Mid-Morning Look: May 07, 2019

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Mid-Morning Look

Tuesday, May 07, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities resume their downward momentum, as confirmation from U.S. Trade Rep Lighthizer saying tariffs would increase to 25% on $200B of Chinese goods starting Friday, claiming China has backtracked from prior agreements has trumped news that China is sending Vice Premier Liu He to Washington to continue talks later this week (but is prepared to impose retaliatory tariffs). After an extremely impressive rebound performance by major U.S. averages yesterday (Dow Industrial Average opened lower by -471 points before paring losses to down -68 by days end), the downward pressure resumes this morning in a broad sector pullback. U.S. Treasury prices are higher, with the two-year yield and 10-year yield down 3 bps each to 2.28% and 2.47%, respectively as stocks slide. In addition to the trade concerns, comments last week from Fed Chairman Powell still messing with sentiment (as the FOMC kept rates unchanged) as he pushed back against calls for a near-term rate cut last week. Heavy dose of earnings again this morning with more to come tomorrow and Thursday, but attention firmly on the trade situation which is hurting materials, industrials and tech stocks on tariff fears.


Treasuries, Currencies and Commodities

·     In currency markets, the dollar is higher against the euro and pound, while slides against the defensive Japanese yen/buck also up vs. emerging market currencies as oil prices slip; commodity prices are mixed with gold up modestly on flight to safety trade, while oil prices dip ahead of inventory data tonight and tomorrow. U.S. energy secretary Rick Perry said on CNBC that Saudi raising production to counter Iran sanctions impact which also weighed on prices. Treasury market’s rally with yields falling across the board on stock weakness, as the 10-year yield to 2.46%.







WTI Crude






Spot Gold









10-Year Note





Sector Movers Today

·     Autos; RACE rises after 1Q earnings exceed estimates, helped by revenue, bolstered by V8 units and Chinese performance and reiterated guidance; GM Cruise reports an equity investment of $1.15B from a group including funds and accounts advised by TROW and existing partners General Motors, SoftBank Vision Fund and Honda; BWA to form a joint venture with Romeo Power Technology, a supplier of battery modules and packs, to bolster its electrification portfolio and systems expertise/BWA will take a 20% equity position in Romeo Power Technology; LYFT to report earnings after the close (first time as a public company)

·     Industrial/instruments; MWA lowered its FY19 sales outlook to +7- 9% YoY from +8-10% previously, including Krausz, and EBITDA growth guidance by -200 bps to a 12-15% range from 14-17% previously; ITRI Q1 beats with Q2 results expected to be sequentially flat to slightly down on both revenue and EPS due to overachievement in Q1 and timing issues as continues to expect H2 improvement with the Q4 exit rate at 150 bps higher than Q1; FAST, MSM and WCC all downgraded to Market Perform at William Blair saying with growth challenges rising distributor earnings estimates are too high for 2019 and 2020

·     REITs; WELL upgraded at BMO Capital to outperform noting after two years of declining earnings as Welltower cleaned up its portfolio, they believe it is back on a solid growth path; DOC was downgraded at BMO citing share outperformance; INVH 1Q19 core FFO of 33c, +3c above consensus as expense control drove the beat; KRC 1Q results were steady overall, with the sequential occupancy dip and 4.2% cash SSNOI decline expected; KRG reported in-line 1Q19 results and management maintained the FY19 FFO guidance; SKT reported in-line 1Q19 FFO, and management revised guidance lower by the expected 9c related to the previously disclosed sale of four non-core assets during the quarter

·     Medical equipment and devices; OFIX reported weaker Q1 results with outperformance in Biologics mitigated by weakness in legacy (non-M6) Spinal Implants and Global Extremities and backed its year outlook; TCMD sales of $37.6M exceeded consensus by ~$4.5M as quarter and guidance top analyst views; LMNX shares drop on Q1 EPS loss and revenue miss

·     Healthcare services and providers; HIIQ Q1 revs were in-line with adj. EBITDA / EPS below estimates and reiterated FY’19 guide but guided Q2 below estimates; BKD posted strong Q1 Ebitda beat driven by better pricing and tighter cost controls, helping lift shares; IVC posted a small EPS miss on slightly weaker revs with no changes to its 2019 guidance or LT financial targets



·     AIG +6%; reported Q1 EPS of $1.58 beating both consensus of $1.06 marking the first time AIG has beat the street in seven quarters and both of its core businesses reported double-digit ROEs

·     AKTS +14%; after announcing the first pre-production order for its 5.6 GHz XBAW WiFi RF filter

·     COHU +21%; on earnings and upgraded to buy at Stifel and up tgt to $22 citing increased confidence in the forming recovery after earnings

·     CROX +3%; after 1Q EPS and revenue beat analyst estimates helped by clean inventories which analysts said bode well for the coming quarter gross margin expectations

·     EVER +12%; Q1 revenue beat expectations and gave a Q2 outlook that was above consensus forecasts, prompting at least two analysts to raise their price targets

·     GWPH +4%; upgraded to outperform at Oppenheimer and raise tgt to $234 from $162 as announced top-line results of a Phase 3 clinical trial of Epidiolex that met its primary endpoint

·     SEDG +20%; strong 1Q and guidance for both revenue (guides Q2 revs $310M-$320 vs. est. $282M) and GMs impressed (upgraded at JMP Securities while Roth raises to Street high $70 tgt

·     VECO +11%; Q1 earnings and revenue topped estimates prompting an upgrade at Benchmark to buy with a $15 tgt



·     ADNT -6%; after reports FQ2 EPS lower than expectations and mid-point of year rev guidance below estimates

·     CPRX -37%; after FDA approval of a competitor to its Firdapse drug that helps patients who suffer from Lambert-Eaton myasthenic syndrome, for which CPRX charges a list price of $375K

·     EMR -4%; lowered the top end of its full-year earnings outlook, after in-line Q2 results while backs FY19 operating cash flow view ~$3.2B, free cash flow ~$2.5B

·     IAG -7%; downgraded by two analysts after reported Q1/19 production of 185koz, a miss relative to consensus at 213koz gold owing to operating issues at Westwood

·     MOS -6%; lowered year adjusted Ebitda and EPS outlook while BMO said it may not be sufficient amid the continued decline in phosphate prices

·     MYL 4%; as Q1 revenue missed estimates ($2.5B vs. est. $2.69B) as declines in both the Europe and North America segments weren’t fully offset by gains in the Rest of the World segment

·     PXD -5%; as cuts long-term output growth to 15% from 20%

·     REGN -6%; after quarterly results both miss the top and bottom line and also cut its guidance for reimbursement from partner SNY to $500M-$535M from $510M-$560M previously

·     XENT -21%; cuts FY19 revenue view to $113M-$117M from $123M-$127M (est. $125.25M) while announced that Lisa Earnhardt will be stepping down from her role as Chief Executive



·     PennyMac Mortgage (PMT) 8M share Spot Secondary priced at $21.15

·     Realty Income (O) 11M share Secondary priced at $69.25


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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