Mid-Morning Look: May 29, 2019

Auto PostDaily Market Report

Mid-Morning Look

Wednesday, May 29, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-132.41

0.52%

25,215

S&P 500

-10.45

0.37%

2,791

Nasdaq

-28.61

0.38%

7,578

Russell 2000

-11.96

0.80%

1,492

 

 

U.S. equities track weakness in Europe and Asia overnight, once again under pressure as the S&P 500 index trades to its lowest levels since early March – hanging around important technical levels (the 100-day MA 2,789 and 200-day 2,776). Several factors playing a part in the recent global stock market declines (over the last 3-weeks) as stocks drop alongside the spike in Treasury prices, with yields falling to lowest levels since 2017 as the 3-month/10-yr yield inverted (raising recession fears) by 12 bps with the 10-year yield down at 2.22% and the 2-year 2.06%. Political strife in Europe (UK PM, Italy as well) also hurting sentiment as well as a plunge in oil prices (extending last week’s 6% drop). And of course, the fact of no trade resolution between China/US anywhere on near-term horizon, with no current meetings scheduled between trade representatives factor into the market weakness. The G20 meeting is not until late June when President Trump said he may meet with the Chinese leader. Overall markets broadly lower, led by financials (plunging yields), energy (oil slump) tech and industrials (trade impact), consumer discretionary (weak earnings – ANF, GOOS, CPRI), while defensive sectors hold (utilities). Also, concerns as Mueller set to make ‘lengthy and substantial statement’ on Russia probe later this morning.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar index adds to yesterday gains, with the DXY trading back above the 98 level, led by gains against the euro which fell to lows around 1.135 today (political issues in the UK and Italy weighs on sentiment); the Canadian dollar pared losses after the Bank of Canada keeps key interest rate target on hold at 1.75% (initially fell to 5-month lows vs. the US dollar at 1.3547); the Yen rises on safe-haven demand

·     Commodity prices are mixed, with safe-haven gold bouncing after yesterday’s slide, oil prices resume downward pressure on dollar spike, slowing global growth concerns, rising domestic stockpiles and impact of trade war between US/China overshadowing Iran sanction impacts; grains have surged in recent weeks given flooding across the Midwest hurting planting crops as corn, soybeans, wheat have pushed higher; lumber futures 3-year lows to $286, down over 7%

·     Treasury market’s rally globally, with Treasury yields still plunging as the 10-year falls to 2.225%, the 2-yr 2.067% and 30-yr 2.66% – the 3-month and 10-yr yield inverted by about 12 bps now (2.346% vs. 2.226%). Amid the turmoil in Europe, slowing global growth fears and of course the potential impact on global economies given the trade dispute with the U.S. and Beijing, investors have once again rotated into the safety of Treasuries.

 

 

Macro

Up/Down

Last

 

WTI Crude

-1.51

57.63

Brent

-1.35

68.75

Spot Gold

2.65

1,282.00

EUR/USD

-0.0015

1.1144

JPY/USD

-0.03

109.35

10-Year Note

-0.032

2.224%

 

 

Sector Movers Today

·     Semiconductors; NXPI agrees to acquire MRVL’s Wi-Fi Connectivity business in an all-cash, asset transaction valued at $1.76 billion/acquisition encompasses Marvell’s Wi-Fi and Bluetooth technology portfolios and related assets https://on.mktw.net/2EHaX4D ; IDCC announced a $100M stock buyback; overall, the semiconductor sector (SOX) has tanked over the last three-weeks, with the latest piece of trade news being China may be ready to use rare earths to retaliate (citing a Chinese newspaper) as rare earths are a group of chemical elements used in high-tech consumer electronics, smartphones, rechargeable batteries. The Philly semi index (SOX) is down more than 300-points from its all-time high on 4/24 of 1,604.56, but up 12.5% YTD

·     Biotech movers; INO slides after saying AZN intends to discontinue activities with respect to the research collaboration programs, other than MEDI0457, that are the subject of the parties’ license and collaboration agreement dated August 7, 2015; CARA announced topline data from the KALM-1 pivotal Phase 3 trial of Korsuva Injection in hemodialysis patients with moderate-to-severe chronic kidney disease-associated pruritus; in research, shares of ESPR, CLVS declined after Goldman Sachs downgraded to sell, while upgraded RDUS to buy; FOLD announced a major expansion of its collaboration with the Perelman School of Medicine at the University of Pennsylvania aimed at the research and development of gene therapies

·     Transports; the Dow Transports extend recent decline, falling below the 10,000 level for the first time since January, as all sub-sectors were under pressure on slowing global growth fears (airlines (AAL, UAL), parcel (FDX, UPS), rails (NSC), truckers (JBHT, LSTR) – Dow Transports now paring losses after briefly dropping below the 9,900 level

·     Metals & Materials; steel producers pressured early as MT said it would cut European production for the second time in a month as weak demand and high quantities of imports continue to take their toll (industry already under pressure from trade tensions with US/China; Australia’s Lynas (LYSCF) rose after Chinese media warned of a potential freeze on the supply of rare earth materials; CENX agrees to sell stake in JV to Guangxi Qiangqiang Carbon for 144.9M yuan

·     Software movers; WDAY pulls back from 52-week highs yesterday after earnings results as posted better Q1 as EPS beat by 2c on revs of $825.1M, up 33% YoY (est. $814.1M), and YoY billings growth of 42%, above the consensus at 31%; UPLD acquired Kapost for $45M which is expected to contribute $15M in revenue and $7M in EBITDA; tonight earnings from PANW in the software security sector and VEEV in application software

 

Stock GAINERS

·     AMRN +11%; after its supplemental new drug application for Vascepa capsules seeking cardiovascular risk reduction indication has been accepted for filing and granted Priority Review designation by the FDA

·     BLMN +5%; will replace TVPT in the S&P SmallCap 600 effective June 3rd

·     CARA +20%; announced topline data from the KALM-1 pivotal Phase 3 trial of Korsuva Injection in hemodialysis patients with moderate-to-severe chronic kidney disease-associated pruritus

·     CY +12%; after Bloomberg reported that the company is weighing a sale after receiving takeover interest https://bit.ly/2HIte3o

·     DKS +2%; raised its full-year EPS of $3.20-$3.40 from prior $3.15-$3.35 (est. $3.27), while Q4 EPS and revenue topped views while comp sales were flat (vs. est. -1.5%)

·     FCSC +11%; receives FDA regenerative medicine advanced therapy designation for FCX-007 gene therapy for the treatment of skin disease RDEB

·     HEI +5%; as posted a better than expected Q2 with higher op margins (23.1%) and organic sales growth was ~17%, with total sales growth of ~20%/also raised its full year FY19 sales guidance to up 12-13% (from 10%), net income to 17-18% (vs. prior 12% and upped op margin guidance

·     MRVL +1%; after NXPI agrees to acquire MRVL’s Wi-Fi Connectivity business in an all-cash, asset transaction valued at $1.76 billion https://on.mktw.net/2EHaX4D

 

Stock LAGGARDS

·     ANF -24%; after mixed results as posted smaller EPS loss (29c) on in-line revenue ($734M), but overall Q1 comp sales rose 1% missing the 1.4% est. as Hollister comps misses (rose 2%)

·     CLVS -6%; downgraded to sell and tgt to $15 at Goldman Sachs saying valuation is full relative to Rubraca’s intermediate-term outlook

·     CPRI -9%; after mixed quarterly results as operating margin and Kors unit comparable store sales missed estimates/gross profit fell 80 bps to 59.4% of sales during the quarter/guides Q1 revs to $1.36B vs. est. $1.45B

·     GIS -5%; downgraded to sell from neutral at Goldman Sach’s citing the mounting deceleration concerns it sees

·     GOOS -22%; dropped near 52-week lows after Q4 revenue of C$156.2M just missed ests. raising growth concerns

·     INO -9%; after saying AZN intends to discontinue activities with respect to the research collaboration programs, other than MEDI0457, that are the subject of the parties’ license and collaboration agreement dated August 7, 2015

·     MT -3%; said it would cut European production for the second time in a month blaming weak demand and high imports/latest cuts amount to annualized production of 1M-1.5M metric tons

·     WDAY -4%; pulls back from 52-week highs yesterday after earnings results as posted better Q1 as EPS beat by 2c on revs of $825.1M, up 33% YoY (est. $814.1M)

 

Syndicate

·     Houlihan Lokey (HLI) 3M share Secondary priced at $45.80

·     Invitation Homes (INVH) 40M share Secondary priced at $25.30

·     Plains GP Holdings (PAGP) 7.33M share Block Trade priced at $23.55

·     Sun Communities (SUI) 4M share Spot Secondary priced at $123.25

_________________________________________________________________

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.

Live Trading

Open an Account

Paper Trading

Register