Mid-Morning Look: July 24, 2019

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Mid-Morning Look

Wednesday, July 24, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities mixed early amid volatility in technology and softer earnings in industrials. Internet giants FB, AMZN, GOOGL were under fire amid a Department of Justice probe into the big tech companies, while industrials fall behind Dow component CAT, as earnings and revenue fell well short of consensus expectations. European stocks fell slightly while Asian markets were mostly higher, piggybacking off the strong session in the U.S. yesterday on trade hopes and ever increasing speculation of Fed rate cuts next week when they meet. Strength in semiconductors are helping offset the large cap tech weakness, after TER, TXN and SLB posted strong results/guidance, while transports get a boost on strong results from UPS (shares up over 8%). Economic data was mixed to down slightly, including weaker new home sales (and a downward revision). Note the European Central Bank (ECB) meets tomorrow, with expectations for additional easing, helped after the IMF on Tuesday revised its forecasts for global growth lower and the Federal Reserve is seen trimming its policy rate by a quarter percentage point next week. On the trade front, Bloomberg reported that U.S. negotiator Robert Lighthizer is set to travel to China next week for the first high-level, face-to-face meeting since talks broke down in May (which was reported late yesterday and one of the reasons for the late day US market pop). The dollar was little changed after three days of gains ahead of Thursday’s European Central Bank meeting, while Crude oil advanced for a fourth session, trading above $57 per barrel after weekly inventory data was bullish amid bigger oil stockpile drawdowns and Treasury yields slip from yesterday levels; gold prices modestly highs around $1,425 an ounce. Another very busy night of earnings with Facebook leading the charge. Defensive sectors leading the declines early (Utilities, Staples).


Economic Data

·     Markit US Manufacturing PMI, July-P 50.0 vs. est. 51.0; Markit US Services PMI, July-P 52.2 vs. est. 51.8 and Markit US Composite PMI, July-P…51.6 vs. 51.5 prior

·     New Home Sales for June rose 7% to 646K up from the prior month but below the est. of up 5.1% to 658K (last month with downward revision to 604K from 626K)







WTI Crude















10-Year Note





Sector Movers Today

·     Internet; sector a focus today with shares of AMZN, GOOGL, FB among those active after the DOJ announced that the Department’s Antitrust Division is reviewing whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation – Treasury Secretary Mnuchin said he supports the broad tech Justice Department investigation: “I think if you look at Amazon, although there are certain benefits to it, it destroyed the retail industry across the United States so there’s no question they’ve limited competition; SNAP shares surged after smaller EPS loss, better guidance and strong DAUs as Q2 Daily Active Users increased 8% YoY to 203M and vs. est. 197.1M; FB will pay $100 million to resolve U.S. SEC claims that the social networking giant misled investors about the misuse of account holders’ data in the Cambridge data story

·     Semiconductors; Philly semi index (SOX) nears its all-time highs after strong earnings in the sector; TER posted a solid 2Q beat, with revenue and EPS above guidance and well above the consensus estimates, with upside led by semiconductor test demand, while industrial automation (robots) grew less than anticipated; TXN posted a 2Q beat, while 3Q guidance was mixed which indicates revenues continue to contract further (-11% y/y vs. -9% y/y in 2Q); SLAB also helping semiconductors after beat and raise

·     Aerospace & Defense; BA reported an unexpected loss for Q2 of ($5.82) vs. est. up $1.98 (as analysts did not adjust numbers on 737 Max issues) with revs $15.75B, -35% YoY and below the $20.45B estimate/Q2 negative operating cash flow $600 million vs. profit $4.68B YoY; GD with an EPS and revenue beat and raises FY19 EPS view to $11.85-$11.90 from $11.60-$11.70and revs view to $39.2B from $38.5B (est. $38.7B), while reports total backlog at end of Q2 of $67.7B; NOC boosted its adjusted EPS view for the year to $19.30-$19.55 from $18.90-$19.30, after posting a Q2 EPS and sales beat

·     Metals & Mining; FCX swung to a Q2 EPS loss from year ago profit but slightly topped estimates as Q2 revenue fell 31% Y/Y to $3.55B from $5.17B a year ago but matched consensus/Q2 consolidated copper sales fell 18% Y/Y to 807M lbs. while gold sales sank 72% to 189K oz.; shares in top iron ore producers RIO, BHP, dipped after VALE said it would resume operations at one of its major mining complexes Vargem Grande, which will add to the supply of Brazilian blended fines, which is among the best-selling medium grade ores in the Chinese market

·     Healthcare services and providers; MPW shares among top movers on earnings, upgraded to buy at Stifel saying there was a long runway for above-average growth; THC said it will pursue a tax-free spinoff of its Conifer business as a separate publicly traded company, completing the separation by the end of 2Q 2021; TDOC shares weak yesterday with SunTrust defending shares today saying ATHM’s new app is not a competitive threat, and certainly not enough to change our view of the growth trajectory over the next few years



·     BYND +4%; after announcing partnership with DNKN to add a new plant-based menu options at Dunkin’ guests in Manhattan

·     CMG +5%; boosts outlook after strong sales growth in second quarter, as EPS and sales topped consensus and said Q2 comp restaurant sales increased 10.0%, net of 40 bps from loyalty deferral

·     EW +9%; as Q2 saw a significant acceleration in TAVR growth to 18.2% from 9.8% last quarter amid increased awareness of the benefits after low-risk TAVR clinical trial data in March

·     JNCE +13%; following partnership with CELG under which it has in-licensed global rights to JTX-8064, an LILRB2 receptor-targeting monoclonal antibody

·     MANH +20%; rises after beating Q2 estimates with a 9% Y/Y revenue growth and also guided an upside FY19 with revenue of $598-604M (consensus: $588.50M) and EPS of $1.46-1.50 (consensus: $1.44).

·     SNAP +16%; after smaller EPS loss, better guidance and strong DAUs as Q2 Daily Active Users increased 8% YoY to 203M and vs. est. 197.1M

·     TER +14%; posted a solid 2Q beat, with revenue and EPS above guidance and well above the consensus estimates, with upside led by semiconductor test demand

·     TXN +6%; Q2 beat ests on the back of strength in the comms equipment and personal electronic end markets/3Q EPS guidance came in ahead, while 3Q revenue guidance was slightly below

·     UPS +8%; reported record profit all around with both the top and bottom line results beating consensus with record profit growth in all segments



·     BA -1%; reported an unexpected loss for Q2 of ($5.82) vs. est. up $1.98 with revs $15.75B, -35% YoY and below the $20.45B estimate

·     CAT -4%; reported a big earnings miss ($2.83 vs. $3.12) on slightly lower than expected revs and said it sees FY19 EPS at ‘lower end’ of previously guided range and modest sales growth

·     HCSG -21% after Q2 earnings results fell short of the lowest estimates

·     NSC -3%; posted a miss on top/bottom line

·     IRBT -19%; lowers FY19 EPS view to $2.40-$3.15 from $3.15-$3.40 and cuts FY19 revenue view to $1.2B-$1.25B from $1.28B-$1.31B citing impact of trade wars (China/US)

·     TUP -18%; Q2 EPS misses estimates on weaker than expected revs and guided year lower (FY19 non-GAAP EPS $3.45-$3.60, consensus $3.97)


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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