Mid-Morning Look: January 22, 2020

Darwin SarazaDaily Market Report

Mid-Morning Look

Wednesday, January 22, 2020

Index

Up/Down

%

Last

DJ Industrials

112.47

0.39%

29,308

S&P 500

13.67

0.41%

3,334

Nasdaq

54.71

0.58%

9,425

Russell 2000

5.11

0.30%

1,691

 

U.S. equities recovering after sliding on Tuesday, setting new record highs for the NASDAQ (topping the 9,400 level) and overlooking past fears of a coronavirus epidemic denting the global economy. China has confirmed 473 cases of a new coronavirus, the People Daily newspaper said on Wednesday while saying the death toll remained at nine, it said (as of latest report – shows 544 confirmed cases). The virus, originated in the central Chinese city of Wuhan in Hubei at the end of last year and has spread to Chinese cities including Beijing and Shanghai, as well as the United States. Better earnings results in tech including Dow component IBM and NFLX, as well as consumer finance/lending names (ALLY, COF) are helping boost stocks early, though banks earnings disappoint (NTRS, BOKF, and ZION). Housing economic data coming in above expectations for existing home sales for December as well. Tesla (TSLA) tops the $100 billion market cap for the first time following additional positive analyst commentary and continued momentum.

Treasuries, Currencies and Commodities

·     In currency markets, the dollar with a modest gain overall, getting a bounce after the better existing home sales data, while commodity prices are under pressure again, with a modest slide gold, but oil prices down over 2%. Treasury markets extend their recent rally as yields inch lower a second day amid fears of the coronavirus spreading.

Economic Data

·     Housing data today: November FHFA Housing Price Index: +0.2% M/M, vs. +0.3% consensus, +0.2% previous. Existing Home sales for Dec rise to 5.54M from 5,35M prior and est. 5.43M (rises 3.6% after falling -1.7% prior month); median home price rose 7.8% from last year to $274,500; 3.0 months’ supply in Dec. vs. 3.7 in November

 

 

Macro

Up/Down

Last

WTI Crude

-1.40

56.98

Brent

-1.43

63.16

Gold

-2.10

1,555.80

EUR/USD

-0.0007

1.1075

JPY/USD

-0.00

109.86

10-Year Note

-0.012

1.762%

 

 

Sector Movers Today

·     Consumer finance and lending; COF quarterly results were strong across the board, with better-than-expected loan growth, NIM performance, fee income, and credit quality, while expenses were slightly higher than expected; Citigroup added PYPL and SSNC to catalyst watch list saying valuations rising towards historical highs, but for now, still comfortable with this; NAVI rises as core EPS of 69c beat by 11c while 4Q consumer lending net income $89 million, +35% YoY; ALLY rises as EPS beat by 2c on slight rev miss/Q4 provision for loan losses $276M vs. $266M a year earlier, while ROSE was up 10.5% vs. 8.8% YoY

·     Pharma movers; Dow component JNJ reported mostly in-line quarterly EPS and sales while segment breakdown showed pharma slightly better while MedTech & consumer in-line to slightly below and FY20 EPS guidance a touch light $8.95-9.10 vs. consensus $9.11; MRK expands its agreement with Theramex related to oral contraceptive Zoely, expanding the latter’s marketing rights from 11 European countries to more than 50 worldwide; JAZZ and Pharma Mar S.A said their exclusive U.S. license agreement for the cancer treatment lurbinectedin is effective, as the U.S. antitrust waiting period has expired; AGN was downgraded at Wells Fargo and upgraded BHC to equal-weight noting 2019 was tough for companies tied to generics, opioids, and drug pricing and says top ideas for 2020 include RVNC, AMPH, EBS

·     Aerospace & Defense; BA remains weak after falling to fresh 52-week lows yesterday after saying it doesn’t expect regulators to sign off on 737 Max until June or July, months later than the manufacturer previously expected; Vertical Research downgraded shares today; in defense, Cowen said they like defense names into earnings on robust weapons outlays, outperformance in presidential election years, and the neutralization of NT budget risk as they raise tgts on several names (GD, LMT, RTN, NOC) and said Q4 favorite is GD on improving defense growth excessive discount paired against HII which they downgraded as see limited upside given the stock’s run

·     Software movers; FTNT was upgraded to outperform at Raymond James saying among the firewall/network security vendors Fortinet checks were the strongest, with most channels they spoke to again beating targets and checks continued to report a turn in fundamentals, with improved enterprise execution; NOW tgt raised to $360 and MSFT to $192 at Raymond James as Microsoft checks were strong this quarter with the biggest improvement from resellers that were seeing an uptick in Office 365 E3 to E5 conversions while checks and commentary remain strong around ServiceNow as well; PI rises as Dougherty sees WMT deploying RFID on apparel in 2020

 

Stock GAINERS

·     AKCA +11%; as the co and IONS report positive topline results from a phase 2 study of Akcea-Apociii-L in the treatment of patients with hypertriglyceridemia as the study met the primary endpoint of significant triglyceride lowering and multiple secondary endpoints

·     COF +4%; quarterly results beat across the board, with better-than-expected loan growth, NIM performance, fee income, and credit quality, while expenses were slightly higher than expected

·     ETN +3%; announced it has entered into an agreement to sell its Hydraulics business to Danfoss A/S, a Danish industrial company, for $3.3 billion in cash

·     EXPR +22%; sees Q4 EPS 17c-19c from prior 16c-21c view and said it expects same-stores sales for Q4 down approximately 3% from a year ago, versus previous guidance of down 1% to down 3%

·     FTNT +2%; upgraded to outperform at Raymond James saying among the firewall/network security vendors Fortinet checks were the strongest

·     IBM +4%; as Q4 operating EPS and revenues ($4.71/$21.8B) narrowly topped consensus and guided 2020 op EPS at least $13.35 vs. est. $13.29

·     MRNA +5%; said it is working with agencies such as the National Institute of Allergy and Infectious Diseases and the National Institutes of Health on a potential vaccine response to public health emergency caused by coronavirus infections

·     TSLA +3%; tops the $100B market cap level with yet another positive analyst comment today, with Wedbush raising its tgt to $550 saying the electric carmaker’s earnings will not disappoint next week, given robust demand in China and Europe

 

Stock LAGGARDS

·     BKR -2%; Q4 profit misses analysts’ estimates, hit by lower orders in its turbomachinery & process business that supplies turbines and compressors to liquefied natural gas producers

·     NFLX -2%; posted strong Q4 results as EPS, streaming adds and revs all topped expectations while guidance was mixed with EPS slightly better ($1.66 vs est. $1.16) on small revs miss (1Q revs $5.73B vs est. $5.74B) and slower 1Q streaming paid net adds of 7.0Mm vs. 9.6M YoY

·     NTRS -2%; as Q4 net income was hurt by charges, while Q4 net interest income of $430.5M increased 1% vs. Q3 and Q4 total revenue of $1.56B rose 1Q Q/Q and 3% Y/Y

·     NVAX -15%; pares some of yesterday gains after files to offer up to $100M in shares

·     ZION -5%; downgraded at Bank America after earnings fall short of analysts’ estimates for Q4, missing expectations, hurt by a drop in net interest income (NII)

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Market commentary provided by Catena Media Financials US, LLC, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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