Mid-Morning Look: July 23, 2019

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Mid-Morning Look

Tuesday, July 23, 2019

Index

Up/Down

%

Last

 

DJ Industrials

65.46

0.24%

27,237

S&P 500

5.07

0.17%

2,990

Nasdaq

1.64

0.01%

8,205

Russell 2000

3.43

0.22%

1,548

 

 

U.S. equities with a strong start to the day, jumping across the board on strong earnings results from KO (record highs), UTX among others, as well as positive sentiment after the White House and Congress reached a two-year budget and debt ceiling deal/included in the deal is a $320 billion increase in the FY20-21 budget caps and a suspension of the debt limit through July 2021. Also upbeat hopes about trade on foreign reports that a U.S. delegation led by U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin is likely to visit Beijing next week, for the first face-to-face meetings since the G20. The combination of news, coupled with expectations of a Fed rate hike next week buoyed stocks initially. But stocks have since slipped, with Treasury prices pushing higher and yields falling from earlier highs amid profit taking. Also today, the IMF further reduced its global growth outlook saying policy “missteps” on trade and Brexit could derail a projected rebound – now sees the world economy will expand 3.2% this year and 3.5% next year, both down 0.1%. Weaker economic data also sunk stocks off highs, with the Richmond Fed index falling to its lowest since January 2013. Another busy night and rest of the week for earnings – with nearly 1/3 of S&P 500 components reporting this week.

 

Treasuries, Currencies and Commodities

·     In currency markets, the euro was under pressure following news in the UK today (new UK Prime Minister announced), falling to its lowest levels since early June at $1.1165. The dollar is overall much higher vs. rival currencies while commodity prices are mixed and Treasury yields pull back from earlier highs as stocks lose steam.

 

Economic Data

·     The FHFA Housing Price index rose 0.1%, below last month figure of 0.4% (which was also the estimate). July Existing Home Sales fell to 5.27M annual rate vs. est. -0.4% to 5.32M.

·     Richmond Fed for July unexpectedly fell to -12 (lowest since January of 2013) vs. est. up +5 (prior month +3%) as shipments fell to -13 after 5 the prior month and new order volume slowed to -18 after -2 the prior month

 

 

Macro

Up/Down

Last

 

WTI Crude

0.01

56.23

Brent

-0.10

63.16

Gold

-1.90

1,425.00

EUR/USD

-0.0055

1.1154

JPY/USD

0.25

108.12

10-Year Note

0.013

2.06%

 

 

Sector Movers Today

·     Aerospace and defense sector; Dow component UTX Q2 EPS of $2.20 beat by 15c on in-line revenue while boosted its annual profit forecast again (to $7.90-$8.05 up from prior $7.80-$8.00) while narrows FY19 organic revenue growth guidance to 4%-5% from 3%-5% – recall recently announced mega merger with RTN reported strong second-quarter results and boosted their guidance for the year (FY19 EPS view to $20.85-$21.15 from $20.05-$20.35); BA, GD and NOC to report earnings tomorrow morning

·     Internet; big week of earnings for the sector with SNAP tonight, FB tomorrow and AMZN, GOOGL on Thursday night; BIDU was downgraded at OTR Global citing spending slowdown; BABA said it will now allow small U.S. businesses to sell on its platform, an attempt to tap into the business-to-business e-commerce market; SNAP another analyst upgrade ahead of upcoming earnings tonight (Stifle raised to buy and $17 tgt)

·     Bank movers; ZION shares tumble, downgraded by at least two analysts after posting lower-than-expected net interest margins, as interest rates dropped (Q2 NIM 3.54% vs 3.68% QoQ and below the 3.67% estimate) while also missed EPS and cut its outlook for FY NII; KEY boosted its provision for credit losses in 2Q to $74M, up 16% year over year and up 19% from 1Q, while Q2 EPS missed by 4c on slightly lighter revs; FITB Q2 provision for loan and lease losses totaled $78M compared to $33M in the year-ago quarter/Q2 NIM of 3.37% rose from 3.28% in Q1 and 3.21% in the year-ago quarter while adjusted EPS beat by a nickel; other movers on earnings, WASH, AMTD, WSFS, FNB; banks have had a rough quarter, with lower NIM, NII and higher provisions

·     Pharma movers; MYOV shares rise after positive results from a second Phase 3 clinical trial, LIBERTY 2, evaluating once-daily relugolix in women with uterine fibroids and heavy menstrual bleeding; MRNS shares plunge as data from mid-stage study in women with postpartum depression showed MRNS drug was as effective as placebo in reducing symptoms after 28 days; CHMA rises on positive results from a Phase 3 clinical trial, OPTIMAL, evaluating Mycapssa (octreotide) for the maintenance treatment of adults with acromegaly

·     Housing & Building Products; homebuilder PHM posted Q2 profit above analysts’ estimates, saying it sold homes at higher prices during the quarter (sold 5,589 units in the quarter, down from 5,741 a year ago, but the average home price rose to $430,000 from $427,000); ZG, RDFN shares declined following the AMZN pact, to offer TurnKey, a program that connects potential homebuyers via the Amazon portal to a Realogy agent (RLGY shares jump); WHR shares dropped despite beat on the top/bottom line and raised year guidance

 

Stock GAINERS

·     AN +9%; shares surge after Q2 results as revs of $5.34B tops views and posts smaller comp sales loss of (-0.5%) vs. (-3%) estimate, along with new CEO change

·     BIIB +5%; posted Q2 beat, but was helped by tax benefits, while boosted its year EPS and revenue outlook to $31.50-$32.30 from $28-$29 (estimate $29.59) and sees FY revenue $14B-$14.2B from $13.6B-$13.8B (est. $13.95B)

·     HAS +7%; reports solid growth across the franchise brands business (+14% Y/Y) and partner brands business (+3%) in Q2, while Hasbro Gaming lagged (-8%) as EPS handily topped consensus

·     HOG +2%%; reverses earlier losses; cut its motorcycle shipments forecast for the full year to 212,000 to 217,000, from prior 217,000 to 222,000 while Q2 adjusted EPS of $1.46 beat by 5c

·     KO +5%; trades to all-time highs as reported Q2 EPS 2c above consensus driven by balanced growth in unit case volume, price/mix and better margins, while raises FY organic revenue view

·     KPTI +7%; upgraded to overweight and tgt hiked to $16 from $8 at JPMorgan saying surveyed physicians say its Xpovio drug has at least moderate effectiveness and manageable side effects

·     RLGY +15%; in pact with AMZN to offer TurnKey, a program that connects potential homebuyers via the Amazon portal to a Realogy agent

·     UTX +1%; Q2 EPS of $2.20 beat by 15c on in-line revenue while boosted its annual profit forecast again (to $7.90-$8.05 up from prior $7.80-$8.00) while narrows FY19 organic revenue growth guidance to 4%-5% from 3%-5%;

 

Stock LAGGARDS

·     ACAD -13%; after its add-on treatment for schizophrenia (Nuplazid) failed to meet the main goal in a late-stage study in patients with schizophrenia who weren’t responding to current medicines

·     IONS -5% after BIIB Q2 Spinraza revs of $488M missed the $530M estimate

·     IPG -2%; shares weak after Q2 results pointed to soft organic revenue growth in the U.S., with mixed overall results (EPS beat/revs missed)

·     PCAR -2%; posted Q2 EPS that missed estimates due to lower than expected margins), while sales were better

·     QCOM -2%; WSJ reports AAPL could be within a week of agreeing to a deal to buy INTC’s modem-chip business, that values the business at $1 billion or more https://on.mktw.net/2y10zAX 

·     ZG -1%, falling along with weakness in RDFN after AMZN and RLGY in pact

·     ZION -5%; downgraded by at least two analysts after posting lower-than-expected net interest margins (Q2 NIM 3.54% vs 3.68% QoQ and below the 3.67% estimate) while also missed EPS

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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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