Mid-Morning Look: June 11, 2019

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Mid-Morning Look

Tuesday, June 11, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities on track for a 7th straight day of gains, with the Dow Industrial Average well above the 26,000 level and at its longest win streak since the 8-day stretch mid-May-2018 as trade hopes, a dovish Fed and China stimulus help send markets higher again. Commodity related sectors, specifically metals, mining and materials outperform after China’s latest stimulus measures helps allay fears over the growth environment. Overnight, China said it would ease restrictions on the spending of proceeds from special bond sales and encourage banks to offer loans to projects funded by such debt. Meanwhile, markets also seeing some easing of last week’s tensions around Mexico trade/tariffs after the U.S. recently suspended plans for tariffs as Mexico agreed to step up efforts to stem the flow of illegal Central American migrants. More “dovish” Fed commentary and rising expectations for a reduction in interest rates at one of the next two upcoming FOMC meetings (June/July) has also boosted buying interest for stocks (today in-line PPI inflation data also helps build the case for lower rates). The upcoming G-20 meeting in Japan at months end will be the next potential catalyst for trade talks between China and the U.S. Note Trump said late Monday he was ready to impose another round of tariffs on Chinese imports if there was no progress in talks with Chinese President Xi Jinping at the G20 summit. Stocks have been moving steadily higher, trading back above key technical levels that were breached in May as momentum remains to the upside.


Treasuries, Currencies and Commodities

·     In currency markets, the dollar index (DXY) little changed as firmer WTI crude prices have supported the CAD early on while the euro holds gains after rising to its best level since late March yesterday on weaker economic data; the pound is higher vs. the buck

·     Commodity prices are mixed, with industrial metals higher, along with a bounce in oil prices early after slumping late yesterday to close near its lowest levels of the day (API inventory data tonight), while gold prices slip after surging to beat 2019 levels last week (profit taking as stocks have resumed upward trajectory, pressuring safe-haven investments)

·     Treasury market’s slipped initially after in-line producer price (PPI) monthly data, pushing the yield on the benchmark 10-year to highs of 2.175%, but has since reversed back to yesterday’s closing levels around 2.15%; 10-year yield little changed at 1.89%


Economic Data

·     PPI data for May mostly in-line across the board: Producer Price Index (PPI) Final MoM for May in-line at 0.1% vs. est. 0.1%; PPI Ex: Food & Energy (core) MoM for May at 0.2% (in-line) vs. est. 0.2%; PPI Ex: Food & Energy (core) YoY for May in-line at 2.3% vs. est. 2.3%; Producer Price Index (PPI) Final YoY for May at 1.8%, below the est. 2.0%







WTI Crude






Spot Gold









10-Year Note





Sector Movers Today

·     Retailers; CROX said it does not anticipate that the expanded U.S. tariffs on footwear imports from China, if enacted, will have a material adverse impact to be about $5M, assuming a 25% tariff takes effect on August 1/continues multi-year effort to reduce sourcing from China; ASNA posted a smaller than expected Q3 EPS loss, but revs misses ($1.27B vs. $1.43B est.) and guided Q4 sales below; DLTR was upgraded to overweight at JPMorgan saying top-line and margin builds across banners support an inflection to high-single net income growth and low-double-digit consolidated EPS growth beyond FY19; CHS Q1 comp-store sales slide below estimates, down (7%) vs. est. (6.6%) drop citing poor performance at its White House Black Market chain while revises FY19 total net sales view to down low-to mid-single digits; LULU earnings tomorrow

·     REITs; several sell-side analysts with rating changes in REITs today: KeyBanc upgraded the self-storage sector to sector weight from underweight, raising the rating on both LSI (to overweight) citing valuation/YTD underperformance and upped PSA to sector weight on expectation for growth to remain steadier than he previously expected; Citigroup downgraded AMH to neutral; Bank America with several changes as upgraded both KIM and VER to buy while downgraded BDN to underperform from neutral; Bank America also upgraded EPRT to buy from underperform as sees to have outsize earnings and dividend growth relative to peers while downgraded EPR to underperform from neutral with an unchanged PT of $20

·     Pharma movers; MRK said the FDA has approved two new indications for Keytruda for head and neck cancer; RHHBY said U.S. regulators approved its antibody drug conjugate Polivy, mixed with other medicines including Rituxan, for relapsed diffuse large B-cell lymphoma; ZYNE said the USPTO has issued it Patent No. 10,314,792, titled “Treatment of Autism Spectrum Disorder with Cannabidiol” which includes claims directed to methods of treating autism spectrum disorder; VVUS launched an e-medicine platform that will enable patients with a prescription for Qsymia capsules CIV to purchase the medication online

·     Casino & Leisure movers; Morgan Stanley raised its tgt price on MGP, VICI and GLPI saying as the mkt looks for defensive ideas, they say gaming REITs look attractive; RRR was upgraded to buy at Goldman Sachs with 35% total return potential as they see potential for a successful Palms ramp and FCF inflection in 2020 to drive a sustained re-rating; BYD positive mention at JPMorgan saying they are reaffirming their Overweight rating and see the risk-reward as compelling at current levels; in cruise industry, JPMorgan lowered 2019/20 estimates for RCL and NCLH for the disruption and lost sales associated with the change to U.S. travel restrictions to Cuba



·     AVGO +1%; has landed a two-year deal with AAPL to supply radio-frequency components for smartphones, tablets and smartwatches

·     CHS +13%; Q1 comp-store sales slide below estimates, down (7%) vs. est. (6.6%) and revises FY19 total net sales view to down low-to mid-single digits (but shares bounce after year underperformance, with shares down 39% YTD into print)

·     GRUB +7%; after GeekWire reported on Tuesday that Amazon plans to close down its Amazon Restaurants food delivery service in the U.S. later this month

·     HRB +4%; agreed to buy financial solutions platform Wave Financial for $405M, boosted its quarterly dividend by 4% to 26c and reported better-than-expected Q4 results

·     JBLU +4%; upgraded to buy at Citigroup and move tgt to $26 saying near-term, with fuel prices down sharply and unit revenue looking healthy, near term EPS estimates are likely headed higher

·     LYFT +2%; upgraded to positive at Susquehanna citing the potential of the ridesharing industry and said the stock should benefit from easing competitive dynamics with UBER

·     POL +10%; boosted its Q2 EPS outlook to 72c-74c from prior view (and est.) of 68c with positive commentary around Europe and China



·     ACLS -1%; cut its Q2 revenue outlook to $75M from $80 M prior (below est. $80.1M) saying a shipment to a Chinese customer was pushed out

·     BYND -18%; downgraded to neutral from overweight at JPMorgan after shares surge over 570% since IPO (while raises tgt to $120 from $97) though says their above-the-Street estimates remain unchanged

·     CBAY -50%; after reporting early data from ongoing mid-stage study testing three doses of its experimental drug Seladelpar for fatty liver disease nonalcoholic steatohepatitis (NASH)

·     CREE -1%; cut its forecast for Q4 following the U.S. ban on Huawei and softer-than-expected demand for LED products (sees Q4 revs $245M-$252M down from prior view $263M-$271M and sees LED Products revenue is expected to be between $113M-$117M

·     HDS -5%; as guides 2Q below/sees EBITDA $240-255M vs. est. $265M and sees 2Q EPS $1.04-1.12 below est. $1.18

·     LOVE -14%; on mixed Q1 results as posted a greater EPS loss of (67c), while revs of $41M was slightly above estimates and growth in marketing spend was +22.3% YoY

·     SYMC -2%; downgraded to underweight at Morgan Stanley and cut its target to $14 saying increased competition and management turnover represent risks to Symantec’s turnaround


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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