Mid-Morning Look: May 30, 2019

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Mid-Morning Look

Thursday, May 30, 2019

Index

Up/Down

%

Last

 

DJ Industrials

79.00

0.31%

25,205

S&P 500

14.33

0.51%

2,797

Nasdaq

45.14

0.59%

7,592

Russell 2000

8.04

0.54%

1,497

 

 

U.S. equities tracking higher to start the day, bouncing off recent 3-month lows for major U.S. averages after mixed GDP data (headlines came in a little below last reading while inflation was sharply lower), and as markets continue to keep tabs on the ongoing trade battle between the US and China which has rattled markets of late as rhetoric on both sides has intensified Oil prices reverse lower, on track for a monthly decline of around 9% currently while Treasury yields are steady, off 20-month lows reached yesterday. The S&P 500 pushes back toward the 2,800 level after closing below it for the first time since March, paced by gains in tech and industrials (moving back above key technical levels). U.S. equities have plunged over 5% in the month after its best quarterly start the first three months in several years. Energy stocks dip with oil, while banks look to rebound with Treasury yields. Retailer’s active once again after several earnings results (DG, DLTR, EXPR, PVH, and BURL – all below). Transports failing to hold early gains as the index falls to lowest levels since January as slowing global growth fears remain.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar index (DXY) rose 0.1%, moving back near its 52-week highs (98.37 on 5/23) as the euro climbed and the British pound declined to its weakest in 21 weeks. Commodity prices are mixed as oil prices tumble further, on track for weekly loss of roughly 8%, while weekly nat gas inventories rose 114 bcf well above the 98 bcf build estimated – bearish. Treasury market’s bounce off yesterday 20-month lows of 2.21%, rising today about 1 bps to above 2.27% after earlier yield weakness following a lower inflation reading.

 

Economic Data

·     The second estimate for Q1 GDP was 3.1%, topping the 3% estimate but below last estimate fo 3.2%, while GDP rose 2.2% in prior quarter. Personal consumption rose 1.3% in 1Q after rising 2.5% prior quarter (vs. est. 1.2%) while GDP price index rose 0.8% in 1Q after rising 1.7% prior quarter (vs. est. 0.9%). The core PCE q/q rose 1.0% in 1Q after rising 1.8% prior quarter (vs. est. 1.3%) – lighter inflation reading

·     Weekly Jobless Claims rose 3K to 215K vs. est. 214K while prior week claims revised to 212K from 211K); the 4-week moving average fell by 3,750 to 216,750; continuing claims fell 26K to 1.657M in the week ending May 18 (nearly 5% lower compared to the same time last year)

·     April U.S. trade deficit in goods widened slightly to a seasonally adjusted (-$72.1B) from (-$71.9B) and vs. est. (-72.7B); wholesale inventories climbed by 0.7% and retail inventories grew by 0.5%; nearly every category of exports, and every category of imports, fell in April (exports fell -4.2% and imports -2.7%).

·     Pending home sales for April fell -1.5% vs. est. up 0.5%, with a 1.8% decline in the Northeast and West and 2.5% drop in the South while the Midwest rose over 1%

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.20

58.61

Brent

-0.84

68.61

Spot Gold

2.40

1,282.15

EUR/USD

-0.0008

1.1123

JPY/USD

0.27

109.87

10-Year Note

0.006

2.269%

 

 

Sector Movers Today

·     Non-apparel; Dollar stores out with earnings; DG Q1 comp sales increased 3.8% in Q1 to top the consensus mark of +2.1% saying both customer traffic and average transaction amount were higher during the quarter with in-line guidance/gross profit fell 30 bps to 30.2% of sales due in part to higher distribution and transportation costs; DLTR mostly in-line Q1 results for EPS/revs while comp sales grew 2.2% (est. 2.1%) and comp sales rose 2.5% at Dollar Tree/cut year EPS view to $4.77-$5.07, down from its previous outlook range of $4.85-$5.25; sporting goods store SPWH sales fell off 3.4% in Q1 due in part to “difficult event-driven” comparisons in the firearm and ammunition categories/adjusted net loss widened to $5.2M from $3.6M a year ago

·     Consumer Staples; recent IPO BYND to new all-time highs, toping $100 per share for the first time today; KHC another record low as Credit Suisse cut its tgt to $26 and forward estimates below management guidance due to the possibility that the SEC’s investigation into the company will continue to reveal breakdowns in internal controls; BUD was upgraded to buy at Argus noting shares have underperformed the market over the past 52 weeks, falling 12% compared to a gain of 3% for the index

·     Media & Telecom movers; AMT said it will acquire Eaton Towers for about $1.85B, including debt as the deal is expected to close before the end of the year; LGF was downgraded to hold at Argus saying it has had a remarkably fallow period in content production despite the recent success of “John Wick 4.”/Starz has become the company’s primary profit driver, though it lost 2.8 million cable system subscribers in FY19; VZ was downgraded to neutral from buy at UBS, positive on wireless fundamentals but said valuation back in-line with historical levels and more difficult comps ahead; CMCSA was upgraded to buy at Guggenheim and raise tgt to $52 praising the company’s fairly smooth transition from a video distributor to a connectivity company

·     Metals & Materials; steel sector cautious at Deutsch Bank as they downgraded U.S. Steel (X) and NUE to sell from hold to reflect a more negative stance on steel and downgraded STLD to hold from buy; gold miners EGO, KGC, and NGD were downgraded to underweight at JPMorgan saying gold equities are coming to terms with the realities of the gold sector with consolidation substituting for the lack of reserve replacement

·     Software movers; VEEV with a strong quarter with F1Q20 delivering billings, revenue, and margins all exceeding consensus expectations. Calculated billings were exceptionally strong, coming in ~$12M above guide; security software names weak early after PANW posted Q3 EPS and revenue above consensus but total billings of +13 y/y were lighter due to shorter contract duration (est. 20%) and guided mixed Q4 (EPS $1.41-$1.42 on revs $795M-$805M vs. est. $1.55/$793.81M); VRNT reported Q1 numbers that beat the Street across the board, and were ahead of the pre-announced top-line guidance from earlier this month while increasing its FY20 guidance; ZNGA upgraded at Stephens and tgt raised to $8.25 citing increasing confidence in ZNGA’s three-pronged approach to growth: live services, new game launches, and M&A

 

Stock GAINERS

·     BURL +9%; Q1 EPS and revs just top consensus with full-year earnings guidance roughly in line with though same-store sales projections were weaker

·     BWA +2%; upgraded to overweight at Barclay’s as sees BorgWarner as well-positioned to benefit from hybrid growth in the 2020s

·     CSIQ +7%; posted a better-than-expected Q1 EPS loss on better revs while also guided Q2 above consensuss lifting shares (sees 2Q revenue $970M-$1.01B vs. est. $864.6M)

·     DG +6%; Q1 comp sales increased 3.8% in Q1 to top est. of +2.1% saying both customer traffic and average transaction amount were higher during the quarter with in-line guidance

·     EXP +1%; said it plans to separate heavy materials and light materials businesses into two publicly traded corporations through a spin-off

·     KEYS +8%; after results as the company not only beat but also guided higher mostly notably on EPS as sales saw some Huawei pull in and guidance take down

·     VEEV +14%; strong quarter with Q1 delivering billings, revs, and margins all exceeding consensus expectations as calculated billings were exceptionally strong, coming in ~$12M above guidance

·     VIAB +4%; after CNBC’s David Faber reported CBS prepares for talks with Viacom, which are expected to begin mid-June https://cnb.cx/2WeCyFd

 

Stock LAGGARDS

·     BYND -3%; the recent IPO to new all-time highs, toping $100 per share for the first time today ($105.25) but has since turned negative on the day

·     KHC -4%; Credit Suisse cut its tgt to $26 and forward estimates below management guidance due to the possibility that the SEC’s investigation into the company will continue to reveal breakdowns in internal controls

·     JILL -46%; guided Q2 EPS loss (8c-10c), well below the 21c profit estimate and sees 2Q comparable sales -1% to -3%; slashed year EPS to 17c-21c from prior 66c-70c (est. 69c)

·     MOV -8%; after Q1 EPS and sales missed estimates though reiterated FY20 guidance

·     PANW -6%; posted Q3 EPS and revenue above consensus but total billings of +13 y/y were lighter due to shorter contract duration (est. 20%) and guided mixed Q4 (EPS $1.41-$1.42 on revs $795M-$805M vs. est. $1.55/$793.81M)

·     PVH -12%; lowered year EPS view to $10.20-$10.30 from $10.30-$10.40 (est. $10.43) and sees year revs to rise approximately 3% – down from prior view of 4%

·     VZ -2%; downgraded to neutral from buy at UBS, positive on wireless fundamentals but said valuation back in-line with historical levels and more difficult comps ahead

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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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