Mid-Morning Look: September 05, 2019

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Mid-Morning Look

Thursday, September 05, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities going parabolic in the early going, with the Dow Jones Industrial Average rising nearly 500-points in a broad based rally, while technology outperforms, leading the Nasdaq Composite higher by roughly 2% taking it back above the 8,100 level to it best levels since the end of July. The benchmark S&P 500 now moves within 2% of its all-time highs as financials also jump given the strong economic data today and subsequent spike in Treasury yields (10-year yield up over 10 bps to 1.58%). The jump in global stock markets comes on news that American and Chinese officials will hold new negotiations on trade in October, a day after stocks spiked with political tensions easing in Hong Kong, Italy though still quite disruptive in the UK (Brexit). Economic data lifting sentiment with ADP private payrolls solidly above views, ISM services topping views at 56.4 and non-farm productivity beat as well. Technology led by strength in software and semis (SOX +4% to new highs), as the industry seen among the top beneficiaries to improved trade negotiations news. The surge in stocks sending precious metal prices lower, while the dollar is mixed and energy names bounce with oil prices.


Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar was mixed, rising sharply (+0.65%) against the safe-haven Japanese yen (back above the 107 level) to its best level since early August as investors rotate into riskier assets, but down against the Canadian dollar, euro and Pound. U.S. data this morning a positive for the buck which is pulling back from two-year highs on Tuesday.

·     Commodity prices mixed as precious metal prices fall from multi-year highs, with gold down over 2% amid the “risk-on” market mentality early, pressuring safe-haven and defensive asset classes that have risen over the last few weeks

·     Treasury market’s plunge as yield surge given the strong economic data (potentially lessens aggressive stance to cut rates by the Fed), better trade news (prompting stocks to rally), as the 10-year yield rises to 1.58%, up 11bps now about 2 bps above the 2-yr yield of 1.56%, marking the 3rd straight day the yield curve not inverted. Global bond yields also bouncing as stocks surge on trade hopes, with the German 30-year yield turning positive for the first time in a month


Economic Data

·     August ADP private payrolls reported at 195K vs. est. rise of 148K; July revised by -14K to 142K from 156K as reported last month. The goods sector increased 11k, with an 8k rise in manufacturing and 6k gain in construction. The service sector added 184k jobs, led by education with a 58k jump, followed by a 42k gain in leisure, and a 39k pop in trade/transport.

·     Nonfarm productivity, Q2-F up 2.3% vs. est. 2.2% while Unit Labor Costs, Q2-F higher at 2.6% vs. est. 2.4%; Output rose 1.9% in 2Q; up 1.9% preliminary while employee hours fell 0.4% in 2Q; down 0.4% preliminary and compensation per hour rose 4.9% in 2Q; up 4.8% preliminary

·     Weekly Jobless Claims rise 1K to 217K vs. est. 215K (prior revised to 216K from 215K), continuing Claims reported at 1.662M vs. est. 1.688M; the 4-week moving average stood at 216.25K

·     Factory Orders for July rises 1.4% vs. est. 1.0%; Factory orders for June revised down to 0.5% gain, from 0.6% rise previously reported; new orders ex-trans rose 0.3% in July after falling 0.1% the prior month and new orders ex-defense for July rise 1.1% for second month. Durables orders for July rise 2% after rising 1.8% in June

·     ISM Non-Manufacturing Index for August reported at 56.4 vs. est. 54.0; component breakdown includes: new orders rise to 60.3 vs 54.1 last month (best levels since February) while prices paid rose to 58.2 vs 56.5; employment fell to 53.1 vs 56.2 MoM at March 2017 lows), while backlog of orders fell to 49.0 vs 54 and new export orders fell to 50.5 vs 53.5

·     The 30-year fixed mortgage rate for week ended today fell to 3.49% from 3.58%, its lowest level since October 2016 while the 15-year rate avg 3.00%, down from 3.06% a week earlier.







WTI Crude















10-Year Note





Sector Movers Today

·     Pharma movers; MNK shares plunge on reports they hired a consultant and law firm to help explore options to absorb potential costs from lawsuits tied to the sales of opioids (shares of specialty pharma names (TEVA, ENDP, MYL) and drug distributors (ABC, CAH, MCK) moved in reaction as well; BMY said a phase III CheckMate-548 trial evaluating the addition of Opdivo to temozolomide and radiation therapy did not meet one of its primary endpoints, progression-free survival in patients with newly diagnosed glioblastoma multiforme; in cannabis space, CRON was upgraded to market perform at BMO Capital following recent stock decline as it is now trading largely in line with valuations of other large, publicly-traded cannabis producers; ACRS said it will restructure its operations, including a reduction in headcount of 86 positions

·     In software research, HUBS was upgraded to outperform from sector perform at RBC and raised its tgt to $230 from $187; VMW was upgraded to neutral from sell at Goldman Sachs with $152 tgt saying the recent pullback in shares back in the share price has reset investor expectations around the company’s growth trajectory; ATVI was upgraded to overweight at Stephens with a new tgt of $65 citing the improving outlook with recent content updates and the fall catalysts right around the corner (BMO upgraded yesterday); CLDR upgraded at JMP Securities after the company reported F2Q20 results that were much improved compared to F1Q20

·     Energy stock movers; RDSA was downgraded to market perform at Cowen and cut tgt to $60 from $69 and lower ests due to peer high relative exposure to international gas which they expect to be lower for longer and a subpar financial framework; OXY initiated positive and $55 tgt at Susquehanna underpinned by view that there’s upside to the capital efficiency implied in OXY’s longer-term production/capex targets as the APC assets are fully integrated; NOV was upgraded to buy at Jefferies saying outlook includes backlog-based growth potential and less margin risk, even with macro uncertainty; HP cut its capital expenditure forecast for the full year to $485M-$495M from $500M-$530M and sees 2020 capital expenditure about $300M/expects to exit quarter at low end of its previously guided range of 193-203 rigs

·     Retailers; SIG shares jump after topping sales and profit estimates, with comp sales falling (-1.5%), better than the (-3.1%) est. loss with positive comps at Zale’s (+2.0%) and Piercing Pagoda (+11.4%) offset in part negative comps at Kay (-2.7%), Jared (-3.5%), James Allen (-1.5%) and Peoples (-0.9%)/guidance better as sees year EPS $2.91-$3.23 on sales $6.0B-$6.3B vs. est. $2.90/$6.01B; KIRK shares plunge after the company said it expects to report a loss for the year between $1.25 a share and $1.50 a share (in June, it said it was expecting net income to be between flat to 15c for the year)/also reported a wider net loss on an adjusted basis; TSCO and TTC announced a new long-term strategic partnership; GIII shares rebound despite mixed Q2 results (EPS beat/sales miss) and lower guidance (cuts year EPS view by a dime but ups sales view), having slipped after two analyst downgrades earlier this week



·     AVAV +7%; reported Q1 revs $86.9M above consensus as double-digit topline performance was lifted almost exclusively by robust small UAS sales

·     CLDR +12%; following an ~8% beat on revenue ($196.7M vs. $182.3M cons.), primarily attributed to improved sales execution and renewals and ARR of $682M, up 16% YoY, down from 21% last quarter, but well ahead of guidance of 10-12%

·     GBT +14%; FDA accepted its marketing application seeking approval of voxelotor for the treatment of sickle cell disease (SCD)/agency’s action date under Priority Review status is February 26, 2020

·     GIII +25%; despite mixed Q2 results (EPS beat/sales miss) and lower guidance (cuts year EPS view by a dime but ups sales view), having slipped after two analyst downgrades earlier this week

·     PANW +6%; reported Q4 earnings results that topped views and hosted an analyst day/shares fell initially on weaker Q1 guidance (EPS of $1.02-$1.04 vs. est. $1.33) but also provided three-year guidance that suggested long-term growth will be ahead of consensus

·     SIG +23%; after topping sales and profit estimates, with comp sales falling (-1.5%), better than the (-3.1%) est. loss/sees year EPS $2.91-$3.23 on sales $6.0B-$6.3B vs. est. $2.90/$6.01B



·     BTU -2%; reaffirms FY guidance targets while sees cap-ex at the lower end of range and said sees Q3 results materially lower than Q2 hurt by falling demand for two different types of coal

·     CHD -3%; shares slide after short-seller Spruce Point Capital issued a strong sell rating with 35%-50% downside risk

·     HOME -8%; after lower guidance as cuts FY20 comp sales view to down 1.5% to up 0.5% from down 1% to up 1%, despite slightly better EPS and comps for Q2

·     MDP -26%; after quarterly results as revs fell YoY, though topped consensus while guidance for the year fell well short of consensus views

·     MNK -39%; shares plunge on reports they hired a consultant and law firm to help explore options to absorb potential costs from lawsuits tied to the sales of opioids

·     MTCH -4%, along with weakness in IAC after FB announced the launch of Facebook Dating in the U.S

·     WORK -13%; as expects slowing revenue growth in the second half, but posted a $3.7M revenue beat, as revenue increased to $145M on growth of 58% y/y, but was partially tempered by $8M in one-time customer credits due to the SLA slipping below 99.99% during outages witnessed in June and July according to KeyBanc


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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