Mid-Morning Look: August 26, 2019

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Mid-Morning Look

Monday, August 26, 2019






DJ Industrials




S&P 500








Russell 2000






A wild start to the week for global stock markets as Asian equities plunged overnight after President Donald Trump said late Friday he plans to hike tariff rates on certain Chinese goods in response to Beijing’s latest retaliation, raising China tariffs on $300B in goods to 15% from 10%, and will raise China tariffs on $250M in goods to 30% from 25%. That news took US futures and Asian markets lower. However, U.S. futures did an about face, pushing higher after China called and asked to restart trade talks according to President Trump after Beijing’s top trade negotiator publicly urged calm following the back-and-forth tariff increases by both nations. The news of potential trade talks resuming helped sooth US equity markets for now, bouncing the yield on the 10-year Treasury off its lowest levels since 2016 (touched 1.44%), while the dollar recovered off earlier lows and gold pulled back from 6-year highs. The gains were broad based but more pronounced in technology. In other trade news, Washington and Tokyo agreed in principle on a trade deal that cuts Japan’s duties on American pork and beef. There will be no change to U.S. tariffs on Japanese cars, Trump said at the G-7. Japan will also buy large quantities of U.S. wheat and corn. A strong start overall, though small and midcap stocks continue to underperform the large caps


Treasuries, Currencies and Commodities

·     In currency markets, the US dollar erased overnight losses, as the dollar index (DXY) trades back to the 98 level (overnight low 97.47) and recovers against the Japanese yen (fell to fresh 2019 lows of 104.46 overnight) to trade back near the 106 level (off highs 106.41) as stocks recover. Commodity prices were mostly higher despite the spike in the dollar, as oil recovers from last week slip and gold holds around 6-year highs above $1,540 an ounce. Treasury markets rallied sharply overnight as the 10-year yield hit its lowest level since 2016 (1.44%) on the increased trade tensions with China, but fought back above the 1.5% level, steady with the 2-yr yield.


Economic Data

·     US July Durables Goods Orders rose +2.1%, topping the 1.2% estimate while prior month was revised to 1.8% from 1.9%; July durables ex-transportation orders fell (-0.4%) vs. estimate unchanged and prior month revised down to 0.8% from 1%; durables ex-defense orders +1.4%, nondefense cap orders ex-aircraft +0.4% and durables shipments (-1.1%)







WTI Crude















10-Year Note





Sector Movers Today

·     Consumer Staples; CNBC reported KFC (YUM) to start testing plant-based fried chicken from BYND in an Atlanta restaurant; STZ said that its share of Canopy Growth Corp.’s losses will be $54.3M on a net basis, or $38.5M on an adjusted basis including a tax benefit, which will be recognized in its fiscal second quarter ended Aug. 31 (has made a $4B investment)

·     E&P sector; SRCI to be acquired by PDCE in an all-stock transaction valued at approximately $1.7B, including SRC’s net debt of approximately $685M as of June 30; Ladenburg downgraded shares of AXAS, HPR, OAS, RRC and REI to neutral from buy as believe reduced estimated free cash flow resulting from lower projected commodity prices, combined with uncertainty resulting from the escalation in the trade war, will be additional head winds for the E&P group

·     Semiconductors; QCOM shares active after a federal appeals court ruled that the chipmaker won’t have to renegotiate patent licenses while appealing an antitrust ruling/Mizuho called the ruling a “major win” and should be a near-term positive for the stock; CREE was downgraded to underweight at Piper and reducing estimates further to reflect the broader weakness in the LED market and the impact of Huawei on the Wolfspeed business; XLNX slipped early as KeyBanc said it believes the launch of MSFT’s FPGA-as-a-Service (FaaS) has been postponed from 4Q to early next year due to the availability of a key software-related feature



·     BMY +3%; AMGN agreed to acquire global rights to CELG’s psoriasis med Otezla (apremilast) for $13.4B in cash/BMY is divesting the PDE4 inhibitor in order to receive regulatory sign-off on its merger with Celgene/BMY raises shares buyback to $7B form $5B

·     DISH +4%; upgraded to strong buy from market perform at Raymond James with a $44 tgt saying now is the opportune time to buy after the recent pullback

·     LYFT +2%; was upgraded to buy at Guggenheim with $60 tgt citing an improved view for the company’s path to profitability

·     MDCO +9%; said its Phase 3 ORION-11 study of inclisiran, a cholesterol-lowering therapy, met all primary and secondary endpoints (shares had risen more than 30% pre-open on trial news)

·     PBI +1%; jumped after agreeing to sell its software-solutions unit for $700M in cash to privately held Syncsort/said it expects the deal will allow it to reduce spending and streamline operations.

·     RKDA +29%; announces agreement with Arista Cereal Technologies and Bay State Milling Company for commercialization of its high fiber resistant starch wheat in North America, Europe and parts of Asia

·     SRCI +6%; to be acquired by PDCE in an all-stock transaction valued at approximately $1.7B, including SRC’s net debt of approximately $685M as of June 30



·     BREW -1%; adds to Friday losses after BUD decided not to make a qualifying offer at $24.50 given BREW’s lackluster shipments/depletions trends and the steep premium

·     CREE -2%; downgraded to underweight at Piper and reducing estimates further to reflect the broader weakness in the LED market and the impact of Huawei on the Wolfspeed business

·     LB -2%; as shares of retailers GPS, LB, CPRI, KSS, M among the top decliners in the S&P 500 early

·     OSTK -7%; as volatility persists after CEO stepped down last week

·     ZGNX -11%; agreed to acquire privately held Modis Therapeutics, Inc., which focuses on developing novel therapies for rare genetic diseases with high unmet medical need


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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