Market Review: May 08, 2019

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Closing Recap

Wednesday, May 08, 2019

Index

Up/Down

%

Last

DJ Industrials

2.17

0.01%

25,967

S&P 500

-4.40

0.15%

2,879

Nasdaq

-20.44

0.26%

7,943

Russell 2000

-7.28

0.46%

1,575


 

Equity Market Recap

·     U.S. stocks end mixed, recovering from earlier declines as markets continue to assess and position themselves ahead of an important round of talks between the United States and China later this week. Yesterday, the U.S. confirmed it would raise tariffs to 25% from 10% on $200 billion worth of Chinese imports on Friday. The comments came as Vice Premier Liu He visits to try and reach a late inning deal, but China’s commerce ministry later said it would have to take necessary retaliatory measures if tariffs are raised. Equities have moved in tandem with headlines (good and bad) pertaining to developments regarding trade as earnings have taken a back seat this week. Note of the 426 S&P companies that have reported so far, about 75% have beaten profit estimates, according to Refinitiv data. Stocks got a midday boost after White House Press Secretary Sarah Sanders told reporters that China has indicated it want to reach a deal. That followed a Reuters report that China backtracked on almost all aspects of the trade deal. Trump earlier said that China intends to make a deal, but that he’s happy to raise tariffs if the negotiations fail to produce an agreement. Treasury prices erased earlier gains, as yields bounced off 5-month lows around 2.44% on the 10-year. Oil prices rebound off 1-month lows. Tech slipped in the final minutes of the day, led by weakness in INTC as it relayed a cautious outlook in the PC market at its investor day.

 

Commodities

·     Oil prices with a nice rebound, rising 72c to settle at $62.12 per barrel, off its earlier lows of $61.07 amid bullish weekly inventory data as well as a bounce in risk assets. WTI crude recovered off its lowest levels in over a month, as increasing tensions between the U.S. and Iran and the threat of disruptions to supplies in the Middle East outweighed the worries of a trade conflict between the U.S. and China that could sap energy demand. Back to the inventory data, the EIA said weekly crude stockpiles unexpectedly fell -3.963M barrels vs. an estimate build of 1.9M barrels. June gold prices fell -$4.20 or 0.03% to settle at $1,281.40 an ounce.

 

Currencies & Treasuries

·     Treasury prices opened the day higher while yields sunk across the board as markets remain concerned about the outcome of this week’s trade talks between the US and China. The 10-year yield hit lows around 2.44% before rallying late afternoon (to 2.48%) as stock recovered and after a weak bond auction. The U.S. Treasury sold $27B of 10-year notes at a yield of 2.479% (vs. w/I price prior to auction at 2.465%) and vs. 2.55% prior auction, with the bid-to-cover ratio (demand) lower at 2.17 from 2.55 prior and indirect bidders buying 53.3% of the notes vs. 68.4% prior auction (primary dealers bought 35.2% and direct bidders purchased 11.5%). The dollar was relatively quiet, ending little changed vs. the yen and euro as economic data very light this week.

 

 

Macro

Up/Down

Last

WTI Crude

0.72

62.12

Brent

0.49

70.37

Gold

-4.20

1,281.40

EUR/USD

-0.0004

1.1187

JPY/USD

-0.10

110.16

10-Year Note

0.025

2.482%

 

 

Sector News Breakdown

Consumer

·     Consumer Staples; COTY reported slightly better Q3 EPS but sales of $1.99B missed the $2.06B estimate as revenue declined 6% on a constant currency basis in Q3, while organic net revenues decreased 3.7% on a constant currency basis; PFGC shares slumped as Q3 EPS fell short of consensus views (35c vs. 37c est.)

·     Services; TWOU shares drop after Credit Suisse downgraded to neutral after the company reported 1Q19 and lowered its FY revenue guidance, primarily accounting for schools tightening their admissions; APEI another weak player in education as EPS for Q1 missed and guided Q2 25c-30c, below the 39c estimate; LOPE also drops in education space as Q1 profit missed views

·     Restaurants; PBPB was downgraded to hold at Maxim following disappointing 1Q19 (March) results and reduction in 2019 guidance and reported a Q1 comp decline of (-4.7%); WEN rises on earnings as higher priced burgers, franchisee fee boost quarterly results; CHUY Q1 EPS beat by 2c on rising comps of 3.2% for Q1 vs. est. 2%; PZZA reported better Q1 results while reaffirmed its year outlook; WING Q1 EPS/revs top views and comps rose 7.1% vs. est. 3.7%

·     Auto’s; ride hailing company LYFT reports its first quarterly results as public company as reiterated revenue and EBITDA guidance ranges for 2Q19 and FY19 after reported better-than-expected growth in Active Riders (shares fell); note UBER IPO expected to price tomorrow night; privately-owned Enterprise Holdings announces it will launch the U.S. car rental industry’s first vehicle-subscription service in the next month (HTZ, CAR)

·     Casino & Leisure movers; KeyBanc said preliminary March domestic RV retail units were down -13.1%, which came in below buy-side expectations for a decline in the mid-to-high single digits noting weather was a headwind during the month (THO, LCII, FOXF, CWH, WGO, PII, PATK); in gaming, SGMS reported mixed 1Q19 results, with EBITDA of $328M in-line as strong margins (42.7%) as EPS missed but revs beat

 

Energy

·     Inventory data mostly bullish for oil as the EIA said weekly crude stockpiles unexpectedly fell -3.963M barrels vs. an estimate build of 1.9M barrels while gasoline inventory fell -596K barrels vs. est. draw of -1,000M. Overnight, the API reported that U.S. crude supplies rose by 2.8M barrels for the week, showed a stockpile decline of -2.8M barrels for gasoline

·     E&P sector; FANG announced a $2B stock repurchase program, the sale of its Central Basin assets for $322M, significant well cost reductions, and lower than expected cap-ex, sending shares higher (Q1 production was in line with consensus, and 1Q19 oil production was 1.2% below consensus but capex was 15% below); CRZO posted 6% beat 1Q19 CFPS, as this was offset by 1Q19 CapEx that was 20% above a stale Consensus estimate; HCLP weak as EPS of ($0.06) missed consensus of ($0.01) while tons sold of 2,41MM tons were at the low end of guidance

·     Services and Equipment; WFT shares dropped after they pushed the release to May 10 and canceled its earnings call/plans to file its 10-Q for quarter ended March 31 on the same day; FTSI shares dropped as said that it faced challenging market environment, and reported Q1 net loss of $55M, down from net income of $78.7M last year

 

Financials

·     Bank movers; the bank stocks have been steadily sliding over the last 2-weeks as the Fed has remained dovish and yields have dropped to one-month lows; big banks and regionals have dropped after what was a mixed quarter (light trading revs the big negative for the quarter for most of the big names); in services, AVLR shares surge after posting a narrower quarterly loss and raised its guidance for the year; RNR traded to 52-week highs after earnings

·     Consumer finance and lending; FLT shares jump as Q1 organic revenue growth of 10.5% to $622M topped estimates (Opco at $610M) while fuel card growth accelerated to 9.5% better than we expected and raised guidance for the year; LC was upgraded to outperform at Wedbush after earnings and raising PT to $5 from $3.75 reflecting significant gains across all fronts over past 3 years; WU shares little changed after Q1 EPS missed the lowest estimates

 

Healthcare

·     Pharma movers; it was announced drug makers will have to include prices in TV ads as soon as this summer; PFE to acquire privately held Therachon for $340M upfront, and up to $470M in added payments based on TA-46 development milestones; AZN and Daiichi Sankyo announce positive results from an open-label Phase 2 clinical trial, DESTINY-Breast01, evaluating trastuzumab deruxtecan; AGN tgt cut to Street low $140 at RBC after the drugmaker’s management failed to inspire confidence yesterday; PTGX rises as expands PTG-200 deal with Janssen; shares up 13%

·     Biotech movers; RGNX reported additional interim Phase 1/2a trial update for RGX-314 for the treatment of wet age-related macular degeneration; AMGN lost its appeal over Sandoz’s biosimilar of Neupogen; ICPT reported a wider than expected Q1 EPS loss on in-line overall revenue of $52.3M and Ocaliva sales rose to $51.8M from $35.2M YoY; BHVN shares rose after 1Q results & investor event at AAN y’day (Cantor raises tgt to $100)

·     Medical equipment and devices; INSP reported 1Q revenue of $16.3M, up 62% YOY and $1.3M above consensus and also raised its 2019 sales guidance, which now calls for full-year growth of 36-42%; IRTC rallies after BTIG said it beat in nearly every metric, as Q1 results were solid with revenue of $47.2M came in 7% above their forecast; MYGN falls as EPS beat driven by significant lower income tax expense, as operating profit missed/revs inline, but OpEx much higher; CERS plunged on earnings miss; GHDX shares dropped over 10% after its results

·     Healthcare services and providers; INGN shares plunge as reported in-line 1Q results that were overshadowed by a $25M reduction to guidance, from $430-440M to $405-415M +13.1-15.9%); NVTA shares slide as reported 1Q results missed consensus by a wide margin while Opco said test volumes of 94K missed est. by 11K; MCK shares outperform on better earnings

 

Industrials & Materials

·     Metals & Materials; in steel, STLD was upgraded to buy and US Steel (X) downgraded to sell with $10 tgt at UBS saying electric arc furnace operators (STLD, NUE) are positioned to continuously capture market share from integrated blast oxygen furnace operators (AKS, X) as US capacity expands by 11%; VALE said nickel sales of the world’s largest producer of the metal fell to 50,300 metric tons in Q1, from 57,900 tons a year earlier; gold miners slump (AEM, NEM, GOLD) on some earnings results and ABX CEO saying "gold global industry is not in good shape"

·     Chemicals; MOS rebounds after falling to 52-week lows yesterday after being upgraded at JPMorgan and CSFB to outperform citing favorable risk/reward; LTHM reported 1Q19 adjusted EBITDA of $27.6M meeting consensus and new 2019 guidance that implies much shallower improvement from 1Q than expected

 

Technology, Media & Telecom

·     Internet; TRIP after posting weaker Q1 revenue, highlighted by weakness in the hotels and auction business/revenue in the hotel/media/platform part of the business was down 1% Y/Y; MEET Q1 beats with revenue up 32% Y/Y and a Q2 outlook that has revenue of $50.3M to $51.3M, which misses the $51.2M estimate at the midpoint

·     Semiconductors; QRVO gains early as reported Q4 results that beat expectations and gave a Q1 revenue outlook that was well ahead of consensus expectations; MCHP Q1 results beat but lowered its Q2 guidance; MTSI jumps after earnings and upgraded to buy at Craig Hallum and raised tgt to a Street-high-matching $25 citing the potential of the company’s GaN/Si technology; INTC slipped late day after saying at its investors day it sees PC business slightly down to flat and sees low single-digit % growth over next 3-years

·     Software movers; HUBS with mixed results as posted Q1 earnings beat and above-consensus FY19 outlook, but shares slipped 31% billings growth (below Cowen 32% estimate); EA leads video game makers higher early (TTWO, ATVI) after delivered a clean top and bottom line beat driven by the contribution from Apex Legends and strong recovery in FUT while outlook was slightly lower than consensus estimates; CSOD 1Q & F19 guide better than expected

·     Telecom movers; ZAYO agreed to be acquired by affiliates of Digital Colony Partners and the EQT Infrastructure IV fund for $35 per share in cash, in total deal valued at $14.3B which includes the assumption of $5.9B in debt https://on.mktw.net/2LxtYwj ; PSN 18.52M share IPO priced at $27.00; while Sprint (S) reported CY1Q19 wireless revenue and EBITDA ahead of Street estimates, postpaid phones and ARPU missed; other earnings movers: CBB, VG

·     Media movers; Dow component DIS to report earnings tonight after the close; MTCH shares rise helped as Tinder massively accelerated sub additions with 384k net adds vs. 233k in 4Q and revs up 38% despite a tough comp; NYT faded from highs after good earnings after saying its Sunday circulation declined 6% in Q1 and expects downward pressure on ARPU in 2019

·     Hardware & Component news; 3D stocks fell (SSYS, XONE) behind DDD after Q1 EPS loss wider than expected as well as a technical problem in the company’s material handling system for its metal 3D printers; CRAY posted wider Q1 EPS loss than expected

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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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