Mid-Morning Look: May 10, 2019

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Mid-Morning Look

Friday, May 10, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-232.28

0.90%

25,595

S&P 500

-29.12

1.01%

2,841

Nasdaq

-98.00

1.28%

7,809

Russell 2000

-13.36

0.85%

1,556

 

 

U.S. equities open down slightly before paring losses…but major averages have since come under pressure following the no trade deal news and increased tariffs for China goods, pushing stocks sharply lower as tech leads the downside (Nasdaq Comp falling over 1%). The U.S. decision to increase tariffs to 25% on an additional $200 billion of imports from China marks a significant escalation in U.S.-China trade tensions, while China has pledged to retaliate their own way (raising fear in the agricultural space). Overall, U.S. equities opened lower for the fifth straight day as tech, healthcare and materials lead to the downside, with several stocks active after another busy night of earnings (PBYI, YELP, SYMC, and TRUE among names falling more than 10% on results/guidance). With today’s decline, major averages are on track for their worst week since December, while Asia managed to end higher. Discussions between Xi Jinping’s top trade envoy and his U.S. counterparts in Washington made little progress on Thursday, but negotiations were due to resume on Friday morning. Note, it was just a week ago that investors cheered all-time highs for the S&P 500, which has since slumped around 3% on trade fears.

 

Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar on track for its 4th straight decline, sliding after the U.S. officially increased tariffs to 25% from 10% on $200 billion worth of Chinese goods. The euro moves to highs around 1.125, up 0.3% vs. the dollar, while the Pound also near best levels (but only modest gains) – tamer than expected inflation data also weighing on the buck

·     Commodity prices were trying to recover after a tough week of losses for industrial metals, with oil prices down slightly and gold prices adding to recent gains

·     Treasury market’s inch higher as yields dip, with the 10-year yield back near weekly lows below 2.44% (lowest in 5-weeks) and the 2-year yield below 2.25% on tamer inflation reading (CPI) leading investors to believe the Fed will maintain its easy monetary policy. Rotation into bonds from stocks coming after the U.S. followed through with its tariff increase on China goods overnight. Note Thursday, the three month T-bill yield briefly traded above the 10-year Treasury note, raising fresh recessionary fears.

 

Economic Data

·     Consumer Price Index (CPI) for April rose 0.3% MoM, missing the 0.4% increase estimate while core CPI (ex: food & energy) rose 0.1%, below the economist estimate of up 0.2%. CPI ex. food, energy YoY rose 2.1% (in-line with estimates while headline CPI YoY rose 2% (vs. est. 2.1%)

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.14

61.56

Brent

-0.00

70.39

Spot Gold

3.00

1,287.00

EUR/USD

0.0031

1.1246

JPY/USD

-0.10

109.64

10-Year Note

-0.014

2.439%

 

 

Sector Movers Today

·     Autos; UBER prices 180M share IPO at $45 per share; TRUE shares slipped after saw Q2 revenue of $88.5M-$90.5M below the $92M consensus and full-year revenue of $361M-$374M vs. $374; CARG top and bottom line results topped estimates with upbeat guidance for Q1 and the year; Ford (F) upgraded to buy at Bank America and raise tgt to $14 saying the automaker was just starting to hit a more sustainable inflection in earnings citing a favorable product cadence in the North American market, along with restructuring efforts with its Global Redesign

·     Semiconductors; the sector has been in decline mode over the last week, led by concerns over the impact additional tariffs on China good will have on companies, as well as weaker guidance this week from MCHP for the upcoming quarter and INTC’s slide (down 12 of the last 13 days into today) after its cautious comments at its analyst day this week; SYNA shares dipped overnight on lower than anticipated revs for Q2 ($300M-$320M vs. est. $362.8M); in research, Citigroup downgraded the Consumables to neutral (OLED, ENTG) as they expect group outperformance to slow down while they prefer LRCX, AMAT;

·     Software movers; SYMC shares slipped as CEO Greg Clark has stepped down, effective immediately and also guided Q2 EPS/revs below consensus after Q1 sales misses ests; FSCT shares fell as guided Q2 EPS and revs below consensus to loss of (48c-46c) on revs $75.3M-$78.3M vs. est. loss (24c)/$83M; DBX posted Q1 EPS/rev beat (10c/$385.6M vs. est. 6c/$381.6M) on solid ARPU growth and raised the top end of its revenue guidance for the year

·     Asset managers; WDR said AUM at the end of April was $72.89 billion, up from $71.65 billion at the end of March/total April outflows were $1.1 billion; IVZ prelim AUM $975.2B as of April 30, up 2.1% as the increase was driven by favorable market returns, non-management fee earning AUM inflows, net long-term inflows, higher money market AUM, and reinvested distributions, partially offset by foreign exchange; TROW preliminary month-end Assets Under Management of $1.11t as of April 30; MN reports preliminary AUM of $21.2B as of April 30

 

Stock GAINERS

·     BKNG +4%; reported 217M room nights booked, up 10% YoY while missed quarterly EPS and revs (Q1 adjusted EPS $11.17/$2.84B vs. est. $11.26/$2.93B) and softer Q2 profit view

·     BPL +28%; agreed to be acquired by IFM Investors in an all-cash deal with an enterprise value of $10.3 billion and equity value of $6.5B, or $41.50 per unit https://on.mktw.net/2HhjrjB

·     CARG +2%; as reported 1Q revenue/adjusted EBITDA ahead of consensus, growing its paying dealer count 15% y/y to 33,253/mgmt noted 1Q19 organic int’l net adds was its strongest ever

·     DBX +1%; posted Q1 EPS/rev beat (10c/$385.6M vs. est. 6c/$381.6M) on solid ARPU growth and raised the top end of its revenue guidance for the year

·     GH +19%; after better earnings/revs and raised guidance and said plans to start testing a colorectal cancer screening study in over 10,000 patients in the latter half of the year.

·     JD +5%; Q1 EPS and revs topped estimates while guided Q2 revs 145 billion yuan to 150 billion yuan, above the estimate 145.35 billion yuan

·     NWSA +4%; among top gainers in the S&P following mixed quarterly results

 

Stock LAGGARDS

·     FGEN -20%; after a pooled analysis of roxadustat for anemia in chronic kidney disease failed to show a clinically meaningful difference in MACE between the drug and epoetin alfa

·     MAR -4%; as Q1 EPS beat but revs of $5.01B fell short of consensus as room revenue was at the low end of the company’s forecast (said worldwide or RevPAR rose 1.1% (had seen up 1%-2%)

·     NVRO -5%; after results come in below expectations and suspended its guidance for the year (follows new CEO taking over in March)

·     PBYI -36%; as revenue for Nerlynx at $45.6M missed the est. $65.8M saying net product revenue declined in the quarter as a result of an increase in patients discontinuing treatment with Nerlynx

·     SSTI -20%; posted larger Q3 EPS loss and cuts revenue forecast for 2019 to $44.5M-$45.5M form prior $45M-$47M citing delays with two potential customers and the loss of another

·     SYMC -15%; as Q4 results were modestly below expectations and guidance was lowered for FY20 and Richard Hill will step in as interim CEO while Vincent Pilette will take the CFO role

·     TRUE -14%; as its revenue outlook for Q2 lagged estimates, and it lowered the guidance for the full year to $361M-$374M vs. $374M

·     WYNN -5%; mostly in-line Q1 results but shares fell as Q1 adjusted Property EBITDA was $494.8M down -12.3%, from $564.3M YoY and operating revenues from Wynn Macau were $523.9M for Q1, a 115.3% decrease YoY

·     YELP -15%; Q1 results mostly in-line with views along with guidance to the light side for current-quarter revenues – Q1 EBITDA grew 19% to $39M

_________________________________________________________________

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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