Mid-Morning Look: February 25, 2019

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Mid-Morning Look

Monday, February 25, 2019

Index

Up/Down

%

Last

 

DJ Industrials

162.22

0.62%

26,194

S&P 500

16.49

0.59%

2,809

Nasdaq

58.26

0.77%

7,585

Russell 2000

7.81

0.49%

1,597

 

 

U.S. equities start the week higher, extending recent gains (Nasdaq Comp and Dow come into the week with 9-week winning streaks) after President Donald Trump notes substantial progress in the trade talks with China and will extend the deadline for the imposition of new tariffs on the country beyond the current cut-off of March 1st. The Nasdaq Comp rises to highs of about 70 points briefly topping the 7,600 level (best since October) on tech strength and a spike in the biotech sector following a few M&A deals before fading. U.S. stock not putting in the same gains China saw overnight, as the Shanghai index soared 5.6% on trade optimism. WTI crude futures fall after President Trump tweeted oil prices are getting too high. President Trump also said he plans to meet China’s President Xi Jinping next month, while offering few specifics such as the date or how long he’s going to let the tariff deadline slide. Last week, the Dow rose 0.6% for its ninth straight week of gains, the longest such run since May 1995. The S&P 500 climbed 0.6%, up for a fourth straight week, and the NASDAQ moved up 0.7%, for its ninth weekly gain, it’s longest since May 2009.

 

Treasuries, Currencies and Commodities

·     In currency markets, the US dollar trades mixed early, falling vs. the euro and British pound early while gaining against the safe-haven yen and mixed against emerging market currencies as investors try to digest the trade headlines/tariff news this morning. Commodity prices are mixed with gold little changed around the $1,333 level (after rising less than 1% less week) while oil prices slip after President Trump tweeted this morning that “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!” Treasury market’s slip early as U.S. stocks advance, with the 10-year yield rising back above 2.67% and the 2-year around 2.51% ahead of a busy week of economic data.

 

Economic Data

·     Wholesale Inventories rose 1.1% in December to $661.8B vs. $654.7B in prior month (largest monthly gains since Oct 2013), well above the estimate for a 0.4% rise while wholesale sales fell (-1%) in December after falling (-1.2%) the prior month and vs. estimate (-0.3%)

·     January Chicago Fed national index -0.43 vs est. 0.10 while December was revised to 0.05 from 0.27; forty-six indicators deteriorated from December to January; 35 of the 85 monthly individual indicators made positive contributions, while 50 indicators affected the index negatively

 

 

Macro

Up/Down

Last

 

WTI Crude

-1.05

56.21

Brent

-1.20

65.92

Gold

0.80

1,333.60

EUR/USD

0.0018

1.1353

JPY/USD

0.14

110.83

10-Year Note

0.017

2.67%

 

 

Sector Movers Today

·     Internet; Chinese ADRs rising after the tariff delay from President Trump, sending Shanghai index up over 5% last night: HUYA, JD, BABA, BIDU among those moving higher; SNAP tops $10 level for the first time since early September; TWTR said Evan Williams has decided to step down from the board at the end of the month after 13 years

·     Industrial & Machinery; GE shares jumped as it agreed to sell its biotechnology business to DHR for $21 billion in cash, moving to pay down debt by parting with one of its fastest growing businesses. https://on.mktw.net/2ViOscg ; TEX shares active as Q4 EPS and revenue topped consensus and guided year EPS $3.60-$4.20 vs. est. $3.41; MDR posted a surprise Q4 loss that came in far short of analyst estimates saying results were hurt by several significant non-recurring charges, including a $2.2B goodwill impairment charge

·     Casino & Leisure movers; in boating space, BC was upgraded at JPMorgan following recent encouraging data points on the marine industry, macro backdrop, and BC-specific growth drivers, as see a more favorable setup to own BC in 2019; IMAX was downgraded at Canaccord to hold ahead of Q4 results, citing weak box office trends, particularly in China; towables declined (WGO, CWH, LCII, THO) after Bloomberg reported total RV shipments in January fell 40%

·     Metals & Materials; GOLD made a hostile bid for NEM in a stock deal that would value Newmont at nearly $18 billion/under terms of the bid, Newmont shareholders would receive 2.5694 Barrick shares for each Newmont share they own (valued at $33.50) https://on.mktw.net/2tDAZQx Reuters reported China’s imports of U.S. soybeans nearly doubled in January from the previous month as cargoes booked after a Sino-U.S. trade truce arrived in the world’s top oilseed importer, according to Chinese customs data (China brought in 135,814 tonnes of U.S. soybeans in January, up 95 percent from 69,298 tonnes in December)

·     Housing & Building Products; HD and LOW expected to report earnings this week in the home improvement retail sector; KBH was downgraded at Raymond James saying shares having rebounded 25% YTD to 1.4x our adjusted book value estimate, we feel this is an appropriate time to step back and evaluate the data as its starts to come in over the next few weeks; ETH discloses that written orders in FQ3 through President’s Day were up 5% Y/Y

 

Stock GAINERS

·     BOLD +13%; upgraded to buy and $40 tgt at Chardan on (1) potential 2H19 visibility of Audentes as a credible player in large orphan indications, e.g. Pompe disease, and (2) the ongoing re-pricing of post-PoC AAV-based gene therapy (GT) companies

·     CMTA +77%; agreed to be bought by Ipsen (IPN) in a deal valued at up to $1.31B as Ipsen said it would initially pay $25 a share in cash for Clementia, and a further $6 a share contingent on Palovarotene drug receiving FDA approval https://on.mktw.net/2IDADUi 

·     CRSP +19%; and development partner VRTX announce that the first beta thalassemia patient has been dosed with CTX001, a gene therapy based on the CRISPR/Cas9 gene editing approach

·     FOLD +3%; said the FDA granted Breakthrough Therapy Designation to AT-GAA for the treatment of late onset Pompe disease

·     GE +9%; agreed to sell its biotechnology business to DHR for $21 billion in cash, moving to pay down debt by parting with one of its fastest growing businesses. https://on.mktw.net/2ViOscg

·     ONCE +120%; RHHBY entered a definitive merger agreement to acquire ONCE for $114.50 per share and that the deal is expected to close in Q2 https://on.mktw.net/2EvUMHK

·     QURE +29%; rising in sympathy with ONCE after gets bought for hefty premium in the gene therapies sector

·     TEX +3%; as Q4 EPS and revenue topped consensus and guided year EPS $3.60-$4.20 vs. est. $3.41 and agreed to sell its Demag Mobile Cranes business for about $215 million

 

Stock LAGGARDS

·     ES -1%; downgraded to underperform from neutral at Bank America given dilution from the recent $2.5B equity raise

·     GIS -1%; as food related names extend Friday declines following KHC earnings miss

·     MDR -7%; posted a surprise Q4 loss that came in far short of analyst estimates saying results were hurt by several significant non-recurring charges, including a $2.2B goodwill impairment charge

·     NEM -1%; GOLD made a hostile bid for NEM in a stock deal that would value Newmont at nearly $18 billion/under terms of the bid, Newmont shareholders would receive 2.5694 Barrick shares for each Newmont share they own (valued at $33.50) https://on.mktw.net/2tDAZQx

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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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