Mid-Morning Look: September 13, 2019

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Mid-Morning Look

Friday, September 13, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities open higher to mixed, with tech stocks lagging initially (NASDAQ), but all-time highs are within sight for the S&P 500 and Dow Industrials (Thursday’s action left the Dow and S&P just about 0.7% and 0.5% from their respective record closes) on rising trade hopes and central bank actions (ahead of the Fed meeting next week). Headlines on trade overnight added to the recent easing of tensions as China said they will exempt U.S. soybeans and pork from additional tariffs (ahead of expected talks with the U.S. in October) while President Trump said last night he’d be open to a smaller-scale, interim trade deal with China. Economic data was strong as U.S. retail sales in August rose by a higher than expected 0.4%, pointing to continued solid consumer spending. Apple (AAPL) falls on cautious comments and a lower price tgt at Goldman Sachs (after good run in shares), which is pressuring tech along with in-line results from semi maker AVGO overnight. Treasury yields rise to near 6-week highs after a strong round of economic data (retail sales beat) which is causing a dilemma for the FOMC. The Fed remains in a tough spot heading into next week’s interest rate policy meeting, where they are stuck between stock market expectations for a rate cut/added easing measures, especially after other central banks around the world (ECB yesterday) has been cutting rates to stimulate growth. At the same time, economic data this week in the U.S. has been solid, including a rise in inflation (CPI), not necessarily warranting Fed intervention at this time as they said they would remain data dependent. The Dow Industrials is looking for its 8th straight day of gains (the Dow last closed up 8 days in a row in May 2018), while Small Caps look to close out the week with big gains. Stocks took a quick dip this morning on a China news report that the USS Wayne E. Meyer, a guided-missile destroyer, entered Chinese waters surrounding the Paracel Islands Sept. 13, while China forces warned the U.S. warship to leave.


Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar is little changed vs. the yen (holding near 5-week highs) and the euro after volatility yesterday following the ECB easing measures; the British pound extended last week’s dramatic rally on Friday as investors pounced on a media report that Northern Ireland’s largest political party had agreed to accept some European Union rules after Brexit. All eyes on the Fed next week when they meet to discuss rates. Commodity prices are mixed with gold prices edging lower while oil prices on track for a 4th straight day of losses.

·     Treasury market’s slide as yields jump, with the 10-year yield jumping to morning highs of 1.836%, up over 6 bps after economic data and its best levels since Aug 5th (and more than 40 bps off 9/3 low of 1.427%). The decline in prices came after August retail sales topped expectations, rising 0.4% vs. 0.2% expected and July was upwardly revised to a 0.8% gain.


Economic Data

·     Import Prices MoM for August falls an in-line (-0.5%) vs. est. (-0.5%), while export Prices MoM for August falls (-0.6%) vs. est. (-0.3%); Import prices ex-fuels unchanged m/m after no change in July and import prices ex-petroleum unchanged m/m after no change in July

·     Retail Sales MoM for Aug rises a better-than-expected 0.4% vs. est. 0.2% (prior month revised to 0.8% from 0.7%) and Retail Sales Ex: Autos MoM for Aug was unchanged vs. est. 0.1%; Retail sales rose to $526.057B in Aug. vs $524.165B in July

·     University of Michigan Confidence reported at 92.0 vs. est. 90.8 after 89.8 prior month; current economic conditions index rose to 106.9 vs. 105.3 last month, the expectations index rose to 82.4 vs. 79.9 last month and the expected change in median prices during the next year rose to 2.8% vs. 2.7% last month.

·     Business Inventories rose 0.4% vs. 0.3% estimate as the three-month annualized change in inventories $51.3B in July; manufacturers’ inventories rose 0.2% MoM in July after rising 0.1% prior month and retailers inventories rose 0.8% MoM in July after falling 0.2% prior month







WTI Crude















10-Year Note





Sector Movers Today

·     Auto’s; Bank America with a slew of rating changes in the auto space, as they downgraded ABG, ADNT, and APTV from Buy to Neutral, cut LAD and SAH to Underperform, upgraded DAN from Neutral to Buy, and upgraded GTX and SHLO to Neutral as generally moving towards a more neutral-bias across each of the sub-sectors in our coverage (OEMs, suppliers, dealers), which they believe is appropriate at this point in the cycle

·     Biotech movers; Eisai Co. Ltd. and BIIB said they would discontinue the Phase III clinical studies on lanabecestat in patients with early Alzheimer’s disease based on the results of a safety review which recommended discontinuing the trials due to unfavorable risk-benefit ratio; BMRN positive mention by Stifel and Piper ahead of likely Q4 phase III results for Vosoritide which are likely to be positive and drive shares higher; ACAD was upgraded to outperform at Leerink and raise tgt to $50 from $21 after positive results on Monday from a late-stage study in dementia-related psychosis; AMGN said a study evaluating the combined use of Kyprolis with dexamethasone and Darzalex for multiple myeloma met its primary endpoint; ADVM adds to yesterday’s 50% declines following data – Chardan said at 24-weeks post intravitreal (IVT) injection of a single dose of 6 x 10^11 vg/eye of ADVM-022 – OPTIC phase I data leave unanswered questions

·     Asset managers; LM was downgraded at Wells Fargo based on view that substantial value in LM has now been unlocked following the implementation of an aggressive cost savings plan and meaningful outperformance for the stock YTD; WDR was downgraded to Underperform at Bank America and lowered target to $17 from $18 citing expectations of elevated outflows, some weakness in investment performance, the industry headwinds, and the recent bounce in the stock, even though he sees the company’s balance sheet remaining healthy; MN reports preliminary AUM $20.7B as of August 31 compared with $21B at July 31, and $21.3B at June 30

·     Exchanges; Bank America downgraded CBOE to Underperform saying trends have moderated some in September while its compares in Q4 are tough/also says open interest and assets under management in volatility products have been moderating; Bank America upgraded TW to buy and raise EPS and maintain tgt at $50 based on the stronger volume trends in the summer



·     ANTM +2%; amid a broad sector rebound in managed care stocks (UNH, HUM) which had fallen yesterday ahead of the Democratic debate last night

·     BITA +8%; said its Board received a preliminary non-binding proposal letter from Tencent Holdings Limited and Hammer Capital proposing to acquire all of the outstanding ordinary shares not already owned by the Buyer Group or their affiliates for $16 in cash per ADR

·     ETSY +2%; upgraded to outperform at Wedbush as they now see a critical mass of new initiatives, highlighted by Etsy Ads and free shipping that can drive stronger GMS growth and margin expansion over time

·     INGN +4%; after Piper said after mgmt meetings they feel more confident in double-digit 2020 growth and an excitement around the New Aera acquisition

·     MNK +3%; analysis shows cost-effectiveness of Acthar Gel for late-line MS relapses

·     PCG +4%; after agreed to pay $11 billion to settle insurance claims for damages from 2017 and 2018 wildfires tied to the utility’s equipment/covers 85% of fire claims the bankrupt utility faces

·     VNCE +18%; after posting quarterly results and provided favorable guidance amid the tough tariff scenario as guides year revs to $295M-$305M vs. $290M-$300M prior



·     AAPL -1%; pulling back after good run as Goldman Sachs cut its tgt to $165 from $187 and maintains a Neutral rating saying the plan to offer a trial period for Apple TV+ is likely to have a material negative impact on ASPs and EPS

·     ADVM -13%; adds to yesterday’s 50% declines following data – Chardan said at 24-weeks post intravitreal (IVT) injection of a single dose of 6 x 10^11 vg/eye of ADVM-022 – OPTIC phase I data leave unanswered questions

·     AVGO -5%; reported results essentially in-line with expectations for the July quarter and maintained its full-year fiscal 2019 guidance

·     MO -3%; as CNBC David Faber reported that Juul valuation now around $225-$230 per share after Altria paid $250/share and after Juul traded as high as $300 in the summer

·     CBOE -3%; downgraded to Underperform at Bank America saying trends have moderated some in September while its compares in Q4 are tough

·     PGR -6%; after EPS of 30c falls short of last year 46c while net premiums written of $2.92B, up 13% Y/Y; net premiums earned $2.78B, up 14%


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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