Mid-Morning Look: April 30, 2019

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Mid-Morning Look

Tuesday, April 30, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-34.68

0.13%

26,519

S&P 500

-8.17

0.28%

2,934

Nasdaq

-69.15

0.85%

8,092

Russell 2000

-5.88

0.37%

1,592

 

 

U.S. equities are lower, pulling back from record highs in the S&P and Nasdaq Composite, led by a decline in tech as GOOGL revenue missed estimates and investors exhibit caution ahead of AAPL’s quarterly results tonight after the close. Despite the overload in earnings, major US averages have held tight around record highs ahead of several potential big catalyst this week. Markets steady after China manufacturing data overnight showed expansion, but slowed from the prior month. Tomorrow, the Fed is expected to keep rates unchanged at their next meeting with updates on the economy and for Friday, investors await the monthly jobs data. Monthly auto sales data expected tomorrow. Healthcare sector active following earnings results from MRK, PFE and LLY today. Economic data was mixed on the day as the Chicago PMI manufacturing report dropped to lowest levels since 2015 while consumer confidence topped estimates and Pending Home sales came in better as well.

 

Treasuries, Currencies and Commodities

·     In currency markets, after touching fresh 2019 highs early last week, the U.S. dollar has declined, falling again today (down -0.3%) after another round of mixed economic data and as markets prepare for tomorrows FOMC meeting (with expectations for further dovish commentary). Commodity prices slightly higher on the dollar decline, with oil prices on the rise. Treasury market’s rally as yields slip, but remain in a tight range heading into the FOMC meeting (10-year between 2.50% and 2.54% the last few days).

 

Economic Data

·     Chicago PMI falls to 52.6 from 58.7 the prior month and below the est. 58.5; prices paid rose at a slower pace, signaling expansion and new orders rose at a slower pace, signaling expansion; employment rose at a slower pace, signaling expansion

·     Consumer Confidence for April rose to 129.2, topping the 126.8 estimate and above 124.2 in prior month; the present situation confidence rose to 168.3 vs 163.0 last month and the expectations index rose to 103.0 vs 98.3 last month

·     Employment Cost Index for Q1 rose 0.7%, in-line with estimates as wages rose 0.7% q/q, benefit costs rose 0.7% q/q

·     Pending Home Sales for March rise 3.8% MoM vs. est. 1.5% as the Northeast fell 1.7%; Midwest up 2.3%; South up 4.4%; and West up 8.7%; Feb. rose 0.5%

·     The S&P CoreLogic Case-Shiller 20-city index rose a seasonally adjusted 0.2% in February compared to January, and was 3.0% higher compared to a year ago (est. 2.95%), though that was the slowest pace of annual growth since September 2012. S&P CoreLogic Case-Shiller National Home Price index rose 4.01% y/y in Feb. after rising 4.22% in prior month

 

 

Macro

Up/Down

Last

 

WTI Crude

0.45

63.95

Brent

0.77

72.81

Gold

1.35

1,281.20

EUR/USD

0.0032

1.1218

JPY/USD

-0.25

111.40

10-Year Note

-0.014

2.518%

 

 

Sector Movers Today

·     Housing & Building Products; TREX mixed Q1 results as EPS missed by a nickel on better revs but guidance falls short of consensus (Q2 $195M-$205M below consensus $230.78M); MHK upgraded to buy at Jefferies calling it a bounce back candidate as investors get comfortable with estimates that have bottomed; LL shares active on earnings with a smaller than expected comp sales loss of (-0.8%) vs. est. (-1.6%); TTS was downgraded at CJS Securities after Q1 EPS and Ebitda miss; MLM shares jump as Q1 results handily top consensus helped by robust pent-up demand and modestly improved weather (EXP, VMC, SUM also active)

·     Transports; KSU noted that the Mexican Revenue Service Administration had eliminated its fuel excise tax credit starting on April 30th/Citigroup said estimate the loss of the tax credit will increase its 2019 and 2020 ORs by ~40 bps and ~70 bps, respectively, reducing EPS by ~1% in both years; also in rails, CNI was slightly below expectations on account of challenging winter weather, even with continued strength in pricing; in airlines, ALK was upgraded to overweight at JPMorgan calling it a YTD laggard, second only to SAVE having underperformed the market by nearly 17%

·     Restaurants; Dow component MCD with mixed results as EPS missed by 3c on slightly better revs of $4.96B while US comp sales rose 4.5% vs. est. 3% and overall better comp sales up 5.4%; TXRH shares fell after missing Q1 earnings and revenue saying high labor costs were putting results under pressure/Street also concerned about margins; YUMC Q1 EPS/revs/comp sales beat on better margins YoY (upgraded at Bank America)

·     E&P sector; Barclay’s upgraded CDEV saying it could be an M&A target for companies seeking “high-grade inventory and able to leverage cash flow and scale to accelerate NAV accretion”, while NBL was upgraded saying it could be open to Permian M&A if it divests NBLX rises on earnings as delivers a +8% EBITDA beat (+$65MM vs. consensus) driven by a 2% beat on oil volumes – this was partially dampened by a 6% capex miss (+$44MM); OXY active after Berkshire Hathaway commits to $10B investment in Occidental for Anadarko (APC) deal; BP boosted cash flow and hit the target on profit estimates in Q1

 

Stock GAINERS

·     GE +5%; reported three-fold rise in quarterly profit to $954M, helped by higher sales in aviation, oil and gas, and healthcare, offsetting a loss in renewable energy

·     GTHX +16%; said it expects to file a new-drug application for its trilaciclib, a drug designed to protect bone marrow from the effects of chemotherapy

·     MLM +3%; as Q1 results handily top consensus helped by robust pent-up demand and modestly improved weather (EXP, VMC, SUM also active)

·     MRK +1%; raised its outlook for the year after better than expected sales and earnings driven by soaring sales of its immuno-oncology treatment Keytruda and sales of cancer drugs and vaccines

·     INCY 5%; shares after EPS beat and in-line midpoint revenue guidance for Jakafi

·     PI +25%; after posting a narrower than expected Q1 EPS loss and improved guidance on both the top and bottom line

·     SANM +15%; Q2 EPS and revs beat for both the quarter and the upcoming one

·     STX +5%; Q3 results that narrowly missed revenue estimates with an 18% Y/Y decline but beat on EPS though the Q4 outlook has revenue below consensus at the midpoint with $2.31B plus or minus 5%

·     WAGE +16% acquired by HQY for $50.50 a share in cash https://on.mktw.net/2J0u4tA

 

Stock LAGGARDS

·     CGNX -16%; on mixed Q1 results but sees Q2 revenue $190M-$200M below consensus $223.04M and says Q2 gross margin is expected to be in the mid-70% range (Q1 GM was 73%)

·     CRTO -13%; after a softer Q2 outlook in addition to full-year guidance coming down as management cited execution delays

·     GLW -9%; $ after mostly in-line results but guided to a full-year slowdown in its largest segment, Optical Communications, to sales growth of about 10% vs. a previous expectation for low teens.

·     GOOGL -7%; broadly missed expectations in 1Q, with revenue decelerating to +19% YoY (ex-f/x) from a steady 23% throughout the majority of last year

·     MGM -7%; with mixed Q1 results as EPS missed by 16c on slightly better revs though revs fell at MGM Grand Las Vegas and Mandalay Bay

·     PETQ -10%; after short seller SprucePoint announced a new short saying sees 75%-90% downside

·     PRGO -8%; after the IRS says Perrigo owes it a tidy $843M for additional taxes owed from its acquisition of Elan in December 2013 plus a 40% penalty

·     RIG -9%; Q1 adjusted EBITDA of $254MM, well above consensus of $193MM and adjusted revenue was much better than expected but shares slipped as operating expenses rose to $508M from $424M YoY as shares lows down over 9%

·     TXRH -11%; after missing Q1 earnings and revenue saying high labor costs were putting results under pressure/Street also concerned about margins

·     WDC -3%; Q3 EPS 17c/$3.67B vs. est. 46c/$3.68B; said market conditions have generally been consistent with our expectations, and while the business environment remains soft, there are initial indications of improving trends

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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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