Mid-Morning Look: May 28, 2019

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Mid-Morning Look

Tuesday, May 28, 2019

Index

Up/Down

%

Last

 

DJ Industrials

33.31

0.13%

25,619

S&P 500

2.30

0.08%

2,828

Nasdaq

15.91

0.21%

7,655

Russell 2000

-1.00

0.07%

1,513

 

 

U.S. equities are paring gains, pulling back after opening the day/week higher despite a handful of cautious/negative comments over the weekend related to China trade issues with U.S. President Trump saying he expects a trade deal with China in the future but that the U.S. currently is “not ready,” adding that tariffs on Chinese imports could rise “substantially.” Yet another headline that is not helping ease investor angst over trade. U.S. Treasury prices continue to rise, pushing the two-year down a basis point to 2.15% and the 10-year yield down 3 bps to 2.29% after hitting 17-month lows. Commodity prices are mixed with gold down and oil bouncing, while in stock news, consumer staples pressured early given broad weakness in beverages, food and tobacco names. Economic data was mixed with rising consumer confidence, but US home price gains slump for a 12th straight month to the weakest In 7-yrs while Dallas Manufacturing turned negative. Technology shares had opened higher, helping lead the Nasdaq Comp higher, but has since also pared gains.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar is little changed vs. major currencies (Pound, euro and yen), but overall the dollar index (DXY) is higher, rising vs. the Canadian dollar and helped by upbeat consumer confidence data.

·     Commodity prices are mixed with gold prices falling over $10 an ounce to below $1,280, while oil looks to recover off its sharp declines last week (front-month contract prices lost 6.8% last week). Grain prices meanwhile are higher (corn, soy) as flooding in Midwest disrupts planting

·     Treasury market’s rallied overnight, with yields falling back to 17-month lows (10-year dropped to lows around 2.28%) before paring declines. Yields bounced off lows as US stocks recovered from overnight gains despite more cautious commentary related to trade between the U.S./China

 

Economic Data

·     Consumer confidence for May rose to 134.1 vs 129.2 in prior month and topped the 130.0 economist estimate while the present situation confidence rose to 175.2 vs 169.0 MoM and expectations index rose to 106.6 vs 102.7 last month

·     Dallas Fed Manufacturing for May an unexpected decline, falling -5.3 vs. est. gain of up 2 (and below prior month reading of 2.0

·     S&P CoreLogic Case-Shiller National Home Price index rose 3.72% y/y in March after rising 3.93% in prior month with the 20 City HPI Y/y rising at slowest rate since Aug. 2012. The 20-city SA index rose 0.09% m/m in March after rising 0.26% the prior month

·     U.S. FHFA home price index rose 0.1% to 273.4 in March following the 0.4% rise to 273.1 in February (revised from 272.8). Increases were seen in 5 of the 9 regions

 

 

Macro

Up/Down

Last

 

WTI Crude

0.31

58.94

Brent

1.08

69.77

Spot Gold

-10.60

1,278.40

EUR/USD

-0.0005

1.1188

JPY/USD

0.05

109.56

10-Year Note

-0.036

2.292%

 

 

Sector Movers Today

·     Software movers; PLAN shares rallied after boosting its yearly forecast and reported a narrower Q1 EPS loss of (16c)/$75.8M vs. est. loss (20c) and raised year revs to $326M-$331M from prior view $310M-$314M (est. $313.0M); MOMO Q1 beat top- and bottom-line estimates with revenue up 28% Y/Y – Q2 revs in-line/live video service revenue was RMB2.7B in Q1 (+14% Y/Y); ATVI was upgraded to buy at Goldman Sachs as see a potential inflection in ATVI’s earnings trajectory, boosting video gamer

·     Transports; FDX shares active after Reuters reported Huawei is reviewing its relationship with FedEx Corp after it claimed the U.S. package delivery company diverted two parcels destined for Huawei addresses; in truckers, JBHT was downgraded to neutral at Bank America and cut tgt to $95 from $110 saying the company’s volumes and multiple may face sustained pressure from higher rail costs and shifting traffic patterns

·     Metals & Materials; The Global Times reported that China is “seriously” considering restricting rare earth exports to the U.S. and may also implement other countermeasures in the future, with no further details; RIO was upgraded to buy at Goldman Sachs saying it is the only iron ore major that has sufficient capacity to increase high returning iron ore volumes over the medium-long run

·     Hardware & Component news; AAPL introduced the new iPod touch® with enhancements to power, capability and communication at a remarkable price; NTNX was downgraded to equal-weight at Morgan Stanley saying weak results from storage peers suggest a market slowdown and recent channel checks highlight increasing competition; ROKU was downgraded at Stephens citing valuation after its rally in shares; back to AAPL Citigroup proactively slashing their iPhone unit sales as we believe the US/China trade situation will result in a slowdown of iPhone demand in China as China residents shift their purchasing preference to Chinese brands

 

Stock GAINERS

·     AMD +6%; after announces its 7nm product roadmap at Computex, which includes several products across all markets set to launch in the next six months/other new products on the way: Zen 2 CPUs, third-gen AMD Ryzen desktop processors, AMD X570 chipset

·     FCAU +7%; has proposed a merger with French rival Renault SA, which would create the third-largest auto maker by production. Fiat Chrysler said the combined business would be 50% owned by its shareholders and 50% by Renault shareholders with a “balanced governance structure.” https://on.mktw.net/2wm1rzh

·     GOOS +6%; higher after positive mentions by both Barclays and Canaccord ahead of earnings (reports 5/29) – Canaccord said view as one of the best growth stories in our coverage universe

·     MOMO +4%; Q1 beat top- and bottom-line estimates with revenue up 28% Y/Y – Q2 revs in-line/live video service revenue was RMB2.7B in Q1 (+14% Y/Y)

·     PLAN +19%; after boosting its yearly forecast and reported a narrower Q1 EPS loss of (16c)/$75.8M vs. est. loss (20c) and raised year revs to $326M-$331M from prior view $310M-$314M (est. $313.0M)

·     SEAS +14%; after acquiring approximately 5.6 million shares for approximately $150.0M from an affiliate of Pacific Alliance Group/also entered an agreement with Hill Path Capital for certain of its affiliated investment funds to acquire ~13.2M

·     TSS +6%; in merger deal with GPN as TSS holders will get 0.8101 GPN shares for each owned, which represents $119.86 per share for Total System Services https://on.mktw.net/2HG4Orm

·     WDAY +3%; record highs, up over 3% this morning ahead of earnings tonight

 

Stock LAGGARDS

·     BMRN -1%; after updating Phase III data on gene therapy Valoctocogene Roxaparvovec in adult patients with hemophilia A/potential diminishing effect of hemophilia A gene therapy

·     FAF -10%; shut down external access to a production environment with a reported design defect that created the potential for unauthorized access to customer data

·     GILD -2%; was downgraded to sell at Goldman Sachs and cut tgt to $60 as sees limited growth and pipeline expansion opportunities

·     JBHT -2%; downgraded to neutral at Bank America and cut tgt to $95 from $110 saying the company’s volumes and multiple may face sustained pressure from higher rail costs and shifting traffic patterns

·     KHC -3%; continued weakness as falls to record all-time lows

·     NTNX -3%; was downgraded to equal-weight at Morgan Stanley saying weak results from storage peers suggest a market slowdown and recent channel checks highlight increasing competition

·     TEVA -4%; amid broad weakness in specialty pharma and generics after the company entered into an agreement for a one-time payment of $85M to the state of Oklahoma over claims related to the opioid epidemic (MYL, MNK, PRGO weak) – Wells Fargo said they were surprised that Teva’s settlement is so large relative to the Purdue settlement ($85M vs. $270M) as Teva’s involvement was minor in comparison – so pressuring the sector)

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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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