Mid-Morning Look: April 23, 2019

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Mid-Morning Look

Tuesday, April 23, 2019

Index

Up/Down

%

Last

 

DJ Industrials

62.92

0.24%

26,573

S&P 500

11.33

0.39%

2,919

Nasdaq

54.38

0.68%

8,069

Russell 2000

6.95

0.45%

1,566

 

 

U.S. equities are pushing closer to new all-time highs for major averages as the busiest day of earnings season thus far (though tomorrow and Thursday have even more volume) has been received well for the most part by investors. Four Dow components reported today (VZ, PG, KO, UTX), with UTX and KO reacting positively to results though VZ and PG shares pullback after their quarters, while strong earnings results from several S&P components also lifting stocks (LMT, HAS, TWTR, CE, DGX, CDNS, WHR). 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 was better in the housing sector as New Home Sales rose 4.5% to 692K, better than expected (comes after weaker existing home sales data weighed on the sector Monday). European stocks decline with the only bright spot is energy companies as oil continues to rally. The dollar explodes higher, pressuring gold and Treasury yields pullback after yesterday’s advance. Earnings tonight from several high profile companies: (AMTD, EBAY, EW, SNAP) and tomorrow morning (ANTM, APD, BA, BIIB, CAT, DPZ, NOC, NSC, T, TROW among them).

 

Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar jumped from better-than-expected monthly new home sales data, topping views after weak existing home sales yesterday, as the buck rallies vs. major rivals (euro, Pound, CAD) and flat vs. the Japanese yen.

·     Commodity prices are mixed, as oil continues to march higher, with WTI crude topping the $66 per barrel market (fresh 6-month highs) on supply tightening concerns (fears Trump’s Iran crackdown will reduce supply), while precious metals decline as the dollar jumped higher.

·     U.S. Treasury prices edge higher, pushing the two-year yield down 3 bps to 2.36% and the 10-year yield lower by 2 bps to 2.56%

 

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

 

 

Macro

Up/Down

Last

 

WTI Crude

0.69

66.24

Brent

0.30

74.34

Spot Gold

-6.00

1,269.00

EUR/USD

-0.006

1.1198

JPY/USD

0.01

111.95

10-Year Note

-0.018

2.563%

 

 

Sector Movers Today

·     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

·     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)

·     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

·     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; 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)

 

Stock GAINERS

·     AKTX +23%; after positive data from a Phase 2 clinical trial evaluating second-generation complement inhibitor Coversin in patients with a rare inflammatory skin condition

·     CDNS +3%; as posted strong 1Q results, and raised its 2019 guidance on continuation of broad-based strength in EDA/factors such as increasing silicon content in autos, autonomous driving, IoT, 5G, AI/ML designs are benefiting the company

·     DGX +5%; as Q1 EPS beat by 4c on better revs ($1.89B) while its outlook remained unchanged saying volume accelerated through the quarter

·     GNC +15%; said it is now offering topical cream products containing cannabidiol in select retail locations and online in 23 states and the District of Columbia.

·     HAS +13%; 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

·     KSS +7%; as announces expansion of Amazon returns to stores nationwide

·     LMT +6%; Q1 EPS and revs crushed estimates and boosted year EPS of $20.05-$20.35 from $19.15-$19.45 prior and revenues of $56.75B-$58.25B from prior guidance of $55.75B-$57.25B

·     TWTR +14%; Q1 beats on revenue, EPS, and 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

·     UTX +3%; amid strong 1Q organic growth across all of its businesses as Aerospace remains strong amid the GTF engine ramp-up and healthy aftermarket demand

·     WHR +2%; 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

 

Stock LAGGARDS

·     ALB 4%; after Umicore, one of its biggest customers, plunged in European trading after warning that profit will miss analysts’ estimates

·     ASTE -18%; as Q1 EPS missed by 19c, dropping below the lowest estimate on softer revs

·     HOG -1%; 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

·     HRL -4%; was downgraded at both Goldman Sachs and JPMorgan over concerns about the rising cost of pork as African Swine Fever upends the global protein market

·     VZ -3%; Q1 results were mostly in-line with estimates to slightly better but posted weaker postpaid phone customers were driven by lower gross adds though partially offset by lower churn

·     WAT -13%; 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

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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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