Mid-Morning Look: September 06, 2019

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Mid-Morning Look

Friday, September 06, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities volatile in the early going, pulling back initially from overnight highs after a weaker-than-expected jobs report for August (added 130K jobs vs. est. 160K) renewed concerns about the U.S. economy, but also boosted hopes it would give the Fed ammo it needed to cut rates when they meet in a few weeks. The underwhelming report actually didn’t do much to alter traders’ expectations for Fed rate cuts as Fed -funds futures point to the market pricing in a 92% chance of the Fed lowering its benchmark rate by 25 basis points at its meeting later this month. Stocks bounced off the lows after White House economic advisor Larry Kudlow said in an interview on CNBC that China trade talks have been slow-going of late but also said “You may say they’re now going to heat up” with Chinese officials coming to Washington. “Tempers are calmer now.” Deputies will meet in “late September,” and principals in early October. Markets now await Fed Chairman Powell who is expected to speak early this afternoon in Zurich on the economic outlook. Outside of a handful of earnings results in tech (DOCU, ZM, GWRE, PD, CRWD) and retail (LULU, ZUMZ, GCO), corporate news generally quiet. Also of note, Hurricane Dorian made U.S. landfall along North Carolina Friday morning. 


Treasuries, Currencies and Commodities

·     In currency markets, the US dollar remains mixed, slipping back below the 107 level against the yen (was at 5-week highs), but has recovered from its initial post-jobs report dip to 106.62 (overnight high was 107.10) amid stock market uncertainty; the Yuan moves higher to 7.1179 per U.S. dollar after the People’s Bank of China reduced the amount of funds banks have to hold in reserve/move releases another 900B yuan ($126.4B) of liquidity; Bitcoin prices up over 3% to $10,580, touching its best levels since August 20th

·     Commodity prices are mixed as gold prices with a nice bounce off morning lows ($1,510.70 an ounce), jumping back above the $1,530 an ounce level following the weaker monthly jobs report (note gold prices plunged over 2.2% yesterday on sector rotation out of safe-havens). Gold prices failing to hold its recent gains, sliding over 2% early back to the $55 per barrel level (down from weekly highs of $57.76 early yesterday on bullish inventory data)

·     Treasury markets reverse earlier losses to trade flat, with the 10-year yield trading to highs above 1.6% earlier on stock strength, only to slide to lows below 1.55% after the better jobs report (off weekly lows of 1.427% on 9/3); yield on 10-year remains above the 2-yr (1.53%) for a 4th day


Economic Data

·     Jobs data weaker as the change in Nonfarm Payrolls for August reported at 130K vs. est. 160K (and prior month revised down to 159K from 164K); the change in Private Payrolls for August at 96K below est. 150K (prior revised down to 131K from 148K); change in Manufacturing Payrolls for August at 3K, below est. 5K; unemployment Rate for Aug in-line at 3.7%; average Hourly Earnings for August rises 0.4% vs. est. 0.3% – recap of jobs data which comes in light on headlines







WTI Crude















10-Year Note





Sector Movers Today

·     Energy stocks broadly lower as oil prices erase earlier weekly gains, with WTI crude sliding 2% dragging energy stocks lower; Goldman Sachs cut tgts for OXY, EQT, APA, HES, SWN, MRO, NBL as firm lowers growth forecast for cos exposed to natural gas and natural gas liquid prices; also downgraded AR to neutral from buy on lower-than-expected NGL/gas prices; says activity in the Appalachia Basin in the United States is starting to slow; sees continued reduction in growth expectations in 2020 for producers

·     Utilities & Solar; Morgan Stanley downgraded ETR while upgraded NRG noting sector outperformance relative to the broader market has resulted in a very high relative valuation for the lowest risk stocks, leaving opportunities to invest in U.S. utility stocks that have been left behind/also raised price tgts on XEL, AEE and CMS as sees these Midwest utilities offering above-average earnings growth (says avoid EIX, PCG, PNW, SO); CNP upgraded at SunTrust as believe the 13%-14% valuation discount for CNP shares (relative to its peers) is unwarranted, and overly penalizes the stock for earnings outlook concerns which should be addressed in coming months

·     Consumer Staples; K (Kellogg) was upgraded to buy at Goldman Sachs with improved $72 tgt on view that organic sales at the food company will accelerate and profit margins improve, while downgraded CAG to neutral and cut tgt to $31 in the food space; FIZZ shares slipped early after the beverage company falls slightly short of Q2 estimates; BYND initiated underperform and $130 target at Davidson citing cautious approach to the total addressable market

·     Internet; BABA agreed to acquire an import e-commerce business from NTES, Kaola, for about $2B, and invest $700M into NetEase’s streaming music business, NetEase Cloud Music. Alibaba will continue to operate Kaola as an independent business https://on.mktw.net/2lzKZJU ; NY State AG said is launching an investigation into FB to determine whether their actions



·     AGCO +2%; was upgraded to buy with $84 tgt at Stifel as came away more encouraged with the self-help margin and market share initiatives underway at the company after mgmt meetings

·     DOCU +19%; provided upside across all revenue drivers (though EPS missed) with subscription revs of $221M +39% YoY and subscription billings of $238M +44% YoY came in well ahead

·     GCO +15%; after Q2 earnings topped views (15c vs. expected loss) on better comps of 3% vs. est. 1.4% and raises year comp sales view to 2%-3% from 1%-2% and better EPS outlook

·     GRUB +8%; as MCD is adding it to its growing roster of delivery services/GRUB and its Seamless division will launch the service at around 500 McDonald’s restaurants in New York City

·     GWRE +11%; a nice bounce off overnight weakness, rising after quarterly beat (shares fell overnight on lower outlook)

·     IMUX +16%; following encouraging IMU-838 data which showed activity at the lowest dose (10 mg) and tolerability at the highest dose (45 mg)/trial will continue with all three dosing arms

·     LULU +7%; Q3 EPS beat by 7c on better sales ($883M vs. $845M est.) and comp sales handily topped the 5.2% estimate and raises year EPS view to $4.63-$4.70 from prior $4.51-$4.58

·     ZUMZ +6%; Q2 revs top estimates with upbeat Q3 guidance and raised FY 19 EPS view to 2.10-$2.20 from $1.84-$1.94 (est. $1.90)



·     APA -2%; as energy stocks broadly lower as oil prices erase earlier weekly gains, with WTI crude sliding 2% dragging energy stocks lower

·     DOMO -34%; set for worst day since company’s IPO in June 2018 after the company cuts FY 2020 revenue, profit forecast – downgraded at CSFB to neutral

·     MRC -11%; after lowering its Q3 revenue outlook to $930M-$950M which was below est of roughly $1B citing continued reductions in customer spending levels and lower demand

·     PD -8%; mixed results as 2Q results topped expectations as billings, revenue, and profits surpassed expectations, but guidance disappointed investors

·     PII -2%; after the NY Times reported the Polaris RZR has been linked to “scores of fires” and four deaths, and lawsuits contend that the company concealed knowledge of defective products


·     Advanced Drainage (WMS) 9M share Secondary priced at $29.75

·     Antero Midstream (AM) 20M share Block Trade priced at $6.88

·     Clarivate Analytics (CCC) 34.5M share Secondary priced at $16.00

·     iRhythm (IRTC) 1.37M share Secondary priced at $73.00

·     Liberty Property (LPT) 8M share Spot Secondary priced at $50.50

·     Turning Point Therapeutics (TPTX) 4.5M share Secondary priced at $45.00

·     uniQure (QURE) 4.89M share Secondary priced at $46.00


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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