Market Review: June 26, 2019

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Closing Recap

Wednesday, June 26, 2019





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks were mixed, fading into the close, though technology stocks outperformed behind strength in the semiconductor sector after better earnings out of Micron. The S&P 500 index was little changed on the day, having gained a little over 6% so far in June, and down after hitting a record high last week, largely on hopes that the Federal Reserve would cut interest rates to counter the impact of a U.S.-China trade war. Speaking of China/U.S., markets got an early boost after CNBC reported earlier this morning Secretary Treasury Mnuchin saying US-China deal 90% complete, which helped spark a rally in the U.S. futures and overseas stocks…but CNBC corrected their earlier headlines to say Mnuchin was using past tense when he described 90% progress in U.S.-China talks. Nonetheless, hoped remain high heading into the G20 meeting in just a few days between President Donald Trump and Chinese leader Xi. Shares of oil companies rise on the back of an increase in crude prices after U.S crude and refined product stockpiles fall (biggest weekly inventory draw in about 3-years). Healthcare stocks were among the top decliners (Bespoke noted of the 60+ Russell 2000 stocks hitting new lows today, nearly a third come from the Health Care sector), along with weakness in interest rate sensitive sectors given the bounce in Treasury yields and Staples led by food weakness. Bitcoin prices surge, rising as much as 20% and up for an 8th straight day as it jumped over $2,400 on the day (over 21%) as it near $14,000 following enthusiasm after Facebook’s foray into the world of cryptocurrencies last week (with Libra). Semiconductors paced tech gains after better earnings results from Micron (MU) overnight.

Economic Data

·     Durable Goods Orders for May-P fell (-1.3%) worse than the est. (-0.3%) while Durable Goods Ex: Transportation rises 0.3% vs. est. up 0.1%. Durable goods new orders revised down to -2.8% for April from -2.1%

·     May advanced trade deficit of goods widened to (-$74.5B) from (-$70.9B) last month and vs. est. (-$71.8B). Imports rose 3.7% in May to $214.745B from $206.988B in April while exports rose 3% in May to $140.195B from $136.073B in April



·     Energy prices jumped, led by big gains in gasoline prices, while WTI crude traded to its best levels of the month behind bullish inventory data. Gasoline priced gained 5% or 9.3c to settle at $1.97 per gallon, its best level in about 5-weeks after news that Philadelphia Energy Solutions refinery plans to close permanently raised concerns over tighter supplies of the fuel on the East Coast. WTI crude prices advanced $1.55, or 2.7%, to finish at $59.38 a barrel (also best levels since 5/22) after the EIA said weekly crude stockpiles fell -12.79M barrels (bullish) vs. est. for draw of -2.83M barrels, while also posting a new record in U.S. crude exports at almost 3.8 million barrels per day (gasoline and distillate inventory data also showed surprise drawdowns – also bullish). Prices traded just shy of $60 per barrel, a big bounce after hitting lows below $51 per barrel as recently as June 18th (boosted recently by growing tensions with Iran after they shot down an unmanned U.S. drone last week and the inventory data). The Overnight, API reported U.S. crude supplies dropped by -7.5M barrels for the week ended June 21, also bullish. Gold prices slip on Wednesday with August gold down -$3.30 to settle at $1,415.40 an ounce, down from the nearly six-year high scored a day earlier, following comments from Federal Reserve chair Jerome Powell on Tuesday that analysts interpreted as less dovish than expected.



·     Bitcoin surge continues as prices jumped over 20%, topping the $13,000 level for the first time since January of 2018 (highs above $13,600 vs. all-time highs stand at $19,511 in December 2017), while Ethereum’s ether hovers at 10-month highs and blockchain related names rallied. Bitcoin has more than tripled in value this year (prices helped recently after Facebook news on its plans for crypto called Libra last week). Outside of the surge in Bitcoin, currency markets were relatively quiet ahead of the upcoming G20 meeting, with the dollar rallying against the Japanese yen (rises to 4-session highs of 107.76 from overnight lows of 107.14), sliding on hopes for a trade deal with China after positive comments by Treasury Secretary Mnuchin. The dollar slipped vs. the Canadian dollar amid the jump in oil, while the euro gained.


Bond Market

·     Treasury prices slipped as yields recovered from weakness Tuesday, with the benchmark 10-year yield up over 5 bps to 2.045% and the 2-year above 1.77%. The U.S. Treasury sold $41B in 5-year notes at a yield of 1.791% vs. 1.785% pre-sale when issued, with a bid-to-cover at 2.35 vs. 2.38 prior auction and indirect bidders awarded 57.1% of the auction. Economic data was on the weak side today as the trade balance widened and Durable Goods orders fell more than expected.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; TGT announced its first-ever "Target Deal Days," scheduled for July 15 and 16, to build upon the success of last year’s one-day sales event, overlapping AMZN’s 2-day Prime Day; not much news in retail sector that has continued to underperform broader stocks

·     Consumer Staples; in tobacco, MO shares active after Francisco on Tuesday approved an ordinance to ban sale and distribution of e-cigarettes/MO holds a 35% stake in Juul Labs Inc., the leading maker of vapes; in food, shares of GIS slipped after Q4 profit beat estimates but sales of $4.16B came up short of the $4.24B estimate. Within its business segments, North America retail sales fell 2% to $2.34B and convenience store and foodservice sales rose 2% to $519M; SFM tgt cut to $17 from $19 and KR to $28 from $30 at Bank America after warnings that deflationary pressure continues to build in the natural and organic parts of the grocery store sector

·     Restaurants; RRGB said in a letter to Vintage Capital that it determined the demand letter issued to the board to convene a special meeting does not satisfy the company’s bylaws and Delaware law and plans to call the special meeting to consider Vintage Capital’s proposals after the deficiencies are cured; restaurants were generally weaker, with DRI, RRGB, CAKE, BJRI falling

·     Services; CRCM shares downgraded to hold from buy at Craig Hallum after the company disclosed in an 8-K filing that CFO Michael Echenberg has tendered his resignation with an effective date of August 30, 2019; SERV shares slipped after Stifel warned that Street estimates for organic growth are too high, given unseasonable rains were a headwind through the 1H

·     Housing & Building Products; ENR bounces off 52-week lows after Deutsche Bank upgraded earlier as believe the market is too focused on declining sales for the acquired Rayovac batteries business while not fully appreciating solid trends within its branded battery business; homebuilders in focus ahead of earnings from KBH tonight after the close (follows LEN results yesterday with mixed results and lower guidance for the year)



·     Energy stocks outperformed behind bullish inventory data by the EIA, helping push oil prices markedly higher (WTI crude approached $60 per barrel) after hitting lows below $51 per barrel as recently as June 18th (boosted by growing tensions with Iran after they shot down an unmanned U.S. drone last week). The EIA said weekly crude stockpiles fell -12.79M barrels (bullish) vs. est. for draw of -2.83M barrels, while also posting a new record in U.S. crude exports at almost 3.8 million barrels per day. Overnight, API reported U.S. crude supplies dropped by -7.5M barrels for the week ended June 21, also bullish

·     In stock news, refiners (PBF, MPC, PSX) were active after Philadelphia Mayor Jim Kenney said he spoke to Philadelphia Energy Solutions CEO and the company plans to shut down the refinery within the next month; COP shares were upgraded to buy at Mizuho and raised tgt to $80 from $74 saying it is uniquely positioned for dividend growth; in equipment, NCSM was downgraded at Piper and lowered numbers for CLB, OIS and NCSM in connection with a flattened L-48 activity outlook for the balance of this year and a low growth profile for next year

·     MLP Sector; Raymond James upgraded WMB to strong buy, while downgraded GEL to mkt perform and HEP to underperform saying while the SOTP valuation concept has been an important component of energy valuation analysis, especially in the refining space, SOTP has not fully caught on in the midstream space.



·     Bank movers; banking stocks outperformed, with strong returns for several large cap, regional and online brokers today; STT was downgraded to neutral from buy at UBS saying they have very little confidence in when the company will be able to get past the headwinds it is facing; one deal in the regional banking sector as VLY agreed to buy ORIT in a deal valued at an estimated $740M, as shareholders of ORIT will receive 1.60 shares of VLY share for each held



·     Pharma & Biotech movers; Pharma and healthcare provider names were under pressure early and dropped hard late day led by weakness in large cap (PFE, LLY, BMY, JNJ); note the top 20 Democratic presidential candidates’ are expected to debate over a four hour period the next 2-nights in Florida (fears of Medicare For All talk) which could be weighing; ABBV upgraded at Leerink; GBT 3.376M share Spot Secondary priced at $59.25; ODT 4.75M share Spot Secondary priced at $26.00; OCX shares slide after provided a mid-year update and said that the Company will require additional time to complete its ongoing CLIA Validation study of DetermaVu, its liquid biopsy test for lung cancer; MDCO 4.545M share secondary priced at $33.00


Industrials & Materials

·     Industrial & Machinery; ATU reported mixed Q3 results (EPS beat/sales miss) but lowered its year outlook to $1.13B-$1.14B from prior $1.21B-$1.24B (est. $1.16B); ROL was downgraded to sell at Stifel and adjust estimates to account for weather and costs; MWA downgraded to sell from neutral and tgt cut to $8 at Goldman Sachs citing weaker margins and execution challenges

·     Transports; package delivery giant FDX Q4 EPS topped consensus by 10c while Express margin deteriorated 140 bps y/y while Ground margin was off 172 bps despite a tailwind from lower incentive compensation/provided weak EPS guidance of a mid-single digit decline off adjusted F19 EPS (implying ~$14.75 assuming -5% y/y)

·     Metals & Materials; Steel stocks rise after industry publication Steel Market Update reported late that NUE announced a $40 per ton price increase on its flat rolled products, with other mills expected to follow suit; SCHN Q3 earnings came in above expectations, though the company reported lower revenues and earnings on Y/Y basis

·     Gold miners fell with gold prices early on signs that the U.S. Federal Reserve will not resort to aggressive interest rate cuts in July after Fed Chairman Jerome Powell said Tuesday the U.S. central bank is "insulated from short-term political pressures," and that its policymakers are wrestling with whether to cut interest rates. RBC Capital a few rating changes as they upgraded AU to outperform while downgrade GFI to sector perform

·     Aerospace & Defense; AVAV shares fell after reported April quarter results with revenues above and EPS in line with Street estimates, but posted a revenue decline with the bulk due to lower product sales compared to Q4’18


Technology, Media & Telecom

·     Internet; FB and GOOGL shares active after President Trump said this morning, talking about EU antitrust suits, that the U.S. should be suing FB, GOOGL and said “perhaps we will”. Overall the sector performed fairly well with the broader bounce in tech (software, semis)

·     Semiconductors; sector outperformed following stronger-than-expected earnings from MU lifted sentiment in the group (despite issuing guidance for next quarter that fell below consensus). MU also said it resumed some shipments to China’s Huawei Technologies Co Ltd and said it still expected demand for its chips to recover later this year (shares of WDC, NVDA, AMD, AMAT, XLNX, QCOM, QRVO among those rallying in reaction)

·     Software movers; LINX 32.8M share IPO priced at $9.36; PFPT shares rise after Piper said overall email security tracker results support shares as they believe will continue to gain market share

·     Hardware & Component news; HIVE rises after EXTR offers to buy the network equipment maker for $250.7M; offer of $4.45/share represents a premium of ~40% to HIVE’s Tuesday’s close; BB shares reversed pre-market gains after results, as Q1 beats and reaffirms its FY20 outlook, which includes being non-GAAP profitable (FY20 view: Revenue growth, 23-27% Y/Y (est. 24.7%); SNX reported Q2 sales and EPS of $5.72bn and $2.86, well above consensus as saw upside in its Technology Solutions distribution segment (80% of sales), which grew 7% y/y on a gross billings basis ex-FX with strong demand for servers and PCs; CMBM 5.8M share IPO price $12.00


Market commentary provided by Hammerstone Markets, a division The Hammerstone Group, a firm separate from and not affiliated with Regal Securities L.P. Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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