Mid-Morning Look: September 04, 2019

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Mid-Morning Look

Wednesday, September 04, 2019

Index

Up/Down

%

Last

 

DJ Industrials

167.97

0.64%

26,285

S&P 500

20.36

0.70%

2,926

Nasdaq

64.59

0.82%

7,940

Russell 2000

9.78

0.67%

1,482

 

 

U.S. equities with a nice recovery after yesterday’s sharp declines, rising on reports that Hong Kong’s leadership said it would withdraw the extradition bill that had sparked three-months of protests. The Hong Kong protests and violent clashes over the last few weeks has weighed heavily on market sentiment that was already dire given the ongoing trade/tariff dispute between the U.S/China. European and Asian shares jumped, led by a near 4% increase in Hong Kong overnight as many of the sectors that led the declines on Tuesday such as Technology, Energy and Commodities are among the top gainers today while defensive asset classes lag. Investors still remain on the alert for any news on China-U.S. trade talks, with officials from both countries struggling to agree on the next step after Washington rejected Beijing’s request to delay tariffs that took effect over the weekend and a tweet from President Trump can come at any time to shake markets up. Oil rebounds, the dollar slips from 2-year highs and gold prices are steady just off 6-year highs.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar a little pullback after sliding nearly -0.5% after touching 2-year highs yesterday; Treasury prices remain steady, with yields pressured (but up slightly from yesterday), as the 10-year yield remains under 1.5%. Commodity prices are recovering after yesterday’s decline for energy (oil) and industrial metals (copper to 2-year lows); precious metals prices have surged over the last month with gold at 6-year highs but silver outperforming the yellow metal of late – but little changed on the day early given the rotation back into stocks; oil jumps after pullback ahead of weekly inventory data.

 

Economic Data

·     The U.S. trade deficit narrows 2.7% to -$54B in July vs. -$53.5B consensus and -$55.5B prior (revised), with imports: $261.4B and exports: $207.4B

 

 

Macro

Up/Down

Last

 

WTI Crude

1.79

55.73

Brent

1.80

60.05

Gold

-0.50

1,555.40

EUR/USD

0.0043

1.1017

JPY/USD

0.22

106.16

10-Year Note

0.016

1.474%

 

 

Sector Movers Today

·     Software movers; COUP shares jumped to a new all-time high after Q2 results of broad-based upside, with 12% upside to consensus rev estimates representing its largest beat since going public and represented the strongest quarter to date in terms of billings upside performance; EA was removed from the Best Ideas list at Wedbush as see few near-term catalysts ahead of the launch of Star Wars Jedi: Fallen Order in mid-November; ATVI was upgraded to outperform at BMO Capital amid stronger conviction that the company’s restructuring efforts and investments in core games improve financial performance; SPLK acquired stealth-mode SaaS company Omnition for undisclosed terms

·     Biotech movers; ICPT was upgraded to buy at Citigroup while cutting its tgt to $85 from $106 saying they believe sentiment around the launch of NASH drugs is now more realistic after the stock fell ~45% since the phase III NASH REGENERATE results in February; PBYI announced that the U.S. FDA has granted Orphan Drug Designation to NERLYNX® (neratinib) for the treatment of breast cancer patients with brain metastases; AMAG activist Caligan seeks to replace four current directors on board, while saying assets could be worth at least $30 per share; RARE announces positive data from the second cohort in its Phase 1/2 clinical trial evaluating gene therapy DTX401 in patients with glycogen storage disease type Ia

·     Retailers; TPR said long-time CEO Victor Luis steps down, Chairman Jide Zeitlin to take over CEO role/Luis joined Coach in 2006 as president and CEO of Coach Japan; VRA shares declined after Q2 profit missed estimates (EPS 25c vs. est. 27c) although revenue rose more than forecast while comparable sales were up 2.1% in Q2 to match the expectation of analysts and fall in line with guidance for a low single-digit mark/E-commerce sales rose 4.7% Y/Y; AEO Q2 EPS of 39c beat by 7c on better sales while Q3 EPS 47c-49c below the 52c estimate and said American Eagle’s comparable sales decreased 1% and Aerie’s comparable sales increased 16%; GIII was downgraded to neutral from buy at Bank America; MIK shares spiked after earnings results as comp sales rose 0.3% in Q2 to top the consensus expectation for a mark of -1.1% while guides year sales of $5.16B-$5.19B and EPS $2.31-$2.42 vs. est. $5.19B/$2.34

 

Stock GAINERS

·     ATVI +4%; upgraded to Outperform at BMO Capital amid stronger conviction that the company’s restructuring efforts and investments in core games improve financial performance

·     BOX +10%; after Starboard Value discloses activist stake in 13D regulatory filing saying shares were “undervalued and represented an attractive investment opportunity”

·     CRK +17%; shares rose following positive comments by Dallas Cowboy owner Jerry Jones on CNBC, talking positively on natural gas

·     COUP +14%; after Q2 results of broad-based upside, with 12% upside to consensus rev estimates representing its largest beat since going public and represented the strongest quarter to date in terms of billings upside performance

·     MIK +17%; after earnings as comp sales rose 0.3% in Q2 to top the consensus expectation for a mark of -1.1% while guides year sales of $5.16B-$5.19B and EPS $2.31-$2.42 vs. est. $5.19B/$2.34

·     STMP +5%; being upgraded to neutral at Roth and upped its tgt to $52 from $32 saying it had a slightly more favorable view of 2020 after a round of channel checks with USPS ecosystem participants

·     TPR +2%; said long-time CEO Victor Luis steps down, Chairman Jide Zeitlin to take over CEO role/Luis joined Coach in 2006 as president and CEO of Coach Japan

 

Stock LAGGARDS

·     EBAY -1%; downgraded to neutral at UBS on valuation as shares are up 44% YTD

·     JBLU -3%; cuts 3Q RSM to -2-0% vs prior +0.5-3.5% citing softer bookings to Puerto Rico, weaker than forecast demand trends and impact of hurricane Dorian for decrease in Q3 RASM guidance

·     SBUX -3%; said it sees FY20 adj EPS growth outlook below 10% model while FY19 EPS is reiterated at $2.80 to $2.82 vs. $2.82 consensus

·     TSN -4%; lowers guidance; cuts year EPS to $5.30-$5.70 from prior view $5.75-$6.10 saying it is experiencing short-term challenges that are negatively affecting Q4 earnings

·     VRA -19%; after Q2 profit missed estimates (EPS 25c vs. est. 27c) although revenue rose more than forecast while comparable sales were up 2.1% in Q2 to match the expectation of analysts

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Content is provided by Hammerstone Inc., which has no affiliation with Regal Securities, Inc. (“Regal”) This commentary is provided for information purposes only, and is not a recommendation, offer or solicitation by Regal to buy or sell securities or to adopt any investment strategy. Regal has not participated in the creation of the Hammerstone content and does not directly or indirectly endorse the content. Any reliance on this material is at the sole discretion of the reader.

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