Mid-Morning Look: July 08, 2019

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Mid-Morning Look

Monday, July 08, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-127.48

0.47%

26,794

S&P 500

-15.97

0.53%

2,974

Nasdaq

-69.43

0.86%

8,091

Russell 2000

-3.16

0.20%

1,572

 

 

U.S. equities pulling back further after reaching record high’s mid-last week for the S&P, Dow and Nasdaq Composite. The move comes after better jobs Friday lowered expectations of an overly aggressive Fed cutting rates end of month – note Fed Chairman Powell testifies this week on Capitol Hill to Senate and House on monetary policy and the economy. Energy stocks one of the few bright spots early as oil prices rebound, while financials broadly lower after several cautious analyst calls this morning with earnings season for the industry starting up next week. Shares of AAPL along with comm equipment names JNPR, NTAP and FFIV among the top decliners in the S&P after all four were downgraded by analysts. The dollar holding Friday’s gains, while Treasury yields are steady.

 

Treasuries, Currencies and Commodities

·     Currency markets quiet ahead of a busy week of Fed talk, headlined by Fed Chairman Powell testifying on the economy and monetary policy to the House Financial Services Panel (7/10) on Wednesday and the Senate Banking Committee on Thursday (7/11). The US dollar bounced on Friday, along with Treasury yields off 2-year lows after the monthly jobs report came in stronger than anticipated which reduced expectations of an overly aggressive rate cut by the Fed later this month. Commodity prices are mixed with gold prices steady around the $1,400 an ounce level while oil prices post solid gains of over 1% early. Treasury market’s little changed after sliding Friday and pushing yields lower (10-year holds around 2.02%).

 

 

Macro

Up/Down

Last

 

WTI Crude

0.78

58.29

Brent

0.69

64.92

Gold

0.80

1,400.00

EUR/USD

-0.0012

1.1212

JPY/USD

0.22

108.68

10-Year Note

-0.012

2.021%

 

 

Sector Movers Today

·     Semiconductors; DA Davidson cautious on the equipment stocks as they downgraded AMAT, LRCX, ICHR, AEIS (four front-end, cycle driven, names and one back-end, unit driven, name (KLIC), noting the stocks have appreciated significantly YTD while the all-important memory recovery continues to lag expectations and the near term data flow will likely remain negative; AVGO has secured financing and identified cost savings for the acquisition of SYMC in an all-cash deal that could value the company at more than $22B including debt https://bloom.bg/2NDEXpf ; SIMO said it sees Q2 adjusted revenue within 4% below the low-end of its $98M-$107M view (estimates for $103.5M)

·     Media & Telecom movers; Dow component VZ was downgraded to neutral at Citigroup given that rising long-term industry risks and its current valuation premium are likely to limit returns over the next 12-months. For the Telecom sector, firm expects an uneventful C2Q operating performance from the wireless category, while long-term risks are rising for industry pricing and margins given the widening array of possible outcomes for the proposed merger of TMUS/S. In the Canadian Telecom sector, JPMorgan downgraded BCE to Neutral and RCI to Underweight, while lowering TU PT to $49 due to negative unlimited plan impact

·     Networking and equipment; JNPR was downgraded to sell at Citigroup as have picked up recent competitive share gains by ANET and CSCO as sets up for more share loss to Juniper and too lofty 2H expectations; ; NTAP was downgraded to sell at Citigroup pointing to increasing competition and said Q1 numbers should come in line with expectations, but Q2 outlook could show the impact of pressure on margins; FFIV downgraded to sell at Goldman Sachs and cut its tgt to $120 from $165 citing a weaker short-term spending environment and increasing competitive threat

·     Oil E&P and equipment names; ECA said its Newfield Exploration Mid-Continent Inc. subsidiary is selling its natural gas assets in Oklahoma’s Arkoma Basin to an undisclosed buyer for $165 million; in research, Wells Fargo upgraded COG to outperform given the focus on gas, COG is more immune to oil price volatility and the company has long embraced the strategy of curtailing activity to increase shareholder capital return.; Wells downgraded SM and ESTE to market perform as lower commodity prices and activity levels will delay the anticipated organic deleveraging into 2021; SunTrust downgraded PXD and CDEV to hold

·     In banking research: trust banks BK and STT downgraded to Underweight from Overweight at Morgan Stanley and cut the large cap banks industry cut to In-Line from Attractive noting it is up 23% year-to-date, but the next 6-18 months look tougher as global GDP is slowing, inflation expectations are dimming and the Fed is expected to cut rates in 2019 and 2020; Raymond James downgraded shares of banks AMNB, PACW, SIVB, CMA, CBSH, EWBC while upgraded SBNY and reducing EPS estimates as primarily reflects a reduction in our NIM and loan growth projections; HBAN was downgraded to underperform at BMO Capital a relative one, compared to an average 14% total return potential for their Regional banks

 

Stock GAINERS

·     AZZ +6%; after Q1 EPS and revenue topped expectations and backed its year outlook

·     CIR +2%; confirmed that CR has commenced a revised tender offer to acquire all of the outstanding shares of stock for $48.00 per share in cash, up from its prior bid of $45 per share

·     CMG +1%; as trades to fresh 52-week highs

·     INSP +6%; said UNH will provide coverage for co’s Inspire device used to treat obstructive sleep apnea, effective Aug. 1

·     JCI +0.5%; trades to 52-week highs after being upgraded to neutral at JPMorgan

·     SGMO +8%; after it presented updated early stage data from its PFE partnered hemophilia A study this weekend in Melbourne as Wells Fargo notes overall data suggest stable Factor VIII activity in the normal range between weeks 19-24 for the highest dose cohort and well above the 68% level mean level from competitor BMRN at 24 weeks

·     SYMC +3%; AVGO has secured financing and identified cost savings for the acquisition of SYMC in an all-cash deal that could value the company at more than $22B including debt – Bloomberg https://bloom.bg/2NDEXpf

 

Stock LAGGARDS

·     CTST -17%; says Health Canada found co’s greenhouse facility in Ontario non-compliant with some regulations; says non-compliance is regarding the growing of cannabis in five unlicensed rooms and inaccurate information provided to the regulator by co’s employees

·     DB 6%; said it will exit global equities trading, cut 18,000 jobs and transfer €75bn of risk-weighted assets into a so-called bad bank as part of a major overhaul of business

·     FFIV -4%; downgraded to sell at Goldman Sachs and cut its tgt to $120 from $165 citing a weaker short-term spending environment and increasing competitive threat

·     ITCI -23%; following its announcement of results from two Phase 3 clinical trials evaluating lumateperone in patients with bipolar depression (study 404 met the primary endpoint of a statistically significant change while study 401, however, failed to achieve the primary endpoint)

·     SIMO -6%; said it sees Q2 adjusted revenue within 4% below the low-end of its $98M-$107M view (estimates for $103.5M)

·     STT -3%; BK and STT downgraded to Underweight from Overweight at Morgan Stanley and cut the large cap banks industry cut to In-Line from Attractive

·     SIVB -3%; amid broad weakness in banking stocks on several cautious analyst calls ahead of earnings start next week;

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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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