Mid-Morning Look: March 21, 2019

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Mid-Morning Look

Thursday, March 21, 2019

Index

Up/Down

%

Last

 

DJ Industrials

72.12

0.28%

25,817

S&P 500

10.94

0.39%

2,835

Nasdaq

44.39

0.57%

7,773

Russell 2000

10.20

0.66%

1,553

 

 

U.S. equities on the rise, recovering after its late day pullback Wednesday despite an overly dovish Fed outlook on interest rates, while Treasury prices jump and yields fall back near 14 month lows (10-year fell below 2.5%). The dollar rebounded after Wednesday’s loss, while government bond yields retreated, gold gains and oil remains steady above the $60 per barrel level. Financials continue to be a drag on the S&P, led by bank declines on the lower rate outlook. Biotech and tech the big stories today with BIIB losing more than 25% of its value after its decision to stop late-stage phase III studies of their Alzheimer’s disease drug aducanumab. Meanwhile, semiconductors surge, led by a rally in Micron after better quarterly results overshadowed a somber outlook (equipment names rise as well). The Bank of England’s monetary policy committee keeps its benchmark bank rate at 0.75%, while the real focus in Europe remains the deadline for the UK to exit the EU on March 29th. Retailers are mixed with attention on the Levi IPO today and Dow component NKE results after the close. Solar stocks lower on CSIQ weak outlook, while energy names take a breather as oil steady.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar rises against the Canadian Loonie as oil prices slip from 4-month highs; the British Pound sinks below 1.315 amid ongoing Brexit fears/BOE decision to keep rates unchanged; the dollar rebounds vs. the euro after the greenback sunk yesterday on the lower growth outlook/low inflation outlook from the Fed. Commodity prices mixed as gold prices extend gains while oil prices pullback from its best levels since November (topping the $60 per barrel mark yesterday). Treasury market’s advance further as the 10-year yield dropped below 2.50% briefly, down as much as 3 bps to more than 1-year lows (follows a 9 bps drop yesterday after the dovish Fed outlook of no additional rate hikes this tear (down from prior view of two).

 

Economic Data

·     Weekly Jobless Claims fell 9K to 221K, below the 225K estimate; the 4-week moving avg. rises 1K to 225K in the week ending March 16; note prior week claims revised up to 230K from 229K; continuing claims fell 27K to 1.750M in the week ending March 9

·     Philadelphia Fed manufacturing index rises to 13.7 in March after – 4.1 in February and above the estimate for up 4.8; General business conditions were -4.1 in the prior month. prices paid fell to 19.7 vs 21.8, new orders rose to 1.9 vs -2.4, employment fell to 9.6 vs 14.5, shipments rose to 20.0 vs -5.3, inventories rose to 17.2 vs 3.3 and prices received fell to 24.7 vs 27.7

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.25

59.98

Brent

-0.41

68.09

Gold

9.70

1,311.40

EUR/USD

-0.0037

1.1377

JPY/USD

0.04

110.75

10-Year Note

-0.019

2.514%

 

 

Sector Movers Today

·     Retailers; Dow component NKE is expected to report earnings after the close this evening; LEVI 36.667M share IPO priced at $17.00; GIII reported Q4 EPS beat of 12c though sales miss and guidance for Q1 mixed (higher sales view and weaker profit); GES mixed Q4 as EPS misses by 5c on slightly better sales of $837.1M, but guides FY20 GAAP EPS $1.09-$1.21 vs. est. $1.38 weighing on shares/analysts note inventory overhang weighs on margins; CHGG will offer $500M convertible notes due 2025, with initial purchasers having an option to purchase up to an additional $75M; for TPR UBS lowers its Kate Spade 3Q comp estimate to -7.5% from -3% and this drives the 3Q EPS change as data suggests Jan. and Feb. US Kate Spade sales have been slow; LE reported strong results this morning with $502.3M in revenue, down 1.6% y/y but above consensus estimates of $474.7M estimate; 52-week lows for TPR, JWN

·     Housing & Building Products; in home furnishing, WSM mixed Q4 as delivered solid core EBIT growth, with adjusted results coming in above the high-end of guidance while comp sales fell short of views (+2.4% vs. estimate +2.8%); furniture maker MLHR posted Q3 EPS beat and revenue miss with an upside Q4 EPS forecast from 76c-80c on revs $645M-$666M vs. est. 72c; JP Morgan initiated VMC and MLM with overweight in construction materials as they like their large aggregates exposure that is more exposed to infra spending, which is growing more than Res and Non-Res (neutral rated on EXP, SUM)

·     Semiconductors; MU shares rallied despite weak results as the chipmaker Q2 results were lower than the year before (but topped estimates), but provided a revenue outlook for Q3 that was below consensus forecasts and said it would cut production and capital spending in response to a drop in demand for key products like its DRAM memory chips; QRVO was upgraded to buy at Goldman Sachs and raised tgt to $79 citing a compelling valuation and early signs of smartphone unit stabilization; shares of WDC, STX advanced in reaction to MU results

 

Stock GAINERS

·     AAPL +3%; as received several positive analyst mentions, upgraded to strong buy at Needham with $225 tgt while Wedbush raised its tgt to $215 and Citigroup boosted its tgt to $220 despite dour sell side sentiment,” as expects the iPhone maker to boost its buyback authorization by $100B and increase its dividend next month

·     ANET +5%; added to Goldman Sachs Americas Conviction List and reiterates a Buy while raises tgt to $360 as sees significant upside potential to consensus expectations

·     CAG +7%; reports net sales growth of 36% in Q4 (but missed views), driven primarily by the Pinnacle Foods acquisition while organic net sales grew 1.9% – reaffirms year

·     DRI +6%; Q3 EPS of $1.80 beats the average analyst estimate by a nickel while Q3 blended same-restaurant sales +2.8% and total sales increased 5.5% to $2.25B topping ests/now sees fiscal 2019 same-restaurant sales growth 2.5%-2.7% vs. prior view of ~2.5%;

·     GIII +9%; reported Q4 EPS beat of 12c though sales miss and guidance for Q1 mixed (higher sales view and weaker profit)

·     MU +8%; despite weak results as the chipmaker Q2 results were lower than the year before (but topped estimates), but provided a revenue outlook for Q3 that was below consensus forecasts and said it would cut production and capital spending

·     WSM +3%; mixed Q4 as delivered solid core EBIT growth, with adjusted results coming in above the high-end of guidance while comp sales fell short of views (+2.4% vs. estimate +2.8%)

 

Stock LAGGARDS

·     BIIB -28%; loses a quarter of its value after it and partner Eisai Co’s decision to stop late-stage phase III studies of their Alzheimer’s disease drug aducanumab based on results of a futility analysis conducted by an independent data monitoring committee, which indicated the trials were unlikely to meet their primary endpoint upon completion

·     CSIQ -15%; better than expected Q4 earnings but warned 2019 net profit will be lower than the previous year from its module manufacturing business, partly due to higher costs caused by the appreciation of the yuan vs. the dollar/euro

·     GES -13%; mixed Q4 as EPS misses by 5c on slightly better sales of $837.1M, but guides FY20 GAAP EPS $1.09-$1.21 vs. est. $1.38 weighing on shares/analysts note inventory overhang weighs on margins

·     I -12%; after FCC Chairman Pai said that a decision on Intelsat plan not needed “right now” and that its “important for us to get it right as opposed to moving very, very quickly”

·     KEY -2%; as regional banks continue to falter given the longer for lower interest rate outlook form the Fed yesterday (RF, HBAN, FITB extend declines)

 

Syndicate

·     AXA Equitable (EQH) 40M share Secondary priced at $20.50

·     Frontdoor (FTDR) 16.73M share Secondary priced at $30.00

·     Levi Strauss (LEVI) 36.667M share IPO priced at $17.00

·     Liquidia Technologies (LQDA) 3M share Secondary priced at $11.50

·     Tecnoglass (TGLS) 5M share Secondary priced at $7.00

_________________________________________________________________

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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