Mid-Morning Look: August 14, 2019

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*** This will be the last “Mid-Morning Look” until Thursday August 22nd

***Service will resume normally at that time.

 

 

 

 

 

 

Mid-Morning Look

Wednesday, August 14, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-448.50

1.71%

25,831

S&P 500

-51.15

1.75%

2,875

Nasdaq

-159.00

1.99%

7,856

Russell 2000

-29.65

1.97%

1,480

 

 

U.S. equities plunge, erasing all of yesterday’s tariff delay headlines on China goods from the Trump Administration to December 15th from September 1st on many technology and retail related products as investors paying close attention to the Treasury markets, as the 2/10 yield curve inverts for the first time since 2007 (recessionary indicator), while the 30-year yield touched a life-time low of 2.01% before paring losses. Gold prices jumped as investors sought safer assets, while oil prices tumble with stocks and bearish inventory data. Energy, consumer discretionary, financials and tech the biggest drags. Interest rate sensitive sectors again volatile given the plunge in Treasury yields, hurting the banks and financials the most (big banks, regionals, brokers all lower), while high dividend paying sectors such as utilities, telecom, and REITs outperform. Macro factors in Europe and Asia also hurting market sentiment as data overnight showed Germany’s economy shrank by 0.1% in the second quarter, while industrial output in China rising 4.8% in July from a year earlier, slowing from the 6.3% increase in June, while the PBoC fixes its daily yuan midpoint at 7.0312. A rough morning for stocks globally as tensions between the U.S. and China, uncertainty about the Federal Reserve’s interest-rate policy and signs of slowing economic growth have created ripples through major markets the last few weeks.

 

Treasuries, Currencies and Commodities

·     In currency markets, the US dollar is bouncing off lows, rising against the euro following weaker German data overnight and rising vs. the Canadian dollar as oil prices tumble. The buck however lower against the safe-have yen, down around -0.8% below 106 (low was 105.78) and off the overnight highs 106.77 after yesterday relief rally on positive trade news. Argentina’s peso resumed its slide given the potential political changes after a surprise primary result this week

·     Commodity prices mixed, with oil prices sliding on global growth concerns, a bounce in the dollar and another week of bearish inventory data with unexpected builds in inventories vs. forecasted drawdowns; gold prices jump on inflation fears (CPI yesterday), and rotation into defensive primers with stocks selling off

·     Treasury market’s surge as yields tumble; the 30-year yield falls to a record low at 2.01% before paring losses; the 10-year yield now at new lows this year, down 11 bps to move below the 1.60% level; yields falling off a cliff on dovish central bank actions, fears of geopolitical concerns (UK, China, Argentina, Italy), with 2/10 year yields inverting for the first time since 2007

 

Economic Data

·     July Import Prices rose 0.2%, above the est. of down (-0.1%), while exports also rose 0.2% vs. est. decline of (-0.1%) both MoM; Import prices YoY fell a smaller than expected (-1.8%) vs. est. (-2%)

 

 

Macro

Up/Down

Last

 

WTI Crude

-1.85

55.25

Brent

-1.85

59.45

Gold

6.10

1,520.20

EUR/USD

-0.0028

1.1144

JPY/USD

-0.80

105.95

10-Year Note

-0.105

1.597%

 

 

Sector Movers Today

·     Retailers; department stores specifically under pressure in the retail segment after Macy’s (M) shares fall to a 9-year low as Q2 adjusted EPS of 28c missed the 45c estimate saying they had a slow start to the year and finished below its expectations, while lowered its year EPS outlook (not including potential tariff impact) to $2.85-$3.05 from prior range of $3.05-$3.25; shares of JWN, KSS and other retailers fell in reaction as Macy’s noted a combination of reasons including a miss in key women’s sportswear private brands and slow sell-through of warm weather apparel; GOOS shares slipped after Q1 loss widened while revs beat (had a net loss of C$29.4M, wider than the loss of C$18.7M last year while revs C$71.1M topped the C$53.2M est.) and maintained guidance; 52-week lows include: RL, TPR, JWN, GPS, M, LB, CPRI, PVH after Macy’s miss

·     Bank movers; shares of U.S. big banks getting hit hard (JPM, C, MS, BAC, WFC, GS, MS) after the gap between the U.S. 2-year and 10-year was the narrowest since 2007, in a sign that investors are bracing for recession risks/an inverted yield curve points to a tightening spread between short-term and long-term interest rates, hurting banks’ ability to earn interest-related incomes from loans and investment; regional banks and insurance names also lower in broad decline

·     Housing & Building Products; homebuilders getting good news in reaction to Treasury yields plunging (30-year hit all-time lows today) as weekly mortgage refinance applications spiked 37% last week, as home loan rates drop; PRPL shares rise after Q2 results handily beat expectations and company guidance which led the company to sharply raise its FY19 sales and margin outlook/strength in the wholesale channel

·     Pharma movers; in cannabis sector, TLRY shares fell as its Q2 loss widens, with Q2 EPS adjusted Ebitda loss $17.9M, larger than the est. loss $14.1M/Q2 revs $45.9M vs. $40.3M est.; AZN and MRK announce the successful outcome of a Phase 3 clinical trial, PAOLA-1, evaluating PARP inhibitor Lynparza (olaparib), added to standard of care bevacizumab, compared to bevacizumab alone; BMY was upgraded to outperform at Atlantic Securities; PFE 52-week lows; TEVA and MYL shares fall on reports that Senator Bernie Sanders and Representative Elijah Cummings are opening an investigation into the two on allegations of apparent coordinated obstruction in failing to provide lawmakers with details about their pricing practices

 

Stock GAINERS

·     GO +9%; after topping Q2 estimates (by 7c on EPS and better revs) and comps improved 5.8% above Cowen 3.0% estimate while gross margin expanded a better than expected 34bps

·     NEM +2%; as gold miners benefit from the bounce in gold and flight to safety trade

·     PFGC +4%; Q4 EPS of 70c beat by 6c on better revs of $5.9B and Q4 total case volume up 9.2%

·     PRPL +18%; after Q2 results handily beat expectations and company guidance which led the company to sharply raise its FY19 sales and margin outlook

·     PSDO +21%; to be bought by BC Partners for $2.1 billion including assumed debt, or $16 per share in cash https://on.mktw.net/31Elw1C

 

Stock LAGGARDS

·     CPLG -29%; cut its full-year key earnings outlook and posts disappointing Q2 revs citing disruption caused by transition of its hotels to a third-party manager’s booking and loyalty platforms; lowers year FFO view to $1.67 from $2.04 and expects comparable rev per available room view

·     DE -1%; mentioned cautiously by both Goldman Sachs and Deutsche Bank ahead of earnings tomorrow morning as Goldman expects it to cut production in North America construction equipment in coming quarters due to building inventory oversupply

·     LK -14%; after larger Q2 EPS loss (48c) vs. est. loss (43c) and as total operating expense in the qtr surged 244%, weighed down by aggressive investments

·     M -15%; shares to 9-year low as Q2 adjusted EPS of 28c missed the 45c estimate saying they had a slow start to the year and finished below its expectations, while lowered its year EPS outlook

·     MYGN -37%; fell on Q2 miss and lower guidance as Q2 EPS 41c/$215.4M vs. est. 48c/$221.6M and lowers year EPS to $1.80-$1.90 on revs $865M-$875M below est. $1.95/$922M

·     TEVA -9% and MYL lower on reports that Senator Bernie Sanders and Representative Elijah Cummings are opening an investigation into the two on allegations of apparent coordinated obstruction in failing to provide lawmakers with details about their pricing practices

·     TLRY -11%; after loss widens; Q2 EPS adjusted Ebitda loss $17.9M, larger than the est. loss $14.1M; Q2 revs $45.9M vs. $40.3M est

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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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