Mid-Morning Look: June 10, 2019

Auto PostDaily Market Report

Mid-Morning Look

Monday, June 10, 2019

Index

Up/Down

%

Last

 

DJ Industrials

170.44

0.66%

26,154

S&P 500

23.84

0.83%

2,897

Nasdaq

121.88

1.58%

7,864

Russell 2000

17.47

1.15%

1,531

 

 

U.S. equities with follow-through after posting their best weekly returns of the year last week, as the U.S. suspended plans for tariffs on Mexico over the weekend, as well as positive commentary on the China trade issues. Despite the suspension of tariffs, Trump warned Mexico in a series of tweets on Sunday that if cooperation should fail, “we can always go back to our previous, very profitable, position of tariffs.”) The benchmark S&P 500 Index advanced for a fifth straight session, led by chipmakers and auto companies, while the tech heavy Nasdaq Composite outperformed, approaching its 50-day moving average resistance (currently stands at 7,858), buoyed by software stocks after the CRM’s $15BB deal for DATA this morning (note the S&P and Dow topped their 50-day MA last week). In other deal news, a huge deal in the defense sector as Dow component UTX announced a merger with defense primer RTN. Emerging-market shares also higher as Mexico’s peso strengthened the most in almost a year after the accord with the U.S. late Friday. Regarding trade with China: over the weekend, White House’s acting budget Chief Russell Vought is pushing for a delay in implementing key provisions of a law that restricts U.S. government’s business with Huawei Technologies Co., citing the burdens on U.S. companies that use Huawei. This morning in an interview on CNBC, President Trump said Huawei could be part of trade talks with China. Stocks a nice extension of last week gains which saw the Dow Industrials rise 4.7%, the S&P 500 climb 4.4%, and the Nasdaq Composite gain 3.9%. In data overnight in China, exports unexpectedly returned to growth in May despite higher U.S. tariffs, but imports fell; China’s May exports rose 1.1% from a year earlier, surprising analysts which expected exports to have fallen 3.8% from a year earlier. China’s imports dropped 8.5% in May, leaving the country with a trade surplus of $41.65 billion for the month.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar index higher (DXY) rising 0.3% as gains vs. the euro, yen and Pound, steady vs. the Canadian dollar, but down against the Mexican peso after President Trump announces a deal to indefinitely suspend tariffs on Mexican goods. The dollar traded to a seven-day high against the Japanese yen as investors fleeing (slowly) defensive, safe-haven assets as global stocks rebound from their latest trade related fear pullback. The dollar among those safe haven assets paring recent gains amid rotation back into riskier assets, while oil prices are little changed. After falling sharply for the last few weeks, Treasury yields rising modestly (2-year yield down 32 bps and the 10-year down 25 bps over the last 2-weeks heading into today). 

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.06

53.93

Brent

-0.31

62.98

Spot Gold

-11.00

1,329.75

EUR/USD

-0.0022

1.1312

JPY/USD

0.33

108.52

10-Year Note

0.01

2.129%

 

 

Sector Movers Today

·     Software movers; DATA to be acquired by CRM in a stock deal valued at $15.7 billion as Salesforce will exchange 1.103 of its shares for each Tableau share outstanding, valuing DATA shares (based on Friday’s closing prices) at $177.88 each, a 42% premium and the deal is expected to close during Salesforce’s Q3 https://on.mktw.net/2I5ONLs (shares of AYX, SPLK, TWLO, TEAM among those advancing in sympathy)

·     Semiconductors; ADI was double upgraded to buy from sell at Goldman Sachs and raised its tgt to $114 from $101 as believes analog units are tracking below trend which indicates that the end of the cyclical correction may be approaching, barring a prolonged economic recession; TSM reports May revenue of about NT$80.44B, up 8% Q/Q but down 1% YoY/revenue for the first five months of the year totaled NT$373.84B, down 9% YoY; AMD tgt raised to $40 at Bank America ahead of the E3 gaming conference this week while RBC Capital said during the E3 conference, MSFT announced its next generation Xbox codenamed “Project Scarlett”/this product will come with a CPU and GPU product provided by AMD

·     Auto sector; industry rose early (GM, F, FCAU, BWA, LEA) after President Donald Trump called off his tariff threat on Mexico on Friday which helps many names in the auto industry as imports from Mexico (in 2018) were roughly $350B, of which $93B were auto imports (as per Deutsche Bank); TSLA was upgraded to buy at Roth Capital after meetings last week with major Chinese EV producers and relevant supply chain participants; NSANY is set to ask Renault to significantly cut its 43.4% stake in the Japanese car maker in return for supporting an FCA-Renault merger, Reuters reports https://on.mktw.net/2EZCs9W

·     Lending and finance movers; SYF and AMZN are partnering on a credit card for Prime members who might not have good enough credit to get one otherwise; FISV announces debt offering in 4-parts to fund FDC purchase; FNMA and FMCC shares fell after Treasury Secretary Steven Mnuchin said a major overhaul of the country’s housing finance system needs to occur first – Mnuchin said he’d prefer an explicit government backstop of Freddie and Fannie securities, a measure that would have to be implemented by Congress

 

Stock GAINERS

·     ADI +5%; double upgraded to buy from sell at Goldman Sachs and raised its tgt to $114 from $101 as believes analog units are tracking below trend which indicates that the end of the cyclical correction may be approaching, barring a prolonged economic recession

·     APTX +12%; announces positive initial data of its Phase II study of NYX-2925 in patients with Fibromyalgia, saying it was statistically significant compared with placebo

·     DATA +34%; to be acquired by CRM in a stock deal valued at $15.7 billion as Salesforce will exchange 1.103 of its shares for each Tableau share outstanding, valuing DATA shares (based on Friday’s closing prices) at $177.88 each, a 42% premium https://on.mktw.net/2I5ONLs

·     GME +8%; said it planned to buy back up to 12 million shares between $5.20 and $6.00 in “modified Dutch auction.”

·     KHC +5%; issued its long-delayed 10-K and said its internal investigation into a procurement issue that led to it restating results going back to 2015 is complete

·     PRVB +307%; after results from the NIH-sponsored “At-Risk” study published in the New England Journal of Medicine show a single course of the company’s PRV-031 (Teplizumab) delays Type 1 diabetes onset in high-risk individuals by at least two years

·     RTN +2%; as UTX agreed to buy defense contractor RTN over the weekend in an all-stock deal, where RTN shareholders will receive 2.3348 shares in the new company for every share they currently own https://bloom.bg/2WzoaY8

·     TLRY +11%; after announcing a deal with its majority shareholder Privateer Holdings to extend the lock-up period for up to two years on the 75M common shares held by Privateer

 

Stock LAGGARDS

·     CRM -3%; among top decliners in the S&P 500 after its $15B purchase of DATA

·     EA -2%; weakness in a few video game software names ahead of E3 conference this week

·     LLY -2%; shares slip after results at ADA studies over the weekend for REWIND data at ADAREWIND as Trulicity showed a 12% reduction in major cardiovascular events in patients in the study/CSFB said investors may have been hoping for a greater risk reduction/UBS at 15%

·     NVAX -10% after FDA recommends additional phase III trial of ResVax

·     ONCE -8%; as the company and Roche (which agreed to buy them), received requests for more information and documentary material from the U.S. FTC in connection with the pending deal

·     TAP -3%; among top S&P 500 decliners after Credit Suisse initiated with an underperform and $50 tgt (SAM initiated neutral and $320 tgt)

_________________________________________________________________

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