Mid-Morning Look: June 28, 2019

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***This will be the final e-mail of the day – service to resume normally Monday morning.

Have a great weekend.

 

 

 

 

 

Mid-Morning Look

Friday, June 28, 2019

Index

Up/Down

%

Last

 

DJ Industrials

44.32

0.17%

26,570

S&P 500

6.65

0.23%

2,931

Nasdaq

12.77

0.16%

7,980

Russell 2000

10.29

0.66%

1,556

 

 

U.S. equities are looking to end the month, quarter and 1H of the year on a strong note, but markets appear hesitant into a key meeting tomorrow between the U.S. and Chin, an OPEC meeting next week on oil production and the annual Russell Reconstitution later today. The market is hoping the U.S. and China to agree to a trade truce and to continue talks without additional tariffs. Banking stocks are leading markets higher after the Fed did not object to their capital plan proposals, while Healthcare stocks lagged again this week. Treasury prices are flat, with the dollar down and oil slipping. Weaker manufacturing in the Chicago region adds to recent weakness in New York and Philly survey readings of late, helping boost the case for a possible interest rate cut by the Fed next month, thought the University of Michigan Confidence number came in slightly better, help markets rebound.

 

On the final trading day of the month and quarter (which will be capped with added volume late day on the annual Russell Reconstitution), global equities are on track for gains of almost 6% in June while bonds are set for the best month of 2019 (low yields) amid expectations central banks will loosen policy to prevent an economic slowdown. The Fed is now widely expected to lower interest rates when they meet in July after holding them steady at the June meeting (and is baked into markets). But for the time being, all eyes remain fixed on the G-20 meeting this weekend in Japan on hopes of positive commentary/trade resolution with China.

 

Some of the biggest highlights in the first half of the year has included 1) big name IPOs (ADPT, BYND, CHWY, CRWD, GO, LYFT, PD, PINS, SWAV, TW, UBER, WORK and ZM); 2) the resurgence of Bitcoin (up around 200% thus far), 3) strength in oil prices (up roughly 21% YTD) amid several factors heading into the OPEC meeting next week in Vienna, 4) strength in technology shares led by software and semiconductors (Nasdaq up 20% YTD)– with major averages not far off record highs reached last week; 5) gold prices also at their best levels in over 5-years on the dovish interest rate outlook and geopolitical concerns; and 6) defensive sectors leading the 2019 gains (Utilities, REITs, Staples). This all comes in the face of higher tariffs against China this year (no resolution yet in the G20), increased tensions with Iran, Brexit concerns remain with turnover in power in the UK, slowing economic signals in the form of jobs, manufacturing and confidence and global growth uncertainty.

 

Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar falls to lows of 1.3070 vs. the Canadian dollar amid the rise in oil prices and economic data – back near February lows 1.3068 (dropping below that level would take it to 8-month lows). The dollar dips as well against the Euro, while little changed vs. the yen. Commodity prices are mixed with oil reversing earlier gains (still on track for strong June), while gold prices look to recover from 2-day losses (after hitting 5-year highs earlier in the week. Treasury market’s steady after mixed economic data, as the 10-year yield holds just above 2%.

 

Economic Data

·     Personal Income rose 0.5% MoM for May, topping the 0.3% estimate while personal consumption in March rose 0.4%, missing the 0.5% estimate. Real personal spending also missed, rising 0.2% which was below the 0.4% estimate. Inflation reading in-line with economist estimates as PCE prices rose 0.2% MoM and core inflation rose 0.2% MoM. The savings rate at 6.1% in May vs 6.1% last month but remains down from 6.6% a year ago

·     The University of Michigan Sentiment for June final reported at 98.2 vs. est. 97.9 as the expectations index fell to 89.3 vs. 93.5 last month and current economic conditions index rose to 111.9 vs. 110.0 last month

·     June Chicago PMI fell to 49.7 (lowest levels since February 2016), which misses the 53.5 estimate by economists; New orders fell and the direction reversed, signaling contraction

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.38

59.05

Brent

0.02

66.57

Spot Gold

2.25

1,412.00

EUR/USD

0.0016

1.1386

JPY/USD

-0.09

107.71

10-Year Note

-0.005

2.01%

 

 

Sector Movers Today

·     Banks among most active after several announce buybacks and dividend boosts after passing Fed stress test round two: JPM to buy back up to $29.4B in stock and boost dividend to 90c; BAC to buy back up to $30.9B in shares and raise dividend by 20% to 18c; BK to raise quarterly dividend 11%, repurchase of up to $3.94B of stock; COF plans to buy back up to $2.2B of shares and expects to maintain its dividend; C to buy back up to $17.1B of stock and raise dividend to 51c; CFG announced stock buyback of up to $1.275B of common stock; GS to buy back up to $7B in shares and boosts dividend to $1.25 from 85c; MS to boost stock buyback up to $6B and raise dividend to 35c from 30c; PNC to raise dividend to $1.15 and buyback up to $4.3B in stock; RF announces $1.37B share buyback and consider boosting dividend; STT announces planned dividend increase, $2B share repurchase plan; USB to recommend dividend boost to 42c and approves $3B stock buyback; WFC dividend to 51c from 45c and buyback up to $23.1B of stock

·     Materials and Metals; BHP to pay $175 million to Western Australia in tax dispute; AUY raised its gold production guidance for its Jacobina mine in Brazil/mine produced more than 144K oz. of gold in 2018, and says it’s a year ahead of schedule in its plans to increase sustainable production; RGLD was downgraded to underperform at Bank America citing valuation

 

Stock GAINERS

·     AZO +1%; was upgraded to outperform at Oppenheimer and raise tgt to $1,225 from $900 saying they are now incrementally optimistic in the underlying potential after mgmt meetings

·     CAMP +15%; reported Q1 results that beat expectations as EOS beat by 3c on better revs ($89.1M vs. est. $86.9M) after recent misses while SaaS was up ~38% reflecting organic growth

·     CDMO +33%; after posts lower-than-expected qtrly loss of (2c) vs. est. loss of (3c) and posts revs of $17.1M vs. est. $15.7M; guides 2020 revenue to range between $64M-$67M

·     GS +2%; among broad gainers in the banking sector after the top 18 names passed the Fed annual stress tests overnight (BAC, JPM, WFC also higher)

·     PG +1%; upgraded to buy from neutral at Goldman Sachs and raise tgt to $125 noting market share and organic sales growth turned around this past year

·     PRGS +13%; reports Q2 beats with upside Q3 and FY19 earnings guidance; raises year EPS $2.52-$2.57, from $2.46-$2.52 (est. $2.51) and affirms year rev outlook

·     SGH +8%; as reversed overnight losses despite Q3 miss and lower Q4 guidance after Needham upgraded shares; Q3 EPS 34c/$235.7M vs. est. 37c/$265M; guides Q4 revs $270M-$280M vs. est. $298.1M (shares were down as much as 15% overnight initially)

·     SRPT +15%; shares jumped after PFE presents initial clinical data on phase 1b gene therapy study for Duchenne Muscular Dystrophy (DMD) – SLDB also leveraged to DMD data; PFE helped treat the underlying cause of the deadly disease in a small study, though it also triggered side effects

·     STZ +5%; after Q1 EPS estimates beat by a wide margin and raised its FY20 guidance to $8.65-$8.95 from prior $8.50-$8.80 as beer sales were $1.48B on shipments growth of 5.4% during the quarter and wine/spirits sales were $620M on shipments growth of -8.1%

·     WDC +3%; announced a power failure that disrupted production at a memory chip plant – while hurts revs may help with pricing and inventory levels for the product category as per Morgan Stanley

 

Stock LAGGARDS

·     AAPL -1%; announced that top designer Jony Ive was leaving the company who had done the groundbreaking iMac to the iPod to the iPhone and the unprecedented ambition

·     LYV -2%; downgraded to sell at Citigroup saying the company’s had solid growth, but valuation looked stretched and it trades at a big premium

·     NKE ; posted its first earnings miss in over 7-years while sales growth remained strong amid headwinds from FX & global political turmoil/China grew +22%, only a slight deceleration vs 3Q (+23%) and mgmt. said they are not seeing any signs that the trade wars are hurting demand

·     PCG -1% after California utilities regulator says it opened a case to evaluate and consider penalties against PCG for its involvement in the wildfires in Northern California’s wine country

·     PTCT -7%; in reaction to a negative opinion from the European Medicines Agency’s advisory group CHMP against approval for Translarna (ataluren) for non-ambulatory patients with nonsense mutation Duchenne muscular dystrophy (DMD).

·     SRNE -19%; prices its public offering of 8,333,334 common shares, at a price of $3.00

·     UNH -2%; amid broad weakness in the managed care sector early, with HUM, CNC, ANTM also trading lower; separately, UNH announced mgmt changes

 

Syndicate

·     Hutchison China MediTech (HCM) 8.5M share Spot Secondary priced at $24.00

·     Karuna Therapeutics (KRTX) 5.578M share IPO priced at $16.00

·     RealReal (REAL) 15M share IPO priced at $20.00

_________________________________________________________________

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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