Mid-Morning Look: June 14, 2019

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Mid-Morning Look

Friday, June 14, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities start the day lower, pulling back amid several data points including weak China data, a lower outlook from semi chip giant AVGO, renewed geopolitical concerns, and strong US data (retail sales and industrial production), which likely boosts GDP outlook and lowers chances of a June FOMC rate cut. The ongoing trade dispute between the U.S. and China also remains a market concern. Tech among the biggest drags, as AVGO the latest casualty of the trade war after the chip maker slashed its sales forecasts sinking ship stocks. China reported its slowest growth in industrial production in 17 years in May (China’s factory output rose 5% YoY, missing estimates for growth to remain steady at 5.4%). Energy stocks have sunk this week on slowing global demand fears and rising inventories – not helped today after the IEA in its monthly report cut its outlook for oil demand growth in 2019 estimate by 100K barrels to 1.2 million barrels per day (bpd), but said it would climb to 1.4 million bpd for 2020. Also a round of better US economic data (see below for industrial production and retail sales) helped reduce expectations the FOMC would be more aggressive at its meeting next week. Both the dollar and Treasury yields rebounded on the data, with Treasury yields bouncing off more than 18-month lows. Overall though, safe havens remain well bid with gold topping the $1,350 an ounce level. In IPO news, another big winner today with shares of CHWY indicated higher after pricing at $22 overnight. Follows recent IPO spikes for CRWD two days ago and FVRR yesterday.


Treasuries, Currencies and Commodities

·     U.S. Treasury prices volatile having moved lower, lifting the two-year yield 4 bps higher to 1.86% (off earlier lows just below 1.8% at lowest since Dec 2017) and the 10-year yield up a basis point to 2.10% (off earlier lows of 2.056%) – but yields have since resumed downward movement as stocks slip further, boosting demand for safe-haven assets. Gold prices also strong, holding above $1,350 an ounce while oil prices are up modestly despite a lower growth outlook from the IEA today. The US dollar gets a bump higher following better US economic data


Economic Data

·     Retail sales better: Retail Sales MoM for May rise a less than expected 0.5% vs. est. 0.6%, (but prior month was upwardly revised to +0.3% from -0.2%) while Retail Sales Ex: Autos for May beat estimates rising 0.5% vs. est. 0.4% (prior month upwardly revised to 0.5% from 0.1%)

·     University of Michigan Confidence, June-P reported at 97.9, mostly in-line with est. 98.0 while current economic conditions index rose to 112.5 vs. 110.0 MoM and the expectations index fell to 88.6 vs. 93..5MoM

·     Business Inventories for April rose 0.5%, in-line with est. 0.5% while March inventories were unchanged; business sales dipped -0.2% in April after rising 1.3% in March

·     Industrial Production for May rose 0.4% vs. est. 0.2% (prior month revised to -0.4% from -0.5%), while Capacity Utilization for May rose to 78.1% from 77.9% prior and vs. est. 78.0%







WTI Crude






Spot Gold









10-Year Note





Sector Movers Today

·     Semiconductors; sector sinks in reaction to lower outlook from AVGO overnight as reported a Q2 EPS beat of 3c, but revs missed views ($5.52B vs. est. $5.69B) and cuts FY19 revenue view to $22.5B from $24.5B (below est. $24.41B) saying they “currently see a broad-based slowdown in the demand environment, which we believe is driven by continued geopolitical uncertainties, as well as the effects of export restrictions on one of our largest customers” – shares of chip makers weak after lower guidance/outlook (sector hurt: MXIM, NVDA, MU, INTC, AMD, SWKS, QRVO)

·     Containerboard and chemical sector; BMO Capital upgraded LYB and OSB to outperform from market perform saying announcements to idle OSB mills remove 5% of industry capacity, which should ease supply overhang and help OSB prices. Overnight, a second significant indefinite OSB mill closure in a week, as LPX said is indefinitely curtailing production beginning early in Q3 at its Peace Valley Mill in Fort St. John, B.C. due to “declining housing starts and cost pressures.”

·     Aerospace & Defense; SunTrust downgraded view of the commercial aerospace OEM sector to negative as they believe ongoing 737 MAX related unknowns and related risks will cause a ripple through effect across the sector over the next 12-24 months producing downward revisions to outlooks and 2019/2020 estimates. Firm downgraded ratings on ATRO, B, DCO, SPR and WWD.

·     Energy stock movers; ROAN slightly raises its guidance for Q2 production to exceed 50K boe/day from 49K boe/day previously, with plans to turn 14 gross operated wells to first sales during June and July and also forecasts Q2 capex to come in ~10% below original guidance of $155M; penny stock LGCY rises after the company executes board approved global restructuring support agreement with its lenders and noteholders; RIG downgraded to neutral at Citigroup and tgt to $6.70 saying organic cash burn analysis implies the drillers will burn cash until “at least” 2021



·     ARQL +36%; after saying preliminary data from an early trial show its experimental drug ARQ 531 demonstrates substantial anti-tumor activity and a favorable safety profile

·     BXG +31%; upgraded to buy at Stifel noting since May 22, the day BBX Capital terminated its merger with BXG, shares have traded off over 46.0% and believe shares are oversold and should bounce after reaching an agreement with Bass Pro

·     FB +1%; as WSJ reported several companies have signed up to back its cryptocurrency Libra, which it plans to unveil next week and launch in 2020

·     HLIT +4%; upgraded at Raymond James based on belief that it benefits from the evolution of Cable TV networks and the transition of its business toward virtual CCAP and software

·     KURA +6%; said it saw positive results from its Phase 2 trial of tipifarnib in peripheral T-cell lymphoma/said in a release that the primary endpoint was achieved

·     LPX +4%; and OSB shares rally after being upgraded to outperform at BMO Capital after LPX and Norbord’s announcements to indefinitely idle OSB mills remove 5% of industry capacity

·     SNE +3%; activist investor Dan Loeb disclosed a $1.5 billion stake in Sony Corp. and pushed the company to make changes, including spinning off its semi-business and listing it in Japan



·     AVGO -9%; reported a Q2 EPS beat of 3c, but revs missed views ($5.52B vs. est. $5.69B) and cuts FY19 revenue view to $22.5B from $24.5B (below est. $24.41B) – chip stocks among the worst performers in the S&P early on AVGO – QRVO, AMD, SWKS, MXIM, NVDA, LRCX fall

·     FFIV-6%; as VMW bought closely held Avi Networks, a player in multi-cloud application delivery services/Piper said raises concerns for FFIV as combination creates a new application delivery controller product with strong backing

·     FVRR -10%; after IPO from yesterday when shares jumped 90% yesterday in its debut

·     NFLX -1%; approaching its 200-day MA support – which is a little lower at $337.30 (hasn’t been below 200-day since late January) – as shares slide for a 5th day

·     MCRB -24%; 26.66M share secondary priced at $2.25 (below yesterday close of $2.83)


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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