Market Review: April 10, 2019

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Closing Recap

Wednesday, April 10, 2019





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks were mixed most of the trading session as the S&P 500 and Nasdaq Composite posted gains as markets brace for upcoming earnings (banks on Friday), a resolution of trade differences between the US and China/EU and digest expectations of the Fed/rates after today’s FOMC Minutes were released. Treasury prices were higher, along with gold and oil as the dollar slipped, helped by tamer than expected inflation data (CPI today ahead of the PPI tomorrow). Financials were in focus as big bank CEOs (JPM, GS, C, MS, WFC, etc.) underwent grilling in front of the House Financial Services Committee this morning, questioned on pay, profit and regulation among other items. The European Central Bank’s Governing Council kept key interest rates unchanged (as expected) and said it sees key ECB interest rates remaining at their present level at least through the end of 2019, in keeping with its statement last month.

·     The Fed Minutes showed the Fed’s decision in March to cease raising interest rates this year was driven by unease over the U.S. and global economies and surprisingly subdued inflation, according to minutes of the pivotal central bank meeting. “Several participants noted that their views of the appropriate target range for the federal funds rate could shift in either direction based on incoming data and other developments.” There was no mention of a rate cut.



·     Oil prices rise, as WTI crude gains 62c to settle at $64.61 per barrel, boosted by another pullback in the dollar, as well as supply concerns after OPEC said its oil production plunged last month as its planned supply cutbacks were amplified by the crisis in Venezuela. Oil output from the group tumbled by 534,000 b/d to just above 30 million b/d in March, the group said. Also, Russian President Vladimir Putin kept his options open on whether to extend Russia’s joint oil-production cuts with OPEC beyond June, saying he wanted to continue cooperation with the group but also highlighting the many uncertainties in the market

·     Gold prices edged higher a 4th straight day, moving back near a two-week high, rising $5.60 or 0.4% to settle at $1,313.90 an ounce. Gold extended early gains, getting a boost midday as the dollar reversed lower. Gold has bounced on slowing growth concerns, helped yesterday after the IMF cut its global growth outlook yesterday. Gold was also supported by central bank purchases and a significant move lower in U.S. equity markets will boost prices.



·     The U.S. dollar found itself lower on the day, erasing earlier gains against the euro while falling broadly vs. most other currencies as a softer inflation reading (CPI) added to expectations that the Fed could keep rates lower given no inflation fears. The euro fell to morning lows of 1.123 after ECB President Mario Draghi one again repeated the ECB’s readiness to adjust all instruments if needed/considered mitigating side effects of negative interest rates.


Bond Market

·     Treasury prices advanced on Wednesday as the 10-year yield slipped over 3 bps to 2.47%, while the 2-year yield dropped to 2.315% and the 30-year moved below 2.90%. Inflation data today (CPI) was in-line to slightly “tamer” than expected, reiterating the view the Fed could keep rates lower for longer given reduced inflation expectations. The U.S. Treasury sold $24B in 10-year notes at a yield of 2.466% (vs. 2.476% when issued prior) with the bid-to-cover (demand) at 2.55 vs. 2.59 prior auction and indirect bidders awarded 68.4% of notes.


Economic Data

·     Consumer prices for March (CPI) rose 0.4%, in-line with estimates while core prices (ex: food & energy) rose 0.1% vs. est. 0.2%; on a YoY basis core prices rose 2% (slowest in a year) vs. est. 2.1% and overall core prices rose 1.9% YoY (vs. est. up 1.8%)






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; LEVI rises after its first earnings report as a public company showed revenue grew near the high end of the company’s expectations, helped by categories outside its main denim lines and in Asia; JWN was upgraded to overweight at KeyBanc noting its powerful brand strength and strong management team in particular; CAL was upgraded to buy at Loop Capital following management meetings that clarified and expanded on near- and long-term company strategy; UAA was assumed coverage at Citigroup with a buy rating (up from neutral prior); TPX rises as Wedbush said the resignation of Mattress Firm CEO Steve Stagner raises the likelihood of a renewed relationship with Tempur Sealy; luxury retail strong as LVMUY 1Q total organic rev. rises 11%, est. was 8.8% and 1Q Fashion & Leather Goods organic sales rise 15%, est. was 12%

·     Auto’s; shares of TSLA jumped after Reuters reported that a Bipartisan lawmaker group to introduce legislation today that would boost electric vehicle tax credit, granting each automaker a $7,000 tax credit for an additional 400,000 vehicles on top of the 200,000 vehicles eligible for $7,500 tax credits; Uber Technologies Inc. has decided it will seek to sell around $10 billion worth of stock in its initial public offering, and will make public the registration of the offering on Thursday – Reuters ; LYFT shares fell to new lows after Uber news

·     Consumer Staples & Restaurants; CAG shares spiked late morning after reiterating FY19 guidance and said it sees FY20 organic sales growth up about 1%; HLF was downgraded to hold at Argus on a slower growth outlook as mgmt expects revenue growth to slow to 4%-8%, down from more than 11% in 2018

·     Housing & Building Products; JPMorgan positive on the homebuilding sector as they upgraded PHM and KBH to neutral from underweight as they expect the sector’s recent positive momentum to continue this earnings season, driven by likely upside to our order growth estimates and an incrementally positive investor sentiment towards the group following an even further decline in the 10-year Treasury yield during March; in home furnishing, BBBY to report earnings after the close this evening; SNA was downgraded to neutral at Baird on indications of more challenging near-term performance and industry/competitive environment



·     Energy stocks busy amid lots of macro headlines: Venezuela told OPEC that the country’s oil output sank to a new long-term low last month due to U.S. sanctions and blackouts, deepening the impact of a global production curb and further tightening supplies. Venezuela told the group that it pumped 960K barrels per day in March, a drop of almost 500K bpd from February. OPEC, Russia and other non-member producers are reducing output by 1.2 million bpd from Jan. 1 for six months. The producers are due to meet on June 25-26 to decide whether to extend the pact.

·     Inventory data: the API reported that U.S. crude supplies rose by 4.1M barrels for the week ended April 5, also reportedly showed stockpile declines of -7.1M barrels for gasoline and -2.4M barrels for distillates. Meanwhile this morning, the EIA reported a larger than expected inventory build of 7.02M barrels vs. the expected 2.5M barrel build est, while gasoline stockpiles fell -7,710M barrels vs. est. draw -2,15M and distillates fell -116K barrels

·     Utilities & Solar; EXC was upgraded to neutral from sell at Goldman Sachs and raised price target to $47 from $43 as sees higher potential nuclear revenue for the company due to potential zero emission credits or subsidies in Pennsylvania and Illinois; in solar, FSLR shares rose to its best levels since June after being added to the conviction buy list and raise tgt to $75 from $64 at Goldman as continues to believe First Solar will elect to convert its idle flex capacity in Malaysia after shutting down S4 production at 2019 and estimates the Malaysia facility could add as much as 23% upside to his 2021 EPS estimate Dominion (D) the top decliner in the UTY after a deadly natural gas pipeline explosion in Durham, North Carolina

·     Other movers; refiners DK and MPC had tgts cut at Raymond James; in MLPs/Pipelines; WMB sold its 50% interest in Jackalope Gas Gathering Services to an affiliate of CEQP for $484.6M, cash/Crestwood was Williams’ 50% joint venture partner in Jackalope, where Williams acted as operator and Crestwood as marketer



·     Bank movers; big bank CEOs (JPM, GS, C) underwent grilling in front of the House Financial Services Committee this morning/afternoon, questioned on pay, profit and regulation. In asset managers; WDR said its assets under management at the end of March was $71.654 billion, up from $71.64 at the end of February, with market action offsetting outflows; IVZ reports preliminary AUM $954.8B as of March 31, up 1% driven by favorable market returns, non-management fee earning AUM inflows, and reinvested distributions; APAM said AUM as of March 31 totaled $107.8B; TROW reported prelim month-end AUM $1.08 trillion as of March 31; LM prelim AUM of $758.0 billion as of March 31, 2019 – month’s AUM included long-term net inflows of approximately $0.9 billion, driven by fixed income inflows of $1.8 billion and alternative inflows of $0.3 billion



·     Pharma movers; SNY said it will cut the cost of its insulin products to $99 per month for uninsured patients and others who pay cash for it in the United States; Indivior, the marketer of Suboxone, has been indicted by the US Department of Justice for deceiving healthcare providers about the safety, abuse potential and susceptibility to diversion of Suboxone and thereby illegally generating revenues; Stifel said a draft report about the cost-effectiveness of peanut allergy treatments “is not flattering” and presents a “modest headwind” for likes of AIMT and DBVT

·     Biotech movers; HSDT shares plunged after the FDA declined the company’s request for De Novo classification and clearance of its Portable Neuromodulation Stimulator device (saying they did not have enough data; GILD was upgraded to buy at UBS as believes 2019 estimates will move higher as NASH pre-commercialization spend likely comes out of guidance; FIXX 5.55M share Secondary priced at $22.50; GH was upgrade to buy at Bank America citing optimism in its liquid biopsy-based cancer testing; SRNE rises as study results show potential non-dopaminergic approach to controlling Parkinson’s motor symptoms in a rodent model

·     Healthcare services and providers; ABC received two analyst downgrades (Evercore and Bank America) after its largest holder and distribution partner (WBA) last week slashed its forecast, saying its U.S. business faces reimbursement pressures/also cautioned uncertainties created by questions over reimbursement, drug pricing scrutiny or the potential for an AMZN disruption


Industrials & Materials

·     Chemicals; Industrial & Machinery; MSM fell as quarterly results and forecast fell short of expectations, while gross margin outlook also disappointed/said conditions generally remained solid in the industrial economy in the quarter, although there was some moderation in February; WDFC Q2 revenue of $101.3M missed estimate and issued mostly in-line guidance; TROX shares rose after it and Cristal, two of the largest suppliers of the white pigment chloride process titanium dioxide, have agreed to settle Federal Trade Commission charges by divesting Cristal’s North American titanium dioxide assets

·     Transports; airline rise early after DAL reports earnings, as strong travel demand boosted Q1 results while JBLU reported strong March traffic data and on reports they could announce service to London, European cities this week (first reported by CNBC); JBLU also narrowed Q1 RASM view to down about 3.1% from down 1.5%-3.5%

·     Metals & Materials; Deutsche Bank said improved Chinese demand and supply/demand dynamics specific to aluminum and will drive outperformance for those two metals, while also recommends adding gold to portfolio for 2019 due to more dovish Fed and potential for weaker U.S. dollar – firm upgraded GOLD and PAAS to buy with top picks being TECK, HCC, GOLD, and WPM –firm also raised forecasts for iron ore for next 3 years, saying it will take VALE until around 2022 to get close to the output that was originally planned for 2019 – cuts RYI to hold; RBC downgraded GLNCY to sector perform citing recent rally in shares


Technology, Media & Telecom

·     Internet; BIDU was downgraded to Perform at Oppenheimer and removing our $205 price target as shares are likely range-bound on higher level of spending through the rest of 2019/now expect BIDU to invest even more in key strategic areas (content, feeds, short video and cloud; STMP was upgraded to buy and $98 tgt at Maxim; SNAP slipped after research firm eMarketer "significantly downgraded its growth outlook for Snapchat" following a troubled redesign of the app

·     Semiconductors; semi’s rally after a flat open, trading higher across the board as the Philly semi index (SOX) back near 52-week highs); German semi maker Siltronic lowered forecasts citing general economic slowdown and geopolitical uncertainties as well as ongoing inventory corrections; AMD tgt raised to $33 at Cowen as increased confidence in the chipmaker’s competitive positioning against INTC; MX and ELAN Microelectronics announced a partnership to expand the capabilities of OLED displays for a wide variety of products

·     Software & Hardware movers; after pulling back on profit taking late last week, software stocks among the top leaders in the tech space today, with shares of TWLO, CRM, SPLK, ZEN, WDAY, NOW among gainers; HUYA 18.4M share Secondary priced at $24.00

·     Media & Telecom movers; DIS investor day tomorrow (several analyst upgraded into meeting, with BMO raising rating today to outperform); AT said that an FT report that HBO is considering selling its European unit is “completely baseless,” according CEO John Stankey; LBTYA was downgraded to Underperform from Neutral at Bank America; Nomura lowered the high end 1Q and FY19 estimates for CHTR to reflect slower synergy ramp, less advertising revenue, and working capital drag on FCF; CMCSA tgt raised to Street high $53 at Buckingham; ZAYO rises on a Reuters report that a consortium featuring Digital Colony Partners, EQT and Stonepeak are close to a deal to buy the provider


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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