Mid-Morning Look: August 09, 2019

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Mid-Morning Look

Friday, August 09, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-203.92

0.77%

26,174

S&P 500

-25.88

0.88%

2,912

Nasdaq

-94.59

1.18%

7,945

Russell 2000

-14.34

0.94%

1,517

 

 

U.S. equities erasing yesterday’s strong gains, coming under pressure once again following actions/comments by President Trump and the administration directed at China and trade. The ongoing tit-for-tat escalations has made it a volatile and choppy market over the last week. Stocks took another leg lower after President Trump said this morning its going “very well with China” but not ready to make a deal. Trump also said “we are not going to be doing business with Huawei” reiterating comments last night as the Trump administration said to be delaying licensing decisions for U.S. companies to restart business with Huawei Technologies. Technology stocks taking the brunt of selling this morning, namely chips and optical related companies that do business with Huawei as the Nasdaq Composite with a quick roll of 1.25% to move below 7,940 (off highs 8,020), with semi’s down over 2.2%. European markets trade lower as Italian banks plunge amid political turmoil, with Germany sliding on another weak data report. Defensive Utilities and REITs among the only sector gainers early. Lone piece of economic data today showed low inflation, raising the prospect the Fed can get more aggressive in their rate cut cycle (note President Trump this morning said he would like to see rates 100 bps lower).

 

Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar mixed as it falls against safe-haven currencies as the Japanese yen following the cautious comments (again) by Trump on China as stocks react negatively, while the euro bounces to the 1.12 level. Gold prices off the lows as well in the rotation back into defensive assets while oil prices jumped early. Treasury market’s rally with yields tumbling again, as the 10-year dips back below the 1.70% level. The IEA has reduced growth forecasts for oil-demand for this year and in 2020, citing increasing trade tensions between the U.S. and China.

 

Economic Data

·     Producer Price Index (PPI) Final Demand MoM for July was reported in-line at 0.2%, while core prices (Ex: Food & Energy MoM for July declined (-0.1%) vs. est. 0.1% (as inflation remains subdued – giving the Fed more room to cut rates further if need be). PPI Final Demand YoY for July was in-line at 1.7% and core prices YoY was 2.1% below the 2.3% estimate

 

 

Macro

Up/Down

Last

 

WTI Crude

2.00

54.54

Brent

1.50

58.86

Gold

1.40

1,510.90

EUR/USD

0.0016

1.196

JPY/USD

-0.40

105.68

10-Year Note

-0.03

1.686%

 

 

Sector Movers Today

·     Hardware & Component news; DBX quarterly billings disappointed even as profit and sales topped estimates, sending shares lower; DXC shares drop as reported an in-line quarter on lower margins and a lower tax rate and revised down FY 20 revenue, EPS and FCF guidance which reflects near-term impact from delayed deal closings, lower revenue and delays in executing cost cutting programs; Huawei suppliers active today ACIA, NPTN, LITE, AAOI, after US opts against providing licenses to sell through Huawei; CNDT slides after Q2 adjusted EPS 13c/$1.11B vs. est. 17c/$1.11B; lowers FY19 revenue growth view to (5%)-(4%) from (4%)-(3%)

·     Metals & Materials; Iron ore price plunges 12% on the week for biggest drop in 16 months and down for a 7th straight day with the most-traded iron ore contract on the Dalian Commodity Exchange dropping as much as 5.4% to 628 yuan/metric ton ($89.11) per reports (shares of CLF, VALE, BHP, RIO leveraged to iron ore); Steel producers were weak (X, NUE, CMC, STLD) after Sky News Business reported ministers agree £300m British Steel support package

·     Chemicals; RBC Capital weighs in on the industry as they downgraded CC and VNTR (and cut tgts) saying with the H2 recovery outlook turning more cautious due to uncertainties arising from lingering trade war and slowing global growth, our view has also now turned more cautious on any near-term uplift in TiO2 demand and prices; Separately, RBC upgraded CTVA to outperform as they believe conditions could now set up 2020 nicely and also upped FMC to outperform from sector perform and raises his tgt to $103 from $87 saying they had mistakenly thought the patent “cliff” in 2022 would result in a quicker deterioration of sales and EBITDA based on prior patent expiration in health care.

·     Retailers; MAT shares fell after the toy company canceled a planned debt sale and disclosed an anonymous whistleblower letter/in a filing with the SEC, the company said it was launching an investigation into matters brought up in the letter, without details; golf retailer ELY shares advanced after reports better-than-expected Q2 sales and profit boosted by its TravisMathew and Jack Wolfskin businesses; FNKO solid quarterly beat with strong double-digit growth across geographies, channels and product segments led shares higher; ALRM reported 2Q results that modestly came in ahead of guidance and consensus estimates on both the top and bottom-line and raised its year outlook to $460.2M-$465M vs. est. $452.1M

·     Hardware & Component news; DBX quarterly billings disappointed even as profit and sales topped estimates, sending shares lower; DXC shares drop as reported an in-line quarter on lower margins and a lower tax rate and revised down FY 20 revenue, EPS and FCF guidance which reflects near-term impact from delayed deal closings, lower revenue and delays in executing cost cutting programs; Huawei suppliers active today ACIA, NPTN, LITE, AAOI, after US opts against providing licenses to sell through Huawei; CNDT slides after Q2 adjusted EPS 13c/$1.11B vs. est. 17c/$1.11B; lowers FY19 revenue growth view to (5%)-(4%) from (4%)-(3%)

 

Stock GAINERS

·     ALRM +8%; reported 2Q results that modestly came in ahead of guidance and consensus estimates on both the top and bottom-line and raised its year outlook

·     CUTR +23%; traded to 52-week high of $35.85 after better results, but shares have slipped back below $31 (gross margins also were better)

·     ELY +12%; reports better-than-expected Q2 sales and profit boosted by its TravisMathew and Jack Wolfskin businesses/ raises 2019 EPS outlook to $1.03-$1.09 from 96c-$1.06 and ups sales view

·     PBYI +30%; reported 2Q19 earnings which included a small Nerlynx beat (+1%) as analysts remain mixed regarding meaningful acceleration for its demand

·     WAIR +6%; agrees to be taken private by Platinum Equity, where it will be combined with Pattonair for $11.05/share in cash, in a deal valued at $1.9B

·     WPP +6%; after beating first-half sales estimates. Revenue, less pass-through costs at the ad giant, fell 2%, compared with the 2.9% consensus. Sales fell 6.9% in North America

·     YELP +8%; Q2 revenue falls short of estimates but profit beats estimates, while forecasts Q3 net revenue to grow by 8-10% compared with prior year and also reiterates 2019 forecast

 

Stock LAGGARDS

·     AMRN -20%; after saying it t anticipates a delay in review of its label expansion application for lead drug, Vascepa, by the U.S. FDA to late December instead of September 28

·     DXC -20%; revised down FY 20 revenue, EPS and FCF guidance which reflects near-term impact from delayed deal closings, lower revenue and delays in executing cost cutting programs

·     FSLY -21%; after a wider Q2 EPS loss of (16c) and in-line revs $46M and announced a board member resignation

·     FTCH -39%; cuts FY growth expectations for GMV to ~$2.1B (+50% Y/Y), platform GMV of $1.91B-$1.95B (+37%-40% vs. previous guidance for +41%) and to limit promotional activity

·     KALA -8%; after saying the FDA declined to approve its marketing application for KPI-121 0.25%, its treatment for relief from symptoms of dry eye disease

·     MAT -9%; canceled a planned debt sale and disclosed an anonymous whistleblower letter/in a filing with the SEC, said it was launching an investigation into matters brought up in the letter

·     NKTR -32%; disclosed a string of negative updates with its 2Q call including no lung data at ESMO, manufacturing issues and identification of suboptimal production lots of bempeg, and narrowing of the scope of the BMY-NKTR collaboration

·     SYNA -5%; downgraded to underweight at JPM after posting mixed F4Q19 results, posting light revenues though beating on EPS driven by mix shift to IoT products and cost rationalizations

·     PUMP -30%; reported preliminary 2q earnings but delayed the release of their 10-Q due to an audit of expense reimbursement practices/downgraded to neutral at Citigroup

·     UBER -7%; after posting a larger-than-expected quarterly loss of $5.2B as well as weaker sales, sending shares sharply lower

·     VRAY -43%; lowers FY19 revenue view to $80M-$95M from $111M-$124M (vs. est. $118.52M) and also increased the expected cash burn to $80-90MM from $65-75MM

 

Syndicate

·     Iqvia (IQV) 4M share Block Trade priced at $157.10

·     PennyMac Mortgage (PMT) 8M share Spot Secondary priced at $21.75

·     Quanterix (QTRX) 2.38M share Secondary priced at $25.25

·     Restaurant Brands (QSR) 20M share Block Trade priced at $73.50

·     Silk Road Medical (SILK) 4.2M share Secondary priced at $39.50

·     Stemline (STML) 5M share Secondary priced at $15.25

_________________________________________________________________

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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