Mid-Morning Look: July 30, 2019

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Mid-Morning Look

Tuesday, July 30, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-63.21

0.23%

27,158

S&P 500

-10.99

0.36%

3,009

Nasdaq

-33.44

0.40%

8,259

Russell 2000

-5.85

0.37%

1,563

 

 

U.S. equities are slipping for a second day, pulling back from record highs in the S&P and Nasdaq last week ahead of the FOMC rate decision tomorrow (a cut is expected of at least 25 bps), while comments from President Trump on China rattle markets while he also attacks the Fed and its policy for the second time in as many days. President Trump said earlier that the U.S. will either make a great deal or no deal with China. The comments come as U.S. delegates including Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer are in Shanghai for another round of talks with their Chinese counterparts. Earlier, Trump warned China against waiting out his first term in office to finalize any trade deal, saying if he wins re-election in the November 2020 U.S. presidential contest they will get no agreement or a worse one. Stronger economic data as personal spending and income was in-line with estimates, while pending home sales rose 2.5% MoM and consumer confidence surged to its best level since November of last year, crushing estimates. Outside of trade and rates, investors bombarded with another heavy dose of corporate earnings results, which continue to come in better, though future outlooks have been more cautious due to trade uncertainty. European markets are getting crushed, led by weakness in the German Dax, while Asian markets rose overnight.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar index (DXY) holding above the 98 level, not far off its YTD highs above 98.35 heading into the FOMC policy meeting results tomorrow. The dollar has managed to rise over the last month despite dovish expectations, given investors fleeing defensive currencies (yen), the Pound falling on Brexit related worries/change in power (Pound) and softer economic data and also accommodative policy in the EuroZone (euro). Gold prices hold on to gains despite the dollar bounce, up around $1,425 an ounce while oil prices rise for a 4th straight day into inventory data tonight and tomorrow. Treasury market’s little changed.

 

Economic Data

·     Personal Spending and Income were both reported in-line with economist estimates as Personal Income for June rises in-line at 0.4% and Personal Spending for June reported in-line at 0.3%. PCE Deflator MoM for June in-line at 0.1%, PCE Deflator YoY for June rises 1.4% vs. est. 1.5%. PCE Core Deflator MoM for June in-line at 0.2% and PCE Core Deflator YoY for June 1.6% vs. est. 1.7%

·     Pending Home Sales MoM for June rise 2.8% MoM topping the est. 0.5%

·     Consumer Confidence for July surges to 135.7 vs. est. 125.0 (prior reading was 121.5) – highest since November of last year which was a print above 136

 

 

Macro

Up/Down

Last

 

WTI Crude

0.31

57.18

Brent

0.44

64.15

Gold

6.40

1,426.80

EUR/USD

0.0003

1.1148

JPY/USD

-0.19

108.59

10-Year Note

-0.024

2.058%

 

 

Sector Movers Today

·     Healthcare services and providers; hospital sector (THC, HCA, UHS) and managed care (ANTM, CI, CVS) a key focus today after the Trump administration on Monday proposed a rule requiring hospitals and medical care operators to disclose the reimbursement rates they have negotiated with insurers. According to the proposal, which would cover all the more than 6,000 hospitals that accept Medicare, hospitals that fail to share the discounted prices in an online form could be fined up to $300 a day; HCA plunges on quarterly results

·     Retailers; UAA shares fell after saying it expected North America year revenue to decline slightly vs previous view of “relatively flat” revenue growth for the region/2Q revs $1.2B in-line; guides FY revs +3-4% including slight decline N.A; SHOO Q2 eps 47c vs. 43c and comps 6.2% vs. 3.8% and Q2 sales $445M vs. $420.5M; RL Q1 EPS 1.77 vs. est. 1.67; total comps ex: FX 2% vs. 3.2% est/while guides FY revs ex-fx +2-3%, FY op margin ex-fx +40-60bps; ZBRA shares outperformed on EPS beat and in-line revs and stock buyback of up to $1B in shares

·     Consumer Staples; Dow component PG shares at record highs after reporting Q2 organic sales increased 7% in Q2 to smash the +4% consensus estimate and organic sales were up 10% for the healthcare business during the quarter and 8% for the beauty business/anticipates FY20 all-in sales growth in the range of 3% to 4% and EPS is expected to increase 4% to 9%; BYND shares plunged more than 18% overnight despite a stronger Q2 rev report and upping its guidance for the year as it was pressured after files to sell 3.25M shares of common stock for holder; in tobacco, MO 2Q adj EPS $1.10 vs est $1.11; and sees FY adj EPS $4.15-4.27; COTY is looking to unload $500M to $1B in assets as part of a turnaround plan, Women’s Wear Daily reported without specifying which assets

·     Housing; LEG Q2 sales fell short of consensus and also lowered its year EPS and revenue outlook amid lower volume from business exited in our Furniture Products segment, weak trade demand; RH shares jump after boosting its year EPS to $9.08-$9.52 vs. prior view of $9.10 and raised its revenue forecast; TREX rises on mixed Q2 results (EPS miss/sales beat) but guided Q3 revs above consensus; in builders DHI posted better Q2 EPS/revs but new orders rose 6.4% to 15,588 homes in quarter, slightly below views as avg home prices fell 2% to $296,450; CVCO earnings beat

·     Drillers; E&P and Equipment; FRAC delivered better-than-expected 2Q adjusted gross profit and EBITDA on record pumping hours for the company as a result of strong execution, operational efficiencies and less white space in the frac calendar; SLCA rises after beating Q2 earnings expectations, as overall volumes sold rose 9% Y/Y and 2% Q/Q to 4.9M tons; NOV Q2 revs beat at $2.13B vs. est. $2.09B but posted a nearly $5.4B loss during the quarter; RIG handily beat estimates (guidance) across the board – revs, costs, cash flow, etc. RIG reported adjusted EBITDA of $257M vs. SE/street estimates of $187M/$186M and generated $65M in FCF

·     Metals & Materials; BERY said it sold its Seal for Life business to P-E firm Arsenal Capital Partners for $330M; Seal for Life makes sealants and corrosion protection products; in chemicals, LXU shares jump on earnings beat, while potash/nitrogen names rally after NTR quarterly results topped views for earnings and revs, while the company lowered its forecast for the year; in metals, AKS 2Q adjusted Ebitda beat highest estimate; HUN rebounded after initial weakness after profit and revs missed expectations

 

Stock GAINERS

·     DHI +5%; posted better Q2 EPS/revs but new orders rose 6.4% to 15,588 homes in quarter, slightly below views as avg home prices fell 2% to $296,450

·     MRK +2%; Dow component reports 2Q sales $11.8B vs est $10.96B, and guides FY sales $45.2-46.2B above prior $43.9-45.1B

·     NBIX +8%; reported a strong qtr with Ingrezza revenues beating estimates. The strong Ingrezza sale growth is driven by new patient starts in addition to a strong refill rate

·     PG +4%; record highs after reporting Q2 organic sales increased 7% in Q2 to smash the +4% consensus estimate and organic sales were up 10% for the healthcare business

·     RH +4%; pre-announced better than expected 2Q results and raised its outlook for 2019 to $9.08-$9.52 vs. prior view of $9.10 and raised its revenue forecast

·     RNG +14% as Q2 results far exceeded expectations and its 2019 guidance above the Street from the 2Q out-performance with implied 2H19 slightly above current Street estimates. Subscription revenue is now projected to grow 30% for FY19 compared to TTM bookings growth of 33.5%

·     SLCA +9%; rises after beating Q2 earnings expectations, as overall volumes sold rose 9% Y/Y and 2% Q/Q to 4.9M tons

·     TREX 15%; rises on mixed Q2 results (EPS miss/sales beat) but guided Q3 revs above consensus

·     VRNS +9%; strong 2Q results that saw faster than expected transition to a subscription-driven model and raised its guidance for full-year subscriptions as a percentage of license revenue from 25% to 45%

 

Stock LAGGARDS

·     BYND 9%; reported stronger quarterly sales ($67.3M) and raised its year guidance outlook to over $240M from over $210M, but shares slipped as filed to sell 3.25M shares for holders

·     CMI -6%; falls on Q2 EPS and revenue miss and guides year rev to flat, down from prior growth view of 0%-4% due to reduced truck demand in international markets

·     COF -7%; after saying personal info of about 100 mln in the U.S. and 6 mln people in Canada were obtained by a hacker who has been arrested/is expected to cost between $100M-$150M in ‘19

·     GRUB -13%; after mixed Q2 results that beat on revenue, missed on EPS, narrowed the FY EBITDA outlook, and came short of the daily active grub’s consensus as Q2 active diners totaled 20.3M (+30% Y/Y) compared to the 19.7M est; daily average grubs were 488,900, below 494,800 est.

·     MDR -39%; Q2 adjusted EPS loss (7c)/$2.1B vs. est. 10c/$2.28B while sees year EPS loss about (32c) on Ebitda about $725M below prior view of about $1.65 and $1.1B

·     NXPI -1% as Q2 profit below estimates, while revenue was in-line, hurt by a fall in demand for its industrial and automotive segments and guides Q3 revenue flat to 2% higher on a sequential basis, but down 7-10% on an annual basis

·     PFE -6%; after two analyst downgraded post MYL deal

·     SSNC -19%; after lowered guidance on deal slippage and weaker market environment as guide 3Q adj revs $1.12-1.15B vs est $1.18B, 3Q adj net $227.5-243.5M vs est $257M

·     TEX -3%; Q2 EPS $1.21/$1.31B in revs vs. est. $1.35/$1.31B; cut its adjusted EPS forecast for the full year to $3.40-$3.80 from $3.60-$4.20 and below est. $4.04 while reaffirms full year FCF

·     UAA -14%; it expected North America year revenue to decline slightly vs previous view of “relatively flat” revenue growth for the region and guided Q3 EPS 17c-18c vs. est. 27c

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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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