Mid-Morning Look: July 18, 2019

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Mid-Morning Look

Thursday, July 18, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities opened weaker but have clawed back off the lows despite a handful of mixed tech results (NFLX, SAP shares fall on guidance/metrics – EBAY, TSM, IBM rise), though semiconductors up over 1% on better results, while broader markets remain concerned of tensions between U.S./China. Stocks slipped late yesterday after the WSJ reported slow progress on key initial demands from Presidents Donald Trump and Xi Jinping, raising doubts about whether the U.S. and China will actually return to the negotiating table. But while that remains, focus today firmly on earnings and data. Philadelphia Fed Index for July soars to 12-month highs, rising to 21.8 and handily topping the 5.0 economist estimate, (strong data), but Leading Index fell -0.3% in latest month, its first negative reading since October 2018, missing views (weak data). Japanese markets fell particularly hard on a negative export reading, as the Nikkei Index dropped -422 points or nearly 2% to 21,046. Treasury yields strengthened while gold fell form 5-year closing highs and oil prices drop over 2% to one-month lows. Of the 46 companies that have reported since yesterday’s close, 67% have beaten EPS estimates and 56% have beaten revenue estimates according to data and top-line beats remain weak so far this season.


Treasuries, Currencies and Commodities

·     Currency markets mixed with the US dollar little changed after sliding yesterday with U.S. Treasury secretary Steven Mnuchin saying there is “no change” to the Washington’s stance on the dollar “as of now”, while the euro fell on reports the ECB staff is studying changing its inflation goal to a “symmetrical” approach rather than its current “below, but close to 2%” target which would means they can allow inflation to stay elevated for a while

·     Commodity prices mixed as gold prices pull back from its best closing level in over 5-years yesterday while WTI crude falls toward one-month Low as U.S. gasoline demand weakens according to bearish data from the EIA yesterday. WTI crude dropped around 2%, below the $56 per barrel level. Treasury market’s slip following a stronger than expected Philly Fed Survey index reading, though softer LEI data helped pare yield gains.


Economic Data

·     Weekly Jobless Claims rose 8K to 216K, in-line with estimates while the prior week claims revised down to 208K from 209K; the 4-week moving average stood at 218.75k in the latest week while continuing claims fell 42K to 1.686M in the week ending July 6

·     Philadelphia Fed Index for July soars to 12-month highs, rising to 21.8 and handily topping the 5.0 economist estimate; July prices paid rose to 16.1 vs 12.9 prior, new orders jumped to 18.9 vs 8.3 prior and employment spiked to 30.0 vs 15.4; also shipments rose to 24.9 vs 16.6 while the six-month outlook rose to 38.0 vs 21.4

·     The 30-year fixed mortgage rate for week ended today rose to 3.81% from 3.75%, Freddie Mac said while the 15-year rate avg 3.23%, up from 3.22% a week earlier

·     Leading index an unexpected drop of (-0.3%, missing the consensus for a rise of 0.1% – last negative reading was October 2018







WTI Crude















10-Year Note





Sector Movers Today

·     Semiconductors; QCOM said it plans to appeal the finding to the General Court of the European Union, after being fined 242 million euros by EU antitrust regulators for deliberately pricing some chips so low they could eliminate a smaller rival; SWKS mixed research as Barclays downgraded to Equal-weight while Raymond James upgraded to outperform (along with AAPL) on increased conviction in the impact of a 5G iPhone product cycle in 2020; POWI was upgraded to buy at Stifel on near-term momentum from USB-PD adoption cycle, and l-t positioning; AMD cut to neutral at Mizuho on share appreciation but raise tgt to $37 as favors its solid Ryzen/Rome portfolio and new product ramps; TSM reported in-line to modesty better results

·     Metals movers; aluminum producer AA reported a smaller than expected Q1 EPS loss but said global aluminum demand growth for 2019 is estimated to range between 1.25%-2.25%, down from 2%-3% in the previous quarter; gold miner GOLD said it expects Q2 copper production to fall sequentially and gold costs to rise while HL reports Q2 silver production of 3M ounces, +16% Y/Y and gold production of 58,390 ounces down 3%; steel producer NUE a miss on the top and bottom line for Q2 ($1.26/$5.9B vs. $1.29/$6.02B) and said it expects performance in its raw materials business to decline in Q3 compared with Q2, due to weaker profit margins for a metal product called direct-reduced iron

·     Chemical movers; ASH the latest chemical maker to cut forecasts as guides Q3 EPS 76c-78c, below consensus 86c and cuts FY19 adjusted EBITDA for Specialty Ingredients to $560M-$570M from $585M-$610M citing lower-than-anticipated sales in personal care and certain industrial end markets; PPG Q2 EPS beat by 2c while sales of $4.02B missed the $4.1B est and guides Q3 EPS $1.57-$1.67 vs. estimate $1.67; APD was downgraded at Bernstein on valuation as shares up 40% YTD as top performer in their coverage

·     Housing & Building Products; UBS cautious on HD saying believe there’s a good chance it will update its FY guidance when it reports 2Q to account for the drag from lumber deflation & some uncooperative weather early this year; in flooring names, Piper cautious view on retailers lowering ests/comps for FND, LL, and TTS (all Neutral rated) ahead of Q2 earnings as they believe the flooring backdrop took a leg down in Q2 vs. Q1 based on a variety of data points; in housing, ZG tgt raised to $56 at Guggenheim and lifting revenue estimates

·     Industrial & Machinery; HON EPS of $2.10 narrowly beat with a miss on revenue $9.23B vs. $9.35B) and lower rev view for Q3 as well while narrows year outlook (sales by segment: Aerospace +11%; Home and Building Technologies +5%; Performance Materials and Technologies +4%; Safety and Productivity Solutions -4%); waste stocks WCN and WM downgraded at Oppenheimer citing to commodity headwinds, softening medium term indicators and the highest valuations in a decade



·     AMAT +2%; another day of gains for semi equipment names on TSM results, a day after better results from ASML; shares of LRCX, KLAC higher

·     EBAY +6%; reported a better than feared 2Q19, with revenue in line with expectations and a beat on EPS though GMV growth continues to be challenged

·     IBM +2%; Q2 top and bottom line results beat estimates while saying they continued to grow in the high-value areas of the business

·     NVS +4%; rises to 4-year highs after the company boosted its 2019 operating income and sales forecasts and said $700M was set aside in the hope of settling a decade-old lawsuit

·     PM +6%; posted better-than-expected Q2 and raised its FY forecast after posting a Q2 EPS beat by 12c with a rev beat as well driven by higher volume of heated tobacco units

·     UNP +4%; showed that lower expenses from its new operating plan helps 2Q profit grow even as revenue fell slightly due to weak volume while operating ratio fell to 59.6% helping boost shares



·     AA -1%; reported a smaller than expected Q1 EPS loss but said global aluminum demand growth for 2019 is estimated to range between 1.25%-2.25%, down from 2%-3% in the previous quarter

·     ASH -3%; guides Q3 EPS 76c-78c, below consensus 86c and cuts FY19 adjusted EBITDA for Specialty Ingredients to $560M-$570M from $585M-$610M

·     CCI -3%; beat and raise for the quarter but reduced its organic growth expectations for the year to 5.6% from 6.0%, driven by slower than anticipated small cell deployments

·     GPC -4%; posted a miss on both the top and bottom line and lowered profit guidance and higher for sales for 2019 due to its results so far this year citing expected continued softness in Europe for the balance of the year, as well as the impact of the acquisitions of PartsPoint Group

·     NFLX -11%; mixed Q2 w/in-line revs but shares fell more than 10% overnight after saying Q2 paid membership grew by 2.7M, less than the 5.5M in Q2 a year ago and below the company 5.0M

·     SAP -6%; Q2 misses with the company blaming the US-China trade tensions for the results as software sales fell 5% Y/Y to €948M on softness in Asia and an 11% operating profit increase missed the 14% consensus

·     TTD -5%; downgraded to hold at Jefferies as believe the multiple at all-time highs may already reflect the bull case for the stock

·     UNH -2%; Q2 top and bottom line results beat and raised its FY19 adj. EPS view to $14.70-$14.90 from $14.50-$14.75 but warned it may miss 2019 rev guidance

·     URI -6%; after the company trimmed the upper ends of its revenue and adjusted Ebitda outlook citing a slightly slower-than-expected pace for the BlueLine integration/bad weather



·     Ellington Financial (EFC) 3.5M share Spot Secondary priced at $17.66

·     Essential Properties Realty Trust (EPRT) 22.86M share Secondary priced at $19.75

·     Forty Seven (FTSV) 9.38M share Secondary priced at $8.00

·     Fulcrum Therapeutics (FULC) 4.5M share IPO priced at $16.00

·     Genmab (GMAB) 28.5M share IPO priced at $17.75 per ADS

·     Mirum Pharmaceuticals (MIRM) 5M share IPO priced at $15.00

·     New York Mortgage (NYMT) 20M share Spot Secondary priced at $6.11


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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