Mid-Morning Look: July 10, 2019

Auto PostDaily Market Report

Mid-Morning Look

Wednesday, July 10, 2019

Index

Up/Down

%

Last

 

DJ Industrials

117.41

0.44%

26,901

S&P 500

14.55

0.49%

2,994

Nasdaq

56.96

0.70%

8,198

Russell 2000

0.96

0.06%

1,563

 

 

U.S. equities with a strong bounce off overnight declines, with the S&P 500 index trading to a fresh intraday record high and surpassing the 3,000 level for the first time, boosted after Fed Chairman Powell in his text prior to speaking on Capitol Hill later that the Fed stands ready to “act as appropriate” to sustain a decade-long expansion amid concerns over trade policy and a weak global economy. The Dow Industrial Average and Nasdaq Composite also traded to record highs intraday. The irony is that global stocks are surging on broad expectations that the Fed will cut interest rates this month (and aggressively this year) to help signs of slowing growth – but this comes while stocks are making new all-time highs! Low inflation and trade uncertainties help their case a bit, but economic data has been better of late (US jobs report Friday strong), which lowered chances of cuts. The yield on 10-year Treasury fell to 2.04% after climbing above 2.11% for the first time in 4-weeks on the headlines while the dollar weakened and gold spiked. Oil prices jumped overnight following a bullish weekly inventory report. In macro news, the U.K.’s ambassador to the U.S., Sir Kim Darroch, has resigned after a leak of diplomatic cables in which he described President Donald Trump’s administration as “diplomatically clumsy and inept” and said he doubted it would become “substantially more normal.” Overall good day for stocks early, though have pulled back from intraday record highs.

 

More on Powell text: concerns about trade policy and a weak global economy “continue to weigh on the U.S. economic outlook” and the Federal Reserve stands ready to “act as appropriate” to sustain a decade-long expansion, Fed Chairman Jerome Powell said on Wednesday in remarks. Powell contrasted the Fed’s “baseline outlook” of continued U.S. growth against a considerable set of risks – including persistently weak inflation, slower growth in other major economies, and a downturn in business investment driven by uncertainty over just how long the Trump administration’s trade war with China and other countries will last and how intense it will become. Powell speaks and take questions from members of the U.S. House of Representatives Financial Services Committee today and will testify again on Thursday before the Senate Banking Committee.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar slides on dovish take from Fed Chairman Powell comments in his prepared text in testimony to House today; the British Pound bounces off 2-year lows vs. the dollar after economic data (UK growth) and news Darroch, Britain’s ambassador to the US has resigned following the leak of confidential diplomatic cables in which he criticized Trump; the Canadian dollar little changed despite holding rates steady and spike in oil. The 10-year yield rose as high as 2.11% earlier this morning – but just slipped back below 2.04% as Powell said concerns about trade policy and a weak global economy “continue to weigh on the U.S. economic outlook” and the Federal Reserve stands ready to “act as appropriate” to sustain a decade-long expansion. Oil prices jump on bullish inventory data while gold prices spike on a dollar blip.

 

 

Macro

Up/Down

Last

 

WTI Crude

1.66

59.49

Brent

1.82

65.98

Spot Gold

11.50

1,409.30

EUR/USD

0.0042

1.125

JPY/USD

-0.32

108.54

10-Year Note

-0.001

2.063%

 

 

Sector Movers Today

·     Oil equipment and services; APY was downgraded to neutral at Citigroup and cut tgt to $34 saying several issues are surfacing simultaneously which presents risk around the upcoming quarter; FTSI was downgraded to neutral at Bank America despite recent underperformance as believe FTSI is too exposed to what is likely further loosening of pressure pumping fundamentals in 2H19 and ’20; CLB was upgraded at Bank America as thinks will reverse underperformance; Susquehanna downgraded SPN to neutral from positive and cut tgt to $1.50 while cuts tgts on SLB, FRAC, HP, OIS as sees a difficult path for any material improvement in H2 estimates, with crude prices falling, producers pulling back on drilling more rigs and budgets being front-loaded

·     Machinery; JPMorgan said going into Q2 they remain overweight on CAT and think the company can beat and raise as its backlog will be a key catalyst. The truck stocks (PCAR) should deliver decent quarterly results given the level of production but says would avoid PH and KMT as both companies will have to guide FY’20 and are likely to be cautious (downgraded TRMB and AGCO as part of call); DE was downgraded to neutral at UBS saying after a sharp rebound from May’s weakness, they think the stock now fairly reflects the balance of near term caution vs. the potential for a pick up in the large ag replacement cycle in 2020

·     Transports; airlines with a boost after AAL raised its Q2 forecast for unit revenue as the grounding of Boeing 737 MAX jets reduced its overall fleet size/said Q2 Prasm to rise between 3%-4% vs. prior view of up 1%-3% and adjusted CASM ex: fuel to rise 4.5%-5.5%; railroads CSX and CP both downgraded to hold at Loop Capital saying freight transportation data continues to paint a picture of a slowing industrial economy, with YoY volumes in negative territory

·     Media & Telecom movers; CMCSA was upgraded to conviction buy at Goldman Sachs and raises its target from $44 to $54 citing strong fundamentals in Cable, NBCU, and Sky plus attractive valuation across all metrics; TMUS will replace Red Hat Inc. in the S&P 500 index at the open on Monday, after IBM completed its $34B deal for the company yesterday; IPG was upgraded to neutral at Bank America but said still cautious on ad agencies

·     Housing & Building Products; HD and LOW shares slipped after Cleveland Research said suggests home center demand in 2Q to date has been mixed, including some pressure from unfavorable weather/firm sees LOW sustaining comp growth near the level of HD, sustaining share progress from recent quarters driven by better execution

 

Stock GAINERS

·     AAL +3%; raised its Q2 forecast for unit revenue as the grounding of Boeing 737 MAX jets reduced its overall fleet size/said Q2 Prasm to rise between 3%-4% vs. prior view of up 1%-3%

·     CMCSA +2%; upgraded to conviction buy at Goldman Sachs and raises its target from $44 to $54 citing strong fundamentals in Cable, NBCU, and Sky plus attractive valuation across all metrics

·     HELE +11%; strong beat of Q1 results while raising FY20 earnings above analyst consensus (guided year EPS view to $8.40-$8.65 from $8.25-$8.50)

·     HLIT +25%; announced that CCCM, a Comcast affiliate, committed to a $175 million purchase of software licenses over the next four years, with $50 million expected in 2019.

·     MDR +12%; awarded an over $1.5B contract from Saudi Aramco to provide engineering, construction and installation of offshore gas facilities and pipelines in Aramco’s Marjan oilfield

·     NIO +4%; after saying Q2 deliveries was 3,550 more than the prior guidance range of 2,800 to 3,200 units; said delivery volume of ES8, its 7-seater electric SUV, for June was 927

·     SGH +16%; as analyst applauded (raised tgts) after announces two acquisitions to gain entry into embedded computing market after buying Artesyn Embedded Computing and Inforce Computing

·     VLRX +30% after saying its V-Go wearable insulin delivery device has been adopted on formularies of CI, HUM and CVS with preferred status

 

Stock LAGGARDS

·     AMRX -28%; after cutting 2019 adjusted EBITDA forecast on supply uncertainty of its epinephrine auto-injector during Q3 as lowers EBITDA forecast to $425M-$475M from $600M-$650M and also cites continuing market pressure and competition for its key generic products

·     LEVI 11%; after Q2 gross margin miss and declining U.S. wholesale sales that weighed on shares (Q2 EPS of 7c missed the 13c estimate)

·     LOW -2%; and HD shares slipped after Cleveland Research said suggests home center demand in 2Q to date has been mixed, including some pressure from unfavorable weather

·     MSM -6%; after Q3 top and bottom line results missed estimates and guided Q4 results below views (sees Q4 EPS $1.21-$1.27 on sales $835M-$851M below the est. $1.47/$881.9M)

·     MYL -4%; amid broad underperformance in the specialty pharma/generics (TEVA, PRGO)

·     OLN -1%; after saying it expects a Q2 net loss of $22M to $15M with corresponding adjusted EBITDA of $200M to $210M in Q2

·     UNM -3%; was initiated with an underperform at Credit Suisse as estimate that UNM’s long-term care insurance block faces a $(5.7B) after-tax reserve deficiency at NPV

_________________________________________________________________

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