Mid-Morning Look: August 01, 2019

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Mid-Morning Look

Thursday, August 01, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities significantly higher, extending gains (and erasing much of yesterday’s late day swoon) as investors digest another heavy dose of earnings and yesterday’s FOMC rate decision move (25 bps cut) and what it means for stocks. The dollar is at fresh 2-year highs while Treasury prices surge, sending yields much lower (10-year back below 2%), as commodity prices are getting hit. Meanwhile markets are shaking off the lack of news from China/U.S. trade talks this week, with no meaningful outcome thus far (though expectations had been low). With the Fed out of the way, adding to positive market sentiment with its first rate cut in over a decade (though still disappointed some hoping for a 50-bps cut), markets will continue to keep an eye on the ongoing earnings season as well as Friday’s U.S. jobs data and trade developments. An extremely busy night and morning of earnings (details of major movers below) has some sectors volatile, while economic data today was mostly in-line but weak enough in some segments to help propel markets higher on hopes it could mean more rate cuts in the futures from the Fed.


Treasuries, Currencies and Commodities

·     In currency markets, the dollar is boss, rising vs. nearly all counterparts, with the dollar index touching its best levels since May of 2017, rising to highs of 98.93 today, while the euro sinks to same 2-year lows. The US dollar rallied following cautious signals from the Federal Reserve overnight, sending the pound to a 30-month low against the greenback. Commodity prices on the decline, with oil prices on track to snap its 5-day win streak as gold prices tumble, with both getting hit from the surge in the U.S. dollar. Treasury market’s rally with yields moving to the lows, with the 10-year down 3 bps to 1.98% (off earlier highs of 2.057%) and first move below 2% since July 5th – the 2-year yield down over 3 bps to 1.835% (far cry from the spike to 1.96% after Powell comments at his press conference.


Economic Data

·     Weekly jobless claims rose 8K to 215K mostly in-line with the 214K estimate (prior week revised to 207K from 206K) while continuing claims rose 22K to 1.699M in the week ending July 20 and the 4-week moving average stood at 211.5K

·     ISM Manufacturing PMI for July at 51.2 (lightest number since August of 2016) vs. est. 52.0; New orders rose to 50.8 vs 50.0 while employment fell to 51.7 vs 54.5 and prices paid fell to 45.1 vs 47.9, while Construction Spending MoM for June falls -1.3% vs. est. 0.3%







WTI Crude















10-Year Note





Sector Movers Today

·     Retailers; BOOT shares jumped as Q1 same-store sales rise 9.4%, above analysts est of 6.2% while forecast same-store sales growth of about 6%, up 1% from its prior forecast; FIT shares tanked after cutting its sales outlook on expectations of weak smartwatch sales and lower average selling prices; Wayfair (W) shares reversed earlier gains on better earnings as guidance disappointed, saying it sees direct retail revenue of $2.22B to $2.27B in Q3 vs. $2.29B consensus and an adjusted EBITDA margin of -6.5% to -6% vs. -3.4% consensus; CROX rises after posting a mixed Q2 report, but lifting guidance ahead of expectations (posted higher sales but gross margins fell 170 bps) – guides Q3 revenue of $295M-$305M vs. $278M and boosts year sales; HBI posted slight beat to Q2 earnings/sales with in-line guidance

·     Auto’s; GM Q2 EPS beat handily on in-line revenue while EBIT-adj fell 5.6% in Q2 to $3.0B vs. $2.65B consensus and reaffirmed full year EPS guidance of $6.50-$7.00; auto parts maker DLPH shares slip following a -9% drop in Q2 revenue amid weak demand for its products in North America and Asia Pacific markets while also guides full-year profit and revenue below estimates (cuts FY19 EPS view to $2.65-$2.85 from $3.00-$3.20 – and also lowers rev outlook) though margins were above estimates due to progress on cost cuts. Monthly auto sales: TM said US July auto sales rose 0.2%

·     Major oils; RDS shares dropped as Q2 earnings missed expectations and total revenues fell, as lower oil and gas prices and weaker refining margins outweighed an increase in production/said its Q2 profit on a current cost-of-supplies basis fell 42% Y/Y to $3.03B from $5.23B a year earlier; OXY reported 2Q19 EPS that was 4% above consensus on stronger Oil & Gas earnings, but 2Q19 capex was 1% above consensus; in refiners, MPC, HFC shares jumped early on better results while PBF declined on its 6c earnings miss

·     E&P sector; CXO shares fell after earnings missed analysts’ estimates and lowering its oil production growth guidance for the rest of the year to 22%-26% from 23%-27%; LPI with better Q2 EPS/revs and increasing FY oil production flat compared to FY 2018 vs. previous guidance of a 2% decline and total production rising 14% vs. prior guidance of 11% growth; WLL shares plunged as posted a surprise EPS loss of (28c) vs. expected profit of 30c while cutting its workforce by 33% or 254 positions and expects to incur a one-time charge of ~$8M in Q3; SRCI 2Q19 CFPS was 15% below consensus and 2Q19 production was 5% below consensus/capex was 11% below consensus and reiterated its 2019 production and capex guidance.

·     Distributors higher as ABC guides 2019 EPS of $7.00-$7.10, ahead of estimates of $6.85 after a 14c Q3 EPS beat while MCK overnight reported Q1 EPS $3.31 topping the $3.02 est and said it sees 2020 adj. EPS of $14 to $14.60; vs. estimated $14.13

·     Chemicals; DD mixed Q2 as EPS beat but revs missed and guided Q3 EPS slightly above estimates; CF Q1 EPS and sales handily topped consensus (Q2 EPS $1.28/$1.5B vs. est. 84c/$1.39B) citing record 1st half and quarterly granular urea sales volume/record quarterly ammonia sales volumes; FOE was downgraded at Buckingham (and KeyBanc) as see declines in European construction demand and global auto builds weighing on company results well into 2020 and believe the stock will remain range-bound until that time; FMC was downgraded at Bank America to neutral as valuation now more adequately reflects its earnings potential

·     Software movers; AYX posted strong 2Q results and boosted its full-year revenue guidance (EPS 44c-50c on revs $370M-$375M vs. est. 44c/$362.7M); TWLO shares dropped despite a quarterly beat and raised guidance, though fell short of the highest estimates; CTSH Q2 beat while forecasted Q3 sales $4.23B-$4.27B topping the $4.22B estimate; DT 35.6M share IPO priced at $16.00; PS shares dropped over 30% following a disappointing billings miss (~17 point deceleration in billings – 10% below Raymond James estimate); FIVN shares jump after Q2 results beat estimates, provides Q3 and FY profit forecast above estimates prompting an upgrade to overweight at JPMorgan

·     Media & Telecom movers; Dow component VZ Q2 EPS and sub growth beat with total wireless subscribers up by 451K which includes 245K new phone customers (vs. est. 349K); in towers CCI was upgraded to overweight with a $150 Dec 2020 price target and SBAC downgraded to neutral with a $270 Dec 2020 price target at JPMorgan, due to the recent disconnect in relative valuation; Bloomberg reported the FCC is poised to decide that cable providers such as CMCSA and CHTR should assign a value to the channels and data networks, and then reduce fees owed to localities by that amount



·     CF +10%; as Q1 EPS and sales handily topped consensus (Q2 EPS $1.28/$1.5B vs. est. 84c/$1.39B) citing record 1st half and quarterly granular urea sales volume

·     CRUS +15%; Wedbush noted delivered a nice beat and raise, with 8% and 14% upside to our Jun Q and 14% Sep Q sales estimates, respectively, even as higher GMs and lower opex drove further outperformance down to the bottom line

·     FIVN +15%; after Q2 results beat estimates, provides Q3 and FY profit forecast above estimates prompting an upgrade to overweight at JPMorgan

·     K +9%; quarterly earnings and sales topped views/Q2 organic net sales growth of 2.3% at $3.44B

·     MET +3%; rises to 52-week high after better top and bottom line results and stock buyback

·     MYGN +21%; in response to a positive coverage decision at UNH for pharmacogenetic testing with multigene panels, including MYGN’s GeneSight Psychotropic test

·     RES +9%; will replace Control4 Corp. in the S&P SmallCap 600 Index effective prior to the open of trading on August 6

·     SPWR +34%; Q2 revenue of $481.9M topped the $451M estimate and boosted the top-end of its rev forecast by $100M to $1.9B-$2.1B and upped its Ebitda guidance

·     TIVO +12%; beat revenue expectations in its Q2 earnings report and raised guidance for the full year to $650M-$665M from $644M-$660M

·     VNDA +27%; after Citigroup upgraded to buy as believe the stock price is undervaluing VNDA’s profitable base business (Hetlioz & Fanapt, along with $293M cash), due to very poor investor sentiment related to pipeline agent tradipitant

·     WDC +6%; rising in reaction possible trough (as per company) as EPS/revs mostly in-line but gross margin and EPS guidance were below Street estimates – WDC said they are “seeing signs of improving conditions in the flash market and believe that it has reached a cyclical trough”



·     ABMD -25%; as cuts FY20 revenue view to 885M-$925M from $900M-$945M (and below est. $927.1M); Q1 revs of $208M misses the $210.5M est

·     BYND -10%;3.25M share secondary priced at $160.00 per share (shares closed at $196.51)

·     CLVS -14%; on larger quarterly loss and Q2 Rubraca revs $33M misses the $35.4M estimate/sees FY global net product revs $137M-$147M

·     CXO -21%; earnings missed analysts’ estimates and lowering its oil production growth guidance for the rest of the year to 22%-26% from 23%-27%

·     HGV -20% as lowered its full-year guidance to $2.04-$2.21 from prior $2.61-$2.77 to reflect expected slower contract sales growth and continued pressure on volume per guest/said full-year contract sales are expected to be flat to down 3%, down from the previous estimate of 5% to 8%

·     OI -20%; after a lower-than-expected Q2 profit and revenue, and cuts 2019 adjusted EPs of $2.40-$2.55 down from $3.00 and lowers 019 adjusted free cash flow to at least $260M from $400M

·     PRU -7%; on operating EPS miss ($3.14 vs. est. $3.22) leading to a downgrade at B Riley FBR to neutral citing reduced visibility and a lower outlook for earnings over the next couple of years

·     PS -38%; following a disappointing billings miss (~17 point deceleration in billings – 10% below Raymond James estimate) citing lack of sales reps

·     SRCL -5% in the waste sector as EPS missed by 27c on better revs and lowered its year rev view to $3.35B-$3.41B from $3.41B-$3.53B prior (est. $3.39B) and EPS below estimates

·     WLL -32%; after cutting 1/3 or workforce and slashing year outlook (prompting several downgrades) – reports an unexpected Q2 loss and a 19% Y/Y decline in revenues to $426M, as well as a 33% reduction in its workforce



·     Beyond Meat (BYND) 3.25M share secondary priced at $160.00 per share

·     Dynatrace (DT) 35.6M share IPO priced at $16.00

·     Kura Sushi (KRUS) 2.9M share IPO priced at $14.00


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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