Mid-Morning Look: June 26, 2019

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Mid-Morning Look

Wednesday, June 26, 2019

Index

Up/Down

%

Last

 

DJ Industrials

61.98

0.23%

26,610

S&P 500

6.48

0.22%

2,923

Nasdaq

56.59

0.72%

7,941

Russell 2000

1.92

0.13%

1,522

 

 

U.S. equities rebounding after declines on Tuesday, getting a boost on trade hopes after CNBC reported Secretary Treasury Mnuchin said US-China deal 90% complete at 5:00 AM this morning, which helped spark a rally in the U.S. futures and overseas stocks…but CNBC corrected their earlier headlines to say Mnuchin was using past tense when he described 90% progress in U.S.-China talks. Regardless, hopes are high heading into the G20 meeting in just a few days. President Donald Trump did warn that substantial additional U.S. tariffs would be placed on goods from China if there’s no progress on a trade deal after his planned meeting with Chinese counterpart Xi Jinping this weekend. Trump has previously said he may decide to raise tariffs on the remaining $300 billion of Chinese imports if he doesn’t like what he hears at this weekend’s summit in Osaka. Oil prices higher after bullish inventory data at the EIA said weekly crude stockpiles fell -12.79M barrels (bullish – as biggest draw in almost 3-years) vs. est. for draw of -2.83M barrels. That is helping WTI crude trade near the $60 per barrel level (in addition to Iran geopolitical tensions as well). Technology stocks outperform, led by gains in semiconductors after better earnings results from Micron (MU) overnight. Consumer Staple stocks weaker, led by declines in food after GIS mixed results, while banks get a lift early. The three main indexes fell sharply on Tuesday after Fed Chairman Jerome Powell pushed back on pressure from Trump to cut rates.

 

Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar posting small gains early, rising against the Japanese yen, while little changed vs. the euro and Pound as all eyes remain fixed on the G20 meeting this weekend. Bitcoin all the rage of late, adding to recent gains following enthusiasm after Facebook’s foray into the world of cryptocurrencies last week (with Libra). Bitcoin prices now up for an 8th straight day, rising as much as 14% overnight to nearly $13,000, bringing its overall return for the year to 250%. Commodity prices are mixed as oil prices rally further, with WTI crude slowly approaching the $60 per barrel level after inventory data while gold prices pullback from multi-year highs on profit taking, a bounce in the dollar ahead of the G20 meeting. Treasury market’s slip as the 10-year yield moves back above the 2% level.

 

Economic Data

·     Durable Goods Orders for May-P fell (-1.3%) worse than the est. (-0.3%) while Durable Goods Ex: Transportation rises 0.3% vs. est. up 0.1%. Durable goods new orders revised down to -2.8% for April from -2.1%

·     May advanced trade deficit of goods widened to (-$74.5B) from (-$70.9B) last month and vs. est. (-$71.8B). Imports rose 3.7% in May to $214.745B from $206.988B in April while exports rose 3% in May to $140.195B from $136.073B in April

 

 

Macro

Up/Down

Last

 

WTI Crude

1.90

59.73

Brent

1.62

66.67

Spot Gold

-15.30

1,408.10

EUR/USD

0.0002

1.1369

JPY/USD

0.44

107.64

10-Year Note

0.031

2.018%

 

 

Sector Movers Today

·     Semiconductors; sector outperformed following stronger-than-expected earnings from MU lifted sentiment in the group (despite issuing guidance for next quarter that fell below consensus). MU also said it resumed some shipments to China’s Huawei Technologies Co Ltd and said it still expected demand for its chips to recover later this year (shares of WDC, NVDA, AMD, AMAT, XLNX, QCOM, QRVO among those rallying in reaction)

·     Metals & Materials; Steel stocks rise after industry publication Steel Market Update reported late that NUE announced a $40 per ton price increase on its flat rolled products, with other mills expected to follow suit; SCHN Q3 earnings came in above expectations, though the company reported lower revenues and earnings on Y/Y basis

·     Housing & Building Products; ENR bounces off 52-week lows after Deutsche Bank upgraded earlier as believe the market is too focused on declining sales for the acquired Rayovac batteries business while not fully appreciating solid trends within its branded battery business; homebuilders in focus ahead of earnings from KBH tonight after the close (follows LEN results yesterday with mixed results and lower guidance for the year)

·     MLP Sector; Raymond James upgraded WMB to strong buy, while downgraded GEL to mkt perform and HEP to underperform saying while the SOTP valuation concept has been an important component of energy valuation analysis, especially in the refining space, SOTP has not fully caught on in the midstream space

 

Stock GAINERS

·     AMAT +4%; among many names in the semiconductor space (NVDA, WDC, QRVO, QCOM) rallying behind the MU quarterly results

·     ENR +3%; bounces off 52-week lows after Deutsche Bank upgraded saying market not fully appreciating solid trends within its branded battery business

·     FDX +1%; Q4 EPS topped consensus by 10c while Express margin deteriorated 140 bps y/y while Ground margin was off 172 bps and provided weak EPS guidance for the year

·     HIVE +38% after EXTR offers to buy the network equipment maker for $250.7M; offer of $4.45/share represents a premium of ~40% to HIVE’s Tuesday’s close

·     MU +12%; following stronger-than-expected earnings which lifted sentiment in the group, despite issuing guidance for next quarter that fell below consensus

·     SCHN +4%; after Q3 earnings came in above expectations, though the company reported lower revenues and earnings on Y/Y basis.

·     SNX +10%; reported Q2 sales and EPS of $5.72bn and $2.86, well above consensus as saw upside in its Technology Solutions distribution segment

 

Stock LAGGARDS

·     ATU -4%; reported mixed Q3 results (EPS beat/sales miss) but lowered its year outlook to $1.13B-$1.14B from prior $1.21B-$1.24B (est. $1.16B)

·     AVAV -6%; after reported April quarter results with revenues above and EPS in line with Street estimates, but posted a revenue decline with the bulk due to lower product sales vs. Q4’18

·     CRCM -20%; downgraded to hold from buy at Craig-Hallum Capital Group citing the announcement that CFO Michael Echenberg was resigning end of August

·     GIS -7%; slipped after Q4 profit beat estimates but sales of $4.16B came up short of the $4.24B estimate. Within its business segments, North America retail sales fell 2% to $2.34B

·     MO -1%; after San Francisco on Tuesday approved an ordinance to ban sale and distribution of e-cigarettes. MO holds a 35% stake in Juul Labs Inc., the leading maker of vapes

·     MWA -6%; downgraded to sell from neutral and tgt cut to $8 at Goldman Sachs citing weaker margins and execution challenges

·     OCX -28%; provided a mid-year update and said the Company will require additional time to complete its ongoing CLIA Validation study of DetermaVu™, its liquid biopsy test for lung cancer

·     ROL -6%; downgraded to sell at Stifel and adjust estimates to account for weather and costs

 

Syndicate

·     Cambium Networks (CMBM) 5.8M share IPO price $12.00

·     Global Blood Therapeutics (GBT) 3.376M share Spot Secondary priced at $59.25

·     Linx S.A. (LINX) 32.8M share IPO priced at $9.36

·     Odonate Therapeutics (ODT) 4.75M share Spot Secondary priced at $26.00

·     The Medicines Co. (MDCO) 4.545M share Secondary priced at $33.00

·     Vermillion (VRML) 18.75M share Spot Secondary priced at $0.80

_________________________________________________________________

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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