Mid-Morning Look: April 03, 2019

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Mid-Morning Look

Wednesday, April 03, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities tracking global markets higher, with market sentiment buoyed by a report overnight that U.S. and Chinese negotiators are 90% of the way to a trade deal. Financial Times reported last night that negotiators for U.S. and China have resolved the majority of the issues in the trade dispute but continue to debate the details on the implementation and enforcement of the trade deal. Also helping sentiment, another round of positive economic data out of China as the Caixin China services purchasing managers index rose to 54.4 last month from February’s 51.1, which was a four-month low. Taking a little steam out of the market early was a disappointing ISM Non-Manufacturing report (services data), falling below estimates and the prior month results (and weaker private payroll data). The better optimism on trade with China and data overseas helped offset a gloomy growth outlook overnight as well after the WTO cut its forecast for trade growth this year by more than a percentage point, to 2.6% (from a 3.7% forecast in September). In stock news, GME shares dropped to 14-year lows on sales miss and lower guidance, while CAT drops on an analyst downgrade; PLAY rises on comps beat for quarter; very few pockets of weakness, with global stocks jumping across the board (though defense stocks slide – RTN).


Treasuries, Currencies and Commodities

·     In currency markets, the dollar slips early against the euro, pound and some emerging markets following weaker ADP and ISM non-manufacturing data; gold prices slip, holding under $1,300 an ounce while oil prices are little changed after recently topping 5-month highs (inventory data today moving markets as well as new robust China data); Treasury prices mixed, with the 10-year yield up at 2.50% as investors digest meaning of weaker data today in the U.S.


Economic Data

·     Private payroll report was soft as ADP said US firms added 129K jobs in March, below the 175K estimate (ahead of the Friday nonfarm payroll report), though February data was revised by 14K to 197K from 183K as reported last month.

·     ISM Non-Manufacturing for March falls to 56.1 from 59.7 in the prior month and below the 58 estimate by economists; Business activity fell to 57.4 vs 64.7 prior month (lowest since July 2017), while new orders fell to 59.0 vs 65.2 and employment rose to 55.9 vs 55.2; also, prices paid rose to 58.7 vs 54.4 and backlog of orders rose to 56.5 vs 56







WTI Crude















10-Year Note





Sector Movers Today

·     Semiconductors; sector leading the charge higher for markets, boosting the tech sector as the Philly semi index (SOX) trades to fresh 52-week highs (above 1,467), rising over 2.5% at its best levels after Nomura took a positive long-term view on chip makers’ growth, seeing annual sales growth of as much as 9% from 2020 to 2025, despite some caution in the near-term. Nomura said sector growth may come from several categories, including AI, autonomous driving, 5G communications, Internet of Things and continued buildout of global data-center infrastructure (initiated INTC and AMD with buys and neutrals on NVDA, XLNX); shares of MU, WDC, ON among top gainers; INTC said that George Davis will become the chipmaker’s CFO effective Wednesday (as he leaves QCOM where he had served as CFO since 2013)

·     Industrial & Machinery; CAT was downgraded to hold from buy at Deutsche Bank saying it was becoming increasingly clear that the company’s backlog growth was poised to turn negative in the next quarter, which it views as an early warning sign for earnings prospects; KMT was upgraded to overweight at Barclay’s (tgt raised to $44) saying while the company was facing growth headwinds, such risks look far more priced into KMT than its peers; in heavy duty trucking (CMI, PCAR, NAV), Class 8 orders declined 66% YoY to 15,700 units

·     Aerospace & Defense; UBS downgraded RTN to neutral from buy saying shares have outperformed the large-cap defense avg by about 900bps YTD on the back of better 4Q cash performance and an industry leading top-line outlook; SPR was downgraded from Outperform to Market Perform at Cowen saying the stock is only slightly off highs despite having the highest 737Max exposure of any of the suppliers (48% vs 27% for BA) while an extended Max software update review increases the risk BA may need to temporarily trim production

·     Biotech movers; RBC Capital previewed quarter and upgraded MRUS, while downgraded INCY, (primarily on valuation) and updated valuation and price target for GLPG following FINCH phase III RA data; APTX shares were active as announced preclinical data on its NMDA receptor modulator NYX-458; EDIT said it will collaborate with privately held BlueRock Therapeutics, LP aimed at discovering, developing and manufacturing novel engineered cell therapies



·     AMD +9%; initiated buy at Nomura as firm positive long-term (cautious n-t) on the semiconductor sector which traded to 52-week highs for the Semi index (MU, WDC rally)

·     APRN +9%; as named a new CEO (Linda Findley Kozlowski as its new CEO, most recently COO at ETSY) while reaffirms its prior guidance

·     BOOM +18%; as raised Q1 revenue guidance to about $100M from $82M-$85M (est. $82.51M), while gross margin is expected to be consistent with the company’s prior forecast of 34% due to strong sequential growth

·     CLF +4%; s price of steelmaking ingredient iron ore burst above $100 a tonne on talk of a supply crunch after warnings of lower output from the industry’s three big producers

·     I +7%; upgraded to overweight at JPMorgan noting shares have declined 38% since February 27th – but believe that after being overly-optimistic in the fall, the market is now underpricing the likelihood of Intelsat and the CBA’s eventually selling spectrum and reaping substantial proceeds

·     OPTT +190%; after announcing a deal with an unnamed oil and gas exploration and production company to complete a 12-week paid feasibility study.

·     PLAY +4%; 4Q comp sales (2.9% vs. 2%) and EPS beat (75c vs. 63c est.) and guides FY revenue $1.37B-$1.40B vs est. $1.38B sending shares higher

·     URBN +3%; upgraded to buy at Davidson citing strengthening fundamentals ahead



·     CAT -1%; downgraded to hold from buy at Deutsche Bank saying it was becoming increasingly clear that the company’s backlog growth was poised to turn negative in the next quarter

·     GME -12%; after posting disappointing Q4 results and guidance for next year/Q4 comp store sales were up 1.4% while new hardware sales fell (-9.8%) and new software sales were down (-7.8%)

·     PM, MO -1% weak ; after FDA says received 35 reports of vaping associated with seizures

·     QCOM -1%; stand out decliner in semi sector, down over 1% after losing its CFO to INTC

·     RTN -2%; UBS downgraded RTN to neutral from buy saying shares have outperformed the large-cap defense avg by about 900bps YTD

·     USNA -3%; announced preliminary Q1 results with sales 11% below consensus due to limited promotional activity and softer-than-expected sales in China (Usana also lowered FY sales guidance 3% and EPS 4% at the midpoint.)



·     Bilibili (BILI) 18M share Secondary priced at $18.00

·     Qutoutiao (QTT) 10M share Secondary priced at $10.00

·     Ruhnn (RUHN) 10M share IPO priced at $12.50

·     StoneCo (STNE) 19.5M share Secondary priced at $40.50


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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