Mid-Morning Look: May 13, 2019

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Mid-Morning Look

Monday, May 13, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities under significant pressure after China retaliated with its own tariffs on U.S. goods in response to the Trump Administration raising tariffs on $200 billion worth of Chinese goods from 10% to 25% last Friday. China said it will raise tariffs on part of $60B of U.S. goods starting June 1st on some 2,493 goods that will see tariffs raised to 25% (and smaller tariffs on other goods), according to the statement. The announcement comes after President Donald Trump warned this weekend that things “will only get worse” for China if they retaliate against the U.S. for increasing tariffs on Chinese goods. Today’s market slide marked the 5th straight gap down day for U.S. stocks of more than 1%. Weakness widespread this morning with technology (semis), industrials, materials and autos dropping amid the trade war escalation, while financials plunge with Treasury yields hitting 6-week lows. Defensive sectors such as utilities, REITs and gold miners among the early market leaders in a flight to safety. The Dow Industrial Average fell more than -550 points (lows 25,346) to move below its 200-day moving average of 25,425 earlier (first time below level since February), while the S&P 500 index took out Friday’s low as well. It was also reported China may stop purchasing US agricultural products and energy, reduce Boeing orders and restrict US service trade with China, while Bloomberg noted many Chinese scholars are discussing the possibility of dumping US Treasuries and how to do it specifically. Headlines on tariffs and trade dominate today’s market action as earnings begin to slow and no major economic data as well. Note stocks posted their worst weekly losses since March for the Dow which fell -2.1% while the S&P saw a -2.2% weekly fall and the Nasdaq Composite shed -3% for their the biggest losses since December.


Treasuries, Currencies and Commodities

·     Commodity prices are mixed with oil rising as Saudi Arabia has said two tankers came under attack near the United Arab Emirates on Sunday, shortly after the UAE said four of its vessels had been sabotaged while gold jumps near $1,300 an ounce on defensive buying. Industrial metals along with agricultural names weak on trade concerns.

·     Treasury market’s rally as yields remain weak (10-year fell 6 bps last week to 2.47%); today the 10-year yield fell to lows around 2.41% before paring losses while the 2-year yield dropped below 2.20% as investors continue to rotate out of riskier stocks and into safety assets amid uncertainty regarding the global trade issues. Longer dated maturities fall to 6-week lows







WTI Crude






Spot Gold









10-Year Note





Sector Movers Today

·     Retailers; BBBY said board member Mary Winston has been appointed Interim CEO after Steven Temares stepped down from the CEO position and resigned as a board member; the NY Post reported top executives at major chains such as WMT, TGT, KR and Safeway have been quietly meeting with makers of drinks, gummy bears, topical creams and oils that are infused with CBD; BOOT was downgraded to hold at Pivotal Research as believe that risk/reward is less favorable at these levels; JWN estimates cut at Piper ahead of the company’s FQ1 earnings report, as channel checks throughout the quarter across multiple markets show elevated inventory levels; TIF and TPR lower as retailers that generate a large portion of sales in Asia have come under pressure on escalating trade tensions with the U.S.

·     Autos; industry pressured early after China threatens to raise tariffs on $60B worth of U.S. goods starting on June 1. Even if auto tariffs aren’t part of the picture, an extension of the trade squabble impacts production and manufacturing decisions within the automobile industry (shares of Ford, GM, DDAIF, FCAU, TM among those names active as well as suppliers)

·     Bank stocks under pressure as the KBW Bank Index dropped as much as -2.6% to the lowest since April 10, after China announced plans to raise duties on some American imports starting June 1, and as U.S. Treasury yields fell as investors sought shelter. Large cap banks such as BAC, C, JPM, WFC and interest-rate-sensitive regional banks such as SIVB, RF, CMA, ZION fell as well

·     Semiconductors; STX among top decliners in the S&P along with weakness in WDC, AMD, QRVO as chip names fall on tariff fears with China slowing demand; overall group getting slammed today amid those chip makers that are China exposed

·     Industrial & Machinery; DE and TITN downgraded to neutral at Baird saying demand for agriculture equipment is stalling as fundamentals have weakened as 2019 progressed and the recent trade flare-up is likely to further weigh on farmer sentiment/says dealer inventories have risen, posing an additional risk; construction equipment growth is moderating (ag industry also under pressure as China retaliates against U.S. tariffs on certain good); CAT said April North American 3-month machine sales +13%; DE reports earnings this week



·     BBBY +1%; as board member Mary Winston has been appointed Interim CEO after Steven Temares stepped down from the CEO position and resigned as a board member

·     NEM +0.5%; as gold miners benefit from rise in gold prices in flight to defensive assets

·     PSA +0.5%; among top S&P gainers as REITs holding up well on lower Treasury yields

·     RIOT +9%; blockchain name among a handful of movers higher as Bitcoin prices surge out of the blue to move above $7,000 (best levels since September)



·     FCX -6%; as metals among biggest decliners on China tariff news/China among top consumers of commodity products/fears of slowing demand

·     INSY -74%; warning that it may seek bankruptcy protection after bleeding tens of millions of dollars on legal settlements and defending former executives convicted of bribing doctors

·     IVZ 5%; shares drop after UBS downgraded to sell saying that current P/E multiple should contract, pressured by the upcoming additional leverage from the Oppenheimer deal and views the 27% YTD rally having been driven by the 2020 multiple rising even as estimates have declined

·     JMIA -16%; on track for 8th straight down day, falling sharply the last few sessions after negative call by Citron Research (Andrew Left) on the company

·     LONE -16%; after quarterly results fell short of consensus

·     TEVA -12%; generic drugmakers under pressure again today (TEVA, MYL, MNK, ENDP), led by reports of a new price-fixing civil suit by 44 states alleging the nation’s largest generic drugmakers conspired to artificially inflate and manipulate prices or more than 100 different generic drugs

·     TIF -5%; as retailers that generate a large portion of sales in Asia have come under pressure on escalating trade tensions with the U.S. (TPR also lower)

·     UBER -7%; falls further below its IPO price last week of $45 per share (priced 180M shares)


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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