Market Review: April 02, 2019

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Closing Recap

Tuesday, April 02, 2019





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stock end mixed, as the tech heavy Nasdaq Comp posted modest returns while the Dow Industrial Average declined, driven lower by weakness in WBA after the Dow component lowered its year sales outlook after a weaker Q4 result, weighing on other healthcare retailers and service names. After yesterday ‘s market surge (major averages all closed over 1%) following better global economic data, markets were in a tight trading range today as investors await details of tomorrow’s expected meeting between US and Chinese delegates on trade as well as details of Brexit after hour long meetings today in the UK, and the US jobs data on Friday. Airline stocks advanced as Delta Air stock jumped after management raised its guidance. Markets overall posted a small pullback from yesterday levels, with the S&P still near its best levels since October. The other big story today was Bitcoin, which saw volatility for the first time in months, moving to its best levels since November as it briefly topped $5,000 before paring gains (rising about 15% to $4,750). Other crypto currencies also rallied in sympathy as well (Ethereum Ripple, Litecoin) but there was no clear reason for the sudden interest. Oil prices finished higher ahead of inventory data (WTI crude best levels since November), while Treasuries were steady.



·     Oil prices extend gains, with WTI crude rising 99c or 1.6% to settle at $62.58 per barrel, adding to yesterday’s 2.45% advance ahead of weekly inventory data, while Brent rose less to settle at $69.37 per barrel. The API reports weekly inventories tonight and the EIA tomorrow morning. WTI crude settled at its highest settlement since early November, adding on to Q1 34% advance, its strongest quarterly advance since the second quarter of 2009.

·     June gold gains less than 0.1%, or $1.20, to settle at $1,295.20 an ounce little changed after falling yesterday after upbeat global economic data pushed the dollar higher and weighed on gold prices. Prices were steady the whole session with both stock and Treasury markets directionless most of the session.


Currencies & Bonds

·     The U.S. dollar pared earlier gains (rose to highs 97.51 – just off 2019 highs of 97.71) after having bounced off its 200-day MA of 95.95 two-weeks ago after the Fed lowered its rate hike outlook. The British Pound bounced mid-afternoon after U.K. Prime Minister Theresa May said a short further delay of Brexit was necessary to hammer out an exit deal. Britain was initially meant to leave the European Union on March 29, but secured a short extension as no withdrawal deal has been approved by Parliament. The dollar was overall mixed on the day.

·     Meanwhile, just a day after extreme volatility in the Treasury markets as the 10-year yield spiked about 9 bps to around 2.50%, the moves today were much less attention getting. The yield on the 10-year was around 2.49% most of the day and the 2-year up around 2.26% amid a quiet day of economic data and as stocks were steady outside of losses in the Dow (die to WBA earnings).


Economic Data

·     Durable Goods Orders for February fell (-1.6%) vs. est. (-1.8%), the largest decline since October, while Durable goods new orders revised down to 0.1% for Jan. from 0.3%; new orders ex-trans. rose 0.1% in Feb. after 0.1% fall and new orders ex-defense fell 1.9% in Feb. after 0.4% rise






WTI Crude















10-Year Note





Sector News Breakdown


·     Autos; LYFT falls further below its IPO deal price last week of $72 per share, with Seaport Global initiating with a sell and $42 tgt this morning; monthly auto sales: TM March US auto sales fell (-3.5%) vs. est. (-5%); FCAU March US auto sales fell (-7.3%) vs. est. down (-6.4%); HMC March US auto sales rose 4.3% vs. est. 0.1%; GM said Q1 US deliveries fell (-7%) as all four brands showed declines); NSANY March US auto sales fell (-7%) vs. est. down (-13.9%)

·     Consumer Staples; LW tops FQ3 estimates and lifts full-year guidance saying volume was up 4.0% during the quarter and price/mix impacted sales by 3.0%/gross margin was reported at 29.5% of sales vs. 28.1% a year ago and 27.4% consensus; COTY was downgraded to neutral at Citigroup noting shares have rallied 72% so far this year on better results, confidence in mgmt and tender offer by largest holder (JAB) to increase their stake; ANFI shares fell after issuing sales outlook; KR extends losses from yesterday, down after AMZN said it would cut prices on “hundreds” of items from Whole Foods starting Wednesday to average 20%

·     Restaurants; WING was downgraded to neutral at Guggenheim as they see increased risk to moderating new store growth and the current multiple; regarding YUM Longbow said based on conversations with Taco Bell franchisees, they believe U.S. system-wide same-store sales for this concept were up approximately 4% in 1Q19, in line with their estimate and consensus.

·     Housing & Building Products; EXP was downgraded to neutral from buy at Davidson noting the shares have experienced a significant recovery since the beginning of the year (+40%), due in part to what we believe was an overly severe correction in calendar 2H18

·     Casino & Leisure movers; gaming stocks extended gains following better Macau data yesterday boosting stocks; WYNN shares up after the Massachusetts Gaming Commission issued a 199-page report on Wynn Resorts regarding the suitability of the company in regard to its application for a gaming license in the state. The report arrived just in front of three days of commission hearings in Boston on the issue



·     Energy stocks pared some of yesterday gains which rallied on better China data, helping boost commodity prices and stocks – today a pullback ahead of inventory data; in the E&P sector; CXO, WPX, Quantum Energy Partners and Post Oak Energy Capital agree to sell their Oryx holdings in the Permian Basin to Stonepeak Infrastructure Partners for ~$3.6B in cash

·     Utilities & Solar; UGI said it will buy the 69.2 million shares of propane marketer APU that it doesn’t already own for the equivalent of $2.44B in cash and stock. Under terms of the deal, UGI will exchange 0.50 of its shares plus $7.63 in cash for each of APU shares. Based on Monday’s closing prices, that values AmeriGas shares at $35.325 ; DTE files automatic mixed securities shelf; EXC was upgraded to outperform at Wells Fargo



·     Asset managers; BLK is launching its largest sweeping organizational overhaul in years, according to Bloomberg citing an internal memo, installing new leaders at its alternatives investment division, reorganizing staff and shifting more  responsibility for clients to regional leaders; OZM said its assets under management as of April 1 was about $31.5 billion, down from $32.3 billion as of March 1, includes about $325 million of redemptions; AMP sold its Ameriprise Auto & Home (AAH), a business unit of Ameriprise Financial for gross proceeds of $1.05 billion in cash

·     Consumer finance and lending; ALLY announced a $1.25B share buyback plan; PYPL is removing flat-fee pricing for sending money to friends and family who have a PayPal account in countries outside of the U.S./it’s starting a variable fee of 5% based on the amount sent with a minimum of 99 cents and up to $4.99 per transaction; in payments space, ADP, GPN, PAYX 52-week highs; FLT and WEX tgts raised at BTIG saying shares look attractive

·     REITs; senior housing stocks slumped, led by declines in SNH after the company said it would slash its dividend by more than half and take a larger stake under a new management deal with its 2001 spin-off, Five Star Senior Living.



·     Healthcare services; retail pharmacy giant and Dow component WBA lowered its 2019 forecast and posted weaker Q2 results (Q2 EPS of $1.64 missed by 10c on mostly in-line revs); cuts FY19 EPS view to ‘roughly flat’ from up 7%-12% view prior – CVS dropped in sympathy along with the rest of the supply chain (CAH, MCK, OMI, ABC, RAD, and DPLO); CRCM shares dropped after BBY said it suspended its relationship with that provided back-up childcare for employees, which prompted a downgrade at BTIG to neutral

·     Managed care (UNH, CI, CNC, WCG, HUM) – CMS announced final 2020 Medicare Advantage (MA) rates will rise by 2.53%, a ~1% increase from prelim est. of +1.59% (in-line with most analyst expectations)/Stephens said rate book analysis indicates that CNC and WCG will receive rate updates above the overall industry average, while ANTM’s weighted rate increase will trail the peer group by ~160 basis points

·     Biotech movers; ADMA shares surged after the FDA approves its immunodeficiency disease treatment ASCENIV/ASCENIV is used for the treatment of Primary Humoral Immunodeficiency Disease in adults and adolescents (12-17 years of age); SGMO shares jump in response to interim data from a Phase 1/2 clinical trial evaluating its SB-525 gene therapy in patients with severe hemophilia A

·     Healthcare suppliers; APYX shares as announced it has voluntarily withdrawn its application for premarket notification 510(k) regulatory clearance of J-Plasma/Renuvion for use in dermal resurfacing procedures/FDA raised questions and concerns related to superior clinical results from one investigational center as compared to the other two investigational centers

·     Medical equipment and devices; DGX were upgraded to buy from hold at Jefferies given the belief that UNH’s upcoming rollout of its preferred lab network is a positive catalyst for both stocks, as their likely inclusion should bolster organic growth beginning in 2020; VIVO shares dropped after cutting its forecast as sees Q2 revs $50.5M vs. est. $56.4M; ANGO Q3 EPS and sales both fell short of consensus views; ATRC was upgraded to buy at BTIG


Industrials & Materials

·     Chemicals; DWDP announced that it has completed the separation of its Materials Science Division through the spin-off of Dow Inc. Dow begins "regular way" trading under the symbol "DOW" – DOW was initiated with buy/outperform by five different analysts today ($64 was the high target; LYB was upgraded to buy from underperform at Bank America, while downgraded DWDP to neutral from buy

·     Transports; airlines get a lift after DAL guided Q1 adj. EPS view to 85c-95c from 70c-90c prior (consensus 81c) with 1Q preliminary revenue growth about 7% (saw 5%-6% y/y) and 1Q preliminary system capacity up 5% (saw up 4%); gains in airlines were offset by weakness in rails (UNP) and package delivery (FDX, UPS)

·     Metals & Materials; AA was downgraded to neutral from outperform at Credit Suisse and tgt cut to $31 from $40 as firm shifted valuation framework to focus on “owned” EBITDA and FCF on a blended 2019/20 basis to account for the shifting fortunes between refining and smelting; iron ore prices rose after BHP became the second major miner to lower its iron ore production estimates following a cyclone off the coast of Western Australia


Technology, Media & Telecom

·     Internet; FB shares outperformed early in the sector as Deutsche Bank said its move into e-commerce via its Instagram app could add billions of dollars to the company’s revenue within a few years; SHOP shares fell after theinformation reported that MSFT considers creating a competitor to the company ; WMT partners with GOOGL on voice-enabled grocery shopping according to TechCrunch

·     Semiconductors; QRVO leads semi’s higher after two analyst upgraded with Goldman Sachs raising to buy from neutral and raised price target to $79 from $66 while KeyBanc upgraded to overweight from sector weight with an $85 tgt; outside of QRVO, semi stocks slipped for the most part after the SOX index jumped 2.5% on Monday

·     Software movers; ZS tgt raised to $74 at Bank America as they highlight Zscaler’s disruptive potential; PSTG acquires file software solutions company Compuverde for undisclosed terms; INTU tgt was raised at KeyBanc as the NT consumer momentum and LT FinTech and FinApp opportunity remains underappreciated, in their view (52-week highs)

·     Hardware & Component news; COMM upgraded to Outperform at Credit Suisse and names it as a top pick with "highest conviction," and raises the target from the Street-low $20 to the Street-high $34 as sees "material" upside from the Arris International acquisition


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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