Mid-Morning Look: March 20, 2019

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Mid-Morning Look

Wednesday, March 20, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-96.47

0.37%

25,790

S&P 500

-11.14

0.39%

2,821

Nasdaq

-12.15

0.16%

7,711

Russell 2000

-8.41

0.54%

1,546

 

 

U.S. equities fade after FDX Q4 results missed estimates and lowered its outlook for the year, renewing concerns about the global economy, while markets also await the FOMC policy meeting results later this afternoon where they are expected to stand pat on rates, but likely reduce their outlook for future hikes while note the economy has weakened over the last few months. Trade developments in the ongoing U.S.-China trade talks closely watched after the WSJ reported Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin planned to go to Beijing next week to complete a tariff agreement. In the UK, Theresa May has formally requested a short delay to Brexit from the EU, but said she’s “not prepared to delay Brexit any further than June 30.” Under current law, the U.K. is set to leave the EU – with or without a deal – at 11 p.m. London time on March 29. In stock news (outside of FDX), healthcare stocks along with materials and mining among the biggest drags. Germany’s DAX Index led the retreat in Europe as BMW AG warned earnings would fall and chemical maker Bayer AG lost the first phase of a trial over allegations that its Roundup herbicide causes cancer.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar tries to stabilize ahead of the FOMC meeting after having slid the last few sessions on expected dovish commentary from Fed Chairman Powell; the British Pound falls after Theresa May has formally requested a short delay to Brexit from the EU; the dollar little changed vs. the yen and down against the euro. Gold prices are little changed after rallying the last few sessions on dollar weakness – again markets await for the Fed today. Meanwhile, oil prices get a bullish inventory report as the EIA posted a weekly drawdown of -9.59M barrels compared to an estimated build of 2.5M barrels. Treasury market’s rally as yields slip (10-year under 2.59%) ahead of the Fed.

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.15

58.88

Brent

-0.00

67.61

Gold

-0.70

1,305.80

EUR/USD

0.0007

1.1360

JPY/USD

-0.00

111.39

10-Year Note

-0.024

2.589%

 

 

Sector Movers Today

·     Transports; Dow Transports bounce off the lows of 10,084….but still down sharply on the day, dropping below its 50-day MA of 10,168 (recovered from its 100-day MA 10,072); sector falls after package delivery giant FDX Q3 results fell short of estimates and lowered its full year profit outlook saying weaker global trade growth trends contributed to the revenue shortfall/weaker demand, particularly in the Ground segment, weighed on operating margins; the sector was pressured yesterday after lower guidance from CVTI in the trucking space and rail weakness on cautious analyst commentary (UNP was downgraded)

·     Consumer Staples; packaged food stocks were strong after GIS Q3 results topped estimates, as organic net sales growth of 1% in Q3 while put up adjusted gross margin expansion of 170 basis points (to 34.2%) over the year-ago figure, topping expectations; Deutsche Bank closes its short-term idea on STZ as they now see STZ trading with lingering uncertainty pending 4Q results and FY20 guidance (April 4), which hopefully brings with it validation of underlying Beer momentum strength, and more clarity on Wine/Canopy impacts; MNST was downgraded to neutral at Goldman Sachs reflecting view US sales could remain softer than expected in the near term, driving downward estimate revisions

·     Auto’s weak (F, FCAU, GM as well as suppliers); BMW with cautious comments in auto space saying it expects a significant decline in profits for the year ahead and announced multibillion-dollar cost savings/said it is facing significantly higher costs to comply with stricter emissions regulation/expects operating profit margin in its auto segment to be between 6% and 8%, below its long-term goal of 8% to 10%

·     Media & Telecom movers; NXST agrees to sell a total of nineteen stations for $1.32 billion in cash following the acquisition of Tribune Media by Nexstar/clears the way for its $4.1 billion acquisition of TRCO; ATTO Q4 core revenue and margins below consensus estimates and 2019 guidance elusive (saying won’t provide until Q1 call); DIS closed its $71 billion acquisition of FOXA’s entertainment assets, more than a year after the mega merger was proposed; VIAB warns DirecTV (T) customers that they could lose access to channels such as Nickelodeon and MTV unless the companies reach a new programming agreement; the current contract between the parties expires Friday

 

Stock GAINERS

·     EOG +1%; amid early gains in E&P stocks as oil prices remain steadily higher (APA, PXD also gain)

·     GIS +4%; Q3 results topped estimates with organic net sales growth of 1% and adjusted gross margin expansion of 170 basis points (to 34.2%) over the year-ago figure, topping expectations

·     NVRO +33%; on the post-close announcement that, effective immediately, Keith Grossman will assume the roles of President and CEO, which was applauded by many analysts (upgraded at BMO Capital and Bank America, while tgts raised as well)

·     SMAR +12%; after Q4 EPS loss was smaller than expected on better revs – (7c)/$52.2M vs. est. loss (14c)/$49.75M while Q1 and year rev outlook well above estimates

·     TTWO +1%; extended gains in the video gamers as the Gaming conference ongoing

 

Stock LAGGARDS

·     AIR -5%; following Q3 results as revs were again impacted by labor tightness in the MRO market leading to a slight top line miss. Adj EPS benefited from a tax gain and lowered its FY19 outlook

·     BAYRY -12%; as it has lost the first phase of a trial over allegations that its Roundup herbicide causes cancer and now proceeds to a second phase to determine the liability and damages in the case of a man who sprayed the product on his property for decades

·     COOP -8%; downgraded to underweight at Piper saying the burden from the company’s deleveraging efforts will hurt earnings

·     FDX -6%; after Q3 results fell short of estimates and lowered its full year profit outlook saying weaker global trade growth trends contributed to the revenue shortfall/weaker demand, particularly in the Ground segment, weighed on operating margins

·     SNE -4%; downgraded to hold at Jefferies citing the company’s “unwillingness” to exit the smartphones business, which he called both “a disappointment and a strategic mistake

·     TDC -5%; downgraded to sell at Citigroup noting shares are up over 20% since the company preannounced a strong Q4, but see risk that Q4 benefitted from one-offs

·     UPS -3%; down in sympathy with FDX miss and lower guidance

·     VIAB -3%; is warning DirecTV (T) customers that they could lose access to channels such as Nickelodeon and MTV unless the companies reach a new programming agreement; the current contract between the parties expires Friday

 

Syndicate

·     Cushman & Wakefield (CWK) 16.5M share Secondary priced at $17.75

·     Dermira (DERM) 9.8M share Secondary priced at $13.25 per share

·     Enanta (ENTA) 1.6M share Spot Secondary priced at $97.00

·     Farfetch (FTCH) 13.1M share Block Trade priced at $26.00

·     NanoString (NSTG) 4.5M share Secondary priced at $23.00

·     ResTORbio (TORC) 7.2M share Secondary priced at $6.95

·     Invitation Homes (INVH) 43M share Spot Secondary priced at $23.30

·     Nomad Foods (NOMD) 17.39M share Secondary priced at $20.00

·     UP Fintech (TIGR) 13M share IPO priced at $8.00

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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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