Market Review: November 07, 2019

Auto PostDaily Market Report

Closing Recap

Thursday, November 07, 2019

Index

Up/Down

%

Last

DJ Industrials

186.08

0.68%

27,677

S&P 500

8.65

0.28%

3,085

Nasdaq

23.89

0.28%

8,434

Russell 2000

4.61

0.29%

1,594


 

Equity Market Recap

·     U.S. stocks posted new record highs following overnight reports that China’s Ministry of Commerce said it has agreed with the U.S. on removing tariffs at the same time and by the same amount when the two countries sign the phase one accord. Major averages were in cruise control all day on the trade optimism, with broad gains in energy (as oil rose), financials (as Treasury yields rose), metals, materials and technology (trade sensitive sectors), while defensive sectors lagged (staples) as well as interest rate sensitive sectors (utilities, REITs). However, stocks pared gains late session, sliding off highs following a Reuters headline that the White House plan to roll back China tariffs faces fierce internal opposition and no final decision has been made. There were no details following the headlines, but it was enough to pull stocks off their highs. Treasury prices slid, driving the two-year yield 5 bps higher to 1.65% and the 10-year yield up over 10 bps to 1.91% while lifted the dollar and oil prices. Online travel declined as EXPE and TRIP declined over 20% on disappointing results/guidance overnight (ahead of BKNG results tonight), while media stocks rally behind DISCA, FOXA results and ahead of Dow component DIS earnings tonight and homebuilders slid on rising yields.

 

Commodities

·     Oil prices rose 80c or 1.4% to settle at $57.15 per barrel while Brent gained 55c or 0.89% to $62.29 per barrel, getting a boost on reports China and the U.S. made progress in resolving the trade dispute that has weighed on global markets, offsetting signs that OPEC and its partners won’t make deeper cuts to supply. The potential elimination of tariffs boosted hopes for increased demand in the space, while markets turn to Baker Hughes rig data tomorrow as well.

·     Gold prices tumbled midday, ending lower by -$26.70 or 1.8% to settle at $1,466.40 an ounce, at 3-month lows (and well off September highs of 1,543.30 on 9/24) as investors fled safe-haven/defensive assets for riskier assets such as stocks (trading at all-time highs) and as the dollar and Treasury yields rebound to multi-month highs

 

Currencies

·     The U.S. dollar extended gains for a 4th day, with the buck nearing the 109.50 level against the Japanese yen, rising to its highest level since the end of May, while the dollar index (DXY) reclaimed the 98 level (first time since Sept 17th) on better economic data of late, getting another boost on positive trade optimism. The euro and British Pound dropped with the buck was little changed against the Canadian dollar which was boosted by higher oil.

 

Bond Market

·     Treasury yields jumped across the board, with the benchmark 10-year yield rising above 1.97% at its peak, its highest level since August 1st amid the further rotation out of bonds and into stocks which set new record highs today; the 10-yr yield finished around 1.93%, up over 10 bps on the day while the 2-yr yield gains over 7 bps to 1.68%, best levels in over 6-weeks (and trading above its 100-day MA of 1.65%). The U.S. Treasury sold $19B in 30-year notes at a yield of 2.43% vs. 2.424% when/issued prior as the bid-to-cover (demand) stood at 2.23 vs. 2.25 prior auction and indirect bidders were awarded 58.8% of the auction and directs 20.5%.

 

Economic Data

·     In the lone piece of U.S. economic data today, weekly jobless claims fell 8K to 211K, better than the expected 215K economic estimate (prior week raised to 219K from 218K); the 4-wk avg rose to 215,250 from 215,000 prior week; continuing claims fell to 1.689M vs. est. 1.683M

 

 

Macro

Up/Down

Last

WTI Crude

0.80

57.15

Brent

0.55

62.29

Gold

-26.70

1,466.40

EUR/USD

-0.0007

1.1047

JPY/USD

0.25

109.23

10-Year Note

0.09

1.919%

 

 

Sector News Breakdown

Consumer

·     Retailers; FOSL shares drop over 20% after Q3 sales missed estimates, and lowered its Q4 gross margin, revenue and operating margin outlooks while also lowering year sales view; RL shares jumped after adjusted Q3 profit and revenue beat amid strong demand for its apparels in Europe and China and cost controls/guides FY revenue growth in the low-end of its 2%-3% forecast; PRTY shares dropped over 40% after reducing its full-year profit outlook alongside Q3 earnings report that fell well-short of expectations/saw year EPS 84c-91c well below the prior $1.26-$1.36 view and $1.26 consensus; GOOS downgraded to neutral from buy over concerns that orders from the wholesale channel (about 40% of the sales mix) could be slowing from the back-half; SBH jumps on Q4 EPS and sales beat and comp sales rising 1.1% vs. expected decline; VSTO jumps as 2Q EPS beat on better general margins despite a sales miss/reiterated its EPS and free-cash flow (FCF) guidance despite a cut in revenue forecast

·     Consumer Staples; ELF shares rose after another strong quarter with net sales of $68 Million, up 11% excluding e.l.f. stores and raises FY20 adjusted EPS and revenue views; KDP posts strong quarter lifting shares as sales growth was 5% in Q3 to $2.87B on higher gross margin and saw underlying sales growth of 3.1%, driven by increased volume/mix of 1.5% and higher net price realization of 1.6%/reaffirms year outlook; THS missed on both lines of its Q3 report and sets full-year guidance below expectations/guide full-year EPS to land in a range of $2.30-$2.50, which has a midpoint below the consensus mark of $2.49; FIZZ slipped as KO said it is launching new flavored seltzer brand (AHA), will have caffeinated versions; Juul Labs Inc. will stop selling its popular mint-flavored nicotine products in the U.S., leaving only tobacco and menthol flavors,

·     Casino & Leisure movers; WYNN posted a miss on the top and bottom line but shares rallied on positive analyst comment; ERI reported EBITDA that came in slightly ahead of consensus; SEAS posted lower-than-expected Q3 revenue as visitor count to its parks fell/revs were $473.7M vs. est. $489.8M and said attendance fell 2.6%, to 8.1 million guests from a year earlier; PLYA drops after cutting its FY adjusted Ebitda outlook after larger quarterly loss; in autos; TM announces a new $1.8B share buyback program on the heels of a FQ2 earnings beat and reaffirmed full-year

 

Energy

·     E&P sector; DNR reportsQ3 EPS and revs slightly better ($315M vs. $307M est.) as expenses were down from a year ago and says on track to reach midpoint of previously raised 2019 production outlook; BCEI Q3 EPS slightly above consensus due to slightly lower costs, capex was 0.9% below its prior estimate while 3Q19 production and 3Q19 oil production were exactly in line; EOG Q3 EPS beat but 4Q19 oil production guidance was 1.1% below consensus/tightened its 2019 capex guidance range and raised its 2019 production guidance by around 1%; APA was downgraded to hold from buy at Argus following the company’s Q3 results and reduced FY production guidance; AM downgraded to market perform from outperform at Wells Fargo, citing heightened risk of midstream gathering rates being re-negotiated.

·     Utilities & Solar; PCG with better than expected quarterly earnings but still reported a $1.6B loss for the quarter, driven by a $2.5B pre-tax charge for fire claims and said it expects as much as $6.3B in after tax costs from the fire; NRG shares rose as Q3 Ebitda topped consensus while narrowing its year Ebitda outlook on top/bottom end of view; in solar, VSLR shares jumped after posting Q3 revs that topped consensus estimates; utilities (PNW, AEP, ES) and homebuilders ($BZH, $DHI, $KBH) all under pressure – banks benefiting from the rising rates

 

Financials

·     Bank movers; banks post strong gains, getting a boost on trade optimism as well as another jump in Treasury yields (10-year up more than 5bps to 1.88% (highest levels since Sept 13th) – JPM, C, BAC, WFC amid those higher along with regional banks; Commerzbank warned it will miss its full-year profit target despite beating expectations in the third quarter, as economic weakness and ultra-low interest rates bite

·     Consumer finance and lending; SQ reported a top and bottom line beat as Q3 gross payment volume of $28.2B increased from $26.8B in Q2 and $22.5B in Q3 2018, but issued lower than expected Q4 revs of $585M-$595M vs. est. $619.1M; FISV reported a strong 3Q as results across its First Data, Payments, and Financial segments were all positive according to Guggenheim saying legacy GBS results improved (Clover, ISV solutions), and overall FISV is seeing healthy client demand for its digital-based products and services/2019 guidance was raised

·     REITs; overall interest rate sensitive REIT names were under pressure given the spike up in Treasury yields, making higher dividend paying names less attractive; RLGY agrees to sell its Cartus Relocation business to Sirva Worldwide in a transaction valued at $400M/deal expected to close in H1 2020

 

Healthcare

·     Pharma movers; OBSV shares drop after the company scraps its pivotal trial of nolasiban, its experimental oral drug aimed at boosting pregnancy chances following IVF, after the drug failed to show effectiveness; AERI slides after Q3 revs of $18.5M beat $15.8M estimate but very weak guidance sunk shares, guiding year revs to $61M-$66M from $70M-$80M; ALNA said it reached the primary endpoint in a study of URIROX-1 for patients with enteric hyperoxaluria; TEVA reported earnings and put another $468M aside for legal settlements related to the US opioid crisis, taking its provisions to almost $1.2B so far this year; ZTS shares rise following quarterly earnings up 25% and boosted its guidance for the yea; COLL jumps as reported 3Q results while Jefferies said the most notable takeaway from the call was that COLL contracted for 35M+ additional lives on the exclusive Xtampa contracts, an impressive 3x+ the past 2Y averages

·     Biotech movers; REGN was upgraded to buy at Citigroup as remain bullish on Dupixent and see $10B peak sales vs current run-rate of ~$2.5B within 3 years of launch; PBYI shares dropped as 3Q Nerlynx sales of $53.5M missed the estimates for $59M and cash equivalents fell 14% YoY; NKTR posted a smaller than expected quarterly loss on higher revs of $29.9M; LVGO shares rise after the company reported stronger than expected 3Q19 revenues of $46.7M (est. $42.7M) and guided Q4 revs of $49.0M-$49.5M (est. $45.2M); TXMD rises following Q3 revenue beats on contraceptive sales, licensing fee; CLVS posted a narrower than expected Q3 EPS loss and raises year net product revenue outlook

·     Medical equipment and devices; DXCM shares jumped after Q3 results come in well above consensus and raises year rev view to $1.43B-$1.45B from $1.33B-$1.38B but lowers year margin view; NVRO said the FDA approved its spinal cord stimulation (SCS) system, Omnia while also reported Q3 rev beat of $100.2M vs. est. $92.3M and raised its full-year rev forecast; DVA was downgraded at Raymond James noting much of the upside in the quarter (in line with the YTD trend) was from the unexpected contribution from calcimimetics

·     Healthcare services and providers; CAH reported F1Q EBIT ($577M v. $488M) and EPS ($1.27 v. $1.10) all coming in ahead of consensus, though company reaffirmed its EPS guidance; ABC reported F4Q results with slightly better revenues ($45.64B v. $45.19B est. and EPS above views with better FY20 initial guidance; XRAY posted beat and guidance raise on Primescan strength and consumables recovery; IVC among top gainers on the day following narrower Q3 EPS loss

 

Industrials & Materials

·     Transports; Dow Transports setting a new all-time high, rising with the broader market gains on improving trade optimism and strong economic data (for the most part) this week; in airlines, DAL said it is on track to achieve earnings and revenue guidance for the December quarter, sees FCF generation of more than $4B for full year, with $3B returned to holders; rails were among the top gainers with NSC, KSU outperforming

·     Metals & Materials; metal stocks outperformed today, led by shares of FCX which was initiated with an overweight and $13.30 tgt at Morgan Stanley as well as TECK with OW and $21.50 tgt as the firm said the copper names were his top picks noting the unloved mining sector has outperformed in prior periods of weaker PMIs recession risks; news as well overnight that China and the U.S. will cancel planned tariffs on each other’s products in stages, with the first agreement due to be signed in the next few weeks is also helping steel, aluminum names; SEE upgraded at KeyBanc as the stock has fallen below our prior price target of $39; since we downgraded on July 14, the shares have underperformed

 

Technology, Media & Telecom

·     Internet; online travel sector under pressure after EXPE and TRIP shares fall on earnings disappointments; EXPE top and bottom line results missed estimated for Q3 soft gross bookings and room night trends for VRBO and disappointing results at Trivago also weighed on the Q, while TRIP Q3 adj EPS 58c/$428M vs. est. 68c/$458.7M/3Q adjusted Ebitda down 12% YoY to $129M below views (ahead of BKNG earnings tonight); BIDU rose as company beats revenue expectations as App traffic continues to grow robustly with DAUs reaching 189 million, up 25% YoY; GDDY jumped as Q3 beat (EPS 42c/$760.5M vs. est. 21c/$761.39M) and ARPU of $155, up 7.1% YoY; CVNA stock falls after wider-than-expected quarterly loss; TWTR downgraded to underperform at Evercore/ISI saying that it believes Wall Street expectations on co’s operating margins are far too aggressive while separately, the U.S Department of Justice has accused two former Twitter employees of spying for Saudi Arabia, a complaint filed on Wednesday showed; IQ rises after topping profit expectations with double-digit user growth

·     Semiconductors; QCOM delivered a strong quarter, with Non-GAAP earnings per share above the high end of their guidance range with upbeat Q1 guidance (guides Q1 EPS 80c-90c on revs $4.8B vs. est. 77c/$4.78B) above views; HIMX reports Q3 beats with revenue down 13% Y/Y and Q4 outlook sees revenue of about $164.3M (above est. $153.22) and a smaller loss per share view; INFN downgraded at Jefferies; SYNA released earnings early (was expected after the close) and announced new CEO as well

·     Software; FSCT falls as guides year revs below views $339-342M down from prior $365.3-375.3M outlook saying results were impacted by extended sales cycles, with the resulting revenue shortfall most pronounced in EMEA; RP 3Q results were better, though lower 4Q and lower initial 2020 guidance commentary prompted a downgrade by JPMorgan; BAND lowered its full-year revenue guidance to $229M-$229.5M from prior $234.8M-$235.8M (est. $235.1M); GLUU shares fell after it posted 2020 guidance that was below estimates

·     Hardware and Optical movers; AAOI shares dropped as Q3 revs of $46.1M missed the $47.9M est. and guided next quarter revs below views $46M-$49M vs. est. $52.3M); ROKU shares dropped after Q3 Ebitda forecast missed and Q3 customer accounts missed/active accounts 32.3Mm up 1.7m from last quarter (est. 32.6m)

·     Media & Telecom; DIS earnings tonight after the close; FOXA Q1 revs topped consensus driven by growth in its affiliate and television and cable-network programming businesses and announced a $2B stock buyback; AMC reports admissions revenue was up 6.1% to $797M in Q3 and food/beverage revenue increased 9.1% to $420M. U.S. average ticket price grew 3.3% to $4.95 and U.S. food/beverage spending per patron rose 4.7% to $5.35; DISH Q3 EPS beat on in-line revenue of $3.17B while adding 148K Pay-TV sub adds and Sling subs rise 14% YoY to 2.69M; NLSN to separate into two publicly traded companies after activist pressure; DISCA with Q3 EPS, Oibda beats and in-line quarterly revs of $2.68B

_________________________________________________________________

Content is provided by Hammerstone Inc., which has no affiliation with Regal Securities, Inc. (“Regal”) This commentary is provided for information purposes only, and is not a recommendation, offer or solicitation by Regal to buy or sell securities or to adopt any investment strategy. Regal has not participated in the creation of the Hammerstone content and does not directly or indirectly endorse the content. Any reliance on this material is at the sole discretion of the reader.

Live Trading

Open an Account

Paper Trading

Register