Mid-Morning Look: May 06, 2019

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Mid-Morning Look

Monday, May 06, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-244.89

0.92%

26,260

S&P 500

-29.38

1.00%

2,916

Nasdaq

-97.65

1.20%

8,065

Russell 2000

-13.01

0.81%

1,601

 

 

U.S. equities pressured to start the week following two tweets from President Trump over the weekend, renewing trade war concerns with China after he threatened to increase tariffs on $200 billion of imports to 25% from 10% on Friday and also raised the possibility of imposing a 25% tariff on another $325 billion in imports from China not currently covered. The move prompted China (as per the WSJ) to consider canceling trade talks with the United States this week. Asia markets plunged overnight on the reports as the Shanghai Index plunged over 170 points (5.58%) to settle at the lows just above 2,900 (worst day in 3-years) and the Hang Seng Index dropped -871 points (2.9%) to 29,209. The CBOE Volatility index (VIX) jumps nearly 50%, to highs of 18.80 (most since October) to the highest level since Jan. 30. The headlines overshadow another big week of earnings. The White House also raised the ante on Iran with a decision to deploy bombers and an aircraft carrier strike group in the Middle East. Investors fled to havens, with the yen, gold and the dollar rallying to start the week. There are no major U.S. economic data points to move markets today. In Fed news, only Fed Bank President Harker speaking today saying in prepared text that he continues to forecast one rate hike at most this year and possibly one in 2020 based on continued economic growth, a resilient job market, and an inflation rate that he expects to move higher (no mention of cut in there).

 

Donald Trump’s tweet: “Donald J. Trump @realDonaldTrump – For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!. The cash market for Treasuries was closed due to holidays in Tokyo and London. Oil also slumped. The VIX volatility gauge jumped the most since October.”

 

Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar mixed to slightly positive in the early going, falling vs. the safe haven yen. Commodity prices opened mixed with safe haven gold rising modestly, but oil prices falling over 1% overnight on the Chia/U.S. trade war fears (but oil prices have rebounded nicely to trade flat for WTI and positive for Brent). Treasury market’s rally as risk-off sentiment has caused the 10-year Treasury yield to move under 2.49% (2019 lows 2.34%)

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.06

61.88

Brent

0.17

71.02

Gold

-0.20

1,279.00

EUR/USD

-0.0008

1.119

JPY/USD

-0.23

110.86

10-Year Note

-0.034

2.491%

 

 

Sector Movers Today

·     Consumer Staples; TSN Q2 EPS/sales topped views but said average prices were down 4.8%, adjusted operating margin was 6.3% of sales vs. 7.1% YoY and margins dropped sharply in the chicken business (4.4% from 9.7%); POST upgraded to buy and $134 tgt at Goldman Sachs; KHC said it will restate its financial statements and related disclosures for the years ended Dec. 30, 2016 and 2017 and each of the quarterly and year-to-date periods in fiscal year 2017

·     Industrial & Machinery; broad weakness in the space today on trade fears with China as tariff-related threats from President Donald Trump boosted the possibility of a trade war with China (shares of DE, CAT among names moving); Heavy duty truckers PCAR, NAV, MTOR, RUSHA downgraded to neutral from buy at Longbow; distributors/services; FAST April daily sales grew 7.4% on a year-over-year basis (April net sales rose 12.5%)/this included a 50 basis point headwind from currency issues (was slowest rate since early 2017); Commodities fell after President Donald Trump threatened Beijing with steeper tariffs

·     Media & Telecom movers; SBGI will acquire the equity interests in 21 Regional Sports Networks and Fox College Sports from Disney which were acquired by in its acquisition of Twenty-First Century Fox for a purchase price of $9.6B (DIS reports later this week) though are valued at $10.6B; DIS “Avengers: Endgame” crossed the $2 billion mark in record time and unseat “Titanic” as the second highest-grossing film ever worldwide. DISH was upgraded at Credit Suisse saying company’s video-subscriber losses “are at a nadir” and appear likely to “improve dramatically

·     Pharma movers; CYTK said a Phase II study of reldesemtiv for patients with ALS failed to reach its primary endpoint of showing a dose-dependent response as measured by a test for respiratory function at 12 weeks; CHRS shares slipped following its settlement with AMGN over the alleged theft of trade secrets related to Neulasta (pegfilgrastim)/CHRS has agreed to pay a mid-single-digit royalty to AMGN for five years; ZYNE has been granted Fast Track Designation to its lead development candidate Zygel (ZYN002 CBD gel) for treatment of behavioral symptoms associated with Fragile X Syndrome; NBIX partner VYGR reported 12 month motor outcomes data in Parkinson’s disease (PD) for its VY-AADC01 gene therapy, delivered to the brain’s putamen; PFE Vyndamax (tafamidis) won FDA approval for treatment of the cardiomyopathy of wild-type or hereditary transthyretin-mediated amyloidosis earlier than expected, with a clean label (analysts noted could be negative for IONS and ALNY); AXSM announces the acceleration of the timeline for reporting topline results from the MOMENTUM Phase 3 trial of AXS-07

 

Stock GAINERS

·     APC +3%; as OXY revised the terms of its $76 per share offer for APC to include more cash and less stock, effectively removing the need for a shareholder vote https://on.mktw.net/2H7g6ox

·     AQ +36%; agreed to be acquired by MRVL for $13.25 per share in cash in a total deal valued at $452M https://bit.ly/2Lp5VQb

·     CHSP +7%; to be acquired by PK in a cash and stock transaction valued at about $2.7 billion, including of transaction costs; CHSP holders to receive $11.00 in cash and 0.628 of a share of Park common stock https://reut.rs/2VLItjT

·     ESPR +7%; after saying yesterday that two applications for its experimental cholesterol medication were accepted for review by the FDA

·     IMGN +16%; as both Cowen and HC Wainwright upgraded shares amid potential for the company’s lead drug (Mirvetuximab) to gain approval from U.S. regulators

·     SBGI +25%; as it will purchase 21 regional sports networks and Fox College Sports from DIS for $9.6B, which are valued at $10.6B, including minority equity interests

·     TSN +1%; reverses earlier losses to trade to 52-week highs on mixed results/Q2 EPS/sales topped views but said average prices were down 4.8%, adjusted operating margin was 6.3% of sales vs. 7.1% YoY/margins dropped in the chicken business (4.4% from 9.7%)

·     ZYNE +6%; has been granted Fast Track Designation to its lead development candidate Zygel (ZYN002 CBD gel) for treatment of behavioral symptoms associated with Fragile X Syndrome

 

Stock LAGGARDS

·     AMG -12%; on mixed results as EPS was in-line on better revs while announced CEO Nathaniel Dalton to leave position, Jay Horgen succeeds

·     BA -2%; as revealed it knew that a cockpit alert wasn’t working as advertised, but didn’t tell airlines or the FAA until after October’s Lion Air crash

·     BABA -4%; as China-exposed exchange-traded funds and ADRs slumped after President Donald Trump’s threat to increase tariffs on Chinese imports (BIDU, JD)

·     CHRS -1% following its settlement with AMGN over the alleged theft of trade secrets related to Neulasta (pegfilgrastim)/CHRS has agreed to pay a mid-single-digit royalty to AMGN for five years

·     CYTK ; said a Phase II study of reldesemtiv for patients with ALS failed to reach its primary endpoint of showing a dose-dependent response as measured by a test for respiratory function at 12 weeks (shares fell as much as 15% earlier before reversing)

·     FAST -5%; daily sales grew 7.4% on a year-over-year basis; this included a 50 basis point headwind from currency issues (was slowest rate since early 2017)

·     PETS -6%; shares drop as Q2 EPS of 32c/$64.5M well below the 46c/$69M estimate

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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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