Mid-Morning Look: July 02, 2019

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Mid-Morning Look

Tuesday, July 02, 2019

Index

Up/Down

%

Last

 

DJ Industrials

23.76

0.09%

26,741

S&P 500

4.61

0.16%

2,968

Nasdaq

6.35

0.08%

8,097

Russell 2000

-6.16

0.39%

1,563

 

 

U.S. equities are little changed, sliding initially on reports that the U.S. may impose new tariffs on $4B of goods from the EU, offsetting any optimism over a pause in the escalation of the U.S.-China trade dispute. The European Union said today it is open to talks with the U.S. over aircraft subsidies. The pullback is minor after the S&P 500 index closed at a fresh all-time high yesterday, as weakness in shares of energy and materials stocks weigh, with oil dipping for a second day in three, while interest rate sensitive stocks/defensive names such as REITs and utilities are higher. Gold prices rebound after its recent slide from 6-year highs while the dollar and Treasury yields are little changed. No major economic data outside of monthly U.S. auto sales data for June. European markets rebound after slipping overnight, while Asia prices jumped. Expect quiet market action into the holiday this week (US markets closed on Thursday for 4th of July and half day in U.S. tomorrow as stock market closes at 1:00 PM EST). Earnings season is right around the corner, with results getting heavy in about two weeks, while the FOMC meeting at the end of the month the main market catalyst at this point with broad expectations for an interest rate cut to help stimulate growth.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar mixed to little changed, with the Pound down around the 1.26 level this morning, the euro holding below 1.13 but the defensive yen up slightly vs. the greenback; Bitcoin prices down as much as 5% today, dropping to the $9,900 level (after falling 14% yesterday) before rebounding back above $10K

·     Commodity prices mixed as gold prices rebound after slipping from recent 6-year highs reached just last week, while oil prices tumble over 2.5%, falling through the $58 per barrel level after touching highs above $60 per barrel just yesterday – move comes ahead of weekly inventory data tonight (API) and tomorrow (EIA) which was supportive of oil last week

·     Treasury markets are little changed, with the yield on the benchmark 10-year holding the key 2% level (but not by much), while the 2-yr yield at 1.77% and the 30-year holding above the 2.5% level (2.53%). No major economic data to move Treasury markets today, with the next major catalyst likely the upcoming FOMC meeting at the end of the month.

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.94

58.15

Brent

-0.82

64.24

Gold

6.80

1,391.00

EUR/USD

0.0008

1.1294

JPY/USD

-0.24

108.20

10-Year Note

-0.015

2.008%

 

 

Sector Movers Today

·     Auto sector; monthly auto sales data for June released today: 1) FCAU June US auto sales up 1.9% vs. est. down (-1%); in other auto news, LYFT tgt raised to $76 from $70 at Stifel and maintains buy while initiated UBER with neutral and $50 tgt/raises rider growth expectations for the rest of 2019 and 2020 to +5.3M /+3.9M active rider net adds, up from +5.0M /+3.6M; KAR downgraded to sell at Guggenheim due to increased industry competition and cyclical headwinds

·     Transports; GBX weighs on rail cars after Q3 EPS of 89c missed by 6c on lower revs $856M vs. $862M estimate) and guided Q4 EPS below views ($1.30-$1.50 vs. $1.89); LSTR was upgraded to market perform at Raymond James as believe the stark deceleration in the spot truckload market YTD (rates off ~20% y/y ex fuel) is now largely priced into the stock at ~17x 2019 EPS estimate; Loop Capital downgraded ratings and tgts on CMI, ECHO, PCAR and Ryder (R) as they continue to see a broader based deterioration in the level of activity across key global economies, and more important to our companies, the US economy; in airlines, DAL sees Q2 EPS $2.25-$2.35, above prior view $2.05-$2.35 and adjusted pre-tax margin 15%-16% vs. prior view 14%-16%

·     Hardware & Component news; ARW was downgraded at Raymond James saying the IT supply chain is too much weight to bear while also lowers estimates for AVT following recent checks; CRNT slides after revising guidance as sees ~$20M less revenue in 2Q19 amid delay in receiving certain large orders from India; ROKU was downgraded to sector perform at RBC Capital citing valuation and outperformance in shares

·     Media & Telecom movers; EROS shares jump after announces its Indian operating subsidiary EIML has paid its outstanding interest payments, which had led to CARE ratings downgrade; TTD was downgraded to sector perform at RBC on valuation noting shares have also dramatically outperformed the market, up over 100% vs. the S&P 500 which is up 18%; GTT was downgraded at KeyBanc as expect ramping of organic growth to take longer than consensus expects as shown in slow hiring in our jobs data; DISH shares rose after CNBC’s David Faber reported this morning that TMUS and Dish have agreed to a divestiture deal, pending DOJ decision

 

Stock GAINERS

·     AMRN +5%; after raises FY19 revenue view to $380M-$420M from $350M (est. $364.78M) and reports preliminary Q2 revenue $97M-$101M vs. est. $88.21M

·     DAL +2%; on better guidance as sees Q2 EPS $2.25-$2.35, above prior view $2.05-$2.35 and adjusted pre-tax margin 15%-16% vs. prior view 14%-16%

·     DISH +5%; after CNBC’s David Faber reported this morning that TMUS and Dish have agreed to a divestiture deal, pending DOJ decision

·     GLPG +4; as its partner GILD plans to ask the FDA to approve an arthritis drug this year; the two have been testing a drug known as filgotinib for rheumatoid arthritis

·     PRGO +3%; raises year EPS view to $3.75-$4.05 from prior $3.65-$3.95

 

Stock LAGGARDS

·     ADP -4%; as 8M share Block Trade priced at $161.00

·     APA -3%; as oil related stocks among top decliners in the S&P early

·     AYI 11%; Q3 as EPS beat but sales of $947M missed the $971M est./are cautiously optimistic about overall market conditions and that Q4 net sales could be down modestly vs. prior year

·     BL -8%; downgraded to sell at Goldman Sachs as recent deceleration in billings could make consensus revenue growth forecasts difficult to achieve

·     CRNT -9%; after revising guidance as sees ~$20M less revenue in 2Q19 amid delay in receiving certain large orders from India

·     CYBE -14%; as guides Q3 revs to $12M-$13.5M, below the $17.5M estimate

·     GBX -11%; after Q3 EPS of 89c missed by 6c on lower revs $856M vs. $862M estimate) and guided Q4 EPS below views ($1.30-$1.50 vs. $1.89)

·     KAR -5%; downgraded to sell at Guggenheim due to increased industry competition and cyclical headwinds

·     WDC -2%; shares take a breather after rising for ten consecutive sessions, as Benchmark downgraded to sell noting the recent outperformance and saying any price increases likely won’t be enough to offset an expected 50% decline in NAND output during F1Q20

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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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