Mid-Morning Look: July 15, 2019

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Mid-Morning Look

Monday, July 15, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-8.62

0.03%

27,323

S&P 500

-2.06

0.07%

3,011

Nasdaq

-0.15

0.00%

8,244

Russell 2000

-6.70

0.43%

1,563

 

 

U.S. equities start the week off flat, holding on to the record gains for the S&P, Dow Industrials and Nasdaq Composite reached last week on Fed rate cut hopes at months end, following positive commentary from Fed Chairman Powell last week. After U.S. stocks surged last week, attention now turns to quarterly earnings, with a heavy dose of results in the banking sector especially (Citigroup earnings today) and industrials along with some large cap tech names as well (MSFT, NFLX, IBM). The Dow Industrials erases early gains after new record highs, as Boeing falls on 737 MAX news. There were a handful of M&A related news items today lifting shares (one in biotech sector and one in the energy E&P sector), while one deal falls apart (SYMC/AVGO). Metals bounce on comments from Trump and interest rate sensitive stocks are mixed as Treasury yields slip from last week highs.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar index is up slightly, as the buck little changed vs. major’s euro and yen early, while the Pound falls -0.3%. Bitcoin prices down over 11% to $10,500 as the crypto space still pressured from last week gov’t concerns about FB’s Libra. Oil prices are up modestly along with gold holding steady at $1,414 an ounce. Treasury market’s rally with yields falling across the board after last week’s spike (the yield on the 10-year increased 8 bps to 2.12%)

 

Economic Data

·     July Empire Manufacturing showed its gauge of business growth in New York recorded its biggest increase in more than two years in July, returning to positive territory. The regional Fed’s “Empire State” index on current business conditions jumped to 4.3 points this month (above est. +2) from -8.6 in June, which had been the first negative reading since October 2016. New Orders pared losses to -1.5 vs. -12.0 prior, shipments +7.2 vs. +9.7 and employment index -9.6 vs. -3.5.

 

 

Macro

Up/Down

Last

 

WTI Crude

0.19

60.40

Brent

0.27

66.99

Gold

0.80

1,413.00

EUR/USD

-0.0006

1.1264

JPY/USD

-0.04

107.87

10-Year Note

-0.026

2.095%

 

 

Sector Movers Today

·     Bank movers; the first of the major banks report earnings with Citigroup (C) Q2 revenue rising 2% to $18.76 billion, while expenses fell 2% and estimates for quarterly profit beat/continued to add loans and deposits in Q2 as total loans by assets rose 3% to $689 billion, while deposits increased 5% to $1.05 trillion, excluding foreign exchange fluctuations. Stock weighed down by weak trading revenue as fixed-income trading fell 4%, while it declined 9% at its equities business; earnings this week from banks include: Tuesday morning: CBSH, FHN, JPM, SNV, WFC … Wednesday: BAC, BK, CMA, PNC, USB…Thursday: ALLY, BBT, BX, MS, MTB, PBCT, STI, COF … Friday: AXP, BLK, CFG, RF, STT, SYF

·     Metals & Materials; steel stocks were active after White House trade representative Peter Navarro told Fox News that Trump will sign an executive order today boosting the use of domestic iron and steel in federal government contracts (shares of AKS, X, STLD, NUE were among those names moving); uranium miners (CCJ, UUUU, UEC, URG) shares active after President Donald Trump on Friday established new nuclear fuel working group, declined to issue quotas for domestic uranium production

·     Paper & Packaging stocks PKG, IP, WRK all downgraded to underweight from sector weight at KeyBanc saying it is likely to further cut its already lower-than-consensus 2020 EBITDA estimates for the companies due to worsening fundamentals in containerboard, pulp and uncoated freesheet. Notes U.S. benchmark containerboard prices have fallen in three of the past four months by a cumulative $30/ton after rising by a cumulative $225/ton from 2012 to early 2018. KeyBanc also downgraded SEE given concerns about the Company’s weak volume trends, levered balance sheet, the recent termination of fits CFO, its large restructuring program

·     Semis and trade; the semi sector active on several reports on Huawei as the U.S. may approve licenses for companies to re-start new sales to Huawei in as little as two weeks (QCOM, INTC, MU among movers), according to Commerce Secretary Wilbur Ross. Also, Huawei reportedly plans to lay off hundreds of employees in the U.S. as it struggles with a blacklist imposed by the Trump administration over national security concerns. Lastly, Reuters reported Huawei to Invest $3.1 Billion in Italy as it confirms U.S. job cuts

·     Medical equipment and devices; DGX was downgraded to sell at Goldman Sachs as remain below consensus estimates and seeing downside pressure to out-year numbers as the lab business struggles to grow organically while upgraded BRKR to neutral; in MedTech at Barclay’s, the firm downgraded MTD and A citing a preference for companies with exposure to healthy biopharma trends over those with exposure to industrial end markets where macro data are more moderate; Agilent cut to equal weight from overweight and tgt to $78 amid cautious expectations that weakening indicators for the sector could weigh on customer funding

 

Stock GAINERS

·     CAPR +108%; rises after announced upbeat results from a trial for its treatment (CAP-1002) of Duchenne muscular dystrophy/interim analysis in the HOPE-2 Trial

·     CRZO +2%; as CPE to acquire CRZO in an all-stock deal valued at $3.2B, with CRZO holders to get 2.05 CPE shares for each share held, or about $13.12 per Carrizo https://on.mktw.net/2xLqs7J

·     GLPG +18%; after GILD agreed to pay $5.1 billion to raise its stake in the company to develop and commercialize its treatments for a ten-year period https://yhoo.it/2XLzTUb

·     GSK +1%; announced positive results from a Phase 3 clinical trial, PRIMA, evaluating PARP inhibitor Zejula as first-line maintenance treatment in women with Stage III or IV ovarian cancer

·     OMCL +6%; rebounds after saying accounting for sales commissions accords with GAAP in response to negative call from GlassHouse Research last week t crushed shares

·     RCL +2%; after Nomura said pullbacks for NCLH are buying oppty into Q2 earnings as expects both companies to have more constructive forward booking commentary than CCL did

 

Stock LAGGARDS

·     BA -1%; after the WSJ reported that its 737 MAX planes are unlikely to be ready to carry passengers again until 2020 because of the time it will take to fix flight-control software and complete other steps

·     CIR -11%; after CR said it won’t extend its tender offer of $48 a share beyond its July 19 expiration date, after CIR rejected its takeover offer a second time last week (to $48 from $45 prior)

·     ETON -15%; as the company said late Friday the FDA provided the company’s partner with a complete response letter related to the application for EM-100

·     SPR -2%; downgraded at Credit Suisse to neutral and cut tgt to $83 saying given the extended grounding of the MAX, it has become increasingly difficult to favor OE names

·     SYMC -13%; after CNBC’s David Faber reported SYMC and AVGO have ceased deal negotiations saying SYMC would not accept less than $28 per share https://cnb.cx/30xiuvn

·     TAP -2%; downgraded to underperform at Bank America and cuts tgt to $50 from $70 citing the heightened potential he sees that the company will need to increase spending to stabilize core brands’ market share

·     TEVA -9%; and ENDP were both downgraded to underweight at Morgan Stanley with TEVA tgt cut to $6 and ENDP tgt slashed to $3 from $8 saying while generic stocks are exposed to opioid litigation, Teva and Endo appear to face more significant risk

·     WRK -3%; amid weakness in paper stocks as PKG, IP, WRK all downgraded to underweight at KeyBanc saying it is likely to further cut its already lower-than-consensus 2020 EBITDA estimates

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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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