Friday, August 10, 2018
A surprisingly busy morning of news, with U.S. stocks tracking its European and Asian counterparts lower, as mounting currency crisis in Turkey raised concern for possible contagion into other markets. Overnight, the Financial Times reported that the Eurozone’s chief financial watchdog had become concerned over exposure of the zone’s major lenders to Turkey, especially when related to banks in Spain, Italy and France. That news sent the Turkish Lira down more than 13% to record lows against the dollar and the euro tumbling to 13-month lows vs. the greenback as it nears the 1.14 level. The Lira dropped further this morning (down as much as 20%) as President Donald Trump said he would double tariffs on steel and aluminum imports from Turkey, in a dramatic escalation in the spat between the two (aluminum will now be 20% and steel 50%). The iShares MSCI Turkey ETF (TUR) plummeted more than 20% having fallen more than 40% thus far this year. The volatility in currency markets rattling US stock markets as major averages pull back, as both the S&P and the NASDAQ decline after rising to within 1% of record levels. The U.S. dollar moved to its firmest level in nearly a year against major rivals. With today’s pullback, the tech-heavy Nasdaq Composite is on track to snap its 8-day win streak. Interest rate sensitive sectors such as financials lagging on sharply lower Treasury yields, while utility stocks edge up. With today’s declines, markets are on track for weekly losses after coming into the day slightly higher.
Treasuries, Currencies and Commodities
· Currency markets are super volatile, led by sharp declines in the Euro, Russian ruble and Turkish Lira against the US dollar. Turkish Lira falls more than 20% vs. the dollar, while the euro down roughly a dollar and the Russian ruble falling this week (Turkey and Russia falling on US sanctions against both countries). The yen inches higher vs. the buck in flight to safety, while the UK Pound falls to new 1-year lows vs. the dollar on hard Brexit fears renewed this week.
· Precious metals steady; despite the concerns about Turkey, impact of Lira on ECB banks, and stocks falling – gold prices no lift holding around the $1,220 an ounce level – pressured by the surge in the US dollar to new 2018 highs. Gold prices have traded as low as roughly $1,213 and as high as $1,222 intraday and remains near the lows of the year (down about 1.2% for August).
· Energy futures bouncing off 7-week lows, with WTI crude above $67.50 per barrel in a week that has seen pricing pressure after bearish inventory data and concerns of potential impact from trade war/tariffs between the US and counterparts. Overnight, the IEA warned that a growing U.S./China trade spat could hurt oil demand growth this year and next if the global economy takes a hit. Note the weekly Baker Hughes rig count also expected later this afternoon.
· Treasury yields fall sharply, with the 10-year moving down to 2.88%, off about 4 bps from yesterday and now down about 13 bps from its highs just 2-weeks ago, as investors flee to the safety of Treasuries given macro concerns. The concern in the currency markets, as well as in-line inflation data this morning (CPI) helping push Treasury prices higher.
· The consumer price index (CPI) rose 0.2% in July, in-line with consensus views as rising shelter costs offset a decline in energy prices. Meanwhile the increase in the CPI over the past 12 months was 2.9%, unchanged from June. Core CPI prices (excludes energy and food), also rose 0.2%, in-line with estimates while the 12-month rate of core inflation rose to 2.4%, the highest rate since September 2008. The cost of food rose by 0.1%. Energy costs fell by 0.5% last month.
Sector Movers Today
· Semiconductors; MCHP shares drop after in-line quarterly revs (EPS beat), but guided next quarter revs $1.474B-$1.55B, below consensus $1.58B; SYNA reported revs in-line and EPS better, but guided midpoints of rev and EPS for Sep below ests and outlook for low-single digit growth for FY19 fell short of consensus; Goldman Sachs upgraded AMD to buy and tgt to $21 saying the delay in Intel’s new products will allow AMD to gain share in not only client computer processing units, but also in the “lucrative” server CPU market (form also downgraded INTC to sell)
· Asset managers: AB preliminary AUM $546B as of July 31, up from $540B at the end of June, with the 1.1% increase was due to market appreciation, partially offset by total firm-wide net outflows; APAM said its assets under management as of July 31, 2018 totaled $117.1 billion; IVZ preliminary month-end assets under management (AUM) of $987.8B, an increase of 2.5% month over month; TROW prelim AUM of $1.07 trillion as of July 31, 2018; WDR preliminary AUM of $79.2B for the month ended July 31, 2018, compared to $78.7B end of June
· Interest rate sensitive stocks such as utilities are moving higher given the rally in bonds and subsequent decline in Treasury yields, with the 10-year moving to 2.88%, down 13 bps from its highs just 2-weeks ago, as investors flee to the safety of Treasuries given macro concerns. On the flip side, financials among the day’s top decliners, led by weakness in foreign banks (DB, UBS, CS, BCS) on Turkish Lira exposure and US banks sliding on lower yields (JPM, BAC, WFC). DB was also downgraded at Morgan Stanley
· ESRX +3%; after advisory firm ISS joins CI shareholder Glenview to support the company’s proposed merger with them, going against activist shareholder Carl Icahn’s efforts to end the deal
· OLED +13%; after 2Q profit and revenue topped analysts’ estimates, saying material sales improved off what it is believed to be a 1Q bottom for material shipments
· OSTK +23%; DA Davidson very positive on shares, raising tgt to $112 but makes bull case tgt much higher saying the company’s latest quarter showed improving retail segment trends, completion of tZERO STO, and the sale of tZERO minority interest
· PLNT +7%; Q2 EPS and revs topped views with comps up 10.2%
· SNCR +24%; Q2 results that beat EPS estimates but missed on revenue with a 36% drop Y/Y and said they expect to deliver “substantial improvements” to its financial results in the 2H; also named new CFO David Clark to replace Lawrence Irving, who is retiring
· TTD +34%; reported a strong 2Q marked by strong spending from new and existing clients, international growth, and strength across channels included mobile, video, audio, connected TV and also increased its 2018 revenue and EBITDA guidance by ~5%
· CHUY -11%; after mostly in-line quarterly results, though analysts cautious (Wedbush, Raymond James) saying that 2018 comp. sales likely to come in below the reiterated +1% forecast; sees low-end of reduced EPS forecast as “realistic”
· CORT -12%; cut its 2018 revenue forecast to $250M-$270M from prior $275M-$300M and vs. est. $291.6M after Q2 revs of $62.3M fell short of consensus
· DBX -7%; posted a solid earnings highlighted by a ~2.9% top-line beat, 5% ARPU expansion, and a ~7% beat on cash flow as per one analyst, but shares fall amid concerns around the lockup late August and COO departure
· GEMP -55%; said a phase 2a trial of its treatment for non-alcoholic fatty liver disease in pediatric patients will be terminated, citing “unanticipated problems.”
· MCHP -12%; after in-line quarterly revs (EPS beat), but guided next quarter revs $1.474B-$1.55B, below consensus $1.58B
· RDFN -15%; downgraded to neutral at DA Davidson after its Q2 results and below-consensus Q3 guidance as company casts doubt on real-estate market
· RUN -16%; modestly beat 2Q18 deployment guidance while maintaining guidance for 15% Y/Y unit growth and $1.00/W in retained value; shares fall after earnings miss views
· SYNA -5%; reported revs in-line and EPS better, but guided midpoints of rev and EPS for Sep below ests
· Mesa Air (MESA) 9.63M share IPO priced at $12.00
· Medical Properties Trust (MPW) 9.42M share Spot Secondary priced at $14.55
· NeoGenomics (NEO) 9.8M share Secondary priced at $12.75
· New York Mortgage (NYMT) 12.5M share Spot Secondary priced at $6.16
· Pacific City Financial (PCB) 2.385M share IPO priced at $20.00
· Party City (PRTY) 10M share Spot Secondary priced at $15.65
· PBF Energy (PBF) 6M share Spot Secondary priced at $48.45
· Regenxbio (RGNX) 2.7M share Secondary priced at $65.00
· Restoration Robotics (HAIR) 10M share Secondary priced at $1.50