Mid-Morning Look: March 13, 2019

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Mid-Morning Look

Wednesday, March 13, 2019

Index

Up/Down

%

Last

 

DJ Industrials

129.15

0.51%

25,683

S&P 500

16.92

0.61%

2,808

Nasdaq

42.91

0.57%

7,633

Russell 2000

8.92

0.58%

1,558

 

 

U.S. equities open firmly higher, with the Dow Industrial Average recovering from yesterday losses as Boeing shares pare recent losses after recent 787 Max 8 plane issues sunk shares. Technology rises again as the Nasdaq Composite nears its best levels in 2019 (was 7,643 on March 4th), while energy is boosted by rising oil prices (near 4-month highs) along with gains in financials, materials and consumer discretionary. US stocks overlook the weak economic data out of Japan and Australia and a warning from DoubleLine Capital founder Gundlach who sees a market correction coming. A round of lower inflation data yesterday (CPI) and PPI (today) help keep the FOMC on track to maintain rates at current levels (lowering fear of them raising rates). Meanwhile, investors are still waiting for details on a potential trade deal between the U.S. and China, and the British Parliament is set to vote on whether the country should leave the European Union on March 29 without a deal.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar drops to fresh lows, losing ground vs. the British Pound, and Canadian dollar (on oil gains), while little changed vs. the euro and yen; gold prices jump firmly back above the $1,300 an ounce on Brexit uncertainty and the US dollar decline; crude oil rose for a third day after an industry report showed an unexpected drop in U.S. stockpiles just as planned cuts and disruptions to OPEC output are tightening supply; Treasury markets are steady after rising yesterday, with the yield on the 10-year hitting its lowest levels since early January on Tuesday (fell below 2.60% briefly), while today around 2.62%

 

Economic Data

·     Durable Goods Orders for January rise 0.4%, well above the estimated decline of (-0.4%) while Durable goods new orders revised up to 1.3% for December from 1.2%; new orders ex-trans. fell 0.1% in Jan. after 0.3% rise and new orders ex-defense rose 0.7% in Jan. after 2.2% rise. Non-defense capital goods orders ex-aircraft rose 0.8% in Jan. after falling 0.9% in December

·     Producer Prices (PPI) for February rose 0.1%, tamer than the expected 0.2% increase, while core prices (ex: food & energy) also rose 0.1% MoM, below the 0.2% estimate; Wholesale inflation has risen a mild 1.9% in the past year, down from 2% in the prior month while final demand ex food, energy rose 2.5% y/y vs est. up 2.6%

 

 

Macro

Up/Down

Last

 

WTI Crude

1.01

57.88

Brent

0.61

67.28

Gold

10.40

1,308.50

EUR/USD

0.0022

1.1309

JPY/USD

-0.04

111.32

10-Year Note

0.005

2.618%

 

 

Sector Movers Today

·     Casino & Leisure movers; in cruises, CCL was upgraded to buy from neutral at Goldman Sachs and raised its tgt to $65 saying that the valuation was near trough absolute and relative levels to the S&P 500 and closest peer (RCL) even as management set a more conservative bar for FY19; gun maker AOBC was downgraded to neutral from outperform at Wedbush and cut tgt to $11 from $13.50 as company faces toughest comps on the Trump era and a hazardous FY20 guide; SKIS rises on strong rev growth – says organic revenue and EBITDA both rose ~10% in FQ3; total revenue was up 42%, including a 54% increase in ski instruction revenue

·     Bank movers; Brookfield Asset Management Inc. agreed to buy a 62% stake in OAK valued at a 12% premium as Brookfield will pay either $49 a share in cash, or 1.077 Brookfield Class A shares for Oaktree Class A shares https://on.mktw.net/2XWnTvu ; CMA was downgraded to neutral at Wedbush and lowered 2019 and 2020 EPS driven by a lower net interest income forecast and the belief earnings growth will be more challenging in 2020; in the insurance space, PGR reported combined ratio for the February of 90.9% vs. 87.8% YoY with net premiums earned $2.60B vs. $2.20B y/y/net premiums written $3.11B vs. $2.70B y/y

·     Consumer Staples; SAFM was upgraded to neutral at JPMorgan (and raise tgt to $127) saying shares have been outperforming as a result of higher chicken prices and the increased chances of China opening its borders to U.S. broilers; in restaurants; CMG tgt raised to street high $700 from $620 at BTIG citing confidence in the concept’s traffic driving initiatives including the national launch of Chipotle Rewards announced Tuesday; WING tgt raised to $74 at Wedbush

 

Stock GAINERS

·     ACB +12% said billionaire investor Nelson Peltz will be a strategic advisor, as they will work to explore potential partnerships and the company’s global expansion strategy

·     AERI +4%; received FDA approval for its once-daily eye drop Rocklatan to reduce elevated intraocular pressure/analysts positive on news

·     CARA +9%; as reports a smaller-than-expected Q4 EPS loss

·     GH +14%; Q4 revs and 2019 sales forecast both topped estimates, as the stock touched new highs

·     OAK +11%; Brookfield Asset Management Inc. agreed to buy a 62% stake in OAK valued at a 12% premium as Brookfield will pay either $49 a share in cash, or 1.077 Brookfield Class A shares for Oaktree Class A shares https://on.mktw.net/2XWnTvu

·     SKIS +11% on strong rev growth – says organic revenue and EBITDA both rose ~10% in FQ3; total revenue was up 42%, including a 54% increase in ski instruction revenue

·     TEUM +20%; Q4 revenue of $14.3M, up 257% y/y, outperformed expectations of $13.5M while adjusted EBITDA of $2.3M missed and introduced 2019 revenue guidance of $105M-$115M and EBITDA that was positive

·     VRA +18%; after Q4 results, with comps falling (-11.2%) in quarter, but better than the expected (-14.5%) est. while gross margin improved 50 bps compared to a year ago after reduced clearance activity/sees FY20 revenue of $420M-$440M vs. $407M est

 

Stock LAGGARDS

·     AMPH -14%; downgraded at Needham and Piper citing valuation saying shares are reflecting significant contribution from Primatene Mist and new generic launches

·     IRTC -4%; was named a new short by Kerrisdale, saying it sees 50% downside

·     NOAH -14%; after Q4 total transaction value of RMB 25.2B fell 11% from RMB 28.2B a year earlier

·     ROKU -4%; after being downgraded by two analysts (Loop Capital and Macquarie) following outperformance in shares since December (up 130% YTD)

·     SIEN -24%; reported a wider-than-expected 4Q18 GAAP loss per share on revenue in line with its 1/7/19 preannouncement

·     ZAGG -12%; results beat on lower taxes and earlier product deliveries while guided 2019 revenue up 1%-4% organically, but 1H19 down 13% due to a difficult compare and soft iPhone demand

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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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