Mid-Morning Look: August 07, 2019

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Mid-Morning Look

Wednesday, August 07, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-238.81

0.92%

27,790

S&P 500

-14.08

0.49%

2,867

Nasdaq

-5.44

0.07%

7,827

Russell 2000

-12.53

0.83%

1,489

 

 

U.S. equities open with a thud, as the Dow Industrial Average fell over 600 points to its lows of 25,440, trading below its Monday lows and the 200-day MA support (25,555) and erasing yesterday’s gains, as economic growth concerns spark a lack of confidence in risk assets. The S&P 500 Index and Nasdaq Composite also sunk as another sharp decline in Treasury yields boosted fear in markets, with the ten-year yield sinking to 1.6% and the 2-yr 1.5% (lowest levels since 2016). Global central bank easing weighing on yields as three more central banks – in India, Thailand and New Zealand – cut their interest rates overnight, while low-to-negative sovereign bond yields around the world likely is driving demand into U.S. Treasury’s in a “safe haven” trade. Gold prices add to gains, moving to fresh 6-year highs above the $1,500 an ounce level while oil prices plunge to 7-month lows on slowing global growth fears as well as another bearish weekly inventory report. All 11 S&P 500 sectors trade lower initially, with financials and energy (-2.1%) leading the decline, but some have crept into positive territory now. Dow component Disney slid over 6% after disappointing earnings and revenue in the latest quarter. Markets in the U.S. have since pared losses the Dow Jones Transport index fell below the 10,000 level (low print 9,965.07), before recovering. Once again, macro fears, and trade concerns with China are dominating stock market action early, overshadowing another very busy night and morning of quarterly earnings results.

 

Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar falling 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. The euro extends 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.

·     Commodity prices are mixed as oil prices tumbled to 7-month lows given the mass sell-off in global risk assets and bearish inventory data while gold prices topped the $1,500 an ounce market for the first time in 6-years as investors pile into safe-haven assets given the stock market uncertainty the last week, plunging on trade concerns and global central bank easing. The EIA showed an unexpected build in crude stockpiles of 2.39M barrels vs. est. for draw of -2.7M.

·     Treasury market’s rally and yields plunge with the 10-year dropping below the 1.60% level and 2-year yield touching lows around 1.50% and the 30-year falling to 2.12% (note we were at 2.07% just a week ago on the 10-year yield prior to the FOMC 25 bps cut and as high as 1.96% for the 2-year yield just after Powell’s press conference a week ago).

 

 

Macro

Up/Down

Last

 

WTI Crude

-2.18

51.45

Brent

-2.02

56.92

Gold

27.60

1,511.60

EUR/USD

0.0019

1.1218

JPY/USD

-0.57

105.90

10-Year Note

-0.08

1.621%

 

 

Sector Movers Today

·     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

·     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

·     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

·     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

 

Stock GAINERS

·     BYND +2%; as 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

·     CBM +47%; 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

·     CVS +5%; 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

·     FLT +7%; 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

·     GH +20%; after releasing better-than-expected Q2 results and boosts FY19 revenue view to $180M-$190M (99%-110% YoY growth) and above consensus $148.52M

·     MTCH +24%; 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

·     RYTM +19%; after two Phase 3 trials evaluating setmelanotide for treatment of pro-opiomelanocortin and leptin receptor deficiency obesities both met primary endpoints.

·     SEDG +23%; quarterly results beat estimates and forecasts Q3 revenue well above estimates amid strong performance of its solar business (sees 3Q revs $395M-$410M vs. $320.4M)

·     WW +37%; 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

 

Stock LAGGARDS

·     AMAG -21%; as Q2 revs miss at $78.1M vs. $90M est; cuts year Ebitda and sales forecast (325m-355m from 365m-415m prior)

·     ATNX 28%; after the company reported a second-quarter loss that was greater than what analysts expected

·     DIS -5%; disappoints as Q3 as fully-consolidated FOX results came in below consensus expectations/Q3 EPS $1.35 on revs $20.25B vs. est. $1.75/$21.47B

·     INGN -22%; 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

·     KAR -13%; 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

·     LL -12%; as tariffs impact guidance with Q2 comp sales flat vs. +0.1% consensus and total sales were up 1.8%

·     NEWR -31%; as Q1 results and updated 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

·     OAS 27%; 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

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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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