Mid-Morning Look: April 15, 2019

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Mid-Morning Look

Monday, April 15, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities are pulling back after last week’s gains, as the S&P 500 index moves back down to around the 2,900 level, with financials mixed after earnings results from GS and Citigroup (weaker equity trading revs weighed on shares of both early). Comments from President Trump over the weekend attacking the Fed once again (on raising rates) as well as trade headlines also playing a part in today’s market move. President Trump ramped his verbal attack against the Fed again this weekend, saying in a tweet” if the Fed had done its job properly, which it has not, the Stock Market would have been up 5000 to 10,000 additional points, and GDP would have been well over 4% instead of 3%…with almost no inflation. Quantitative tightening was a killer, should have done the exact opposite!” The CBOE Volatility index (VIX) is bouncing off its lowest levels since October (previous lows around the 12 level). Earnings results from Dow components and healthcare giants UNH and JNJ set for tomorrow morning.


Treasuries, Currencies and Commodities

·     In currency markets, the dollar is mixed as the USD-CAD fell to one-week lows around 1.33; the euro inches above the 1.13 level and the Pound moves above the 1.31 mark vs. the greenback; commodity prices are lower, with gold dropping below $1,290, while oil pares last week’s gains. Treasury market are steady after the late surge last week for Treasury yields that saw the 10-year top 2.56%, the 2-yr yield approach 2.4% and the 30-year yield rise to 2.97%.


Economic Data

·     Empire Manufacturing in New York State inched higher to a reading of 10.1, topping the 8.0 estimate and above last month’s nearly two-year low of 3.7 in March; the new-orders index rose 4.5 points to 7.5 in April, while shipments inched up 0.9 points to 8.6. Inventory levels picked up while inflation pressures cooled. Optimism about the longer-term waned in April. The index for future business conditions dropped 17 points to 12.4 in April, its lowest level in three years.







WTI Crude















10-Year Note





Sector Movers Today

·     Chemicals; Nomura upgraded six names catalyzed by recent improvement in China credit and industrial production data as see valuation as encouraging vs. more defensive chemicals and the broader market. Upgraded DOW, EMN, HUN, and LYB to buy from neutral and raised WLK, OLN to neutral from reduce – sees a modest improvement in cash margins for commodity chemicals in 2Q19 and further normalization in 2H19; CC was upgraded to buy at SunTrust saying with TiO2 inventory destocking activity starting to run its course and pricing declines starting to moderate, investor anxiety about the TiO2 cycle has largely dissipated; LTHM was downgraded to neutral at Citigroup and reduce tgt by 13% to $13 and also cut tgt on ALB to $88 as get the sense that the lithium market has become a buyer’s market.

·     Casino’s; Bernstein said weekly gross gaming revenue in Macau fell short of expectations, as casino results for April are expected to face tough comparisons against the prior year/now expects April GGR to be down 9%-12% y/y, had seen -2%-4% a week ago; Morgan Stanley lowered US regional estimates in gaming slightly to reflect weather, but sees an attractive opportunity to own BYD and PENN as expects results will be better than feared. Raising Macau EBITDA estimates as thinks that 1Q19 Macau gaming revenue declined 0.5% y/y to $9.4B, slightly beating his estimate of a 1.2% decline (WYNN, MGM, LVS)

·     Asset managers; BEN, APAM were both upgraded to neutral from sell at Citigroup as the firm favors the Alternatives and view B/Ds as broadly range-bound (said top picks remain OZM; BAM (90 Day Positive Catalyst Watch); and, BX; Monthly Master Trust data: 1) BAC March default rate 2.78% vs. 2.62% last month and reports March 30-plus day delinquencies 1.67% vs. 1.70% last month; 2) JPM March Credit-Card Charge-Offs 2.55% vs. 2.25% in February and March delinquencies 1.23%, vs. 1.25% in February

·     Towers; two analysts out as Guggenheim said though they expect solid 1Q earnings across the board from tower companies, valuations of all three companies have risen to near record level, prompting a downgrade of CCI to neutral; Wells Fargo downgraded AMT to market perform following recent checks in the private tower and wireless services space, as the only tower stock they recommend is CCI, and raise our PT to $142



·     ADNT +11%; after guides Q2 revenue to $4.2B, in-line with consensus views

·     ADSW +19%; as WM announced a roughly $4.9 billion deal to buy its smaller rival, paying $33.15 a share in cash for Advanced Disposal https://on.mktw.net/2vb2uBv

·     CTLT +7%; to buy privately held Paragon Bioservices for $1.2B

·     CVS +3%; rallied after Barron’s said it’s time to buy shares of the health care supply chain company, but Oppenheimer downgraded shares to perform

·     EFII +25%; to be acquired by an affiliate of private equity firm Siris Capital Group for about $1.7 billion in an all-cash deal, with EFII holders getting $37 per share, a 26% premium from Friday’s close https://on.mktw.net/2Xf3sZK

·     GOGO +15%; as launches $900 Million Senior Secured Notes Offering

·     VEC 33%; after announcing four contracts with the U.S. Army Contracting Command-Rock Island

·     WTW +11%; after Morgan Stanley said the firms tracker points to 1Q19 quarter end subscribers of ~4.5mn (-2.5% y/y), relatively in-line with guidance calling for ‘down slightly’ and also slightly above his estimate for 4.3mn



·     AAOI -7%; after Rosenblatt said Finisar may have taken all of Applied Opto’s 100G market share at Facebook in the second quarter, setting up Applied Opto for a 20%-30% q/q decline in total revenue in the second quarter

·     ADS -9%; Publicis agreed to buy ADS Epsilon unit for $4.4B in cash or $3.95B after tax step-up; Publicis says it plans to build a strategic partnership with Alliance Data remaining business https://on.mktw.net/2Gq0evN (Bloomberg notes comes just weeks after people familiar with the matter said an auction could fetch about $5 billion)

·     APHA -14%; after writing down the value of its controversial Latin American assets, reported quarterly revenue that missed estimates and announced Green Growth Brands Inc. has dropped its hostile bid for the company

·     C -1%; 1Q EPS rose 11% y/y, mainly due to a 9% reduction in average diluted shares outstanding and growth in net income/equities markets revenue missed estimates

·     CLVS -10%; shares fell after the drugmaker said it would stop developing Rubraca in bladder cancer after the drug failed to show efficacy

·     GS -2%; after results as FICC trading revenues beat estimates, while equities trading revenue missed and its investment banking transaction backlog fell compared with the end of 2018

·     INSY -9%; replaced its CEO Saeed Motahari as it deals with ongoing costs from a criminal trial of several former senior executives related to the company’s promotion of its opioid drug

·     LYFT -5%; shares fall further below its recent IPO price of $72, touching lows below $57 today on valuation concerns and the recent UBER IPO

·     SPOT -4%; after Friday’s Billboard report that AMZN plans to launch an ad-supported music streaming service/says the service would work through the Echo devices with a limited catalog of music


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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