Mid-Morning Look: April 04, 2019

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Mid-Morning Look

Thursday, April 04, 2019

Index

Up/Down

%

Last

 

DJ Industrials

101.91

0.39%

26,320

S&P 500

-0.51

0.02%

2,872

Nasdaq

-20.85

0.26%

7,874

Russell 2000

3.43

0.22%

1,564

 

 

U.S. equities another push higher, getting even closer to last year’s record highs for major averages as trade deal optimism continues to help sentiment amid reports that President Trump will meet Chinese Vice Premier Liu today and could announce a summit date with President Xi shortly. Economic data also lifting markets as jobless claims fell to a 49-year low as the labor market tightened further (comes ahead of tomorrow’s non-farm payroll report). The Dow Industrials rise over 100-points early, led by gains in DOW, BA and DIS along with strength in financials, while healthcare names the biggest drag in the index (WBA, MRK, and JNJ). The Philly semiconductor index (SOX) reverses gains – turns negative dragging the overall NASDAQ lower now (SOX highs 1,475) after hitting 52-week highs, while software names hit very hard (CRM, TWLO, ZS, WDAY, NOW). Markets still awaiting further clarification on trade with lots of positive “nuggets” this week lifting averages and sentiment, along with jobs data tomorrow and earnings season right around the corner (starts in about 2-weeks).

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar bounces on strong jobless claims data (after the buck fell yesterday on weaker US data); natural gas prices dropped following bearish weekly inventory data (EIA said stockpiles rose 23 bcf vs. est. build 10 bcf); WTI crude small pullback after recent surge despite bearish inventory data, while Brent closing in on the $70 per barrel level (WTI just off recent 5-month highs). American stockpiles surged by the most since January last week, according to EIA figures on Wednesday, with a 7.24 million-barrel increase; Treasury market’s a small bounce as the 10-year yield dips back to 2.50% ahead of the jobs data tomorrow.

 

Economic Data

·     Weekly Jobless Claims fell 10K to 202K (the lowest level since December 1969), below the 215K economist estimate while the 4-week moving avg. fell 4K to 213.5K in the week ending March 30 (note overall prior week claims revised up to 212K from 211K); continuing claims fell 38K to 1.717M in the week ending March 23

·     The 30-year fixed mortgage rate for week ended today rose to 4.08% from 4.06%, Freddie Mac said in statement; the 15-year rate avg 3.56%, down from 3.57% a week earlier

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.23

62.23

Brent

0.12

69.43

Gold

-6.80

1,88.50

EUR/USD

-0.002

1.1213

JPY/USD

0.08

111.57

10-Year Note

-0.008

2.512%

 

 

Sector Movers Today

·     Auto’s; TSLA shares slumped after saying deliveries were 62,950 vehicles (up 110% YoY but down 31% QoQ)/ Model S/X deliveries fell far short of expectations (12,100 vs. consensus of 20,340; down >50% sequentially) while Model 3 deliveries mostly came in line with expectations – TSLA also reaffirms prior guidance of 360,000 to 400,000 vehicle deliveries in 2019; NIO was upgraded to Neutral from Underperform at Bank America and upgraded to buy at Citigroup; MNRO was downgraded at Guggenheim as believe current near-peak valuation has become difficult to justify and offers limited room for expansion; TM, F and GM formed a consortium to promote safety in autonomous vehicles. Together with auto engineering group SAE, the automakers will establish a set of safety principles to be used in the development of standards; Ford (F) said U.S. Light-Vehicle Sales Fell 1.6% YoY and truck and van sales were up 4.1% YoY

·     Consumer Staples & Restaurants; STZ agreed to sell about 30 of its brands of under-$11 wine to E. & J. Gallo Winery for $1.7 billion. Constellation said it will hold onto its more premium line of wine brands like Robert Mondavi, The Prisoner Wine Co., Kim Crawford, Ruffino, and Meiomi (STZ also reported earnings and revenues that topped consensus); RRGB said its CEO resigned and said Q1 comp sales fell (-3.6%) on a constant currency basis, slightly more than the (-2.1%) estimate (downgraded at Bank America on the news); SMPL reiterated its ability to exceed guidance for long-term net sales growth target of 4% to 6%/sees full-year fiscal 2019 net sales and adjusted EBITDA to increase double digits y/y

·     Banks; JPMorgan downgraded CMA, ZION and KEY while upgraded SBNY to Overweight saying their overall call remaining to reduce exposure to regional banks; CMA was downgraded to neutral from buy at Goldman Sachs and cut tgt to $84 from $89 saying while loan growth has begun to improve from the lows, a lack of additional interest rate hikes, likely means margins will begin to compress beyond Q1; SNV was upgraded to strong buy at Raymond James

·     Pharma movers; REPH rises as announced plan to restructure its Acute Care Segment, which analysts says should enable REPH to become cash flow positive in 2H19/also raised guidance for revs; TNXP rises after reporting it plans to expand its TNX-102 SL Phase 3 program to include fibromyalgia/sees dose boosting to 5.6 mg from 2.8 mg as evidence to support higher dose; PRGO received tentative approval from the FDA for the generic version of Sernivo Spray 0.05%; TCDA 5.6M share secondary priced at $36.00; NGM 6.67M share IPO priced at $16.00

 

Stock GAINERS

·     DIS +1%; reinstated buy and $142 tgt at Goldman saying the close of the Fox acquisition and the approaching debut of the Disney+ streaming service in late 2019 marks a momentous shift

·     FB +2%; trading at its best levels since August after being upgraded to buy at Guggenheim and up tgt to $200 to reflect view that investors will continue to gain comfort with the incremental financial risk created by content and privacy concerns

·     NIO +1%; was upgraded to Neutral from Underperform at Bank America and upgraded to buy at Citigroup citing a recent decline in shares, along with Q1 shipments that were above expectations

·     REPH +24%; announced plan to restructure its Acute Care Segment, which analysts says should enable REPH to become cash flow positive in 2H19/also raised guidance for revs

·     RPM +6%; as Q3 results topped views on in-line Q4 view

·     SMPL +1%; reiterated its ability to exceed guidance for long-term net sales growth target of 4% to 6%/sees full-year fiscal 2019 net sales and adjusted EBITDA to increase double digits y/y

 

Stock LAGGARDS

·     BHF %; downgraded to sell at Citigroup saying the recent decline in long-term interest rates/the forward curve could negatively impact BHF’s ability to generate FCF from its VA business

·     LNDC -11%; falls on guidance as Q3 results mixed while guides sees Q4 EPS 12c-15c on revs $150M-$153M, below est. 22c/$154M

·     MU -2%; downgraded at Morgan Stanley as they DRAM remaining oversupplied throughout the year and into next/while NAND is closer to a bottom than DRAM, they do see difficult conditions persisting through the year

·     ROKU -6%; was downgraded to neutral at Guggenheim as believe that the Apple video product unveiled on March 25 represents an additional risk to Roku’s active user base while Amazon’s and Viacom’s greater pushes into advertising video on demand (AVOD) are increasing competition

·     RECN -14%; as Q3 EPS and revs both fell short of consensus views

·     RRGB -9%; said its CEO resigned and said Q1 comp sales fell (-3.6%) on a constant currency basis, slightly more than the (-2.1%) estimate (downgraded at Bank America on the news)

·     TSLA -8%; as issued delivery update; Model S/X deliveries fell far short of expectations (12,100 vs. consensus of 20,340; down >50% sequentially) while Model 3 deliveries mostly came in line with expectations/delivery data showed a 31% sequential decline as U.S. demand fell sharply

 

Syndicate

·     Aveo Pharmaceuticals (AVEO) 217.4M share Spot Secondary priced at $1.15

·     DBV Technologies (DBVT) 5.218M share Spot Secondary priced at $6.75

·     EVO Payments (EVOP) 5M share Secondary priced at $26.50

·     NGM Biopharmaceuticals (NGM) 6.67M share IPO priced at $16.00

·     Pulmatrix (PULM) 10.667M share Spot Secondary priced at $1.35

·     Sangamo (SGMO) 11M share secondary priced at $11.50

·     Silk Road Medical (SILK) 6M share IPO priced at $20.00

·     Tricida (TCDA) 5.6M share secondary priced at $36.00

·     Tradeweb Markets (TW) 40M share IPO priced at $27.00

_________________________________________________________________

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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