Mid-Morning Look: April 11, 2019

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Mid-Morning Look

Thursday, April 11, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities are mixed as the Dow looks to rebound after underperforming small caps yesterday (Russell rose 1.4% Wednesday while the Dow was flat), as technology takes a breather. Financials strong, led by gains in banks heading into earnings tomorrow morning (from JPM, WFC, PNC), while waste stocks (RSG, WM) among the top decliners in the S&P after a sector analyst downgrade. The dollar moves higher, weighing on commodity prices while the Pound slips after news the EU has granted the U.K. more time to find a way of leaving the EU, with the deadline moved to Oct. 31, doing nothing to resolve the uncertainty over what Brexit will look like. In other news, WikiLeaks founder Julian Assange is facing extradition to the US following his arrest at the Ecuadorean embassy in London, charged with involvement in a computer hacking conspiracy. Economic data was mixed as Producer Prices (PPI) for March showed rising inflation, while jobless claims sunk again to lows. Transports are among the biggest gainers, led by strength in airlines, while rails slip. All quiet on the trade front with China today.


Treasuries, Currencies and Commodities

·     In currency markets, the dollar index (DXY) rebounds, moving back above the 97 level following the “hotter” PPI inflation data, while the British Pound falls further amid more Brexit uncertainty after another delay is agreed upon; the stronger dollar weighing on commodity prices as oil and gold both slip; nat gas prices rise as EIA said stockpiles rose 25 bcf, smaller than the 36 bcf estimate; Treasury market’s dip as yields inch higher with the 10-year at 2.49% (but narrow ranges this week for yields despite several FOMC speakers/minutes from the meeting


Economic Data

·     Producer Prices (PPI) for March jumped 0.6%, well above the 0.3% economist estimate (and prior month rise of only 0.1%), while core prices (ex: food and energy) also came in “hotter” than expected, rising 0.3% vs. est. 0.2% rise. Final demand rose 2.2% YoY vs. est. up 1.9% while final demand ex food, energy rose 2.4% YoY, in-line with views (inflation data higher than yesterday’s mostly modest CPI rise)

·     Weekly Jobless Claims fell 8K to 196K, dropping well below the 210K estimate while the prior week claims revised up to 204K from 202K; the 4-week moving average stood at 207k in the week ending April 6; continuing claims fell 13k to 1.713m in the week ending March 30







WTI Crude















10-Year Note





Sector Movers Today

·     Industrial sector; industrial distributors rebound after FAST Q1 results topped expectations amid increased unit sales on strong demand and higher pricing, helping the group that declined yesterday due to weaker earnings/guidance from MSM; in the waste sector, Stifel downgraded WCN, WM, ADSW and RSG to hold from buy saying recycled paper prices are down $34/ton from the FY18 average into early April/paper accounts for 60% to 70% of the recycling basket for most companies, which translates into ~$20/ton of headwind

·     Financials; banks were rallying into earnings tomorrow (JPM, WFC, PNC) helped as yields inching higher as 10-year up at 2.49%. Bloomberg noted that banks have been the worst-performing S&P 500 sector over the past month amid a flattening yield curve and fears of a recession, as analysts have cut their 1Q EPS estimates for the biggest banks by an average of 8.4% since the 4Q earnings season ended; CBSH shares fell after reporting Q1 EPS and revs that missed estimates with higher Q1 loan loss provision $12.46M vs. $10.4M a year ago

·     Retailers; CATO reports sales fell 10% in March to $87.4M and same-store sales were down 7% during the month/negatively impacted by the shift of Easter from March last year to April; FIVE was upgraded to overweight at JPMorgan; BBBY shares fell as Q4 results topped views on weak comp sales, but Q1 guidance weighed on shares (guided Q1 EPS 7c-12c on revs $2.6B below the 29c/$2.68B est.); COST reports March total comp sales +5.7%, missed the 6.2% est. and compared to +8.60% YoY while March U.S. comp sales ex: fuel, currencies +5.5% vs. 7% est.

·     Pharma movers; VKTX reported data demonstrating that all patients who received 5 mg of VK2809 dosed daily were considered responders, as defined by a relative reduction in liver fat of greater than or equal to 30% at Week 12; LLY was downgraded to neutral from buy at Guggenheim sees limited upside for the stock from current levels until Lilly’s overall immunology portfolio and competition is more fully understood; not the BMY proposed takeover of CELG will finally reach a climax on Friday when investors cast their votes on the merger



·     ALK +2%; broad strength in the airline sector today (AAL, ALK, UAL)

·     CZR +2%; NY Post reported the company is preparing to put itself up for sale as soon as this week after its board approved a sales process amid pressure from Carl Icahn https://nyp.st/2uXc0In

·     EVH +8%; following a better-than-expected increase in Kentucky Medicaid rates that should allow the Passport business to remain solvent (as per analysts)/Passport is Evolent’s largest customer, accounting for ~10%-12% of 2019 revenue

·     FAST +4%; Q1 results topped expectations amid increased unit sales on strong demand and higher pricing

·     FRSH +31%; as MTY Food Group agrees to buy Papa Murphy’s for cash of $6.45 per share, in deal valued at $190M (including debt) https://yhoo.it/2uXrThZ



·     APOG -7%; as reports light 4Q-FY19 due to severe winter weather’s impact on manufacturing locations and mixed guidance for FY20

·     BBBY -8%; as Q4 results topped views on weak comp sales, but Q1 guidance weighed on shares (guided Q1 EPS 7c-12c on revs $2.6B below the 29c/$2.68B est.)

·     COST -1%; reports March total comparable sales +5.7%, missing the 6.2% estimate and compared to +8.60% YoY while March U.S. comparable sales excluding fuel, currencies +5.5% vs. 7% est.

·     CSII -6%; downgraded to underperform at Bank America citing mostly valuation after rally in shares/also expects the competitive landscape to intensify in 2020 and 2021.

·     ICPT -11%; on reporting additional data from late-stage study of OCA in NASH/new details emerging at the European Association for the Study of the Liver congress in Vienna

·     MTSI -8%; after saying CFO Robert McMullan has submitted his resignation for personal reasons and will transition to an advisory role and support the transition for the next two months

·     RSG -3%; as waste stocks among the biggest drags in the S&P 500 early (WM as well) after Stifel downgraded the sector to hold as sees headwinds to recycling business

·     TSLA -2%; after it and Panasonic are suspending plans to expand the capacity of their $4.5B U.S. plant in the face of uncertain demand for electric vehicles

·     WTW -13%; JPM lowers tgt to $12 and cuts estimates after taking in recent data that showed a 40% Y/Y drop in daily average users for WW subscribers during Q1

·     X -1%; downgraded to underperform at Bank America (2nd analyst downgrade this week) citing worse near-term U.S. market conditions than anticipated



·     Autolus Therapeutics (AUTL) 4.2M ADS Secondary priced at $24.00

·     CareTrust REIT (CTRE) 5.25M share Spot Secondary priced at $23.35

·     PagerDuty (PD) 9.07M share IPO priced at $24.00

·     Tufin (TUFN) 7.7M share IPO priced at $14.00


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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