Mid-Morning Look: March 22, 2019

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Mid-Morning Look

Friday, March 22, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities fall in a massive risk-off trading session, as interest rate sensitive related sectors making the biggest “waves” following the massive Treasury buying this morning, pushing yields to more than 1-year lows across the board. Financials falling for a third session, with the biggest losses in large cap banks (BAC, JPM, C) and regionals (STI, KEY, ZION) as the recent change in tone from the FOMC Wednesday, (now sees no additional rate hikes in 2019 vs. two seen prior) has pummeled sentiment in banks that benefit from rising rates/lending margins. On the flip side, sectors such as homebuilders, REITs, utilities and other dividend paying names have seen massive buying thus far. Gold prices also rising on the weaker dollar/softer economic outlook from the Fed. Equity futures were soft overnight following renewed concerns of slowing economic growth after a round of March purchasing-managers-index readings pointed to a further slowdown in activity across the EuroZone. IHS Markit said EuroZone PMI fell to 51.3 in March from 51.9 in February versus economists’ expectations for a dip to 51.8, while the region’s manufacturing PMI reading falling to 47.7, a 71-month low, from 49.4 in February (German region PMI data also came in well below consensus). As European equities came under pressure, investors bought bonds, briefly pushing the yield on Germany’s 10-year government bond below 0%. Today’s action comes after stocks touched fresh 5-month highs yesterday.


Treasuries, Currencies and Commodities

·     In currency markets, the US dollar overall holding up fairly well, falling vs. the perceived safe-haven Japanese yen (to 110.00), but rises vs. most other currencies as weaker manufacturing data overnight in the EuroZone (Germany, etc.) overshadows the recent weakness in the greenback following the lower growth outlook from the Fed this week/lower interest rate hike outlook

·     Commodity prices slammed early, led by declines in oil prices (pulling back from $60 per barrel for WTI crude) as well as industrial metals given the weaker manufacturing data in Europe, while precious metals jump as investors rotate into safe-haven assets

·     Treasury market’s rally, and in a big way, with the 10-year yield down over 9 bps to lows around 2.44% today, lowest back since January of last year, as a raft of weaker-than-expected EuroZone data drew investors into the perceived safety of government paper; the 2-year yield drops to 2.34% while the 30-year falls under 2.89%


Economic Data

·     Existing-Home Sales for February rise 11.8% to 5.51M rate after falling 1.4% prior month and was above estimates for a 3.2% rise to 5.10M; there was 3.5 months’ supply in Feb. vs. 3.9 in January while inventory rose 2.5% to 1.63M homes; median home price rose 3.6% YoY to $249,500

·     Wholesale Inventories rose 1.2% in January to $669.9B from $662B in prior month (matches the biggest gain since Sept. 2012); wholesale inventories excluding oil rose 0.9% in January and wholesale sales rose 0.5% in Jan. after falling 0.9% the prior month; Petroleum inventories rose 10.7% from last month, the biggest gain since June 2008

·     U.S. March Markit manufacturing PMI fell to 52.5 after dropping 1.9 points to 53.0 in February (lowest level since June 2017 and down from 55.6 a year ago); the March flash services index fell 1.2 points to 54.8 after rising 1.8 points to 56.0 in February







WTI Crude















10-Year Note





Sector Movers Today

·     Bank movers; financials sliding for a 3rd day, with Dow components JPM, GS a drag on the index and regionals down again (STI, ZION, SNV) as Treasury yields tumble to 14-month lows after the Fed dovish statement this week on rates; DB said in its annual report that it expects group revenue to be slightly higher this year than in 2018 as revenue at its key corporate and investment-bank division should grow slightly

·     Metals & Materials; Broad based selling in commodity space as metals crushed (AKS, FCX, X, STLD, AA) and oil names also pounded with E&P getting hit hard (CXO, EOG, APA, MUR, FANG) on slowing global growth concerns; CMC positive mention by several analysts today, upgraded to outperform at Macquarie while JPMorgan said results were solid and we expect earnings to continue to improve throughout the balance of the year/raise tgt to $23 and remain OW

·     Housing & Building Products; SWK was upgraded to buy at Longbow in conjunction with analysis of its opportunity with Craftsman through 2022 and current valuation discount to the SP500; homebuilders in focus next week with earnings from LEN and KBH; housing stocks strong ahead of the earnings next week as well, a boost on housing data today and the low rates env’t

·     Retail earnings; Sporting goods retailer HIBB shares rise as Q4 results blew past estimates and offered upbeat guidance for FY20; Q4 comp -store sales rose 3.8% vs. est. of flat; announced the planned retirement of CEO Jeff Rosenthal; sees FY20 EPS of $1.80-$2.00, above estimates of $1.74; in jewelry, TIF reports comparable-store sales flat on constant currency basis vs. est. up 0.1% during its key holiday period/gross margin rate -10 bps to 63.8%; DXLG Q4 sales of $131.2M and EPS topped views and guides for continued low-single digit same-store sales for FY2019, but no other guidance was provided



·     DHI +1%; as housing stocks strong ahead of the earnings next week as well, a boost on housing data today and the low rates env’t (PHM, LEN)

·     HIBB +24%; as Q4 results blew past estimates and offered upbeat guidance for FY20; Q4 comp -store sales rose 3.8% vs. est. of flat; announced the planned retirement of CEO Jeff Rosenthal; sees FY20 EPS of $1.80-$2.00, above estimates of $1.74

·     LITE +1%; upgraded to overweight at JPM citing the solid outlook for the telecom business on the back of strong growth led by 5G investments, upside to synergy targets relative to recent acquisition of Oclaro

·     PZZA +4%; announced that it has added NBA Hall of Famer Shaquille O’Neal to its board and is investing in nine restaurants in the Atlanta area, and has agreed to pitch the brand

·     TWTR +4%; Cleveland Research raised its 2019 ad revenues on positive feedback regarding video ad spend, stronger execution, and partner investments

·     VAR +2%; was upgraded to outperform at Baird saying multiple paths are emerging for Varian to sustain upper-single digit plus oncology order growth

·     YRCW +1%; after reaching a tentative agreement with the Teamsters union on a new contract covering thousands of workers/current labor deal was set to expire March 31



·     CAL -8%; share fall after Q4 EPS of 38c missed by 7c on weaker Famous Footwear comps (1.1% vs. 1.3% est.)/in-line EPS guidance

·     CNAT -56%; after it disclosed yesterday that its emricasan failed to demonstrate the desired effect in the Phase 2B NASH fibrosis study

·     GBX -9%; guides Q2 EPS 7c-9c, well below the 42c estimate (though sees higher revs) blaming the weak EPS view on poor manufacturing execution in Romania, compounded by supplier delivery failures and railcar loss contingencies/increased labor costs

·     JKS -7%; Q4 revenue fell short of analysts’ expectations amid lower selling prices of solar modules, coming in at $1.12B, below the $1.22B estimate

·     NKE -4%; posted weaker-than-expected Q3 sales in its key North American market and noted that a stronger dollar would hit profits over the near term/Q3 gross margin beat expectations with revenue fairly in line with consensus

·     SIVB -5%; among top S&P 500 decliners, as the regional and large cap banks slammed on plunging Treasury yields

·     ZUO -10%; shares dropped after guidance for the following quarter came in short of consensus views after Q4 results were in-line to a slight beat


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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