Market Review: August 07, 2019

Auto PostDaily Market Report

Closing Recap

Wednesday, August 07, 2019

Index

Up/Down

%

Last

DJ Industrials

-22.25

0.08%

26,007

S&P 500

2.26

0.08%

2,884

Nasdaq

29.56

0.38%

7,862

Russell 2000

-1.41

0.10%

1,500


 

Equity Market Recap

·     It was another wild day on Wall Street as U.S. stocks opened the day sharply lower, trading below Monday’s troughs and erasing all of yesterday’s gains as the S&P 500 fell over 2%, and the Dow Industrial Averages was down nearly 600 points as all 11-S&P sectors declined. The trade war between the U.S. and China has intensified over the past week after U.S. President Donald Trump announced 10% tariffs on a further $300 billion of Chinese goods while China retaliated Monday after letting the yuan weaken beyond the psychological level of 7 per dollar. The result has been a pullback for stocks off record highs (just 2-weeks ago), a sharp spike in Treasury markets (pushing yields to near 3-year lows) and a drop in the dollar/surge in gold prices to six year highs (topping the $1,500 an ounce level today). The moves were exacerbated after a series of dovish central-bank surprises underscored escalating concern over the outlook for growth, and also boosted expectations of additional (and aggressive) interest rate moves being factored for the FOMC as September rate cut odds for a 50 bps cut was around 45% as of midday today. Overnight, the Reserve Bank of India trimmed interest rates by 35 bps, New Zealand’s central bank cut to an all-time low and Thai central bank cut as well. Oil prices plunge to 7-month lows on slowing global growth fears as well as another bearish weekly inventory report. A weak 10-year auction result early afternoon (1:00 PM EST) helped alleviate selling pressure in Treasury yields mid-afternoon and in turn helped boost stocks off their lows. There was another tweet late day (from Fox business) that took the wind out of the sails of rallying stocks that China expects 10% tariffs on an additional $300 billion will be added Sept 1st (which Trump said last Friday) but that China expects that 10% to go to 25% because China will stand firm and not buy US agriculture (which was the new market concern). Those concerns were quickly dismissed as stocks resumed their afternoon upward momentum in what was a very volatile trading session. Financials fell on lower yields, energy dropped on falling oil, industrials and metals down on trade impact while interest rate sensitive and defensive sectors once again outperformed.

 

Commodities

·     Oil prices dropped to 7-month lows, sliding $2.54 or 4.75% to settle at $51.09 per barrel (nearing its 2019 lows) amid deepening U.S.-China trade tensions that is weighing on the outlook for global economy/energy demand, while bearish weekly inventory data gave more reasons not to buy oil stocks. Brent has plunged more than 10% over the past week after U.S. President Donald Trump said he would slap a 10% tariff on a further $300 bln in Chinese imports from Sept. 1 Both Brent and WTI crude prices are now in bear market territory, defined as down more than 20% from their YTD peaks. Earlier the EIA said U.S. crude stockpiles rose 2.4M barrels last week, in stark contrast to consensus expectations for a ~2.8M-barrel draw, and now stand 2% above their five-year average for this time of year. Natural gas prices dropped 2.8c to $2.083 mln btus.

·     Gold prices spike $35.40, or 2.4%, higher to settle at $1,519.60 an ounce for its biggest daily move in about 2-months, and its fourth straight daily to fresh six-year highs. Prices have risen over the last month on easing FOMC interest rate expectations (which ramped again this morning given the Treasury market action) and escalating trade policy tensions between China and the U.S., as investors flock to safe haven assets.

 

Currencies

·     The U.S. dollar dropped for a 4th straight day (after hitting 2-year highs mid last week), as global central banks continue to cut interest rates to boost their economies (three more Asian banks cut interest rates overnight). The euro extended its bounce off 2-year lows last week (now firmly above the 1.12 level vs. the USD), while safe-haven currencies (carry trades) such as the yen and franc surge further. The dollar fell to lows vs. Japanese yen around 105.54 – taking out yesterday low and at the lowest intraday levels since January (last time below the 105 level was March of 2018). The dollar fell as stocks declines, trade concerns and other central bank actions increased the chances the Fed will become more aggressive in its rates cuts at the next meeting.

 

Bond Market

·     Treasury prices started the day very strong, adding on to recent gains as yields absolutely collapsed to fresh near 3-year lows (10-year below 1.6%, the 2-yr 1.5% and the 30-yr yield nearing all-time lows now around 2.12%) amid a continued fight to safety as stocks plunge, trade tensions with China ramps up this week, and on expectations the Fed will raise rates more aggressively in upcoming meetings to fight slowing global growth fears. A weak 10-year auction midday pared Treasury gains as the U.S. Treasury sold $27B in in 10-year notes at a yield of 1.67% vs. the 1.653% when issued presale with a bid-to-cover (demand) at 2.20 vs. 2.41 prior and indirects bidders awarded 55.7% of the auction and directs 13.6%.

 

 

Macro

Up/Down

Last

WTI Crude

-2.54

51.09

Brent

-2.71

56.23

Gold

35.40

1,519.60

EUR/USD

0.0024

1.1222

JPY/USD

-0.53

105.94

10-Year Note

-0.008

1.693%

 

 

Sector News Breakdown

Consumer

·     Retailers; CPRI EPS beat and sales missed while reports double-digit comparable sales growth for the Versace business in Q2, while comp sales for Jimmy Choo were flat and decreased at a low single-digit rate for Michael Kors; GOLF missed sales estimates for golf balls sales, golf clubs and golf gear and Q2 overall missed estimates

·     Consumer Staples; BYND is partnering with Subway on a limited-time test at 685 U.S. and Canada locations of a meatball marinara sub made with plant-based meatballs; WW shares jumped as end of Period Subscribers in Q2 were up 1.5% versus the prior year period and raises FY19 EPS view to $1.55-$1.70 from $1.35-$1.55 (vs. est. $1.52) after Q2 EPS beat; in tobacco, MO shares slipped late day on reports FDA investigating more than 127 reports of seizures after vaping

·     Restaurants; WEN comp sales in North America rose 1.4% in Q2 vs. +1.2% consensus while adjusted EBITDA of $118M was churned up during the quarter to top the consensus mark of $114M and restaurant margin was 16.5% of sales vs. 17.4% a year ago; PBPB shares drop on unexpected Q2 EPS loss and decrease of (4%) comp sales while sees FY19 flat to low-single digit decrease in comp sales; PZZA mixed as EPS miss, revs beat while comp sales fell -5.7% and sees year comp sales view to fall between 1% and 5% vs. -1% to -4% prior view

·     Housing & Building Products; LL shares slide as tariffs impact guidance with Q2 comp sales flat vs. +0.1% consensus and total sales were up 1.8%./growth of installation services was offset by a slight decline in merchandise sales during the quarter; BECN cut FY’19 guidance, which now calls for Adj. EBITDA of $490-$510 MM ($540-$610 previously), after harsh rainfall drove a 22% Adj. EBITDA miss in Q3; JELD shares drop on EPS/rev miss and lower guidance

·     Casino & Leisure movers; casino stocks slide early as WYNN earnings report disappoint and global growth fears ratchet up again (MLCO, LVS fall); theme parks (SEAS, SIX, FUN) were active after DIS said theme park attendance was down; in auto’s; KAR falls on EPS miss, lower guidance; Q2 adjusted EPS 30c/$719.1M vs. est. 37c/$691.54M; guides year EPS $1.24-$1.34 vs. est. $1.29; in lodging, shares of HST, STAY moved after earnings; PLNT shares dropped despite beat and raise as sees full-year revenue growth of +18% vs. +15% prior view

 

Energy

·     Energy stocks can’t get out of the line of fire, with many energy names setting fresh 52-week lows in the S&P 500 today including OXY, SLB, EOG, COP, CXO, COG, APA, HAL, MRO, and PXD Oil prices dropped to 7-month lows earlier amid deepening U.S.-China trade tensions weighing on outlook for global economy/energy demand, while bearish weekly inventory data gave more reasons not to buy oil stocks. The EIA reported weekly crude stockpiles rose 2.39M barrels vs. est. for draw of -2.7M barrels; Gasoline inventories rose 4.4M barrels vs. est. for draw of -1.25M.

·     E&P sector; QEP shares fell after entering a cooperation agreement with Elliott Management that will keep the company independent/QEP says it will work together with Elliott, which owns a 4.9% stake in QEP to agree upon two new independent QEP board members; FANG delivered 7% sequential oil growth on lower than projected capex, but weak 2Q19 gas and NGL realizations drove an EPS/CF miss vs consensus; OAS shares drop after reporting mixed Q2 results and issuing negative full-year guidance revisions/says Q2 production averaged 84.5K boe/day, up 6% Y/Y but down 8% Q/Q, prompting it to lower the top end of full-year production guidance, now forecasting 86.8K-88.5K boe/day from 86K-91K boe/day previously; PDCE is in talks to merge with rival explorer SRCI in a deal that would create a larger oil and gas player in Colorado, Bloomberg reports, citing people familiar with the matter. https://bloom.bg/2M2FjE0 ; PE after rises after Q2 oil production beat estimates, leading it to boost 2019 guidance; other E&P movers after earnings included CPE, PXD, DVN, DNR

·     Utilities & Solar; SEDG shares outperform, trading to record highs as quarterly results beat estimates and forecasts Q3 revenue well above estimates amid strong performance of its solar business (Q2 EPS 94c/$325M vs. est. 83c/$315.5M; sees 3Q revs $395M-$410M vs. $320.4M); overall utilities still holding up well as dividend paying sectors remain attractive given the sharp retracement in Treasury yields

 

Financials

·     Bank movers; SCHW, AMTD, ETFC shares slipped on plunging Treasury yields as well as news that Fidelity said it would automatically direct investors’ cash into higher yielding options, without any minimum requirements; banks overall continue to get smacked amid the recent dismantling of Treasury yields, which narrows margins for banks on what they lend, as large cap and SMID cap banks absolutely punished over the last week

·     Consumer finance and lending; FLT Q2 adjusted earnings beat-and-raise driven not by the outperformance of a single business segment, but rather by strong performances from each of them; LC shares rise as revs a bit light at $190.8M but generated $33.2mm of adjusted EBITDA, up 29% year-over-year and significantly outpacing the consensus estimate of $27.5mm; in insurance, VOYA dropped after Morgan Stanley called its results somewhat disappointing as core results excluding favorable temporary items came in below expectations

 

Healthcare

·     Pharma movers; MRK an AZN’s Lynparza meets primary endpoint in Phase 3 trial; RYTM jumped after two Phase 3 trials evaluating setmelanotide for treatment of pro-opiomelanocortin and leptin receptor deficiency obesities both met primary endpoints; ATNX falls after the company reported a second-quarter loss that was greater than what analysts expected; JAZZ Q2 Xyrem sales were up 16% and also sales outlook raised; GWPH 2Q revenues of $68.4M crushed the consensus $45.5M estimates

·     Specialty pharma; TEVA maintains guidance as profit drops less than feared, announces its CFO to step down and Q2 revs beat; CBM to be acquired by Permira Funds for $60.00 per share in cash or $2.4B which represents a 47.1% premium to the August 6 closing stock price; HZNP posts Q2 beat and raised guidance for revenues to $1.28B-1.30B from $1.26B-1.28B and non-GAAP EBITDA: $460M-475M from $450M-465M; XNCR was downgraded by Raymond James and Guggenheim after earnings and valuation following 40% rally the last 3-months; SUPN slides given downward revision due to prescription (Rx) volume trends for both products year-to-date

·     Biotech movers; GH shares jumped after releasing better-than-expected Q2 results and boosts FY19 revenue view to $180M-$190M (99%-110% YoY growth) and above consensus $148.52M; AMAG plunges as Q2 revs miss at $78.1M vs. $90M est; cuts year Ebitda and sales forecast (325m-355m from 365m-415m prior); ICPT smaller Q2 EPS loss and higher Ocaliva sales of $65.9M and overall revs; CLVS fell in apparent response to positive Phase 3 data announced this morning on AstraZeneca and Merck’s PARP inhibitor Lynparza (olaparib) in certain metastatic castration-resistant prostate cancer patients; MRNA rises following its Q2 report released this morning that included a pipeline update and an announcement that collaboration partner VRTX

·     Healthcare services and providers; CVS posted Q2 EPS beat $1.89 vs. $1.69; comp sales 4.2% vs. est. 3.1% and raises year to 6.89-7.00 from 6.75-6.90; INGN shares drop after cutting FY19 revenue view to $370M-375M from $405M-$415M (est. $408.89M) associated with reduced expectations of the direct-to-consumer sales channel and posts Q2 eps/revs miss; NVTA to record highs as beats Q2 revs est., boosted by more than 111,000 samples in qtrly volume as tops revs est. for sixth time in last eight quarters; OMI jumps on better Q2 profit beat; EVH shares up over 30% despite larger quarterly EPS loss and rev miss and reduced its outlook; AXGN another supplier falling on reduced guidance

 

Industrials & Materials

·     Chemicals; BAYRY shares jumped after Susquehanna out saying roundup trial maybe postponed until January (originally scheduled for August); chemicals in general posted modest gains most of the trading session (DOW, CE, DD)

·     Transports; HTZ posts Q2 EPS beat, helping boost the car rental sector that fell yesterday on weaker CAR quarterly results; FDX confirms it won’t renew a ground delivery contract with AMZN as the company continues to pull away from the e-commerce giant.

·     Metals & Materials; gold miners rise early as investors continued to seek safe havens against heightened U.S.-China trade tensions (NEM, HMY, GFI, AUY, KGC), with gold topping the $1,500 an ounce level for the first time since 2013 before fading; outside of strength in gold miners, copper producers, steel makers, aluminum and iron ore companies all remained under pressure given the slowing global growth fears and trade impact fears (X, VALE, CLF, CMC, AKS)

 

Technology, Media & Telecom

·     Internet; NFLX shares fell below the $300 level and down for the 16th time in last 20 days; QUOT shares tumbled over 20% and downgraded by two analysts on lower outlook and as Bank America noted its three large Consumer Packaged Goods clients continued to decrease spending; in online travel,

·     Semiconductors; MCHP EPS of $1.41 were $0.03 above consensus. SepQ rev outlook is 2.5% below consensus, but assumes 2% QQ growth; Trump administration to unveil rule that bans equipment or services purchases from Huawei, CNBC reported late morning; semi’s overall outperformed broader technology after having dropped over 6% the last few sessions

·     Software movers; NEWR shares drop as Q1 results and updated FY20 outlook were disappointing as Q1 revs beat but billings of $125MM was below est. of $133.6MM while sees Q2 revs $144M – below estimates $146M; HUBS reported strong 2Q results, beating consensus expectations across the board–sub rev, billings, and op margins with revs (+34% YoY) and billings growth (+34% YoY) accelerated from 1Q levels; SAIL delivered a solid bounce-back quarter with headline results that were above expectations across all metrics, including revenue, billings and cash flow; in security, CYBR shares dropped despite beat and strong guidance raise, with some concerns surrounding deferred revs weighing on the stock

·     Media & Telecom movers; Dow component DIS disappoints as Q3 as fully-consolidated FOX results came in below consensus expectations/also said it would offer a $13-per-month bundle of its three streaming services Disney+, Hulu and ESPN+ starting in November/Q3 EPS $1.35 on revs $20.25B vs. est. $1.75/$21.47B; MTCH reaches record high as posts better-than-expected Q2 revenue and forecasts Q3 sales above est., as its popular app Tinder attracts more users (Tinder Average Subscribers were 5.2M in Q2 2019, increasing 503,000 sequentially and 1.5M YoY; SBGI shares fell as Q2 EPS missed Street expectations, despite revenues grow 5.6% to $770.7M; ETM shares dropped as much as 40% as Q2 results missed consensus on top and bottom lines and moved on two podcast-related acquisitions; NYT tumbled on ad decline rev forecast

_________________________________________________________________

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.

Live Trading

Open an Account

Paper Trading

Register