Mid-Morning Look: May 15, 2019

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Mid-Morning Look

Wednesday, May 15, 2019

Index

Up/Down

%

Last

 

DJ Industrials

20.42

0.08%

25,552

S&P 500

6.83

0.24%

2,841

Nasdaq

44.95

0.58%

7,779

Russell 2000

-5.59

0.36%

1,537

 

 

A nice bounce for U.S. stocks after opening lower amid several negative headlines and economic data. Market got a boost as Trump tries to ease some tariff concerns CNBC as he plans to delay auto tariffs by 6-months. The headline boosted autos and suppliers, while other tariff related sectors (tech, industrials, metals) also seeing a bounce. U.S. equities were under pressure initially following a combination of factors. In a CNBC interview this morning, former White House Chief Strategist Steve Bannon said there is no chance Trump is going to back down in the China trade war. Also hurting: U.S. retail sales dropped (-0.2%) in April, missing economist estimates for a rise of 0.2% and retail sales in China grew at their slowest pace since June 2003. Finally, the IEA slashed estimates for global oil demand in the first quarter by 400,000 barrels a day, and for the year as a whole by a more modest 200,000 a day. So overall, add renewed growing global growth concerns (on weak retail sales) to trade uncertainties dragging stocks lower (though boosts expectations for the Fed to remain accommodative and not raise rates).

 

Treasuries, Currencies and Commodities

·     In currency markets, the British Pound touched its lowest since February as Brexit uncertainty drags on, while the dollar was mixed overall, steady vs. the Yen. Commodity prices mixed as gold prices rise $2 to $1,299 (paring gains as stock recover off the lows) while oil prices are lower following mixed inventory data

·     Treasury market’s rallied early as yields extended their recent decline on trade fears as the benchmark 10-year yield fell below 2.37% and the 2-year dropped to 2.16%, its lowest since February ’18. Weaker economic data in the form of retail sales and industrial production also raised the case for the Fed to remain accommodative (and that the next move could be a rate cut and not a hike after softer global growth data)

 

Economic Data

·     Empire State manufacturing index climbed to a six-month high in May of 17.8 from a reading of 10.1 in April, and above estimates for a reading of 8.0; general business conditions were 10.1 in the last month while prices paid fell to 26.2 vs 27.3 and new orders rose to 9.7 vs 7.5

·     Retail sales dropped (-0.2%) in April, missing economist estimates for a rise of 0.2% as receipts fell (-1.1%) at auto dealers after a decline in sales of new cars last month. Sales also declined (-1.3%) for electronic stores and (-1.9%) at home and garden centers. Clothing stores, pharmacies and Internet retailers all posted a (-0.2%) dip in sales. Retail sales less autos rose 0.1% in April, well below the est. of up 0.7%

·     Industrial Production for April fell (-0.5%), missing the estimate to hold unchanged (after rising 0.2% in March) while Capacity utilization fell to 77.9% from 78.5% in March, revised down from 78.8%. Factory production fell 0.5% in April after no change in March

·     The U.S. Home Builders’ Confidence index (NAHB) rises to 66 in May which was above 63 last month. The Present single family sales rise to 72 vs 69 last month, future single family sales rise to 72 vs 71 last month and prospective buyers traffic rises to 49 vs 47 last month

·     Business Inventories for March was unchanged MoM, in-line with estimates while business sales rose 1.6% in March after rising 0.2% the prior month. February business inventories rose unrevised 0.3% MoM

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.47

61.31

Brent

-0.14

71.10

Gold

2.00

1,299.00

EUR/USD

0.0012

1.1216

JPY/USD

-0.06

109.55

10-Year Note

-0.031

2.382%

 

 

Sector Movers Today

·     Pharma movers; HZNP lost an appeals court ruling that invalidated two patents on its pain drug Vimovo; PFE Phase 3 study of its investigational oral Janus kinase 1 inhibitor, abrocitinib, in ages 12 years and older with moderate to severe atopic dermatitis, achieved all co-primary and secondary endpoints; in cannabis sector, TLRY Q1 revenue of $23M was ahead of the average analyst estimate of $21.4M and was upgraded to market perform at BMO (citing valuation), while ACB quarterly revs missed estimates and Bank America said 9,160kg of cannabis sold (+31% q/q) was below their 10,370kg outlook

·     Autos; sector (FCAU, F, TM, GM) gets a boost after President Trump said plans to delay imposing tariffs on auto imports; Ford (F) issues two safety recalls in North America of select 2019 Ranger trucks and 2013-16 Fusion vehicles; TSLA tgt cut to $200 at Evercore/ISI as they reduced delivery estimates across all models amid lingering production concerns (sees 343K total deliveries for 2019 vs prior 368K est.) – while company guidance was 360K-400K

·     Monthly Master Trust data; SYF reports April net charge-off rate 5.11% vs. 5.24% last month and April 30-plus day delinquencies 2.62% vs. 2.92% last month; DFS April Charge-offs 3.46% vs. 3.20% YoY; April delinquencies +2.38% vs. +2.30% YoY; April total card loans $66.4B, in-line YoY; COF reports April net charge-offs 5.15% vs. 4.90% last month and April delinquencies 3.42% vs. 4.04% last month; JPM reports April net credit losses 2.51% vs. 2.55% last month and April 30-plus day delinquencies 1.18% vs. 1.23% last month; ADS April net charge offs 6.4% vs. 6.3% last month and April delinquency rate 4.9% vs. 5.2% last month; AXP reports April net write-off rate 2.4% vs. 2.5% last month and April 30 days past due loans 1.3% vs. 1.3% last month

 

Stock GAINERS

·     AMAT +1%; upgraded to positive at Susquehanna citing recent major memory contract wins while firm also upgraded AEIS noting that AMAT accounts for about 33% of AEIS overall revenues

·     BABA +0.5%; quarterly earnings and sales that topped estimates as revenue climbed to $13.6B and sees FY20 revenue over RMB 500M compared to RMB 376.84M in FY19

·     M +1%; Q1 earnings beat while same store sales for owned as well as licensed stores gained 0.7% its sixth consecutive gain/also said it had another quarter of double-digit online sales growth

·     PGR +4%; after strong earnings results YoY and said April net premiums written $3.67B vs. $3.23B last year

·     TTWO +4%; extends recent gains after strong earnings the day prior

·     ZG +2%; Guggenheim raises to a buy citing the potential of the company’s Offers business

 

Stock LAGGARDS

·     A -9%; after Q2 earnings missed estimates and cut its revenue forecast for the full year to $5.085B-$5.125B from $5.15B-$5.19B (below est. $5.19B) while backs FY19 EPS view

·     CMA -2%; broad weakness in banks, with regionals hit hard (KEY, ZION, HBAN, RF) as Treasury yields broadly lower on weak economic data

·     ECOR -15%; slides after Q1 results missed estimates, prompting a downgrade at BTIG to neutral from buy

·     EGHT -5%; missed Q4 profit expectations as its net loss widened to $28.1M from a year-ago $13.3M, as operating expenses that grew 32% vs. revenue growth of 18%/also mixed guidance

·     IMGN -30%; after the FDA recommended conducting a new Phase 3 trial of its ovarian cancer drug, mirvetuximab soravtansine as a recent trial looking at the drug as an ovarian cancer therapy did not meet its primary endpoint

·     TSLA -1%; tgt cut to $200 at Evercore/ISI as they reduced delivery estimates across all models amid lingering production concerns (sees 343K total deliveries for 2019 vs prior 368K est.)

 

Syndicate

·     Hostess Brands (TWNK) 8M share Spot Secondary priced at $13.40

·     JinkoSolar (JKS) 4.063M share Spot Secondary priced at $16.00

·     Postal Realty Trust (PSTL) 4.5M share IPO priced at $17.00

·     Virtu Financial (VIRT) 9M share Spot Secondary priced at $22.50

·     Western Asset Mortgage (WMC) 5M share Spot Secondary priced at $10.14

_________________________________________________________________

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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