Mid-Morning Look: September 09, 2019

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Mid-Morning Look

Monday, September 09, 2019

Index

Up/Down

%

Last

 

DJ Industrials

83.27

0.31%

26,880

S&P 500

5.16

0.17%

2,983

Nasdaq

3.51

0.04%

8,106

Russell 2000

7.10

0.47%

1,512

 

 

U.S. stocks edge higher to start the week, on track for a 4th straight day of gains for the S&P 500 as the index moves with less than 2% of its all-time best levels on more trade hopes and rate cut expectations by the Fed. Treasury Secretary Steven Mnuchin said he takes it as a sign of “good faith” by China that officials will restart trade talks with their U.S. counterparts. Officials are expected to begin discussions in early October and Mnuchin said his objective is getting a good deal for American workers and companies. Financial stocks pacing the market gains early as Treasury yields move to their best levels in several weeks, while healthcare stocks lead declines after Goldman Sachs warns of a potential onslaught of drug pricing headlines in the coming weeks following Congress’s August recess. Energy stocks getting a boost early as oil prices extend last week gains, led by natural gas stocks (RRC, SWN, GPOR) as gas prices ear the highest level since May ($2.58 mln btu). In corporate news, no major earnings today, but top story was Elliot Management disclosing a $3.2B stake in AT&T (T) and outlined a plan it said could take the stock to $60 per share. Stocks gaining as well on rising expectations for easing from the ECB this week and the Fed next week. Risk on early with gold, the yen and Treasury prices slipping.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar is mostly lower, rising against the Japanese yen back above the 107 level, but falls vs. the euro and Pound while also dropping to 5-week lows below 1.135 against the Canadian dollar as oil prices rise. Commodity prices mixed as oil prices extend last week’s rebound and gold prices fall further from 6-year highs early last week. Treasury market’s slide as yields rally; the 30-year yield rises to 3-week highs trading above 2.11% (now more than 20 bps off all-time lows of 1.9% more than a week ago), while the 10-yr yield also rises well off recent lows (of 1.427% on 9/3), to trade above 1.61% and spread widens to over 4bps vs. the 2-year yield now; the 3-month/10-yr yield still inverted by roughly 33 bps

 

 

Macro

Up/Down

Last

 

WTI Crude

1.12

57.64

Brent

0.79

62.33

Gold

-1.70

1,513.80

EUR/USD

0.0026

1.1056

JPY/USD

0.14

107.06

10-Year Note

0.066

1.626%

 

 

Sector Movers Today

·     Hardware & Component news; AAPL to hold its annual product announcement tomorrow afternoon; FFIV upgraded to overweight from neutral at Piper and raise tgt to $166 from $161 on valuation after recent underperformance; in storage, Susquehanna upgraded shares of NTNX, PSTG and NTAP to positive from neutral

·     Consumer finance and lending; FNMA, FMCC shares rose after Treasury Secretary Steven Mnuchin said on Fox Business that an agreement between the Treasury and the Federal Housing Finance Agency soon that ends the Fannie and Freddie profit sweep; in auto loans, ALLY upgraded to overweight at Stephens saying they should be able to maintain or increase auto yield as it increases its application funnel, with dealers such as Carvana, CarMax, Fair, while downgraded SC to underweight saying declining credit reserves unlikely to keep driving EPS/losses broadly increasing; PAYS cuts FY19 revenue view to $35M-$37M from $38M-$40M which reflects delays in onboarding of new plasma industry programs planned for Q1 and Q2

·     Aerospace & Defense; BA shares active after it suspended testing of its 777X aircraft in the latest delay to a widebody program intended to soften the impact of its grounded 737 MAX jets; SAIC was upgraded to outperform at Cowen and raised tgt to $102 from $92 saying the -8% sell off Friday on a revenue guide down that was mostly timing provides attractive entry point given strong EPS/cash flow prospects and solid B2B; Baird said RTN and UTX added as fresh picks saying shares could rice between 30%-40% for both

·     Metals & Materials; in chemicals, RYAM suspended its quarterly cash dividend in order to prioritize its cash flow to repay indebtedness and fund capital investments and working capital needs; NEM was upgraded at RBC Capital saying now that that weaker than expected guidance from the Goldcorp assets is now likely priced in, expects the market to begin to discount the successful integration of the core Goldcorp assets and synergies from the Nevada JV

·     Paper sector rises after WRK announced today that it is reconfiguring its North Charleston, SC, paper mill to improve the mill’s operating efficiency and long-term competitiveness/shut down of one paper machine will reduce linerboard capacity by approximately 288,000 tons; shares of other paper stocks PKG, IP were active on the news

 

Stock GAINERS

·     ACAD +64%; after saying its experimental treatment pimavanserin met the main goal of a late-stage study testing the drug in patients with dementia-related psychosis/said the study will be stopped early, upon the recommendation of the study’s independent data monitoring committee

·     CMG +2%; upgraded to Outperform at Wedbush and raise target to $980 from $780 saying within the emerging battle for digital real estate, CMG is quickly establishing a leading position that could enable a multi-year streak of mid- to high-single digit SSS growth

·     CYOU +52%; after SOHU announces plan to buy remaining stake in company it doesn’t already own for $10 ADS

·     LVS +2%; after Deutsche Bank upgraded to buy with $70 tgt saying bearish sentiment on the Macau gaming market has created an attractive entry point for medium to longer term investors.

·     NEM +2%; upgraded to sector perform at RBC Capital saying now that that weaker than expected guidance from the Goldcorp assets is now likely priced in, expects the market to begin to discount the successful integration of the core Goldcorp assets and synergies from the Nevada JV

·     NFLX +3%; rises to highest levels in a month after Bank of America says it’s ‘seeing significant reacceleration’ in mobile app downloads, as per CNBC

·     T +4%; as shareholder Elliott Management Corp called the company “deeply undervalued” and urged it to restructure its business, including cutting costs in units, to increase shareholder value/said the company could achieve a value per share of more than $60 by the end of 2021

 

Stock LAGGARDS

·     AMGN -2%; announced new data from the ongoing Ph1 study for AMG-510 in KRAS lung cancer pts/new data shows 54% ORR at high dose, at the lower-end of Street expectations following ~50-100% ORR in prior data

·     BA -2%; after it suspended testing of its 777X aircraft in the latest delay to a widebody program intended to soften the impact of its grounded 737 MAX jets

·     CMA ; tgt cut to $74 from $86 at RBC Capital following the company’s 3Q outlook update ahead of an investor conference this week

·     NTRP -80%; after the company’s Bryostatin-1 failed to meet the primary endpoint in a phase 2 study in moderate to severe Alzheimer’s disease

·     PAYS -20%; as cuts FY19 revenue view to $35M-$37M from $38M-$40M which reflects delays in onboarding of new plasma industry programs planned for Q1 and Q2

·     RYAM -3%; said late Friday it has suspended its quarterly cash dividend in order to prioritize its cash flow to repay indebtedness and fund capital investments and working capital needs

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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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