Market Review: April 08, 2019

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Closing Recap

Monday, April 08, 2019





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks were little changed for the most part, as the S&P 500 and Nasdaq Composite finished slightly higher after early losses, while the Dow Industrial Average would have been little changed, if not for the weakness in Boeing. The S&P 500 index extended its win streak to eight days, the longest such streak in a year and a half. Boeing’s (BA) decline was solely responsible the Dow decline after the aircraft/defense maker said it was cutting production of its 737-jet output 19% to 42 airplanes a month by mid-April (from 52 per month) to reduce its spending on the 737. Energy stocks were among the early leaders with WTI crude topping the $64 per barrel level, along with gains in metals as the commodity trade has recently perked up given the better economic data points out of China. Overall it appeared stocks were just taking a breather ahead of the earnings season next week (big banks JPM, WFC report this Friday), with major averages having surged Q1 after the Federal Reserve calmed investors by saying it may not raise interest rates at all in 2019. Regarding trade, China’s official news agency said Sunday that trade talks with the U.S. in Washington last week "achieved new progress." It said remaining issues will be handled through "various effective means" but did not elaborate on where or when further discussions will happen. Oil and gold prices gained as the dollar fell broadly while Treasury yields inched higher as U.S. stocks reversed earlier losses to close near its best levels. Dow component Apple (AAPL) topped the $200 level for the first time since mid-November, helping tech.

Economic Data

·     Factory Goods Orders for February fell (-0.5%), in-line with estimates while factory orders for January were revised to unchanged from 0.1% gain. Capital goods non-defense ex aircraft new orders for Feb. fall 0.1% after rising 0.9% in January. Durables goods orders for Feb. fall (-1.6%) after rising 0.1% in January but was in-line with estimates



·     Oil prices rise as news out of Libya lifted prices to the highest levels in over 5-months, with WTI crude up $1.32 to $64.40 while Brent topped $71 per barrel. News that civil war threatened to break out again in Libya, alongside reports that the U.S. military said it would pull its military forces, led to expectations of reduced oil production. Warlord Khalifa Haftar, who has used control over oil ports to exert political pressure, has moved his self-styled Libyan National Army west toward Tripoli, the base of the United Nations-backed, internationally recognized government of Prime Minister Fayez al-Sarraj, Bloomberg noted.

·     Gold prices advanced on Monday (after falling -0.2% last week), rising $6.30 or 0.5% to settle at $1,301.90 an ounce, its highest settlement since 3/27 amid the dollar decline. Silver prices rose 13c or around 1% to $15.216 an ounce. Gold also got a boost as investors looked to safe-haven assets as stock markets dropped ahead of earnings season.



·     The U.S. dollar was broadly lower, falling against most rival currencies, led by a sharp decline vs. the Canadian Loonie amid a bounce in oil prices to fresh 5-month highs (higher oil helping many emerging market currencies vs. the dollar). The dollar index (DXY) fells to lows just below the 97 level (off overnight highs around 97.40); the Turkish lira extends slide amid political uncertainty; the Mexican peso faces downside risk after the White House’s increasingly aggressive stance on the border following the resignation of DHS Secretary; the buck fell vs. the pound, euro and yen.


Bond Market

·     Treasury yields inched higher, with the 10-year yield up a few bps to 2.51% as investors continue to watch the ongoing Brexit situation in the EU/UK as well as upcoming inflation data later this week. The 2-year yield was also up slightly at 2.35%. Treasury prices stayed in a narrow range most of the session with many potential market moving catalysts this week.






WTI Crude















10-Year Note





Sector News Breakdown


·     Consumer Staples; PG upgraded to Outperform at Wells Fargo and raised tgt to $115 from $91 as believe a sense of urgency & accountability has been infused into the organization, driven by CEO David Taylor; at JPMorgan, ELF upgraded to neutral saying the worst may be behind the company after 10 months of distribution declines, while the firm downgraded CLX to underweight saying it has little room to offset sales challenges for charcoal, bags & wraps after recent price hikes; SJM was upgraded at Credit Suisse noting recent improvement in retail sales trends and the margin expansion in its Coffee division have exceeded their expectations; NBEV rises after announcing a distribution deal with Walmart for the company’s Marley brand; POST says its unit has submitted a draft registration statement to the SEC on its proposed IPO of its active nutrition business.

·     Restaurants; Chuck E. Cheese parent CEC Entertainment Inc. said it has agreed to merge with Leo Holdings Corp., a publicly traded special purpose acquisition company, to create a new public company with an initial enterprise value of about $1.4B ; SBUX was downgraded at UBS to neutral following the ~55% increase in shares since June as risk/reward now appears more balanced

·     Casino & Leisure movers; HOG was downgraded at Wells Fargo as believe risk/reward is now less attractive at current levels amid continued heavyweight motorcycle market weakness, tariff uncertainty, and long path to stabilization; PII was upgraded to overweight at KeyBanc saying while 1Q19 ORV retail checks are in the -LSD/MSD range, they believe this slow start is relatively understood at this point; in gaming, WYNN was upgraded to buy with $170 tgt at Jefferies following better than expected gross gaming revenue results from Macau for March and signs that suggest it is reasonable to expect economic improvement throughout 2019 in China

·     Retailers; FL mentioned positively in Barron’s saying shares could return 20% over the next year based on sales and earnings momentum; Starboard withdrew is proxy fight at DLTR saying it’s pleased the company has announced intentions to "perform a significant test of multiple price points" at stores and decided to withdraw its slate of board nominations



·     Energy stocks advanced for a third straight session, getting a boost from WTI crude prices trading to their best levels in over 5-months with broad gains in the E&P and services related sectors (CXO, FANG, TUSK, EOG, SLB), though drilling related stocks were weak (DO, ESV, RIG)

·     Utilities & Solar; Goldman Sachs downgraded OGE and WEC to sell from neutral and AEP to neutral from buy while upgrades AGR to neutral from sell and NI to buy from neutral; removes NEE from conviction list, remains buy-rated – Goldman moves to a more cautious outlook on utility stocks after sector outperformance since the start of 4Q 2018



·     Bank movers; getting to that time when earnings are upon us, starting with the kick off to earnings season with banks, as WFC, JPM and PNC among the names reporting this week; in the insurance sector, ALL was downgraded to neutral at Credit Suisse saying auto insurance pricing is likely to hover in the danger zone; MC shares fell after Morgan Stanley cut its Q1 EPS view and tgt to a Street low $45 citing a partial fixed-income market shutdown late in Q4, along with the U.S. government shutdown in January



·     Pharma movers; CHRS pre-announced Q1 sales for Udenyca, a generic of AMGN’s Neulasta, was higher than consensus estimates (Citi raised its tgt to $28 from $25); INSM said it expects total net product sales of ARIKAYCE to be approximately $21.9M for the quarter; MLNT shares rise after it announced multiple presentations at the upcoming European Congress of Clinical Microbiology & Infectious Diseases in Amsterdam, including abstracts on BAXDELA (delafloxacin) and ORBACTIV (oritavancin)

·     Biotech movers; ALNY will collaborate with REGN to discover, develop and commercialize new RNA interference (RNAi) therapeutics for disorders in the eye and central nervous system (CNS) and a select number of target in the liver; UTHR shares fell after saying to discontinue developing esuberaprost after its study in patients suffering from pulmonary arterial hypertension did not meet its primary endpoint of delayed time to first clinical worsening event; CNCE loses IPR patent trial as PTAB rules that INCY proved that Concert ‘149 patent claims are unpatentable.

·     Healthcare services and providers; BAX was downgraded to in-line at Evercore/ISI; CMS Final Rule (released Friday after the market close) allows MA Plans Greater Flexibility on Telehealth Benefits. Effective 2020, MA plans would be allowed to provide “additional telehealth benefits” to enrollees and treat them as “basic benefits” for purposes of bid submission and payment


Industrials & Materials

·     Aerospace & Defense; Dow component BA shares fell after the company said its cutting production of its 737 jet output 19% to 42 airplanes a month by mid-April (from 52 per month) to reduce its spending on the 737 and preserve cash; shares of Boeing suppliers declined after the plane maker cut output of its 737 MAX by nearly 20% (ATI, SPR, HXL, TDG); SPR was downgraded to hold at Canaccord after the Boeing announcement saying SPR will face incremental costs and the loss of the volume increase on the 737 is material; AAXN was upgraded at Raymond James to Strong Buy from Outperform and laying out the case for a $100 share price exiting 2021

·     Industrial & Machinery; GE was downgraded to Underweight from Neutral and lowered target to $5 from $6 as believe many investors are underestimating the severity of the challenges and underlying risks at GE, while overestimating the value of small positives

·     Transports; overall sector was down most of the day, led by weakness in airlines; LUV was downgraded to market perform from outperform at Raymond James due to MAX fleet grounding-related near term earnings risk, which may run into the summer months; rails were lone bright spot with small gains in CSX and NSC

·     Metals & Materials; VSM said Merck KGaA has offered to acquire the company for $53 a share, or about $5.78 billion, and that its board determined that the bid constitutes a superior proposal to its planned all-stock merger with ENTG; metals have been strong, the last few weeks getting a boost as China data has improved, easing fears of slowing growth for the country


Technology, Media & Telecom

·     Internet; SNAP was upgraded to Outperform from Sector Perform at RBC Capital and raised its price target to $17 from $10 saying they see early evidence that its Android platform improvements are finally gaining traction and may have reached a fundamentals inflection point; ZG was upgraded at Cowen saying longer-term targets in its move toward flipping houses are achievable, while its internet, media and technology unit has enduring value; Pinterest sets its IPO at 75M shares at $15-$17 per share

·     Semiconductors; MU was downgraded at Cowen saying field work indicates Micron’s profitability will decline again in calendar year 2020; AMD tgt raised to $35 from $30 at Bank America citing the potential for more benign price competition with key rival INTC where the company’s new management team is likely more FCF and 5G focused and hence less likely to pressure AMD on pricing; STX was upgraded to in-line at Evercore/ISI and raised tgt to $45 citing a more balanced risk/reward on the reset of conservative earnings expectations.

·     Software movers; CLDR was upgraded to Outperform at Bernstein citing potential revenue growth and the stock’s recent weakness/says Cloudera should benefit from the Hortonworks merger both strategically and on a reported revenue growth-basis; SYMC upgraded to buy at Goldman Sachs and raised tgt to a Street-high $28 as expect FY20 to show improvement on key metrics driven by a return to more normalized execution, stabilization in business mix

·     Media & Telecom movers; WWE active after WrestleMania 35 came off last night with a record-setting performance, as the event set a MetLife Stadium record by grossing $16.9M; that surpasses the previous record, the $12.3M grossed by WrestleMania 29 in 2013

·     Hardware & Component news; SNE rises as Reuters reported that Third Point is buying a stake to push for changes; says seeking up to $1B invest vehicle for Sone; ROKU downgraded to sell at Citigroup citing the stock trading at near record highs, the risk of greater competition in the changing OTT landscape, and the potential for dilution from increased option grants and restricted stock


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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