Market Review: April 23, 2019

Auto PostDaily Market Report

Closing Recap

Tuesday, April 23, 2019

Index

Up/Down

%

Last

DJ Industrials

145.14

0.55%

26,656

S&P 500

25.64

0.88%

2,933

Nasdaq

105.56

1.32%

8,120

Russell 2000

25.05

1.61%

1,585


 

Equity Market Recap

·     U.S. stocks getting close and closer to all-time highs across the board, as the start of earnings has been received well for the most part by investors (with about 20% of the S&P 500 having reported). Dow components KO and UTX advanced on earnings result earlier while VZ and PG shares slipped despite better headline results. Economic data was better in the housing sector as New Home Sales for March rose 4.5% to 692K, beating consensus (comes after weaker existing home sales data weighed on the sector Monday). The dollar explodes higher, pressuring gold and Treasury yields pullback after yesterday’s advance, while oil spikes again.

·     Both the S&P and Nasdaq have yet to breach their all-time intraday highs, but came very close today as the benchmark S&P 500 index moved to within 0.2% of its all-time best (all-time highs 2,940.91 on 9/21). The Nasdaq Comp crept near its bests rising as much as 1.4% to (all-time highs 8,133.29 on 8/30) and the Dow Industrials touched highs of 26,695 before paring gains (all-time highs of 26,951.81 on 10/3). The big negative for markets remains that the rally to highs have been on light volume with low volatility (the S&P 500 index hasn’t seen a 1% move thus far (up or down) in the month of April, though came close today.

·     Healthcare stocks were among the top gainers in the S&P with Dow components MRK, UNH, and JNJ all bouncing as the broad rebound continues in the sector (hospitals, managed care names) following last week’s carnage amid fears of "Medicare for All" policy potential. Small Caps played catchup as the Russell 2000 index outperforms large cap. Defensive sectors such as utilities led the declines given the “risk-on” market attitude again today. Tech spiked led by the Internet space after TWTR shares jump 15 on its beat and better sub numbers. The life science/MedTech space under pressure after a big miss from WAT shares, falling over 14%, as banks are broadly lower after another round of mixed results (STT, NTRS, FITB, SNV, ZION).

Economic Data

·     March New Home Sales stronger, rising 4.5% to 692K above the 649K estimate, while new home sales rose 30Kin March from prior month (though the previous three months’ new home sales data revised down by 42K); median new home price fell 9.7% y/y to $302,700; average selling price at $376,000; 17% of new homes sold in March cost more than $500,000, unchanged from 17% prior month; months’ supply at 6.0 in March compared to 6.3 prior month

·     Richmond Fed’s April Manufacturing Survey at 3, well below the est. reading of 10, as shipments fell to -2 after 2 the prior month and new order volume slowed to -2 after 9 the prior month. Order backlogs rose to -12 after -13 the prior month

 

Commodities

·     Oil prices extend gains, as WTI crude rises 75c to settle at $66.30 per barrel, a new 6-month high as concerns of supplies tightening add to the upside momentum. Prices jumped yesterday after President Trump’s Iran crackdown yesterday as the U.S. declared it would end waivers for countries to import Iranian oil, as part of a bid by the Trump administration to push Iran’s exports to zero. Prices rallied despite a spike in the dollar to new 52-week highs.

·     Gold prices fell -$4.40 or 0.3% to settle at $1,273.20 an ounce, falling to its lowest levels since December as a surge in the dollar following better housing data and strength in stocks over the last 2-months has overshadowed a dovish Fed interest rate outlook to send precious metal prices lower. Coming into today, Bespoke had noted the range between the intraday high and low for $GLD over the last four days had been the narrowest on record.

 

Currencies & Treasuries

·     The U.S. dollar jumped firmly, with the dollar index (DXY) rising 0.35% (hit highs of 97.77 its best levels of 2019 and overall highest levels since June 2017) after better-than-expected monthly new home sales data. Stronger earnings results, along with the better US data (and disappointing European data) have pushed the dollar higher over the last month, despite the fact the FOMC remains very dovish on its interest rate outlook going forward.

·     U.S. Treasury prices edged higher, and then held steady, sending the two-year yield down 3 bps to 2.36% and the 10-year yield lower by 2 bps to 2.56%. Treasury prices rallied despite a bounce in US stocks and stronger monthly new home sales data for March. The U.S. Treasury sold $40B in 2-year notes at a yield of 2.355% in-line with the when issued prior, with a bid-to-cover (demand) at 2.51 vs. 2.60 prior auction and indirect bidders awarded 47.7% of notes.

 

 

Macro

Up/Down

Last

WTI Crude

0.75

66.30

Brent

0.47

74.51

Gold

-4.40

1,273.20

EUR/USD

-0.0044

1.1213

JPY/USD

-0.10

111.84

10-Year Note

-0.016

2.565%

 

 

Sector News Breakdown

Consumer

·     Retailers; GES to reduce future quarterly cash dividends to 11.25c from 22.50c to redeploy capital and buy back shares; said intends to initiate an accelerated share repurchase program of $150M or more; HAS shares soared after Q1 sales growth of 2% greatly exceeded consensus of a 7.5% decline, and reported an unanticipated profit for Q1 on higher margins/franchise brands revenue was up 9% during the quarter and Hasbro gaming revenue rose 2%; CROX was downgraded at Piper saying stock price already reflect MSD revenue growth for next two years; KSS rises as announces expansion of Amazon returns to stores nationwide; TPR downgraded by OTR Global after U.S. Coach outlets were hurt by a later Easter and chilly spring

·     Consumer Staples; Dow component and beverage giant KO posted a narrow Q1 earnings beat, while organic sales were up 6% vs. +3.8% consensus, and unit case volume of 4% was reported for the quarter/sees year ~4% organic growth and 12% to 13% total sales growth; Another Dow component, PG reports organic sales increased 5% in FQ3 off a 2% gain in organic volume, while volume was up 3% during the quarter/sees all-in sales growth of flat to +1% vs. -1% to +1% prior; GNC said it is now offering topical cream products containing cannabidiol in select retail locations and online in 23 states and the District of Columbia.

·     In the protein sector, HRL was downgraded to sell at Goldman Sachs and cut price target to $35 from $37 as estimates are now below consensus citing limited earnings growth forecast and risks to premium valuation while upgraded SAFM upgraded neutral and raised tgt to $131 from $81 saying higher competing protein prices and improving U.S. export prospects make a more negative stance unsustainable (HRL was also downgraded at JPM)

·     Housing & Building Products; homebuilder PHM reported Q1 EPS of 59c topping estimates by 12c on better revenue saying it was helped by the recent decline in mortgage rates; in appliances, WHR ongoing EPS beat estimates, and it boosted its guidance for GAAP earnings per diluted share for the full year, even as it left its ongoing EPS forecast unchanged

·     Casino & Leisure movers; in leisure, HOG said motorcycle shipments fell 7.9% to 58,891 in Q1 (34,505 U.S. and 24,386 international) while posted motorcycle/related products revenue of $1.20B vs. $1.21B consensus and weaker margins (29.1% of sales vs. 30.8% est. and 34.7% YoY); PII Q1 EPS and sales topped consensus as strength in snowmobile sales helped offset declines in ORV, motorcycles and boats (sales guidance same as raises year EPS view); TRVG was upgraded to buy at Guggenheim

·     Auto’s; European auto makers weaker after auto related profit warning at materials maker Umicore and reports of widening probes related to VW’s diesel-emissions scandal (FCAU among those falling); LYFT gets Wall Street coverage as10 analysts initiate on the day with nine of them buy/overweight rated (tgt high $95 at CSFB) with KeyBanc the only sector weight today; TSLA shares bounce off lows after “ho-hum” investor autonomy day

 

Energy

·     Energy stocks advanced again as oil added to yesterday’s gains, with a barrel of West Texas Intermediate for June delivery trading above $66 this morning while Brent crude was also higher. The move comes in the wake of the Trump administration’s decision to end waivers on the ban of Iranian oil exports in an attempt to increase pressure on the country

·     E&P sector; RRC Q1 EPS was above consensus, but 2Q19 production guidance was 4% below expectations/1Q19 production that was 1% above consensus and reiterated its 2019 capex and production guidance; SRCI preannounced an 18% oil beat vs. consensus (9% beat on total volumes) and raises FY19 guidance to 53-56 Mboepd, up 6% from the midpoint vs. prior guidance; NOG to buy the Williston Basin properties of VEN Bakken, a unit of Flywheel Bakken for $165 million in cash, a $130 million 6% three-year senior unsecured note due 2022 and about 5.6 million shares of its common stock; MUR agreed to Buy Gulf of Mexico Assets From LLOG for $1.375B; HLX shares dropped after earnings

·     Utilities & Solar; AES agrees to sell its interests in six power plants in the U.K. and Jordan, exiting both regions, for a combined $211M; in the coal sector, ARCH shares rise as strong results from the metallurgical coal segment drove an impressive EPS beat in an otherwise difficult quarter

 

Financials

·     Bank movers; FITB Q1 adjusted EPS of 63c beat by 4c helped as loan growth exceeds the bank’s previous expectations and expense management and solid credit quality also helped Q1 results, but its outlook was disappointing; SNV rises as Q1 EPS beat by 7c as adjusted net interest margin of 3.59% compares with NIM of 3.92% in the prior quarter and 3.78% in the year-ago quarter and Q1 total loans of $35.6B rose from $26.0B QoQ; ZION Q1 driven by NIM expansion, solid loan growth and expense management, and continued improvement in credit metrics, which overshadowed a decline in the run-rate for fee income; EQBK shares fell as much as 10% after big miss on top and bottom line; Trust banks were slammed last week after disappointing results from BK while today, STT and NTRS with mixed results

·     REITs; ACC 1Q FFO was 6% above Street expectations, driven by lower expenses as same revenue growth was modestly below and reaffirmed year; KeyBanc upgraded BXP to overweight and downgraded OFC to underweight in the Office REIT sector noting the sector has outperformed the REIT sector by 300 bps YTD despite continued fundamentals headwinds; DLR was downgraded to hold at Jefferies saying with volumes increasingly driven by large hyperscale deals, another quarter of light volumes will likely weigh on shares

 

Healthcare

·     Managed care/healthcare: the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) announce the CMS Primary Cares Initiative, a new set of payments that they say will lower administrative costs and enable primary care doctors to spend more time caring for patients. The Initiative features five payment options under two paths: 1) Primary Care First (PCF) and PCF-High Need Populations and 2) Direct Contracting (DC) – Global, Professional and Geographic.

·     Pharma movers; TEVA said it is discontinuing the clinical development program for use of fremanezumab in cluster headaches as an analysis of a Phase III study revealed that the study’s primary endpoint is unlikely to be met; MNK said it has reached the enrollment target of 172 subjects in a Phase 4 clinical trial evaluating Acthar Gel in patients with systemic lupus erythematosus (SLE) with persistently active disease; AKTX rises after positive data from a Phase 2 clinical trial evaluating second-generation complement inhibitor Coversin in patients with a rare inflammatory skin condition

·     Medical equipment and devices; life science tool stocks pressured after WAT delivered 1Q results that missed expectations citing soft demand led by macro concerns in China and Europe, with European sales falling 6% measured in constant currency (A, TMO, MTD among movers); DGX Q1 EPS beat by 4c on better revs ($1.89B) while its outlook remained unchanged saying volume accelerated through the quarter

·     Healthcare services and providers; in hospitals, HCA was upgraded to outperform at Raymond James citing the recent sell-off in all things healthcare as a buying oppty; CNC reported Q1 EPS and revs above views and boosted guidance; hospital shares rebound after the mass selloff in healthcare last week (THC, CYH, UHS) – managed care (CI, UNH, ANTM among bouncers as well)

 

Industrials & Materials

·     Industrials; UTX rises amid strong 1Q organic growth across all of its businesses as Aerospace remains strong amid the GTF engine ramp-up and healthy aftermarket demand/Otis’ 7% growth was the elevator unit’s highest since 2014; ASTE shares plunged as Q1 EPS missed by 19c, dropping below the lowest estimate on softer revs

·     Transports; the Dow Transport index traded back above the 11,000 level, as airlines played catch up (rails have pushed the group high on better results from KSU, UNP, CSX over the last week), as JBLU posted a solid Q1 EPS beat on operating revenue of $1.87B and said it expects Q2 unit revenue growth of 1% to 4% and cost per available seat mile growth of 1.5% to 3.5%

·     Metals & Materials; NUE helped bounce steel stocks after beating Q1 results and guidance for Q2 was also in-line; ATI missed Q1 EPS by 4c; TECK posted better than expected Q1 earnings despite declining from a year ago due to lower commodity prices and higher operating costs/said commodity prices were lower than a year ago but rose during Q1 and closed higher than prices at year-end 2018.

·     Chemicals; CE posted earnings beat and better-than-expected acetyl chain pricing which RBC said could be a slightly positive read for EMN upstream business and LYB’s Intermediates & Derivatives business; lithium names weak initially (ALB) after Umicore, one of its biggest customers, plunged in European trading after warning that profit will miss analysts’ estimates; SHW Q1 EPS and sales missed estimates while guidance mid-point of the year also short of consensus ($20.40-$21.40, consensus $21.14)

·     Aerospace & Defense; LMT shares rally, leading defense stocks higher after Q1 EPS and revs crushed estimates and boosted year EPS of $20.05-$20.35 from $19.15-$19.45 previously and revenues of $56.75B-$58.25B from prior guidance of $55.75B-$57.25B (shares of GD, NOC, RTN among active movers on results); earnings from GD, BA, NOC in the defense sector tomorrow

 

Technology, Media & Telecom

·     Internet; TWTR shares jumped as Q1 beats on revenue, EPS, and surprise DAU and MAU strength/total average monetizable DAU count of 134M versus the 128.4M estimate as U.S. mDAUs came in at 28M, up 2M Y/Y, and Int’l 105M compared to last year’s 94M/MAUs came in at 330M, down 6M from last year’s quarter but up 9M consecutively; shares of SNAP (reports after the close) and FB were also active

·     Semiconductors; QCOM shares rise as Morgan Stanley the latest firm to upgrade shares, saying the market hasn’t fully appreciated the new opportunities opened by last week’s settlement with Apple; NVDA said it isn’t useful to compare Tesla’s two-chip Full Self Driving computer against NVDA’s single-chip driver assistance system

·     Software movers; broad strength in the software sector after a brief (but aggressive) move lower for the high flying sector (MSFT earnings this week); CDNS shares rally as posted strong 1Q results, and raised its 2019 guidance on continuation of broad-based strength in EDA

·     Media & Telecom movers; VZ reports upside Q1 EPS and in-line revenue with a 1% Y/Y growth but posted weaker postpaid phone customers were driven by lower gross adds though partially offset by lower churn (wireless revenue totaled $22.7B and wireline came in at $7.26B/FIOS video net change was up 53K. Postpaid smartphone net adds were up 174K; DIS trades to new all-time highs after positive analyst comments at Guggenheim and Bank America

·     Hardware & Component news; AAPL iPhone outlook lowered at Wells Fargo, cautious ahead of earnings as cuts its Q2 iPhone shipment forecast from 44M to 40.4M and lowers its earnings and revenue outlook; ANET was downgraded to equal-weight at Morgan Stanley saying the recent rebound in shares YTD brings more balanced risk/reward over the near-term

_________________________________________________________________

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

Register