Market Review: March 28, 2019

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Closing Recap

Thursday, March 28, 2019





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks closed higher, rising despite a weaker GDP reading in the U.S. while Treasury prices held steady (as did the declining yields) as investors moved back into riskier stocks and took profits in defensive sectors (Telecom, Utilities among the top decliners). At the same time, gains in consumer-driven companies, industrials and technology stocks outperformed. Data on the day disappointed as Q3 GDP was revised lower to 2.2% from 2.6% while pending home sales dropped for a 14th consecutive month. Homebuilders declined after the housing data, paring recent gains in a group that has rallied on low rates and better earnings. Consumer discretionary space was helped by better reactions to earnings/guidance from LULU, PVH. Not helping markets today, White House economic adviser Larry Kudlow said the Trump administration is prepared to keep negotiating with Beijing for weeks or even months. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin arrived in Beijing for a new round of talks today, which will be followed by talks in Washington next week.

·     Treasury year yields rebounded from a 15-month low, holding steady most of the session while the U.S. dollar extended gains into a third day. The British pound slumped as the U.K. gov’t will put the Brexit withdrawal agreement only to a vote Friday. Oil prices rebounded off earlier lows to finish little changed despite President Donald Trump renewed his criticism on OPEC. Note the S&P 500 index is on track for the biggest quarterly gain since the third quarter of 2009 (up 12%), while the Nasdaq on track for 15% gains and the Dow 10% with a day left to the quarter. Still, investors remain anxious about the slowing global economy and worrisome signals coming from the bond market.

Economic Data

·     The U.S. economy was revised lower for GDP to 2.2% from 2.6% prior and just below the economist estimate of 2.3% (GDP rose 3.4% in prior quarter); Personal consumption rose 2.5% in 4Q after rising 3.5% prior quarter (est. 2.6%) while the GDP price index rose 1.7% in 4Q after rising 1.8% prior quarter (est. 1.7%). Core PCE q/q rose 1.8% in 4Q after rising 1.6% prior quarter

·     Weekly Jobless Claims fell 5K to 211K, better than the 220K estimate while the prior week claims revised down to 216K from 221K; the 4-week moving avg. slipped by 3,250,000 to 217,250; continuing claims rose 13k to 1.756m in the week ending March 16

·     Pending Home Sales for February fell (-1%) vs. estimated decline of (-0.5%) as the Northeast fell -0.8%, Midwest fell -7.2%, South up 1.7% and the West up 0.5%

·     The 30-year fixed mortgage rate for week ended today fell to 4.06% from 4.28%, according to Freddie Mac, its’ lowest since Jan. 2018 while the 15-year rate avg 3.57%, down from 3.71%



·     Oil prices ended the day lower, but managed a late day rally to pare losses to minimal, with WTI crude down 11c to $59.30 per barrel while Brent dropped only a penny to $67.82 per barrel, both well off earlier lows. Oil started the day lower after President Trump called on OPEC to lift output, tweeting that the price of oil was “getting too high.” Note prices have rallied by some 25% year to date as OPEC/allies have remained committed to their pledge to curb production. Oil prices slipped yesterday after bearish EIA inventory data.

·     Overall, big moves in the commodity space today with industrial metals higher (aluminum up over 1%), while Hog futures fall limit down by 3c (4th daily decline) and lumber futures rose by limit $15 to one week highs; precious metals gold and silver each down over 1.5% with dollar spike today and palladium prices falling over 7% (after dropping over 5.8% yesterday) – was at 52-week highs of $1,614.88 on 3/21, down under $1,350 today

·     Gold posted big losses (largest single day decline since August) on Thursday with the June futures contract losing -$21.60, or 1.6%, to settle at $1,295.30 an ounce while soon to be expiring April gold dropped -$20.60, or 1.6%, to end at $1,289.80 an ounce



·     Strong gains for the U.S. dollar today, rising vs. nearly all rival currencies, posting the biggest gains vs. emerging markets (Turkish Lira) and the British Pound (falling over 1%) as U.K. Prime Minister Theresa May plans to hold a vote on Friday in Parliament solely on the withdrawal agreement she made with the EU, according to reports. The dollar index (DXY) extended its gains for a third day after sinking last week (post FOMC lows of 95.74), and despite a weaker GDP reading for Q4. The Canadian loonie dropped to 3-week lows vs. the dollar on oil weakness.


Bond Market

·     After several days of extreme volatility Treasury prices were steady throughout the day, with the 10-year yield holding around 2.38% (off yesterday lows of 2.34%), while the 2-year yield was up slightly at 2.17% and the 30-yr 2.80%. It has been a crazy ride since the FOMC decision last week for no additional rate hikes in 2019 (down from its prior view of two hikes) and a lower economic growth outlook. With central banks getting even more dovish the last few days (ECB as well), Treasury markets have jumped while pressuring yields to more than 1-year lows.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; LULU posted a strong 4Q on robust momentum across products, channels and margins, with initial 2019 guidance that is already above consensus (EPS guidance of +17% to 19% y/y); Q4 comparable-company sales rose +17% and gross margin expanded +110 bps; PVH shares also rise on Q4 earnings beat expectations with EPS of $1.84 beating by 8c, driven mainly by stronger than expected revenue growth (beat revenue expectations for Calvin Klein and for Tommy Hilfiger); watch maker MOV shares jump as earnings handily beat by 12c on better sales ($199.4M vs. $194M est.) while margins improved to 55.7% of sales vs. 52.7% a year ago; SPWH shares fell after Q4 net sales just missed estimates, and guided Q1 sales $174M-$180M, below the $183.7M estimate/announced its CFO is leaving; FIVE advanced after earnings results

·     Consumer Staples and Restaurants; CHD said it would acquire FLAWLESS Brand for $475M plus earn-out and sees deal boosting 2019 cash earnings by 4%; Citigroup took a more positive view on the tobacco sector as they upgraded Imperial Brands and BAT to Buy and also lifted price targets on PM, MO and Swedish Match; MNST mentioned positively at Credit Suisse, named a top pick saying the variety of headwinds that have pressured the stock this month “do not put the Monster story at risk (reit outperform); 52-week highs for several names in the consumer space – SBUX, CHD, EL, KMB, PG, ULTA, HSY

·     Housing & Building Products; homebuilders were the standout sector to the upside yesterday after better earnings/new orders data from LEN and KBH, while the global rally in bonds has pushed down Treasury yields (in turn lowering mortgage rates); TREX was upgraded to buy at Stifel saying the stock is trading at an attractive level (at a 13% discount to 5-yr avg), and believe with the risk reward very favorable below $60

·     Auto’s, Casino & Leisure movers; LYFT IPO pricing expected tonight, with the company boosting the IPO price range to $70-$72 per share from $62-$68 per share; SEAS was upgraded to buy at B Riley/FBR saying is well positioned to benefit from increased global consumer brand awareness and improving economies of scale; YOGA shares drop under $1 per share after weaker Q4 results



·     Energy stocks were lower along with the decline in oil prices, as commodity prices were broadly lower on the day, led by energy, precious metals along with other declines in lean hogs and “softs” such as cotton; the recent bounce in the E&P and services sector amid the spike in oil prices saw profit taking today following yesterday’s bearish inventory report for crude. Utility stocks pulled back from recent record highs, having; in coal, ARCH shares rose after Seaport Global said a new West Virginia law signed Wednesday, which incentivizes new mine development in the state, is a “big positive”



·     Bank movers; group has been under siege the last week following the drop in interest rates outlook/treasury yields; JEF Q1 income from continuing operations of $47.0M, or 14c a share, fell from $86.2M, or 23c YoY as Q1 total equities and fixed income net revenue of $371M vs. $368.8M a year ago and Q1 investment banking net revenue of $278M vs. $433.8M a year earlier; negative headlines regarding job cuts with reports of JPM, Nomura, Wells all making layoffs; QIWI Q4 results beat estimates and the company’s board approves a targets distributing 65%-85% of its adjusted net profit for 2019 as a dividend to shareholders starting in Q1/sees 2019 total adjusted net revenue up 0%-8% Y/Y and adjusted net profit growth of 15%-25%



·     Pharma movers; Starboard says it believes the proposed acquisition of CELG is not in the best interests of BMY, urging holders to vote against the deal; PRTO plunges as its vonapanitase treatment in chronic kidney disease (CKD) patients failed to beat placebo in second late-stage study; AMRN rises the American Diabetes Association updated its Standards of Medical Care to include a recommendation that Vascepa be considered for certain patients with diabetes; TCDA shares surged over 40% following a narrower Q4 EPS loss and positive results from long-term clinical trial of TRC101 in patients with CKD and metabolic acidosis

·     Biotech movers; DTIL 7.9M share IPO priced at $16.00; SRPT announced preliminary data from a Phase 3 clinical trial, ESSENCE, evaluating casimersen and golodirsen in Duchenne muscular dystrophy (DMD) patients amenable to skipping exons 45 and 53, respectively; OSMT shares fall after a Phase III study of Ontinua ER failed to work better than a placebo on one score as a treatment for spasticity in multiple sclerosis, but worked on another.

·     Medical equipment and devices; IRTC shares weak as defenses by several analysts fail to lift shares (shares down as Washington Analysis has released a report on iRhythm, detailing its analysis of expected changes for the reimbursement of iRhythm’s Zio patch)

·     Healthcare services and providers; ARA shares plunge following another mgmt resignation as CFO Jason Boucher resignation follows former CFO Jonathan Wilcox’s departure in September (analysts lower tgts); managed care stocks (ANTM, HUM, CI, UNH) have suffered big losses this month amid competing policy proposals in Washington that threaten a long period of uncertainty


Industrials & Materials

·     Industrial & Machinery; WBC shares fell after agreeing to be acquired by Switzerland-based auto components maker ZF Friedrichshafen AG in a deal valued at more than $7 billion, with holders getting $136.50 in cash (6.5% discount to Wed closing price) ; lighting companies (CREE, AYI) shares slipped late morning after Osram cuts 2019 revenue view as now expected to decline 11%-14%, compared to “flat to moderate” growth in 0%-3% range

·     Transports; FDX was downgraded to neutral at Susquehanna saying there is no clear path to a free cash flow inflection emerging near-term, given an uncertain macro backdrop and a capex that is more likely to rise before it falls; in truckers, Deutsche Bank said ODFL could see a large miss in the first quarter, noting that the "entirety" of the miss is already priced in

·     Chemicals; BAYRY shares active after a federal jury awarded $80 million in damages to a California man who blamed Roundup weed killer for his cancer, in a case that his attorneys say could help determine the fate of hundreds of similar lawsuits (Roundup is owned by Monsanto which Bayer acquired); FUL mixed Q1 results as sales declines 1% Y/Y to $673M, excluding the impact of for-ex, driven by favorable pricing, and low-single digit organic growth in Americas Adhesives & EIMEA while revenue growth was offset by slowdown in China


Technology, Media & Telecom

·     Semiconductors; ON agreed to acquire QTNA for $24.50 per share in all cash transaction; this transaction has an enterprise value of value of $936M; the group still feeling the effects of Infineon’s 2nd profit warning in a few months yesterday hitting sentiment saying demand has been weaker than expected

·     Software movers; PLAN tgt raised from $42 to $45 saying CY20 revenue still has a lot of room for upside citing the "impressive" financial performance since the October IPO and the “strong beat-and-raise dynamics for top- line and billings." VRNT shares rise post earnings as Q4 results beat expectations and raised its fiscal 2020 outlook (Wedbush raised tgt to $63 and Oppenheimer to $65 on results); PFPT tgt was raised to $140 and upped the tgt on NOW to $285 saying the growth trajectory sustained by multi-product strategy

·     Media & Telecom movers; NLSN shares slipped after the New York Post reported Private equity giant Blackstone Group is dropping out of the Nielsen Holdings sales process — putting the future of the auction in doubt ; WWE 3.2M share Block Trade priced at $84.50; after rising the last 6-days, Dow component VZ was among the top decliners in the index following 6-days of gains; RBC Capital maintained $140 tgt on DIS saying with the Fox deal done, investors can now look to a catalyst-rich setup for DIS incl. the April investor day + DTC launch

·     Hardware & Component news; ACN rises on better Q2 results as cloud figures help the earnings beat while bookings hit a record $11.8 Billion and boosts forecast for the year; in the optical sector, ACIA had its price tgt lifted by two analysts – Piper Jaffray to $68 from $59, noting the company has a leadership position in Coherent DSPs, 600G and DCO modules and UBS to $64; SNX Q1 beat while midpoint of Q2 guidance $5.4B-$5.7B topped estimates of $5.48B


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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