Mid-Morning Look: March 25, 2019

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Mid-Morning Look

Monday, March 25, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-66.64

0.26%

25,435

S&P 500

-8.74

0.31%

2,791

Nasdaq

-40.81

0.53%

7,601

Russell 2000

-9.80

0.65%

1,496

 

 

U.S. equities open the day weaker, extending losses from Friday after slowing global growth fears wreaked havoc on market sentiment (Eurozone PMI data, Fed outlook of US), while attention this weekend turned to Washington and the Mueller report findings as well as Brexit again and new trade talks with US negotiators heading to Beijing later this week. Stocks have already begun paring losses, but traded down early as Treasury prices jump further (pushing yields to year lows). Bank America strategist said earlier today that the biggest rally since 1987 was solely driven by corporate buybacks / derivative call buying / short-covering / retail single stock buying, raising fears. Markets studied the effect of Special Counsel Robert Mueller’s finding that neither President Donald Trump or anyone close to him colluded with Russia in the 2016 campaign. Asian shares tracked Friday’s Wall Street losses, as global-growth worries were back in focus for Monday. The dollar edges lower, along with Treasury yields and oil prices, while gold extends gains. Utilities, Homebuilders and Retailers among early gainers while banks slide again along with profit taking in tech.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar is mixed, rising to its best level against the Canadian dollar in over 2-weeks, while falls against the euro, and remains little changed against the yen and British Pound ahead of busy week of more expected Brexit headlines. UK PM Theresa May is inclined to put her Brexit deal to a third vote in Parliament on Tuesday, according to various reports

·     Commodity prices are 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 are higher trading to $1,327 an ounce (up about $40 off last month lows), while oil prices par recent gains.

·     Treasury market’s extend last week’s rally, as the yield on the benchmark 10-year slides back to around Friday lows, down about 3 bps at 2.42%, while the 2-year plunges further to 2.275% and the 30-year at 2.88% – bonds gain – yields fall in extension of last week announcement by the Fed that they no longer see a rate hike this year (vs. prior view of 2 hikes) and one next year

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.76

58.28

Brent

-0.37

66.66

Gold

8.30

1,327.00

EUR/USD

0.0013

1.1315

JPY/USD

0.03

109.95

10-Year Note

-0.03

2.425%

 

 

Sector Movers Today

·     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

·     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

·     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 https://bloom.bg/2CvE3D9 ; 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

·     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 https://on.mktw.net/2uwKRM9 ; 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

 

Stock GAINERS

·     ASNA +16%; 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

·     AVYA +33%; after yesterday’s Reuters report that the company is considering a leveraged buyout with an over $5B value, including debt https://yhoo.it/2Ox5PnH

·     BIIB +1%; announces a $5B share buyback plan

·     LEN +1%; as homebuilders continue to benefit from the plunging Treasury yields/lower mortgage rates (reports earnings this week along with KBH)

·     ORLY +2%; added to JPM focus list following weather deep dive

·     VIAB +5%; 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

 

Stock LAGGARDS

·     AKAM -4%; 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

·     CMCM -1%; reported Q4 revenue miss and guided Q1 below consensus ($154.2M-$158.5M below est. $187.8M

·     NUS -9%; 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

·     PTI -55%; 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)

·     REPH -38%; after its filing for IV meloxicam received a second complete response letter (CRL) from the FDA

·     SLB -1%; 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

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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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