Market Review: April 16, 2019

Auto PostDaily Market Report

Closing Recap

Tuesday, April 16, 2019





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks add to recent gains, with the S&P 500 index moving toward all-time highs (before fading late session) as mixed earnings and dovish global central banks continue to boost sentiment. The 10-year Treasury yield reached its highest level since the March Federal Reserve meeting as the S&P 500 index moved within 25 points of its all-time best of 2,940.91 in September (though healthcare was a drag). The Nasdaq Composite was firmly higher, topping the 8,000 level ahead of earnings results from NFLX and IBM later tonight. Defensive and safe haven assets fell with gold prices plunging over 1% and Treasury prices sliding (yields moving to April highs). Stocks were helped again by more dovish Fed commentary after Boston Fed’s Eric Rosengren said the central bank does not need to adjust monetary policy at the moment, and Chicago Fed President Charles Evans said rates can stay unchanged until the fall of 2020.

·     In sector news, bank stocks managed to erase early declines despite another round of mixed earnings results (BAC, CMA) and ahead of more results tomorrow morning (MS, USB). Managed care (UNH, CI, CNC, and MOH) and U.S. hospitals (HCA, UHS, and CYH) were among the biggest decliners in the S&P 500 today as market attention remains firmly on policy risks in Washington. UNH failed to ease any investor concerns about policy, with shares falling despite a beat and raise quarterly result as the company criticized the “Medicare for All” proposals being debated by Democrats. Markets also may have taken notice of JNJ comments saying that preliminary estimates indicate a slight declining trend in both hospital admissions and lab procedures, with growth of 0.5% and flat respectively. Packaging stocks (IP, PKG, and WRK) also dropped sharply following disappointing March containerboard industry data points that showed box shipments were down a "surprising" 3.0% YoY and inventories declined 47,000 tons. This week also one of the busiest in the IPO market this year with eight names scheduled to price (BWAY, PINS, MNRL, GNLN, HOOK, PLMR, TPTX, and ZM).

Economic Data

·     Industrial Production for March fell (-0.1%), missing the est. of up +0.2%and after rising 0.1% in February; industrial production was revised up to 0.1% gain from unchanged in Feb. Capacity utilization fell to 78.8% from 79% in Feb., revised down from 79.1%

·     U.S. Home Builders’ Confidence index (NAHB) in April rises to 63 vs 62 last month, according to NAHB/Wells Fargo; the builder confidence rises to its highest level since Oct. 2018; the present single family sales rise to 69 vs 68 last month and future single family sales falls to 71 vs 72 last month; prospective buyers traffic rises to 47 vs 44 last month



·     Oil prices reverse late session to close at the best levels of the session, with WTI crude up 65c at $64.05 per barrel, getting a boost into tonight’s weekly inventory data (API) and tomorrow as well (EIA). Gold prices another asset class pressured due to stocks closing in on near record highs (for the S&P 500), with June gold falling -$14.10 or 1.1% to close at its lowest settlement of 2019.


Currencies & Treasuries

·     It was another quiet lackluster session for the U.S. dollar, posting modest gains against the euro, Pound and Japanese yen despite the lone piece of economic data (Industrial production for March) coming in weaker than economist estimates. Treasury prices dropped across the board as stocks rallied and safe haven/defensive assets came under pressure with yields pushing higher midday with the 10-yr yield near 2.59% and the 30-year just under 3%; 2-year at 2.406%. The overall positive move in stocks early was enough to sap interest in safe havens, while news was quiet regarding trade with China today. China stocks surged over 2.8% earlier today, helping boost interest in commodity prices.






WTI Crude















10-Year Note





Sector News Breakdown


·     Auto’s; TSLA gross margin estimates lowered by Oppenheimer citing a lighter mix of Model S due to an expected refresh cycle and Model 3 volumes likely coming at slightly lower prices throughout 2019; KAR positive mention by Starboard Value’s Jeff Smith saying valuation is incredibly cheap for this great business with secular tailwinds

·     Consumer Staples & Restaurants; L’Oreal (LRLCY said Q1 comp sales rose 7.7% vs. Bloomberg est. 6.4% and Q1 sales EU 7.55B vs. est. EU7.37B; ELF was upgraded to buy at Da Davidson saying proprietary store check data show that in recent re-sets, ELF increased its Target (TGT space by 17% and overtook COTY’s COVERGIRL to become #3 on shelf

·     Housing & Building Products; US homebuilder sentiment hits six-month high as mortgage rates decline; SNA was downgraded to neutral at Bank America as they are less optimistic that the company will see upside from improving tool revenues, and growth in the RSI group is likely to remain volatile



·     Energy stocks active with lots of analyst research calls today; MRO was upgraded to Outperform at RBC Capital as expect MRO to deliver industry-leading FCF yields while driving strong organic production growth through 2020; BP was downgraded at RBC Capital after rally in shares while remain constructive; DVN positive mention at Mizuho saying the divestiture story looks good, except Canadian assets pose risk and raises tgt to $35. In the E&P sector, MKM Holdings downgraded EOG, EQT and HES to neutral from buy citing valuations as so far in 2019, EOG has risen 17%, EQT 14%, and HES 62%; PUMP and were all upgraded to buy at Bank America

·     MLPs; Barclay’s downgraded ALTM from OW to EW on the back of a reduced growth outlook for the next several years amid growing balance sheet pressure as the company works through the exercise of its JV pipeline options/cut SUN to EW and GLP to UW due to rising wholesale gasoline prices likely reducing margins in 1Q and potentially 2Q. Lastly downgrade SEMG and MIC mainly on valuation, as well as limited visibility for meaningful improvement in underlying fundamentals of the base businesses that would cause material upward revisions to our estimates. Raymond James also a handful of changes as they upgraded ET to Strong Buy from Outperform, while downgraded KMI and OKE from Strong Buy to Outperform on YTD strength and cut MPLX, and TRGP to Outperform (from Strong Buy) on risk/reward assessment

·     Refiners; Goldman Sachs said investors should focus on refiners able to generate free cash flow that can outperform in a $60-$70/bbl Brent environment, and attractive sum-of-the-parts upside while the firm downgraded HFC to sell from neutral on tighter Brent-WTI outlook, weak base oil margins, DK cut to neutral from buy as expects tighter Midland spreads and upgraded CVE

·     Utilities; overall index underperformed amid a jump in yields and defensive stocks being sold; ETR agreed to sell Indian Point Energy Center to Holtec Int’l for decommissioning, which is expected to result in completion of decommissioning "decades sooner/Entergy to operate Indian Point Unit 2 and Unit 3 until their permanent shutdowns in 2020 and 2021



·     Bank movers; it has been a rough go to start earnings season for banks so far – today being no different as CMA and BAC both post headline EPS beats but other factors (NIM, NII views) weighed on stock prices before ending the day higher; BAC Q1 EPS of 71c beat by a nickel and is flat from Q4 2018; consumer banking segment, net income rose 25% to $3.2B and loans increased 5% to $292B; deposits are up 3% to $697B/Global Wealth & Investment Management net income increased 14% to $1.0B and pretax margin of 29% rose from 25% a year ago loans rose 3% and deposit increased 8%/trading like GS, C was lower; in regional banks, CMA reported better-than-expected 1Q results, including a core EPS beat driven by strong loan growth, NIM expansion, and lower-than-expected credit costs according to one analyst/avg loan growth better than expected at +1.7% q/q/sees average loans rising 2%-4%, average deposits falling 1%-2%, and net interest income rising 3%-4%; earnings tomorrow from BK, MS, USB

·     Consumer finance and lending; JPMorgan said it remains constructive on the U.S. consumer into 2H19 as we believe strong labor markets and wage growth provide a stable foundation for credit. JPMorgan upgraded SC to neutral and called it the best near-term idea into 1Q19 EPS while DFS remains their favorite name in the consumer space

·     REITs & Services; INTU a positive mention by Guggenheim saying they utilized the TurboTax Live service over the final weekend+ of the 2019 tax season and believe there was a significant uptick in demand relative to our interactions in late February and throughout March; REITs fell along with other defensive sectors as yields rose (SPG, SLG, KIM)



·     Pharma movers; Dow component JNJ helps the beaten healthcare sector after top and bottom line earnings beat views with in-line mid-point of guidance as JNJ drug sales for arthritis and other autoimmune disorders beat estimates; RNN rises as the company and New Jersey and China-based BioSense Global LLC announce a pact to advance the development and commercialization of RX-3117 for pancreatic cancer and other cancers in Greater China; Cannabis names a little boost after CGC Co-CEO Bruce Linton at a conference in Toronto that the company expects to generate over C$1B in sales over the next 12 months.

·     Biotech movers; the FDA designates CRSP and development partner VRTX gene therapy candidate CTX001 for Fast Track review for the treatment of transfusion-dependent beta thalassemia; RARE gets FDA Fast Track and Rare Pediatric Disease designation for the treatment of long-chain fatty acid oxidation disorders; GH tgt raised to street high $90 at Canaccord saying its blood test for cancer – Guardant360 – has penetrated less than 5% of the $6B U.S. liquid biopsy therapy market; RCKT 4.5M share Spot Secondary priced at $17.50; WVE falls as Phase 1 study of investigational suvodirsen (WVE-210201) in boys with Duchenne muscular dystrophy had favorable safety and tolerability results.

·     Healthcare services and providers; Dow component UNH shares opened higher by over 3% after its results topped views, as added nearly 900,000 new customers in Q1, and as a result is raising its year earnings forecast…but shares quickly reversed lower after sharply criticized the “Medicare for All” proposals being debated by Democrats; CERN positive mention by Starboard Value’s Jeff Smith saying it remains cheap even after recent gains (spoke at the 13D Monitor Active-Passive Investor Summit); hospital stocks were among the top market decliners (CYH, HCA, UHS) along with other managed care names (CI, HUM, CNC, MOH)

·     Medical devices and equipment; BSX shares dropped more than 4% midday after U.S. health regulators ordered two medical device companies to stop selling a surgical mesh used in pelvic repair surgeries, after thousands of claims by women that they were injured by the products.


Industrials & Materials

·     Industrial & Machinery; CMI was upgraded to buy from neutral at Citigroup and raise tgt to $190 from $155 as see upside to 2019 estimates, and think out-year cash flows stay higher for longer based on end market diversity and increasing contribution from the aftermarket; the multi-Industry Sector downgraded to negative from neutral at RBC Capital saying the multi-industry sector’s rebound from last December’s selloff has pushed its relative price-to-earnings valuation to a 22% premium to the S&P 500; LII was downgraded to neutral at Baird as the stock’s recent outperformance sets up a more balanced risk/reward for investors

·     Transports; truckers were weak after JBHT Q1 top and bottom line results missed estimates (Q1 EPS $1.09/$2.09B vs. est. $1.26/$2.20B) while JBI load volumes declined 7% from the same period 2018; in airlines, Lufthansa AG shares fell warning Q1 would post an adjusted loss before interest and taxes of 336 million euros ($380 million loss) vs. small profit YoY

·     Metals & Materials; RIO cut annual guidance for iron ore shipments as Q1 cargoes plunged after operations in Australia were hit by fires and a tropical cyclone; lowered annual guidance to a range of 333M-343M tons, after saying earlier this month sales would fall to the low end of a previous range of 338M-350M tons; iron ore miners fell (CLF) after VALE received authorization from a Brazilian judge to resume the use of a group of tailings dams at a large iron ore mine

·     Materials & Chemicals; DWDP downgraded to Sector Perform from Top Pick at RBC Capital after the spin-off of its Dow division based on fundamental economic macro concerns, particularly Europe and China as well as continued weakness in the Agriculture segment after the March floods. Packaging stocks (IP, PKG) decline following "disappointing" March containerboard industry data points reported today as Bank America downgraded shares of both saying box shipments were down a "surprising" 3.0% YoY and inventories declined 47,000 tons (group was among the top stocks decliners in the S&P (WRK as well)


Technology, Media & Telecom

·     Internet; NFLX was upgraded to buy with a $400 tgt at Deutsche bank ahead of earnings after the close tonight on its view that no other streaming platforms are close to the company’s reach; FB shares active after NBC news reported it gave favored companies access to user data in some cases and in others denied access to rivals, according to leaked documents seen by NBC Bay Area; SNAP tgt raised to $8.50 at Morgan Stanley saying it is executing at a higher level but they believe its ~120% multi expansion YTD captures these improvements (remain underweight)

·     Semiconductors; sector continues to lead as the Philly semi index (SOX) rises 2.6% to highs around 1,525, new all-time highs for chips with all 30-names in the SOX higher in the early going (top gainers AMAT, AMD, MKSI MU); WDC jumps after being upgraded to buy and tgt raised to $60 at Deutsche Bank saying favorable data points in both hard disk drive and NAND that will support a "solid" second half of the year recovery; QCOM shares jumped over 15% late day after AAPL and QCOM agree to drop all litigation which includes an AAPL payment to QCOM.

·     Software movers; CRM acquires for $300M, which Needham says is BLKB’s biggest competitor and creates add’l challenges for BLKB as it sunsets its legacy products & migrates customers to NXT offerings at same time it invests in net new customers; INST shares advanced after a positive mention by Levin Oram at the 13D conference

·     Media & Telecom movers; AT&T’s (T) WarnerMedia has sold its 9.5% stake in Hulu back to the joint venture for $1.43B, valuing the streaming service at $15B/DIS w/two-thirds ownership of Hulu and CMCSA NBCUniversal unit in control of the rest. ; OMC helping lift ad agencies after EPS topped the highest estimates

·     Hardware & Component news; HIVE shares fell as guides Q1 EPS loss (10c-9c) on revs roughly $33M, below the (1c) loss and $37.5M est.; CTSH was downgraded at Wells Fargo and lower tgt to $75 (from $82) as see no near-term positive catalysts, while operating headwinds persist; video conferencing company ZM raised the proposed price for its upcoming IPO


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.

Live Trading

Open an Account

Paper Trading