Mid-Morning Look: January 09, 2020

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Mid-Morning Look

Thursday, January 09, 2020

Index

Up/Down

%

Last

 

DJ Industrials

156.43

0.54%

28,901

S&P 500

17.75

0.55%

3,270

Nasdaq

76.29

0.84%

9,205

Russell 2000

3.25

0.20%

1,667

 

 

U.S. equities at it again, rising as the relief rally continues with major averages setting fresh all-time record highs for the Dow Jones Industrials, S&P 500 and Nasdaq Composite. Easing Middle East tensions after President Trump said yesterday he would impose “powerful” economic sanctions on Iran, but did not threaten military action after Iran had retaliated overnight for the U.S. killing of Iranian Major general Qassem Soleimani by striking two military bases in Iraq is boosting sentiment. Also helping, China’s confirmation that Vice Premier Liu He will visit the U.S. next week to sign the phase one trade deal. Markets also preparing for earnings season, kicking off next week, as well as monthly jobs data tomorrow morning (after stronger ADP report yesterday on private payrolls). Treasury yields move to their highest levels in over a week, approaching the 1.9% level as safe haven assets decline, with gold prices down a second day after snapping its 10-day winning streak Wednesday. 

 

Economic Data

·     Weekly jobless claims 214k vs. est. 220k (prior month revised to 223k from 222K); continuing claims 1.803M vs. est. 1.72M and the 4-week moving avg. at 224k in the week ending Jan. 4; actual, unadjusted initial claims at 335.2k from 312.5k in prior week

·     The 30-year fixed-rate mortgage rate averages 3.64% for the week ending Jan. 9, 2020, down from 3.72% in the previous week and at its lowest levels in 13-weeks, according to the Freddie Mac Primary Mortgage Market Survey. Compares with 4.45% at this time a year ago

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.72

58.89

Brent

-0.74

64.70

Gold

-8.70

1,551.50

EUR/USD

0.0001

1.1106

JPY/USD

0.37

109.49

10-Year Note

0.014

1.887%

 

 

Sector Movers Today

·     Retailers; KSS shares weigh on retail after guiding its year EPS view to the low end of $4.75-$4.95 (vs. est. $4.86) and said its holiday period comp sales were down (-0.2%); LB lowers Q4 EPS to about $1.85 from $2.00 and said holiday 2019 holiday sales down about 3%; PRTY said prelim year brand comp sales down 3% and hires new CFO (from CHS); CHS raises Q4 revenue view to flat versus prior of low single-digit decline as outlook reflects sequential comparable sales improvement at Chico’s and White House Black Market; CATO Dec comp sales were flat and overall sales $85M; in research, Gordon Haskett downgraded shares of DLTR, FIVE, BJ and TSCO ratings while upgraded JWN; JCP announced today that its comparable store sales for the combined nine-week period ending Jan. 4, 2020 decreased 7.5%; COST Dec total comp sales rose 9% vs. est. 7.3% and US comp sales ex-gas and FX rises 7.8% vs. est. 6.3%; reported net sales of $17.04B for the retail month of December

·     Restaurants; SBUX was upgraded to overweight from equal-weight at Barclays citing a fundamental reacceleration into fiscal 2020 and an attractive valuation as the company continues to offer an attractive combination of outsized global growth in both comparable sales and store units; NDLS 1.6M share block priced at $5.65 per share; SHAK initiated underperform at Raymond James as believe Street expectations for 2020/2021 seem overly optimistic and create further downside risk from still elevated valuation levels; Oppenheimer identified WEN and SBUX as our 2020 top picks, while upgrading CMG to Perform from Underperform

·     Healthcare services and providers; Bank America with three ratings changes as PDCO upgraded to neutral with $22.50 tgt saying the company saw signs of total segment improvement from a Primescan-led dental equipment cycle; HSIC downgraded to underperform and cut tgt to $65 from $71 saying the overall market for dental distribution has been soft for a multiyear basis, yet Henry Schein has been able to outpace Patterson; TDOC downgraded to neutral from buy with $90 tgt (up from $82) as believes shares are fully valued

·     IT Services; Wells Fargo with a sector call as for government services, says 2019 was a great year for the sector; good news for the sector are GFY20-21 Budgets, Book-to-Bills, and EBITDA margins but the worries include the Presidential Election, and retaining talent as firm downgraded shares of LDOS, MANT and PSN. For IT/BPO Services, 2019 performance was mixed as firm favors EPAM for pure-play bias to software engineering, ASGN given its role as “arms” provider for digital, and CTSH for the best “value” opportunity – upgraded CTSH and cut DXC, EXLS ratings to underweight while G is favorite given improved positioning

·     Internet; SNAP was upgraded by two analysts today as Jefferies upgraded to buy with $21 tgt as believes Snap can accelerate user growth, particularly from international markets with AR lenses, the rebuilt Android app, and local language investments while Cowen raised to outperform with $20 tgt citing a rebound in fundamentals, a positive survey from ad buyers, and branding trends; EBAY was downgraded to underperform at Jefferies saying the online auction company is losing relevance for consumers and cuts price target to Street-low $31 from $38; SPOT initiated underperform at Bernstein as believes consensus growth expectations are overly optimistic

·     Casino & Leisure movers; in cruise lines, RCL was upgraded to buy at Argus with $160 tgt as believe it is agile enough to focus on the strongest markets, but large enough to endure the occasional weak regional economy; movie theatres AMC and CNK pressured after yesterday declines after AMC CEO at Citi TMT conference said 2020 doesn’t look as strong as 2019; in autos, TSLA was downgraded to Neutral from Outperform at Baird and up tgt to $525 from $355 saying the risk/reward is more balanced following the recent stock appreciation; ORLY was upgraded to outperform from in-line at Evercore/ISI

 

Stock GAINERS

·     AMD +4%; was upgraded to buy with $55 tgt at Mizuho as see the 2020 server market could be stronger than current muted consensus

·     CHS +11%; raises Q4 revenue view to flat versus prior of low single-digit decline as outlook

·     DBVT +14% as announces positive long-term results from the open-label extension study (PEOPLE) of its Phase 3 clinical trial, PEPITES, evaluating Viaskin Peanut in peanut-allergic children aged 4 – 11 years.

·     HELE +4%; on Q3 EPS and sales beat while raises year sales view to be in the range of $1.650B-$1.675B, which implies consolidated sales growth of 5.5% to 7.1% compared to the prior expectation of 2.9% to 4.8%

·     LNN +14%; rises as quarterly earnings handily topped consensus

·     SBUX +2%; upgraded to overweight from equal-weight at Barclays citing a fundamental reacceleration into fiscal 2020 and an attractive valuation

·     SNAP +5%; after being upgraded by two analysts today as Jefferies upgraded to buy with $21 tgt as believes Snap can accelerate user growth, while Cowen raised to outperform with $20 tgt citing a rebound in fundamentals, a positive survey from ad buyers, and branding trends

·     VOYA +4%; after the Financial Times reports that the U.S. retirement plan provider held talks with a number of prospective buyers late last year https://bit.ly/2utBK25

 

Stock LAGGARDS

·     AMAG -9%; announces the initiation of a leadership transition, the decision to divest Intrarosa and Vyleesi and financial updates

·     AYI -10%; reported Q1 EPS $2.13 missing the est $2.23 while Q1 sales $834.7M misses $874.8M estimate while gross margins 42.8% vs. est. 40.9%

·     BBBY -18%; as reports Q3 EPS loss (3c) on revs $2.76B below the est. $2.85B as Q3 operating loss $29.8M compared to profit $49.5M YoY, and withdraws FY19 guidance/Q3 comp sales fell (-8.3%) vs. est. loss (-4.9%)

·     KSS -8%; after guiding its year EPS view to the low end of $4.75-$4.95 (vs. est. $4.86) and said its holiday period comp sales were down (-0.2%)

·     SLDB -17%; said it plans to cut one-third of employees as part of organizational changes to prioritize development of SGT-001

·     TUFN -26%; cuts Q4 revenue view to $29.5M-$30.1M from $34M-$38M (est. $36.1M); sees Q4 adjusted operating loss $1.1M-$2.6M

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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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