Market Review: November 29, 2019

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Closing Recap

Friday, November 29, 2019

Index

Up/Down

%

Last

DJ Industrials

-109.36

0.39%

28,055

S&P 500

-12.16

0.39%

3,141

Nasdaq

-39.70

0.46%

8,665

Russell 2000

-9.68

0.59%

1,624


 

Equity Market Recap

·     U.S. stock declined on the final day of trading for November, pulling slightly off record highs achieved on Wednesday for major averages, but posting good gains for the month with the S&P 500 now up about 25% YTD, the Dow Jones Industrials up 20% YTD and the Nasdaq Composite up 30% YTD heading into December. The Russell 2000 index has played catch-up over the last week as well, now on track for a 20% YTD advance. What a difference a year makes as U.S. stocks have been buoyed following Fed easing measures this year (several rate cuts) improved earnings despite tariffs imposed by the U.S. and China and growing optimism that a Phase 1 deal is near between the two powerhouse economies heading into the final month of trading for 2019. Last year at this time, stocks started their major swoon as major averages fell around 20% from its highs as the Fed raised rates last December and trade tensions between the U.S. and China were stressed. Stocks eased overnight after China’s foreign ministry warned of unspecified retaliation for President Donald Trump’s signing of legislation that expresses support for Hong Kong protesters. Over the holiday, President Trump signed into law Congressional legislation supporting the city’s anti-government protesters, prompting Beijing to say it would take "firm counter measures" and attempts to interfere were doomed to fail.

 

Commodities

·     Oil prices dropped over 4% after WTI crude opened above the $58 per barrel level, falling as low as $55.26 as a combination of record U.S. production (as per Wednesday data from the EIA), combined with prospects for further delays in the U.S./China trade deal following Trump’s signing of the bill backing anti-government protesters, weighed on prices. Expectations for further OPEC+ production cuts have been downplayed, as Saudi Arabia is set to focus on compliance. The move today also comes before a key OPEC+ meeting next week that will set the path for future production cuts. OPEC said it sees balances oil market in 2020 at current production level as Bloomberg reported that according to delegates’ data presented this week to the groups. Gold prices edged higher as stocks pulled back and the dollar fell from highs.

 

Currencies & Treasuries

·     The U.S. dollar index (DXY) was up slightly to start the day at highs of (98.54) extending gains following a week of general solid economic data Tuesday/Wednesday (none today), but saw a reversal mid-morning, with the euro, Pound and Canadian Loonie all rebounding. The Euro bounced after touching 7-week lows of 1.0981 (before rising to highs of 1.1021). Treasury prices dipped slightly with yields inching higher despite stocks pulling off record highs. The 10-year yield was last up around 1.77%, close to where it finished the week prior.

 

 

Macro

Up/Down

Last

WTI Crude

-2.72

55.39

Brent

-1.38

62.49

Gold

9.80

1,470.70

EUR/USD

0.001

1.1020

JPY/USD

-0.09

109.42

10-Year Note

0.024

1.789%

 

 

Sector News Breakdown

Consumer

·     Retailers; all about Black Friday sales headlines today as Adobe Analystics said a total of $2.1 billion was spent as of 5:00 PM EST on Thursday, which is a 20.2% gain YoY and expects shoppers to have spent $4.4B after the day is over (said 46.4% of sales made on smartphones vs. 33.5% last year) – more to come this weekend giving Black Friday breakdown for major retailers; PTON shares jumped after SunTrust said the company’s marketing promotion of its home trial and its $58/month Bike plan this holiday season bodes very well for 2Q 2020 results

·     Autos’; DDAIF said that it plans to cut thousands of jobs world-wide over the coming years to save costs amid heavy investments into emissions compliance and future technologies; job cuts to help save $1.5B; SORL entered into a merger agreement for going private with Ruili International, formed on behalf of a consortium, for $4.72 per share; BMW and Great Wall Motor announce plans to build a €650M plant in China near Shanghai with the capacity to produce 160K cars per year. Construction is slated to begin next year and be finished in 2022. Autos in general weaker due in part to risks of possible retaliation from China after President Trump signed a legislation this week supporting Hong Kong’s protesters

·     Consumer Staples; LK tgt raised to $27 from $21 at Morgan Stanley based on QuestMobile data, LK mobile app’s new downloads hit a record high last month, and firm believes November should see a further boost in customer growth

 

Energy

·     Energy stocks were the weakest group in the S&P 500 during Friday’s shortened session as commodity prices weaken, led by broad declines in the energy complex (drillers, &EP, equipment and integrated major oil names). In stock news, Gazprom (OGZPY) posted Q3 net profit of RUB228.3B, down 43% Y/Y on lower export volumes and weaker gas prices in its core European market, but topped estimates. In utilities, PCG dipped after a federal bankruptcy court judge rejected the company’s latest attempt to change a California law requiring utilities to pay for the devastation from wildfires ignited by their electrical equipment.

 

Healthcare

·     Pharma movers; relatively quiet for overall sector, with the biotech space higher for an 8th straight session (IBB) to its best levels since October 2018; CANF shares jumped after mixed quarterly results with net loss ($7.8M) (-151.6%), loss/share: ($0.11) and said reached an agreement with FDA on Phase III liver cancer study design, study expected to begin in H2 2020; EVH adds to Wednesday’s -27% decline after its partner Passport failed to get Kentucky Medicaid contract

 

Industrials & Materials

·     Transports; The Baltic Dry Index shot up 4.16% to 1,528 points in London to gain for sixth day in a row. The recent upswing is being attributed in part to increased demand for high-quality iron from China and a burst of iron ore spot activity in Brazil. Capesize rates increased 4.79% and Panamax rates were up 4.94% to lead the index higher. Supramax rates were up 1.14% and Handysize rates edged up 0.66%.

·     Metals & Materials; sector taking a breather, led by declines in U.S. Steel (X) in the steel sector, falling over 6% after a report that its largest plant, Gary Works, was hit by flooding from a water pipe leak, forcing the company to shut down blast furnaces. Longbow said the reported shutdown of U.S. Steel’s Gary Works because of flooding may help hot-rolled coil (HRC) steel prices if the suspension leads to extended downtime

 

Technology, Media & Telecom

·     Tech space; Hardware & Component news; TECD shares jumped after CNBC noted TECD agreed to be bought by APO for $145 a share or $5.14B ex-debt, but that deal price was sweetened from Apollo’s prior bid of $130 a share or $4.77B after Berkshire Hathaway (BRK.A) previously made a bid as well, CNBC reported https://cnb.cx/2XYGW8R ; GTT rises a 3rd day (after rising 25% both Tuesday and Wednesday) – as filing late Wed showed director Satin bought 5K shares on 11/26. Note Raymond James said on 11/27 "shares of GTT are up were up 24.4% in afternoon trading Tuesday, after the announcement that management has hired bankers to advise the potential sale of the company’s pan-European fiber network, as well as its undersea transatlantic fiber and data center infrastructure that were included within the Hibernia and Interoute acquisitions."

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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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