Mid-Morning Look: June 27, 2019

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Mid-Morning Look

Thursday, June 27, 2019






DJ Industrials




S&P 500








Russell 2000






U.S. equities are mixed, with the S&P 500 index, Nasdaq Comp and Small Caps rising early on mixed economic data and as investors position themselves ahead of the G20 meeting this weekend, but the Dow Industrial Average falls amid weakness in Boeing (BA) after tests on its currently grounded 737 Max have revealed a new safety risk and U.S. regulators are ordering the company to make additional design changes. Markets also prepare for earnings in Dow component and retail giant Nike (NKE) after the bell tonight, watching for the impact of the current trade dispute between the U.S. and China. Most sectors are higher, outside of some weakness in the Consumer Staples sector given weak earnings in the food space (CAG today follows weak GIS results yesterday). Energy also a drag on markets after yesterday’s outperformance on rising oil prices and subsequent bounce in energy stocks. Economic data this morning was mixed as the third estimate of Q1 GDP data was in-line with the prior reading of 3.1%, with weaker personal consumption (+0.9%), but inflation data points a little “hotter” as Core PCE rose 1.2% vs. est. 1%. Overnight, futures slipped after the WSJ reported China terms for a trade truce with Trump will include an insistence that the U.S. lift its ban on the sales of technology to Huawei. Also later today, the Fed releases part two of its annual bank stress tests, the crucial CCAR numbers. In the first of two Democratic Presidential hopeful debates last night was a focus on income inequality, border reform, corporate power, healthcare and battling Republicans in Congress. Senator Elizabeth Warren stood center stage last night with good showings as well from Julián Castro, the former housing secretary, and Mayor Bill de Blasio of New York. Tonight’s debate will have Bernie Sanders and Joe Biden.


Treasuries, Currencies and Commodities

·     In currency markets, the dollar index (DXY) little changed early after mixed economic data, as the buck is flat vs. the euro (1.1368) and yen (107.82), and Pound (1.2686) – ahead of G20 this weekend. Treasury market’s up slightly, with yields paring back some of yesterday gains as the 10-year holds above 2% (settled around 2.05% late yesterday). Commodity prices are steady, with oil holding yesterday gains, with WTI crude just under $60 per barrel (rising over $8 bucks the last week on Iran tensions and bullish inventory data), while gold down a few after touching more than 5-year highs earlier this week – but still above the $1,400 an ounce level.


Economic Data

·     The third est. for Q1 GDP stood at 3.1%, below estimate of 3.2% but was unchanged compared to the second estimate (note GDP rose 2.2% in prior quarter). Personal consumption rose 0.9% in 1Q after rising 2.5% prior quarter and was below the +1.3% estimate. GDP price index rose 0.9% in 1Q after rising 1.7% prior quarter, but was below the 0.8% estimate. Core PCE q/q rose 1.2% in 1Q after rising 1.8% prior quarter and was above the 1% economist estimate

·     Weekly Jobless Claims rose 10K to 227K, above the 220K estimate while the 4-week moving avg. stood at 221.25k in the week ending June 22 (prior week claims revised up to 217K from 216K); continuing claims rose 22k to 1.688m in the latest week

·     Pending home sales MoM for May rose 1.1% vs. est. up 1% (prior month was -1.5%)







WTI Crude






Spot Gold









10-Year Note





Sector Movers Today

·     Retailers; Dow component NKE expected to report earnings after the close; JWN and ROST were both downgraded to sell at Goldman Sachs as the firm takes a conservative stance on the retail sector saying 2Q headwinds have proven persistent, and they see risk that a 2H inflection in earnings growth may not materialize for many companies in our sector (reiterate buys on UAA, TPR); Cowen raised its tgt on VFC to $100 from $90, saying new five-year targets should be laid out at its upcoming 9/25/19 Investor Day – a positive catalyst; Cowen also upped SKX tgt to $32 from $30 given our increased confidence on SKX’s product cycle and raises both FY19E and FY20E EPS; furniture retailers a bounce, led by MLHR after earnings beat last night and reported sales increased ~9% to $671M, and on organic basis

·     Consumer Staples; food sector with a bout of recent earnings misses as CAG shares drop after Q4 sales and profit missed estimates, hurt by weak demand for groceries and snacks/its Grocery & Snacks segment sales decreased 7.1% in the qtr while the midpoint of 2020 adj EPS guidance range below Wall St. estimates; MKC however beat EPS for Q2 while raised year EPS ($5.20-$5.30 from $5.17-$5.27) and sales view (to 8%-10% from 7%-9%); group dropped yesterday after weaker GIS results and guidance (KHC, CPB, K, POST, SJM shares also active); FIZZ tgt and ests cut at Jefferies following Q4 EPS miss w/net sales modestly better, though GM % worse

·     Auto sector; Ford (F) with details of its reorganization announced months ago, saying it will shed 12,000 jobs in Europe, launch new models and add electric technology to its vehicles in an attempt to bring the lossmaking region back to profit; TSLA two cautious analyst comments as Cowen raised its delivery estimates 5K to 85K units (70K model 3, 15K S/X) but remain below the low end of guidance of 90-100K as expect the stock to fade following the delivery report heading into earnings (remain underperform on shares), while Credit Suisse initiated at underweight and $189 tgt saying it faces risks ahead – reflected in his below-consensus estimates. Credit Suisse started coverage of F, GM, APTV, AXL and BWA with outperforms

·     Retail pharmacy movers; earnings in the group as Dow component WBA reported better-than-expected quarterly results, and also reaffirmed its outlook (it had said it April that earnings would be flat for the rest of its fiscal year, which goes through August); comparable retail-pharmacy sales in the U.S. were up 6% year-over-year; RAD shares fell -9% as Q1 adjusted EPS loss (14c)/$5.37B was below the est. loss (7c)/$5.38B driven by reimbursement pressure in the Retail Pharmacy segment and margin compression in the Pharmacy Services segment.



·     AAOI +12%; upgraded at Rosenblatt to Neutral saying the company could benefit from the proposed $300B tariff because it has a factory in Taiwan, unlike many major Chinese competitors

·     DOVA +15%; as the FDA approves Dova its supplemental marketing application for DOPTELET (avatrombopag) to include treatment of thrombocytopenia (low blood platelets) in adult patients with chronic immune thrombocytopenia who have did not respond to previous therapy

·     HHC +29%; CNBC’s David Faber reported the company has hired bankers at Centerview Partners to explore strategic alternatives that include a sale of the company https://cnb.cx/2ITkSqA

·     KBH +5%; posted better than expected Q2 results as homes delivered increased 2% to 2,768 in the qtr, while net orders surged 15% to 4,064 and had a positive outlook for the 2H

·     MLHR +15%; after earnings beat last night and reported sales increased ~9% to $671M, and on organic basis net sales and orders increased by 7.6% Y/Y and 6.4%, respectively

·     NVAX +10%; on the heels of its announcement that the FDA is on board with accelerated review status for flu vaccine NanoFlu.

·     WBA +3%; reported better-than-expected quarterly results, and also reaffirmed its outlook; comparable retail-pharmacy sales in the U.S. were up 6% year-over-year

·     ZGNX +19%; as it expects to resubmit its U.S. marketing application next month for FINTEPLA (fenfluramine) for the treatment of seizures associated with a severe type of epilepsy called Dravet syndrome



·     ACRS -39%; after results from a Phase 2 clinical trial of ATI-502, an investigational topical Janus Kinase, or JAK, 1/3 inhibitor, in patients with alopecia areata did not achieve statistical superiority at the primary or secondary endpoints

·     BA -3%; after U.S. FAA identifies a new risk the plane maker must address before the grounded 737 MAX jets can return to service

·     CAG -7% as Q3 EPS 36c below 41c est, lowers year EPS view to 2.08-2.18 from prior 2.10-2.20 and gross margin also weaker at 27.1% from 29.2% yoy

·     FDS -2%; Goldman Sachs downgraded to sell from neutral and tgt to $246 from $253 citing rich valuation and diminished revenue outlook

·     PDCO -5%; on mixed Q4 results as EPS missed on a light revenue beat and issued lower guidance for FY20 (EPS $1.33-$1.43, consensus $1.51)

·     PIR -11%; reported 1Q below consensus, with weak sales and gross margins; Q1 comp sales fell (-13.5%) vs. (-8.2%) YoY; Q1 gross margins 25.1% vs. 32.3% YoY

·     WAGE -2%; is being acquired by HQY for $51.35 per share in deal valued at about $2B, giving HealthEquity access to a bigger share of the HSA market, expanding its direct distribution to employers and benefits advisers https://on.mktw.net/2Xy4bJ5



·     360 Finance (QFIN) 9.6M share Secondary priced at $10.00

·     Adaptive Biotechnologies (ADPT) 15M share IPO priced at $20.00

·     BJ Wholesale (BJ) 9.98M share secondary priced at $25.74

·     BridgeBio (BBIO) 20.5M share IPO priced at $17.00

·     Change Healthcare (CHNG) 42.9M share IPO priced at $13.00

·     Gamida Cell (GMDA) 7M share Secondary priced at $5.00

·     Interxion (INXN) 4M share Secondary priced at $72.75

·     Morphic Holdings (MORF) 6M share IPO priced at $15.00

·     Motus GI Holdings (MOTS) 6.667M share Spot Secondary priced at $3.00


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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