Market Review: November 11, 2019

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Closing Recap

Monday, November 11, 2019





DJ Industrials




S&P 500








Russell 2000





Equity Market Recap

·     U.S. stocks ended mixed to little changed, bouncing off morning lows but pulling back from record highs attained on Friday, as the Dow was boosted by components BA and WBA, while the tech heavy Nasdaq slipped led by a drop in semiconductors. Boeing (BA) shares helped bounce the Dow Jones Industrial Average after the company said it may be able to resume deliveries of the grounded 737 Max as soon as next month depending on the successful completion of a series of milestones with U.S. regulators, while Walgreens (WBA) rose on buyout deal talk. Volumes were light given the Veteran’s Day holiday, news sparse and no U.S. economic data as Treasury markets were closed in observance. Both Asian and European markets sunk amid more unrest in Hong Kong (those markets fell nearly 3%) and created volatility for US futures overnight before levelling off throughout the morning. Quiet trade talk to start the week following last Friday, when President Donald Trump shot down speculation of a rollback on tariffs, saying he has not yet agreed to remove tariffs on Chinese goods, though Beijing would like him to. A lot of good news is currently priced into markets with optimism of a phase I deal coming soon with China, the Fed recently cutting rates for a third time this year to stimulate growth, economic data improving and corporate earnings season wrapping up shortly with results solid. Will it be another Santa Claus rally into year-end for U.S. stocks or another rough ride like last December when stocks plunged nearly 20% from highs?



·     Oil futures reversed late morning to end the day higher, rising 38c or 0.7%% to settle at $56.86 per barrel while natural gas prices slumped 5.8% to settle at $2.63 mln btus. Headlines were generally quiet with no major developments in the trade front and no major economic data due to the holiday in the United States. Note WTI crude put in a nearly 1.9% gain for the week ended Friday and traded around the highest levels since Sept. 24th

·     Gold prices fell -$5.80 or 0.4% to settle at $1,457.10 an ounce marking its lowest closing level in roughly two months, following the sharpest weekly skid in percentage terms since 2017 for silver and gold last week; the recent stock market surge has dulled demand for gold and assets perceived as havens, including Treasuries; gold prices dropped -3.2% last week (most since May ’17) while silver dips after falling nearly 7% last week.


Currencies & Treasuries

·     The U.S. dollar slipped vs. most major currencies, paring some of last week’s gains in quiet trading; the British pound gained (up 0.6% to 1.285 – off highs 1.2898, highest in a week) after Brexit Party leader Nigel Farage said his party won’t contest seats captured by the ruling Conservative Party in the last election, a boost for Prime Minister Boris Johnson’s party; the dollar also slipped vs. the euro after matching a four-week low earlier; Treasury markets were closed due to Veterans Day, and no economic data in the U.S. as well.






WTI Crude















10-Year Note





Sector News Breakdown


·     Retailers; strength in retail names with M, GPS among leaders in the S&P; Wayfair (W) upgraded to buy from hold at Argus as believe that the sharp recent pullback to the low $80s offers a favorable entry point, and that the company would benefit if the U.S. and China are able to reach a "phase 1" trade deal (still by no means a certainty); LB was downgraded to hold at Deutsche Bank while slashed tgt to $20 from $31 saying monthly promo watch indicates promotions remain at elevated levels; TUP shares slipped after suspends its quarterly common dividend saying it is working to improve financial flexibility and drive profitability in the short term

·     Auto’s; TSLA tgt raised to $400 from $300 at Jefferies reflecting higher earnings, improved balance sheet and expectation that the electric-car manufacturer will maintain its edge in product, affordability and technology; UBER active as Travis Kalanick sold about 20% of his stake in Uber Technologies last week, according to a regulatory filing. Kalanick, who is still a director at the company, sold 20.265M shares worth about $546.9M that were held in a trust; ADNT shares underperformed in the auto parts sector (has exposure to China, Hong Kong – fears of unrest)



·     Energy stocks busy following several macro stories including reports that Saudi Arabia raised its oil output in October to 10.3M barrels per day but kept its supply to the oil markets below its OPEC output target, Reuters said citing a Saudi industry source. Saudi Arabia, the world’s largest oil exporter, told OPEC that its production in September fell by 660,000 barrels per day (bpd) from August to 9.13 million bpd in the wake of attacks on its energy installations. Iran said it found a new oil field with over 50B barrels, a find that could boost the country’s proven reserves by a third as it struggles to sell energy abroad over U.S. sanctions; CRR shares lower after its larger than expected quarterly loss; NINE shares edge higher after earnings results

·     Utilities & Solar; SPWR said it would split into two separate publicly traded companies; the companies will be called SunPower and Maxeon Solar Technologies, and Tom Werner will continue as the chief executive officer of SunPower, it said



·     Bank movers; banking stocks were mixed amid a lack of specific news for the sector and no Treasury action to move names with bond markets closed for the holiday; BK was upgraded to buy from neutral at UBS as firm says it sees NII stabilization and improved cost control driving better than expected earnings growth in the near-term

·     Consumer finance and lending; ADS was upgraded at Oppenheimer noting sees the card services segment net of corporate drag as worth at least $119 using a 2.95x P/TBV multiple, and says total Alliance Data including LoyaltyOne could be worth $131

·     REITs; RLGY shares slip after Susquehanna downgraded to negative from neutral as sees 2020 EBITDA coming in below consensus/continued market share decline, USAA affinity loss provide continued headwinds



·     Pharma movers; BMY said the FDA accepted for priority review its supplemental biologics license application for Opdivo in combination with Yervoy for patients with advanced hepatocellular carcinoma who were previously treated with sorafenib; PBH reported lower third-quarter profit as expenses rose, though revenue grew more than expected/also said it has approved a dividend of C$0.525 a share for the fourth quarter; LPCN shares plunge after saying the FDA declined to approve its testosterone drug, Tlando, noting that a clinical trial of the drug failed to meet three secondary goals; for GWPH, two cannabis-based medicines have been recommended for use on the NHS for the first time (Epidyolex has been approved for two rare types of epilepsy, while the spray Sativex has been recommended for muscle spasms in multiple sclerosis); NEPT entered into a collaboration agreement with IFF to co-develop hemp-derived CBD products for the mass retail and health & wellness markets; FOMX shares fell as signs all-stock merger agreement with MNLO to focus on dermatology/FOMX shareholders to own ~59% of combined company; ETNB 5.3M share IPO opens 25% above $16 price, touches high of $21.30 and trends lower

·     Biotech movers; NXTC shares fell over 50% (pulling back after big gains last week) after positive early data for a new cancer treatment, NC318, but latest update showed that only lung cancer tumors responded to the experimental immunotherapy treatment; NKTR said data from the melanoma study showed the potential of NKTR-255 to enhance the ability of antibody-dependent cells to destroy the tumor cells and said NKTR-358 was safe and well-tolerated with no anti-drug antibodies detected; GNFT rises after a study showed its noninvasive NASH test, NIS4, outperformed other noninvasive diagnostics in identifying NASH in type 2 diabetics

·     Healthcare services and providers; WBA shares jumped on a Bloomberg report that KKR has approached WBA with an offer that could mark the largest leveraged buyout in history


Industrials & Materials

·     Metals & Materials; VALE lowered its iron ore sales guidance for this year as expects to sell between 307 million and 312 million metric tons, down from a previous range that went as high as 332 million, designed to give “more visibility” on sales expected for the last quarter; TMST downgraded to underweight at JPMorgan with $5 tgt; industrial metals (copper, steel, aluminum) are pulling back after strong gains last week on improved trade talk optimism; in packaging, MATW shares dropped following lower guidance late Friday and recorded a $78M goodwill write-down at its Graphics Imaging reporting unit; in industrials, BA shares rose after the company said it may be able to resume deliveries of the grounded 737 Max as soon as next month depending on the successful completion of a series of milestones with U.S. regulators.


Technology, Media & Telecom

·     Internet; BABA shares falling with broader markets despite strong sales in its annual “Single’s Day” sales event which started yesterday – set one day gross merchandise sales of 268.48B yuan; BIDU upgraded to outperform and $145 tgt at Oppenheimer after reported better 3Q results, driven by stabilizing advertising trends and more disciplined investments, resulting in EBITDA much better than expected

·     Semiconductors; NVDA tgt raised to $240 from $195 at UBS ahead of earnings this week (11/14); QCOM was downgraded at Morgan Stanley saying valuation gap to semiconductor peers has closed, and market appears to: 1) assign a high probability of a China/US trade agreement, 2) downplay the FTC case, and 3) expect 5G acceleration; semi index (SOX) pulls back from its all-time highs reached last Thursday of 1,745 in tech profit taking

·     Software movers; CARB to be acquired by OTEX in cash deal with an enterprise value of about $1.42B, with holders to receive $23 per share ; SMAR was downgraded to neutral at Wedbush on intensifying competition, with attendant risk of longer sales cycles and/or commoditization; TWLO rises following comments by RBC today calling it most attractively priced, durable high growth story in coverage after a meeting the company’s VP of investor relations; FSCT shares

·     Media & Telecom movers; DTEGY downgraded to underweight at Barclays and cuts target price to EUR 14 from EUR 17.6 saying despite the company reported its best quarter in 15 years with Q3 2019 figures, the broker says believes we could be reaching a turning point; TV downgraded at Barclay’s following a 50% rally in less than three months; QRTEA shares rose despite reporting a 4% drop in Q3 revenue and larger operating income loss than a year ago.

·     Hardware & Component news; CSCO was downgraded to neutral at Piper which centers on a slowing macro, slowing cycles, a lack of a near-term catalyst, and risk to FY20-FY21 estimates; HPQ was upgraded to outperform at Evercore ISI; PT $24


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.

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