stanley said has a significant opportunity from cloud gaming chips

·     HF +6%; 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 https://on.mktw.net/2TcQdX7

·     MIK +10%; active after mixed results and guidance (Q4 EPS beat, comps in-line while guides Q1 and year profit view below consensus)

·     NVDA +3%; 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

·     SYNH +7%; 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

·     ZUO +4%; 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

 

Stock LAGGARDS

·     CVTI -4%; 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

·     DSW 12%; after Q4 results, as margins fall short (24.4% of sales vs. 25.2% consensus and 26.8% a year ago)/also reported unexpected Q4 EPS loss

·     MNST -3%; shares slide after Wells Fargo said a deep dive of Nielsen data through March 9 suggest growth remains muted

·     REV -9%; after disappointing Q4sales and a delayed 10-K filing that may reveal a “material weakness” in its financial reporting

·     UNP -2%; 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

·     VRTX -2%; downgraded at Leerink saying an “impasse” with government payers in Europe that has led to a slower ramp of its cystic fibrosis drugs

 

Syndicate

·     AquaBounty (AQB) 3.345M share Secondary priced at $2.25

·     Assurant (AIZ) 7.87M share Spot Secondary priced at $98.70

·     Cactus (WHD) 8.5M share Spot Secondary priced at $36.25

·     Encore Capital (ECPG) 1.5M share Block Trade priced at $30.65

·     PlayAGS (AGS) 4M share Spot Secondary priced at $25.50

·     Two Harbors (TWO) 18M share Spot Secondary priced at $13.85

_________________________________________________________________

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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