Market Review: March 25, 2019

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Closing Recap

Monday, March 25, 2019





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks end little changed, but that doesn’t tell the whole story today, as major averages swung between gains and losses with investors watching the yield on the benchmark 10-year yield fall as low as 2.38%, its lowest level since late 2017. The dollar drifted lower, oil prices slipped while gold prices advance for a 3rd day on recession fears/slowing global growth concerns after last week’s cautious economic outlook (weak EuroZone PMIs) and Fed commentary. In Washington, Special Counsel Robert Mueller’s found that neither President Donald Trump nor anyone close to him colluded with Russia in the 2016 campaign. The effects failed to generate any positive market momentum as Asian shares tracked Friday’s Wall Street losses, as global-growth worries were back in focus for Monday. Apple (AAPL) held a service event today that unveiled a new look for TV, announced new channels, new deals and features (more below). Consumer discretionary stocks notched gains, while homebuilders jumped on lower rates/yields and ahead of earnings this week (LEN, KBH), while financials, healthcare and tech were among the top sector decliners. Lastly, the mixed start comes amid a lull in news on the tariffs war between the United States and China, with trade talks set to resume Thursday in Beijing.



·     Commodity prices were mixed on slowing global growth fears raised last week from the Fed (lowered US outlook) and data out of Europe (significantly weaker EuroZone PMI data sank sentiment on Friday). Gold prices advanced $10.30 or 0.8% to settle at $1,322.60 an ounce, rising for a 3rd straight session and to its best level since late February. Gold prices have risen over the last few weeks as the dollar weakened and concern mounted over prospects for slowing global economic growth. Oil prices slip as WTI crude ends lower by 22c to settle at $58.82 per barrel, off the earlier lows of $58.17, paring recent gains.



·     The U.S. dollar pulled back slightly on Monday, but was overall mixed, leading to little action in the U.S. dollar and euro, with a small rebound from losses in emerging markets. The euro inched higher vs. the dollar, but the greenback posted mild losses across the board with no major economic data to sway currencies. On Monday, Germany’s Ifo data for March showed stronger than anticipated assessments of business climate, current conditions and expectations, a day after weaker PMI manufacturing sunk sentiment in the EuroZone. The yen was steady after shooting to a roughly six-week high in response to Friday’s action in bond yields.


Bond Market

·     U.S. Treasury rates surged late afternoon as yields continued to tumble, pushing the 10-year yield down 6 bps to below 2.38% and the 2-yr at 2.22% and the 30-year at 2.83%. The fall in stocks provided a boost to bonds, as the 10-year yield fell to its lowest levels since late 2017, just a week after yields post their largest weekly slides of 2019. Yields have been in freefall mode the last 4-days following last week’s announcement by the Fed that they no longer see a rate hike this year (vs. prior view of 2 hikes) and one next year.






WTI Crude















10-Year Note





Sector News Breakdown


·     Auto’s; Uber Technologies Inc. is set to announce a $3.1B cash-and-share deal to acquire its rival Careem Networks FZ as early as this week, Bloomberg reported ; LYFT mentioned cautiously in Barron’s saying investors should steer clear of the upcoming IPO until there’s a clear road to profitability; TSLA active after CEO Musk tweeted prices on all Tesla Inc. inventory cars will rise by about 3% on April 1/meanwhile, RBC lowered its tgt to $210 and reiterated its underperform ahead of expected April deliveries; GM mentioned positively in Barron’s saying GM is the favorite pick of Rod Lache, Institutional Investor’s No. 1-ranked U.S. auto analyst every year since 2012; Baird raised Q1 unit and revenue estimates for CVNA above consensus as remain constructive on shares given the momentum from seasonal uplift in car sales, positive near-term data checks; ORLY added to JPM focus list

·     Retailers; NKE grabbed headlines after California lawyer Michael Avenatti was charged by federal prosecutors in New York with attempting to extort millions of dollars out of Nike Inc. by threatening to release damaging information about the company, which did not meet his demands; ASNA announced an agreement to sell a majority stake in Maurice’s, the women’s clothing chain, to private-equity firm OpCapita LLP for about $300 million; retailers extended gains throughout the session, with several apparel and department stores outperforming: ANF, AEO, M, KSS, JWN, LULU rising along with home improvement retail HD, LOW

·     Consumer Staples; NUS was downgraded to sell at Stifel reflecting increasing uncertainty surrounding direct selling cos in China relating to an investigation into the unlawful promotion and sale of health products; THS was upgraded to buy at SunTrust with $55 tgt citing a more favorable backdrop for packaged food than we have seen in years, and strong upside potential to THS top and bottom line forecast

·     Casino & Leisure movers; WGO mixed results as Q4 EPS topped consensus on weaker than expected quarterly revs; in gaming, Bernstein said March industry gaming trends continue to be weaker than expected, as they cut monthly industry revenue estimate for a second time (sees March Macau industry gross gaming revenue (GGR) will decline 5%-6% YoY vs. prior view down 3%-5% YoY – watch MGM, LVS, WYNN); in parks, SEAS tgt raised to $35 saying it will be boosted further this year by a “solid” turnaround strategy that began in 2018

·     Services; in education sector, Morgan Stanley upgraded TAL and EDU to Overweight from Equal Weight, as expects China’s education market to grow from close to RMB6T in 2019 to over RMB10T by 2028 and expects stricter regulations enacted in 2018 to form a normalized environment where high-quality leading players benefit from higher barriers to entry



·     E&P and services sector; SLB said it sees North American onshore E&P spending down over 10%, U.S. shale facing increasing technical challenges and sees moderate shale output growth in coming years (comments from Scotia Howard Weil conference today); HAL said service pricing pressure remains in North America, Middle East service pricing seen as very competitive/sees North American E&P spending declining in 2019

·     Utilities & Solar; PCG shares were under pressure in what was a generally positive showing for the utility sector yet again, boosted by lower yields making dividend paying sectors more attractive; the UTY another record high, up around the 750 level



·     Bank movers; regional banks partially rebound as the KRE rises after falling 9% the last 3-days of last week, regional banks a little rebound early – RF, KEY, SIVB gain SBNY was added to the best ideas list at Wedbush while removed CATY; Sandler O’Neill upgraded shares of RF, MSL and FBNC after pullback in shares

·     REITs; CUZ and TIER announced a merger, creating an office REIT with a combined equity market capitalization of about $5.9 billion, where terms of the 100% stock deal, Cousins will exchange 2.98 shares of newly issued shares for each Tier stock outstanding/values Tier shares at $29.44 each, a 15.6% premium ; DLR was downgraded to Market Perform on valuation at Raymond James with lower growth outlook, and see limited upside to the story from the current level; MAA was upgraded to outperform at BMO Capital



·     Pharma movers; REPH shares fell after its filing for IV meloxicam received a second complete response letter from the FDA; ABBV was downgraded to hold from buy at Argus; AIMT announced successful results from a European Phase 3 clinical trial, ARTEMIS, evaluating lead candidate AR101 for the treatment of peanut allergy; PTI shares dropped following disappointing data of Phase 1 data on cystic fibrosis (CF) triplet therapy of PTI-801 (CFTR corrector), PTI-808 (CFTR potentiator) and PTI-428 (CFTR amplifier)

·     Biotech movers; BIIB to buy back up to $5B in shares; SRPT released a clinical update with of its Micro-dystrophin study-101, showing consistent and persistent improvement from baseline to day 270 from initial functional data.

·     Medical equipment and devices; TMO said it is buying privately held Brammer Bio for $1.7 billion in a move that would expand the lab-equipment company’s presence in the rapidly growing field of gene therapy. ; the FDA cleared ZBH’s ROSA ONE Spine System for robotically assisted spine surgeries, strengthening ROSA ONE Brain and ROSA Knee portfolio


Industrials & Materials

·     Transports; Dow Transports were down slightly on the day – holding above the 10K level (low 10,011.88) – rails leading higher (UNP, NSC) while truckers (CHRW) and airlines (UAL) lead to the downside; Stifel lowered its LTL industry volume growth forecast for 2019 from 0%-3% to -2%-2%/raising our pricing forecast for 2019 from 3%-4% to 3%-5%, even with a reduced vol outlook

·     Metals & Materials; in steel sector (X, AKS, STLD, NUE) Credit Suisse noted the U.S. International Trade Commission has elected to proceed with its antidumping / countervailing duty investigation on imports of fabricated structural steel imports from Canada, China, and Mexico.

·     Paper & Packaging; shares of IP, WRK, PKG among those active/weak early after PPW cuts domestic kraft liner by $10/ton in PriceWatch, reports mixed indications on March box demand. March 2019 marks the first period of a downward price adjustment in 42# Kraft Linerboard ($10/ton on both the East/West Coasts) since January 2016, said Wells Fargo

·     Chemicals; TROX shares rose after confirming the Federal Trade Commission withdrew adjudication of a proposed consent agreement related to Tronox’s acquisition of National Titanium Dioxide’s titanium dioxide business; ADM says extreme winter weather will cut up to $60M off Q1 pretax earnings


Technology, Media & Telecom

·     Apple (AAPL) hosted a video/service event today:  announces magazines will be added to Apple News (will include over 300); says Apple News+ costs $9.99 per month for entire family; AAPL announced a credit card in Wallet app, accepted where Apple Pay is accepted, which has Daily Cash, a daily cash back reward (partners with Goldman Sachs, MasterCard to launch Apple Card); said it will include augmented reality, multi-player games (include over 100 exclusive games); announces deals with HBO, Starz, Showtime

·     Internet; AKAM downgraded to sell from hold at Deutsche Bank and cut its price target to a Street-low view of $58 with below consensus FY19-21E Top Line and Earnings estimates and calling for ~20% underperformance to current levels; Google-owned (GOOGL) YouTube has canceled plans for high-end dramas and comedies, Bloomberg reported, citing people familiar with the matter, a retreat from direct competition with NFLX and AMZN Prime Video service

·     Semiconductors; TXN and ADI were both downgraded to market perform at Bernstein saying they were increasingly nervous about the semiconductor industry going into the second half of the year; ON was reiterated underweight at Morgan Stanley with Street-low price target of $14.50 saying the company had the "most unattractive" risk profile in its coverage; CAMP was downgraded to neutral at JPMorgan and keeps a $17 PT citing limited catalysts; MU shares back down above the $40 level – round trip back to levels prior to earnings (rallied as high as $44.21 on Thursday after mixed results and weaker outlooks)

·     Media & Telecom movers; VIAB advanced on news it has renewed its contract with AT avoiding a blackout of Comedy Central, MTV, Nickelodeon and other channels on the DirectTV service/details were not disclosed; CMCM reported Q4 revenue miss and guided Q1 below consensus; AVYA shares jumped after yesterday’s Reuters report that the company is considering a leveraged buyout with an over $5B value, including debt ; CRTO, TTD shares dropped after a report that Google is contemplating changes to its consumer and advertiser-facing tools that could include third-party ad-targeting restrictions.


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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