Mid-Morning Look: June 03, 2019

Auto PostDaily Market Report

Mid-Morning Look

Monday, June 03, 2019

Index

Up/Down

%

Last

 

DJ Industrials

77.31

0.31%

24,892

S&P 500

5.73

0.21%

2,757

Nasdaq

-33.37

0.44%

7,420

Russell 2000

2.65

0.18%

1,468

 

 

U.S. equities are mixed early with markets coming into the new week and month watching for the latest developments in the U.S.-China trade war. This weekend, China said that Washington’s trade moves have done serious harm to the U.S. economy by increasing production costs, causing price hikes, damaging growth and people’s livelihoods and creating barriers to U.S. exports to China. Markets are looking to pick up the pieces from last Friday when President Trump announced 5% tariffs on all Mexican imports starting June 10, in order to address the illegal migration crisis at the border. Tariffs would then rise to 10% on July 1, 15% on August 1, 20% on September 1 and 25% on October 1 if Mexico does not take sufficient actions. Markets on alert as the President is visiting the UK this week. Economic data weighing on markets early, with weaker Manufacturing and Construction Spending reports. Technology stocks, particularly the FAANG sector (ex-AAPL) are hitting the market hard, with GOOGL falling on a DOJ investigation report, while AMZN and FB drop below key technical levels to their lowest levels in months. Meanwhile, the Philly semi index (SOX) up nearly 2% to 1,320 (back at its 200-day MA), getting a boost from CY up 25% after Infineon agrees to buy them and AMD up on Samsung partnership. Energy stocks looks to rebound after oil prices plunging the last few weeks, while financials remain weak on lower Treasury yields and discretionary stocks hammered of late on weaker earnings and outlooks in the retail sector. Defensive sectors such as utilities, REITs have rallied on low yields.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar pulls back further after touching near 2019 highs the early part of last week; dollar slips on weaker economic data, while the yen is flat, and the Canadian dollar rebounds along with oil prices after WTI dropped 16% for the month of May. Gold prices move back to 2-month highs on the dollar dump and rotation into safe haven assets.

·     Treasury market’s rally further, adding to last week gains as Treasury yields move to new low levels from 2017; the 10-year yield fell to 2.11% after dropping as low as 2.069%, while the 3-month and 1-year yield invert further to over 25 bps, boosting recession fears; the 2-yr yield falls under 1.9% and the 30-yr drops to 2.55%

 

Economic Data

·     Markit US Manufacturing PMI, May-F reported at 50.5 vs. est. 50.6, while the new orders index for May stood at 49.6 vs flash reading 49.7 and final April 53.5 (lowest since September 2009)

·     ISM Manufacturing for May fell to 52.1 (lowest since Oct ’16) from 53.0 last month, which was also the estimate while new orders rose to 52.7 from 51.7 prior, employment rose to 53.7 vs 52.4, inventories fell to 50.9 vs 52.9 and prices paid rose to 53.2 vs 50.0

·     Construction Spending for April was unchanged, slightly below the estimate for a +0.4% increase, while the prior month was revised to +0.1% from -0.9%

 

 

Macro

Up/Down

Last

 

WTI Crude

0.16

53.66

Brent

-0.06

61.93

Spot Gold

12.00

1,317.50

EUR/USD

0.0037

1.1204

JPY/USD

-0.01

108.29

10-Year Note

-0.026

2.104%

 

 

Sector Movers Today

·     Highlights/movers from this weekend ASCO conference in Chicago:

·     ADRO falls, downgraded at Oppenheimer as Aduro’s partner NVS presented initial clinical results from an ongoing Phase 1b trial of ADU-S100 in combination with spartalizumab in advanced tumors/said of 83 patients dosed as of an April 5 cutoff, five objective responses were observed

·     AMGN rises after AMG 510 response rate improved to 50% from 30% in lung cancer patients/saw early signs of activity in a study of 35 patients for an experimental drug targeting one of the most commonly mutated genes in cancer (MRTX shares surged, which is developing its own medicine with GSK for KRAS mutation data, boosted by AMGN data at ASCO)

·     FPRX shares fell after being downgraded at Wells Fargo following review of data at ASCO for B7:H4 antibody FPA-150 in B7:H4+ patients w/ solid tumors including ovarian cancer saying response rate of 1/18 in B7:H4+ tumors is underwhelming, w/lack of clarity on dose response

·     GNCA surges over 50% as announces promising data from its ongoing trial of GEN-009, its lead cancer treatment vaccine, at ASCO saying in five patients, GEN-009 monotherapy elicited T cell responses to 91%; the treatment has been well tolerated to date, with no dose-limiting toxicities

·     NKTR after its bempegaldesleukin combined with BMY’s Opdivo spurred more remissions of skin cancer, as updated results from an early-stage study showed four additional patients out of 38 were cleared of their cancer, for a total of 13

·     MRK presented data on its blockbuster cancer drug Keytruda at ASCA as data showed that five year overall survival rate was 23.2% in new patients and 15.5% in previously treated patients, as compared to a historical survival rate of around 5%

·     Non biotech movers: in auto, monthly auto sales data for May released today: 1) TM said May total U.S. auto sales rose 3.2% vs. est. (-0.5%); 2) FCAU May U.S. auto sales rose 2% vs. est. (-5.9%) as Ram brand sales rose 29% YoY while May Jeep brand sales fell (-7%) YoY; 3) HMC May US auto sales fell (-4.9%) vs. est. (-1.3%); 4) NSANY May auto sales rose 0.1% vs. est. (-6.2%)

·     Restaurants; CMG said it could face about $15M in costs this year if the U.S. carries out proposed tariffs on goods from Mexico (notes gets avocados from Mexico) with its CFO saying “if the tariffs become permanent, we would look to offset these costs through other margin improvement efforts already underway,”…and “could also consider passing on these costs through a modest price increase”; EAT was upgraded to neutral from sell at UBS saying that with the stock falling below that level, valuation now appears to reflect the challenges of April initiation

·     Consumer Staples; MO said it took an 80% stake in the global business of Burger Sohne for $372M; CHWY is offering 5.6M shares of its Class A common stock at an IPO price expected to be between $17-$19 per share (the subsidiary of PetSmart, Inc., is offering 36M shares of stock); FIZZ was upgraded to hold from sell at Maxim after shares have significantly declined from its 52-week and all-time high of $127.32 and $129.82, respectively; KHC mentioned in Barron’s saying shares could be near a bottom after the latest downdraft

 

Stock GAINERS

·     AMD +7%; said it will license its graphics designs to Samsung Electronics Co. for use in smartphones and tablets

·     ATXI + 21% after saying a second late-stage trial of its intravenous (IV) drug tramadol achieved the main goal of improving pain over 24 hours versus a placebo in patients with postoperative pain following abdominoplasty surgery

·     CY +24%; will be acquired by Germany’s Infineon Technologies for an enterprise value of $10.1B, which is equal to $23.85 per Cypress share in the latest chip deal https://on.mktw.net/316d0sv

·     EE +13%; after agreeing to be acquired by the Infrastructure Investments Fund, an investment vehicle advised by JPMorgan Investment Management, for $68.25 per share in cash in total deal valued at $4.3B including debt https://on.mktw.net/2WywR4v

·     FL +2%; among the best gainers in the S&P 500 early amid a bounce in the discretionary sector

·     NKTR +10%; after its bempegaldesleukin combined with BMY’s Opdivo spurred more remissions of skin cancer, as updated results from an early-stage study showed four additional patients out of 38 were cleared of their cancer, for a total of 13

 

Stock LAGGARDS

·     AMZN -3%; another technical breakdown in the tech space, dropping sharply below its 200 day (1,753) and 100-day MA (1,756) and moving to lowest levels since mid-March

·     BA -2%; after U.S. regulators say some Boeing 737 max planes may have faulty parts

·     BIG -4%; downgraded two notches to underperform from buy at Bank America saying they believe that the company’s outlook for the rest of the year may be too optimistic and could be due for additional cuts (cuts tgt to $23 from $45)

·     CNC -8%; after HUM said this morning it would not bid for CNC https://on.mktw.net/3179JsY

·     FB -4%; weakness in FAANG/tech sector as fell below its 100-day MA of 170.70- first break below 100-day MA since January

·     FDX -1%; slipped on reports China will investigate into the U.S. package delivery co, Xinhua news agency said on Saturday, after Chinese telecoms giant Huawei Technologies Co Ltd said parcels intended for it were diverted – UBS cut estimates and tgt citing the investigation

·     FPRX -17%; downgraded at Wells Fargo following review of data at ASCO for B7:H4 antibody FPA-150 in B7:H4+ patients w/ solid tumors including ovarian cancer saying response rate of 1/18 in B7:H4+ tumors is underwhelming

·     GOOGL -4%; touched lowest level in over 4 months after reports the U.S. Justice Department is preparing an investigation of Google to determine whether it broke antitrust law in operating its sprawling online businesses

·     WYNN -2%; after gross gaming revenue (GGR) for Macau casino operators was 26 billion patacas ($3.2 billion) in May, up 1.8% YoY but was slightly worse than the median analyst estimates of a 3% increase

_________________________________________________________________

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.

Live Trading

Open an Account

Paper Trading

Register