Mid-Morning Look: August 13, 2019

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Mid-Morning Look

Tuesday, August 13, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities a remarkable spike higher after a flattish open, with markets going parabolic the first 30-minutes of trading all coming after headlines that the U.S. delayed tariffs on some Chinese imports until Dec. 15 (specifically on certain tech and retail products). The market strength was in technology (near 200 point bounce off the 7,851 lows in about 30 minutes), retailers, metals and mining all paced the gains, while defensive utilities, REITs and precious metals slipped after the headlines. The first spike came a few minutes after the open after reports from Xinhua Viewpoint that the U.S. and China are to speak again in the next 2-weeks, ahead of the deadline set by the U.S. last week of September 1st to add 10% additional tariffs on $300B of Chinese goods. The tweet from Xinhua indicated that China’s Liu He spoke with Mnuchin and Lighthizer. The parabolic move higher came after the USTR announced next steps on the proposed tariffs on China imports saying the US will delay some tariffs on some items until Dec 15th including cell phones, laptops, video game consoles, some toys and footwear (lifting technology stocks). The news helped low volume markets surge while pushing gold lower along with treasury prices. The trade news/headlines with China temporarily put the Hong Kong protests and Argentina debt issues to the back burner, but those items and global growth worries (German ZEW indicator of economic sentiment for Germany slumped to a -44.1 reading in August, which is the worst level since Dec. 2011) will continue to play a role in markets. Also of note today, the 2 and 10-year Treasury yield spread narrowed to as close as 2.2 bps before widening on the market bounce, raising recession fears (the spread was last negative in early June 2007). Meanwhile, on the data front, July core CPI readings came in a little hotter than expected – note Fed fund futures showed less 2019 easing priced in following the higher-than-expected CPI report. Note over 450 S&P 500 companies have reported second quarter earnings…73% beat on EPS while 59% beat on revenue.


Treasuries, Currencies and Commodities

·     In currency markets, the dollar was flat initially, but got a boost vs. major currencies following the trade talk news, coupled with a weaker euro after another sour data point in Germany, while safe-haven currency’s slide as investors rotate into riskier assets/Argentina’s peso tumbled for a second day, as investors remain jittery about the country’s political future.

·     Commodity prices mixed with gold prices dropping from earlier 6-year highs, benefiting from unrest in Hong Kong, a rout in the Argentine peso – but the latest delay in tariffs and the hotter CPI inflation pushed gold prices sharply lower while boost oil prices.

·     Treasury market’s erase early as investors buy stocks, with the 10-year yield up about 6.5 bps to 1.71% (off lows 1.616%) while the 2-yr yield up over 6 bps to 1.65% (off lows 1.557%) – the 2/10-yr spread narrowed to 2.2 bps earlier


Economic Data

·     Consumer Price Index (CPI) MoM for July reported in-line at 0.3% while core CPI (ex: Food & Energy) MoM for July little hotter at 0.3% vs. est. 0.2%. Consumer Price Index (CPI) YoY for July rises 1.8% vs. the est. 1.7% and core prices YoY at 2.2% vs. est. 2.1% – recap of data







WTI Crude















10-Year Note





Sector Movers Today

·     Retailers; Footwear and apparel stocks in particular were on watch after the U.S. Trade Representative includes “certain items of footwear and clothing” on the list of imported Chinese products that will see tariffs delayed until December 15 (NKE, DECK, UAA, CPRI, RL, TIF, TPR, FOSL, FLR, GPS, M, JWN, KSS, BBY all among top gainers); auto parts retailer AAP disappoints after Q2 EPS and revs fell short of consensus estimates and cuts the upper end of FY outlook with 2019 net sales of $9.65B-$9.75B down from prior view $9.65B-$9.80B and comparable store sales between 8%-8.2% from 8%-8.4% (shares of AZO, ORLY also active on reports which showed flat comps vs. est. up 1.6% for Q2

·     Restaurants; YUM announced that David Gibbs, President and COO, will be promoted to CEO on January 1, 2020 to succeed Greg Creed, who intends to retire and take an advisory role; EAT Q2 EPS of $1.36 beat by 2c on mostly in-line sales of $834.1M while system-wide comparable sales of +1.2% missed the +1.8% consensus/comp sales were up 1.5% at company-owned Chili’s restaurants and fell 0.2% at Maggiano’s restaurants/sees year EPS $4.15-$4.35 vs. est. $4.01; DPZ said stores across the nation will soon have the option to use custom e-bikes for pizza delivery through a partnership with e-bike brand Rad Power Bikes; DRI’s Olive Garden’s Never-Ending Pasta Pass is back for a sixth year, and this time they’ve got an upgrade available: a $500 Lifetime Pasta Pass that will be available to 50 fans; DAVE jumps on better Q2 earnings/sales

·     Asset managers; AB preliminary assets under management increased to $585B during July 2019 from $581B at the end of June, as the 0.7% increase was due to market appreciation, as well as total firm wide net inflows; IVZ preliminary month-end assets under management (AUM) of $1,198.7B, an increase of less than 0.1% driven by favorable market returns, higher money market AUM, non-management fee earning AUM inflows, and reinvested distributions, partially offset by foreign exchange and net long-term outflows MN preliminary assets under management of $21.0B at July 31, 2019 fell from $21.3B at June 30, 2019

·     Semiconductors; the Philadelphia Semiconductor Index (SOX) rose over 2.5% while AAPL gained as much as 5% earlier after the U.S. delayed the 10% tariff on some Chinese goods (including cell phones, laptops, and game consoles) until December 15. Earlier today, China said it would continue trade talks with the U.S. within the next two weeks. Last month, Apple filed for tariff exclusions for parts related to its Mac Pro line.



·     AAPL +5%; among leaders in technology along with chip related names following the positive news of tariff delay on cell-phones and lap tops to December

·     AVYA +10%; as beats Q3 revenue estimates and guides next quarter above ($735M-$755M vs. est. $716M) saying it was awarded two US government opportunities in Aug but guides year revs below views at $2.9B-$2.92B vs. est. $2.94B

·     DCPH +81%; said a phase 3 trial of its treatment (ripretinib) of gastrointestinal stromal tumors (GIST) achieved its primary endpoint of preventing cancer from progressing in patients with a form of stomach cancer, paving the way for the company to submit a NDA to the U.S. FDA

·     GNW +13%; after Brookfield Business Partners (BBU) agrees to buy GNW’s majority stake in Genworth MI Canada, the largest private sector residential mortgage insurer in Canada, in a transaction valued at C$2.4B (US$1.8B)

·     KSS +5%; as retailers among the biggest gainers on tariff delay news

·     OPTN +16%; after posting better-than-expected results after the close yesterday



·     AAP -1%; after Q2 EPS and revs fell short of consensus estimates and cuts the upper end of FY outlook with 2019 net sales of $9.65B-$9.75B down from prior view $9.65B-$9.80B

·     BE -34%; reported a smaller than expected Q2 loss and a 38% Y/Y in revenues to $234M but warning of slower than expected U.S. market growth in 2020/warned during yesterday’s earnings conference call that the company expects headwinds in the rest of 2019

·     CVET -42%; after Q2 miss with net loss of ($10M) as GAAP EPS loss (9c) on flat YoY revs of $1.01B and sees FY19 pro forma organic net sales growth of low single-digits

·     NEM -2%; a reversal to the downside in gold prices weighs on miners

·     TME -1%; Q2 results were in-line with ests, but flat mobile monthly active user growth and a dip in monthly average revenue per user; said mobile MAUs grew just 1% to 652 million and monthly ARPU dipped 1%

·     WES ; downgraded at both JPMorgan and Ladenburg given uncertainties following OXY’s recent acquisition of Anadarko, which owned ~55% of WES’ common units


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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