Mid-Morning Look: April 09, 2019

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Mid-Morning Look

Tuesday, April 09, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities are taking a breather, pulling back after surging to their best levels in over 6-months yesterday, as the S&P 500 index is on track to snap its 8-day winning streak, while the Dow Industrials dropped more than 200-points initially. Stocks opened lower after the International Monetary Fund cut its outlook for global growth to the lowest since the financial crisis (marking the third time it has downgraded its outlook in six months), renewing global growth fears. Trade fears also adding to concerns, this time between the US and the EU, after the Trump administration moved toward imposing tariffs on about $11 billion in imports from the European Union, saying the move was justified by the bloc’s subsidies for European aircraft manufacturer Airbus. Markets opened weak on Monday before rallying into the close to post modest gains, as investors await the start of earnings season in a week. The International Monetary Fund cut its outlook for global growth to the lowest since the financial crisis amid a bleaker outlook in most major advanced economies and signs that higher tariffs are weighing on trade. The IMF said the world economy will grow 3.3% this year, down from the 3.5% the IMF had forecast for 2019 in January. The 2019 growth rate would be the weakest since 2009, when the world economy shrank. It’s the third time the IMF has downgraded its outlook in six months.


Treasuries, Currencies and Commodities

·     In currency markets, the dollar index (DXY) declines again, falling below the 97 level, as the greenback weakens vs. nearly all major rival currencies; the dollar decline also giving another boost to commodity prices, specifically gold, while oil prices post a modest decline ahead of weekly inventory data tonight/tomorrow and after touching fresh 5-month highs yesterday. Treasury market’s rally with the yield on the 10-year down 2 bps back below the 2.5% as markets eagerly await Brexit final results and trade deal completions with the U.S.







WTI Crude






Spot Gold









10-Year Note





Sector Movers Today

·     Aerospace & Defense; BA shares resume downside pressure after falling yesterday as the company said its cutting production of its 737 jet output 19% to 42 airplanes a month by mid-April (from 52 per month); AJRD shares were pressured after short-seller SprucePoint said sees 40%-60% downside in shares; HRS received a $243M contract from LMT to provide fully digital navigation signals for the first two GPS III Follow-On satellites; Japan’s military said it lost contact with one of its LMT F-35 stealth fighters over the Pacific Ocean close to northern Japan

·     Transports; in airlines, AAL guides 1Q total revenue per ASM flat to up 1%, down from prior view of flat to up 2% while says 1Q capacity was slightly higher than previous guidance due to better completion factor offset by flight cancellations due to 737 Max 8 groundings (also lowers 1Q pre-tax margin ex-items to about 2% to 4%, down from previous view of up 2.5% to up 4.5%); also, HA narrows Q1 operating revenue per ASM to (5%)-(3%) from prior view (6%)-(3%); lowers Q1 operating costs per ASM excluding fuel to up 0.5%-2.5% from up 1%-4%

·     Casino & Leisure movers; in the RV sector, Stephens cut CWH estimates saying improved RV sales in late March won’t be enough to rescue the quarter from challenges at the start of the year; while Jefferies said the RV industry-wide wholesale shipments declined by 15.4% in Feb, while retail trends saw a decline of 10.6% (said WGO sales actually increased slightly Y/Y and the data supports their bullish call on supplier LCII vs. the manufacturers); in the casino sector, WYNN has ended talks with Australia’s Crown Resorts after deal talks leaked, CNBC reported

·     Semiconductors; NXPI tgt raised to $110 at Piper saying even after the recent price appreciation, they believe NXP is still attractive at these levels, as believe its story is one of the most underappreciated in the semiconductor industry; QCOM lost a European Union court bid to overturn a request for information from EU regulators as part of their antitrust probe into whether the chip giant deliberately underpriced products to thwart a smaller rival; KLAC was resumed with a sell and $107 tgt at Goldman Sachs, cautious given potential downside to second half of 2019 Street estimates and near-term concerns regarding Orbotech’s business; SIMO said it sees Q1 revs to be within 5% below the low-end of the original guidance range of $97.5M-$103.6M but margins to be within 50 bps above the high-end of its 47.0%-50.0% guidance

·     Healthcare services and providers; CERN shares rise after reaching a pact with activist investor Starboard Value and appoints four new directors to the board/also boosts its share buyback program by $1.2B; Piper said (on CNC, WCG, MOH) they identified a $90B organic growth opportunity for MCOs within the Long-Term Support Services (LTSS) Medicaid population, which accounts for $167B in Medicaid spending on individuals with long-term disabilities; Caresource to switch drug plan from CVS to Express Scripts



·     CERN +13%; after reaching a pact with activist investor Starboard Value and appoints four new directors to the board/also boosts its share buyback program by $1.2B

·     CPE ; after the sale of certain non-core assets in the Midland Basin for initial cash proceeds of $260M (Seaport Global said CPE got a surprisingly high price of $14K per acre)

·     DIS +1%; was upgraded to outperform at Cowen and upped tgt to $131 (first time at OP rating since 2008), noting several upcoming catalysts this year

·     GPRO +1%; after Longbow raised 1H sales and EPS forecasts following our end of quarter preview as all evidence suggests units mix is heavily skewing towards HERO7 Black

·     PHAS +25%; announced that the FDA has granted breakthrough therapy designation for PB2452, a reversal agent for the antiplatelet drug ticagrelor.

·     PKI +1%; upgraded to buy at Goldman Sachs and adding the stock to the bank’s Conviction List saying its continued accelerated growth should exceed conservative expectations



·     AJRD 6%; pressured after short-seller SprucePoint said sees 40%-60% downside in shares

·     HOLI -22%; downgraded to Neutral at JPMorgan and lowered its target to $23 from $26 as views the company’s 7.8M share offering as surprising

·     LNN 11%; Q2 operating revenue missed estimates, saying North America irrigation market conditions worsen as trade concerns weigh on farmer sentiment ($109.2M vs. est. $116.3M)

·     NTCT -3%; after reporting prelim Q4 revs of $235M, about $15M lower than originally anticipated and missing the average analyst estimate of $249.2M

·     PNR -10%; as cuts forecast for the year and Q1; sees Q1 EPS 43c, down from prior view of 52c-55c (est. 54c) saying results were significantly impacted by adverse weather in its higher-margin aquatics and ag-related businesses

·     SAP -3%; was downgraded by two firms (HSBC and UBS) both citing limited upside potential with no inflection in S/4 adoption this year

·     X 6%; downgraded to underperform at Credit Suisse and lowered its tgt to street low $13 from $21 saying it’s in a weaker competitive position vs. peers entering the “Sheet Tsunami” period

·     ZGNX -24%; as received a refusal to file letter from FDA regarding its new drug application for Fintepla for the treatment of seizures associated with Dravet syndrome.


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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