Mid-Morning Look: July 17, 2019

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Mid-Morning Look

Wednesday, July 17, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-73.97

0.27%

27.261

S&P 500

-11.26

0.37%

2,992

Nasdaq

-22.83

0.28%

8,199

Russell 2000

-8.21

0.53%

1,553

 

 

U.S. equities posting declines early, adding to yesterday’s late market pullback that pushed major averages below intraday record highs on Tuesday, as renewed trade concerns following comments by President Trump against China yesterday weighs, and market attention turns toward quarterly earnings. Expectations that the Fed will lower interest rates in two-weeks keeps major averages not far off all-time best levels. After leading markets yesterday, transports a big drag today, falling behind CSX miss and lower outlook, while truckers give back gains after KNX guided EPS lower. Semiconductors getting a lift from earnings results/guidance out of ASML. Another onslaught of earnings for large cap and regional banks, with the theme this week remaining a dip in net interest margins and lower outlooks for net interest income but positive loan growth and mixed trading revenues (on top/bottom line beats for majors). Defensive sectors among the early leaders, while industrials slide. Gold prices rise, oil volatile after mixed inventory data and Treasury yields slip on weaker housing data. With today’s dip, the S&P 500 drops back below the 3,000 level.

 

Treasuries, Currencies and Commodities

·     In currency markets, the dollar index is down, but mixed in general as the euro erased a decline after June inflation data largely met economists’ expectations while the British Pound was trading below $1.24 overnight amid dollar strength and growing investor concern that a no-deal Brexit is becoming increasingly likely – but has since rebounded. The Canadian dollar edged lower, touches 1.3074 to the US dollar after domestic inflation and manufacturing data. Commodity prices getting a lift as gold prices hold steady around $1,415 an ounce, while oil looks slip initially following bearish gasoline and distillate inventory data from the EIA, failing to rebound after falling to one-week lows yesterday. Treasury market’s rally as yields fall after weaker housing starts and building permits data – 10-year yield back under 2.10%.

 

Economic Data

·     Housing Starts for June fell a greater (-0.9%) to 1,253M annualized, slightly below the est. decline of (-0.7%) to 1,260M after falling (-0.4%) the prior month. Single-family starts +3.5% to 847,000 unit rate and multifamily (-9.2%) to 406,000 unit rate. Building permits fell an unexpected (-6.1%) to 1,220M vs. est. of up small to 1,300M, after rising 0.7% the prior month

 

 

Macro

Up/Down

Last

 

WTI Crude

0.39

58.01

Brent

0.69

65.02

Gold

4.10

1,415.40

EUR/USD

0.0009

1.1220

JPY/USD

-0.05

108.19

10-Year Note

-0.026

2.076%

 

 

Sector Movers Today

·     Bank movers; the theme this week in banks so far has been a dip in net interest margins and lower outlooks for net interest income but positive loan growth and mixed trading revenues; BAC cuts its guidance for net interest income for 2019 after reported a quarterly profit beating estimates, while reported a 3 bps increase in its interest margin to 2.44% for Q2 and Q2 sales, trading revenue fell 10% to $3.3B ex-DVA; PNC Q2 EPS of $2.88 beat by 5c and rises from $2.61 in Q1 and $2.72 in Q2 2018 saying loan growth was strong, as total loans increased to $234.8B, up 3% from Q1, and net interest income of $2.50B increased $23M Q/Q/NIM declined 7 bps from Q1 to 2.91%); USB Q2 EPS and revs topped estimates while NII climbed partly because of the company’s loan growth and loan mix and NIM was 3.13%, unchanged from the comparable quarter a year earlier; CMA shares dropped after Q2 EPS of $1.94 missed by 6c while net interest income fell $3M to $603M, and net interest margin dropped 12bps QoQ to 3.67%; trust bank BK Q2 EPS of $1.01 beat the 95c est. as Q2 net interest margin 1.12% vs. 1.26% YoY and vs. est. 1.16%; other bank movers on earnings included FULT, HOPE, FNF

·     Transports decline after yesterday advance: rails giving back some today after CSX reported Q2 results below estimates, hurt by weakness in the intermodal markets, and lowered its full-year revenue outlook to down 1%-2% from prior view of low single digit rev growth; in airlines, UAL the 2nd major carrier to report as EPS and revs beat and raises low end of year EPS view to $10.50-$12.00 from $10.00-$12.00 while authorized a new $3B share buyback plan; in truckers, KNX guides Q2 and Q3 EPS below consensus vies (Q2 EPS 57c-58c vs. 61c and Q3 54c-57c vs. 62c)

·     Semiconductors; very active sector with news, as QCOM shares rose after Reuters reported the U.S. Justice Department asks appeals court to pause antitrust ruling against Qualcomm; AAPL supplier DLGNF raises Q2 revenue view to $482M, up from prior view of $438M-$478M; MTSI was upgraded to overweight at Piper citing cost cuts in place, data center coming back, 5G remains an opportunity; semi-equipment names moved higher after ASML reiterated its full-year forecast despite a weaker-than-expected Q3 view (KLAC, LRCX, AMAT) and Q2 sales were boosted by the rollout of 5G telecom networks that kept up demand for co’s machines

·     Retailers; shares of RL, PVHand LEVI were all downgraded at Goldman Sachs; FRAN shares jumped as Cross River Capital Management LLC, Affiliates report a stake; in toy stocks, MKM said its positive on HAS ahead of its earnings report, raises PT to $123 from $112, maintains buy and raises estimates saying it benefited from its Marvel and Transformers products; KSS announced holiday hiring starting today for an early wave of seasonal positions across 500 stores, ~2x the number of stores w/early hiring positions vs. 2018

·     Software movers; OKTA tgt was raised to a Street high $154 at Needham saying business appears strong, momentum out of OKTANE19 still driving robust growth, and new features & capabilities appear to be getting strong uptake & interest; EBIX to buy YTRA in an all-stock transaction valued at $337.8M, with YTRA shareholders to receive $4.90 per share https://yhoo.it/2JNxA9f ; DOYU 67.387M share IPO priced at $11.50; TTWO tgt raised to $140 at Stephens on increased conviction in the ability to outperform cons in F20

 

Stock GAINERS

·     ABT +4%; Q2 EPS beat by 2c on roughly in-line sales and boosted its 2019 EPS forecast to $3.21-$3.27 range from prior range of $3.15 to $3.25 and boosted organic sales growth

·     ASML +5%; reiterated its full-year forecast despite a weaker-than-expected Q3 view and Q2 sales were boosted by the rollout of 5G telecom networks that kept up demand for co’s machines

·     CTAS 8%; amid upside 4Q rev/margin/EPS which reflects strong execution in supportive markets, which followed a weak F3Q hurt by weather and other one-offs

·     FRAN +28%; as Cross River Capital Management LLC, Affiliates report a stake

·     HSY +2%; was upgraded to neutral from sell at Goldman Sachs and boosted tgt to $142 from $86

·     MTSI +6%; upgraded to overweight at Piper citing cost cuts in place, data center coming back, 5G remains an opportunity

·     QCOM +1%; as Reuters reported the U.S. Justice Department asks appeals court to pause antitrust ruling against Qualcomm

·     SGEN +15%; following better-than-expected Q2 sales of its cancer treatment Adcetris and says it submitted a marketing application for a bladder cancer treatment, enfortumab vedotin, to the FDA – Adcetris Q2 sales rise 30% to $159M

·     YTRA +12%; as EBIX agreed to buy the company in an all-stock transaction valued at $337.8M, with YTRA shareholders to receive $4.90 per share https://yhoo.it/2JNxA9f

 

Stock LAGGARDS

·     CSX -7%; reported Q2 results below estimates, hurt by weakness in the intermodal markets, and lowered its full-year revenue outlook to down 1%-2% from prior low single digit rev growth view

·     DVA -3%; and FMS slip in response to the commencement of a clinical trial evaluating a home dialysis device from CVS that could pose a competitive threat.

·     KNX -4%; guides Q2 and Q3 EPS below consensus vies (Q2 EPS 57c-58c vs. 61c and Q3 54c-57c vs. 62c) on capacity oversupply in truckload freight market follows mixed results from JBHT yesterday, though shares rallied

·     LFUS -2% as preliminary Q2 EPS $1.91/$398M below consensus $2.03/$412.86M (and down from previously guided Q2 EPS $2.00-$2.14 and revenue of $409M-$421M)

·     MNK -10%; after permanently discontinuing its Phase 2B study designed to assess the efficacy and safety of Acthar Gel as an investigational treatment for amyotrophic lateral sclerosis

·     NUS -21%; cut FY19 EPS to $3.20-$3.35 from $3.80-$4.05 (est. $3.95) and lowers FY19 revenue view to $2.48B-$2.52B from $2.76B-$2.81B (est. $2.77B) citing slowness in China markets

·     TXT -5%; falling below its 100-day MA support $51.34 (50-day MA lower at $50.37) after Q2 sales missed as sales slide across all segments

 

Syndicate

·     Anterix (ATEX) 2.22M share Secondary priced at $45.00

·     Avrobio (AVRO) 6.5M share Secondary priced at $18.50

·     BeyondSpring (BYSI) 2.06M share Spot Secondary priced at $17.00

·     Bruker (BRKR) 2M share Block Trade priced at $48.50

·     DouYu (DOYU) 67.387M share IPO priced at $11.50

·     Repligen (RGEN) 1.38M share Secondary priced at $87.00

·     Tonix Pharmaceuticals (TNXP) 9M share Secondary priced at $0.60

_________________________________________________________________

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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