Mid-Morning Look: August 02, 2019

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Mid-Morning Look

Friday, August 02, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-273.47

1.03%

26,309

S&P 500

-34.88

1.18%

2,918

Nasdaq

-134.86

1.66%

7,976

Russell 2000

-20.13

1.30%

1,530

 

 

U.S. equities on track for their fifth straight day of declines as renewed concerns about trade uncertainties push stocks lower and Treasuries higher. The decline started mid-afternoon on Thursday after President Trump said in a tweet that the U.S. would levy a 10% tariff on $300 billion in Chinese goods starting Sept. 1st after talks this week between trade reps from the U.S. and Chinese counterparts failed to reach any sort of agreement in Shanghai. Overnight, China struck back, pledging to retaliate if the U.S. raised tariffs on an additional $300B of Chinese goods. The back-and-forth rhetoric has sunk stocks that are coming off recent record highs for the S&P and Nasdaq Composite, getting a boost from a 25-bps cut by the Fed on Wednesday, while ten-year Treasury yields were at the lowest levels since November 2016. Oil prices rebounded from Thursday’s 8% decline while gold surges further. The trade news overshadowed a jobs report that was generally in-line with expectations and following a bevy of mixed earnings results overnight, ending a busy week of corporate results. Stocks are still sliding with major averages down over 1% heading into the weekend.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar extends yesterday’s late day slide, pulling back after touching 2-year highs early Thursday, led by a sharp decline against the Japanese yen (falls to lowest levels since March of 2018 around the 106.70 level now), and as the euro and British Pound bounce back off their 2-year lows earlier this week. Economic data this morning mixed, but trade concerns is what dragging the buck lower

·     Commodity prices rising after yesterday’s slide, with oil prices recovering following its biggest one-day decline in about 5-years (fell about 8%), while gold extends its late day gains, topping the $1,450 an ounce level on dollar slip, trade uncertainty as investors flee to safe-havens.

·     Treasury prices extend gains with yields falling all over the world. The German benchmark bund hitting a historic record low of -0.5%, while the 30-year fell below 0% for the first time ever. The U.S. 10-year yield has extended its decline, falling to 1.84% this morning while the 2-year yield drops under 1.70% early (back at 1.73%) as fed fund future expectations jump for additional rate cuts from the FOMC this year.

 

Economic Data

·     Jobs report was mostly in-line as the change in Nonfarm Payrolls for July added 164K vs. est. 165K – prior month revised to 193K from 224K, while Private Payrolls for July were 148K vs. est. 165K – prior month revised to 179K from 191K; the unemployment rate was steady at 3.7% vs. est. 3.6% (vs. 3.7% prior) and average Hourly Earnings MoM for July rose 0.3% vs. est. 0.2%

·     Factory Orders for June up 0.6% vs. est. 0.7% (prior month was -0.7%), while Durable Goods Orders, June-F rose 1.9% and 1% ex transportation

·     University of Michigan Sentiment, July-F 98.4 vs. est. 98.5; Expectations index rose to 90.5 vs. 89.3 last month while current economic conditions index fell to 110.7 vs. 111.9 last month.

 

 

Macro

Up/Down

Last

 

WTI Crude

1.41

55.36

Brent

1.83

62.33

Gold

21.70

1,454.10

EUR/USD

0.001

1.110

JPY/USD

-0.63

106.71

10-Year Note

-0.034

1.858%

 

 

Sector Movers Today

·     Medical equipment and devices; busy night of earnings for MedTech; MTD mixed Q2 results as EPS beat/sales just miss and guided next quarter EPS light ($5.65-$5.75 vs. $5.73 expected); ABMD shares downgraded by several analysts after yesterday’s miss and sharp guidance cut; TNDM shares rise as Q2 results far exceeded expectations and raised guidance as the pump market has clearly accelerated according to Piper (raises FY19 revenue view to $350M-$365M from $300M-$315M and also ups gross margin outlook); FLDM drops after Q2 rev miss $28.2M vs. $30.06M and guides Q3 revenue $27M-$30M below consensus $32.71M; CDNA reports Q2 rev beat and upped year guidance to $123M-$125M from $113M-$115M in revenue

·     Metals & Materials; group sliding in general following the renewed trade tensions between the U.S/China on tariff threat; in steel sector, US Steel (X) bet top and bottom line estimates on better Ebitda of $278M (though fell 38% YoY), while Q2 total shipments of flat-rolled steel rose 8.5% YoY to 2.8M tons; gold miners surged yesterday (AUY, GOLD, AEM, KGC) after gold prices spiked on the stock sell-off/dollar roll off highs; GFI said it expects interim earnings have fallen by as much as 15% despite reporting higher gold production

·     Chemicals; KWR shares dropped after in-line earnings; VAL shares fall after Wells Fargo downgraded as believe VAL’s outlook has more inherent risk going forward with lower EBITDA forecasts, a diminished near to intermediate term FCF picture and the weaker operational and contracting performance; NWL rises on Q2 EPS beat and better guidance 3Q sales $2.42-2.47B vs est $2.23B, FY EPS $1.50-1.65 vs est $1.51; LYB declines following EPS and revenue miss

·     Hardware & Storage; sector under pressure after NTAP guides Q1 EPS 55c-60c on revs $1.22B-$1.23B well below est. 83c/$1.39B; said now sees year revs down between 5% and 10% year-over-year, below the company’s previously stated full fiscal year 2020 guidance of low-end of the mid-single-digit range (PSTG, HPE, DELL active in reaction)

·     Internet; PINS shares rise on better quarter and raises FY19 revenue view to $1.10B-$1.12B from $1.06M-$1.08B and ups FY19 adjusted EBITDA; GDDY reported Q2’19 results above consensus on bookings, uFCF and revenue/full year revenue guidance was unchanged and in-line with the Street, while the uFCF outlook also remained the same; SVMK upgraded to buy at UBS after better than expected top/bottom line results, and positive momentum in key growth initiatives, namely Enterprise and Teams

 

Stock GAINERS

·     APHA +28%; announces 158% increase in adult-use sales and profitable Q4 as net revenue of $128.6M was an increase of 75% from prior quarter and 969% from prior year

·     CATM +12%; as Q2 revenues of $340.8M, effectively flat Y/Y, up 3% in a constant-currency basis, while operating margin increased 264 bps to 7.5% and guides year above views after qtr beat

·     CLDR +13%; after Carl Icahn reported a 12.62% holding and plans for talks to enhance shareholder value in a new 13D filing

·     FTNT +16%; reported strong Q2 results and slightly increased guidance for FY19/beat on billings by about 4%, product revenue by 5%, total revenue by 2% and operating income by 8%

·     NCI +15%; as Guidehouse, a portfolio company of Veritas Capital agreed to acquire the company for $28 in cash per share

·     NWL +12%; 2Q sales from cont ops $2.1B vs $2.12B, normalized EPS $0.45 vs $0.33, guides 3Q sales $2.42-2.47B vs est $2.23B, FY EPS $1.50-1.65 vs est $1.51

·     PINS +13%; as posts smaller EPS loss on better revs ($261.2M) withQ2 global MAUs up 30% at 300M and raises FY19 revenue view to $1.10B-$1.12B

·     SVMK +12%; upgraded to buy at UBS after better than expected top/bottom line results, and positive momentum in key growth initiatives, namely Enterprise and Teams

·     TNDM +14%; Q2 results far exceeded expectations and raised guidance as the pump market has clearly accelerated according to Piper (raises FY19 revenue view to $350M-$365M from $300M-$315M and also ups gross margin outlook)

 

Stock LAGGARDS

·     ACOR -46%; as posted smaller EPS loss but sales of new drug Inbrija disappointed (was only $3M vs. est. $5.9M) – Cantor said today “we see Acorda’s fate (and ability to become cash flow positive) as being clearly in the hands of Inbrija, and we remain cautiously optimistic”

·     FLR -17%; as posted Q2 EPS loss with charges ($3.96) on revs $4.1B vs. est. 52c/$4.7B; said it is withdrawing all previously issued earnings per share guidance for 2019

·     GLUU -28%; reported solid Q2’19 results, but FY19 guidance is below consensus, due to weakness in WWE Universe and delay of Disney Sorcerer’s Arena

·     NTAP -19%; guides Q1 EPS 55c-60c on revs $1.22B-$1.23B well below est. 83c/$1.39B; said now sees year revs down between 5% and 10% year-over-year, below prior guidance

·     SGMS -10%; after Q1 EPS and revenue well short of consensus

·     SPTN -21%; UNFI, SPTN and SFM were all downgraded at BMO Capital based on view that the outlook for small and regional grocers is becoming increasingly challenging in a rapidly-changing digital food retail landscape.

·     SQ -8%; after Q3 guidance fell short of Wall Street’s estimates and said it was selling its food delivery platform Caviar to DoorDash for $410M

·     STX -3%; Q4 EPS/revs slightly topped estimates (86c/$2.37B vs. 84c/$2.33B) though revs fell 17% YoY and mixed Q1 guidance as guides EPS below views on in-line revs

·     TUSK -14%; larger than expected Q2 loss and suspending its quarterly dividend and said it is also reducing its FY 2019 capital spending budget to $41M from $80M previously

·     XENT -12%; downgraded at both Guggenheim and Piper as reported Q2 revenue light of estimates, but the big news was management meaningfully reducing revenue year guidance

·     VAL 10%; after Wells Fargo downgraded as believe VAL’s outlook has more inherent risk going forward with lower EBITDA forecasts, a diminished near to intermediate term FCF picture and the weaker operational and contracting performance

_________________________________________________________________

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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