Mid-Morning Look: January 10, 2020

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Mid-Morning Look

Friday, January 10, 2020

Index

Up/Down

%

Last

 

DJ Industrials

12.91

0.04%

28,969

S&P 500

5.36

0.16%

3,280

Nasdaq

28.04

0.30%

9,231

Russell 2000

1.36

0.08%

1,666

 

 

U.S. equities extend gains with the Dow Jones Industrial Average topping the 29,000 level for the first time ever and both the S&P 500 and Nasdaq Composite reaching fresh intraday record highs as well, with momentum continuing higher on positive trade optimism with China, and easing tensions in the Middle East with Iran. Markets overlooking a slightly weaker-than-expected monthly jobs report which also showed wages slowing (markets have generally ignored any negative headlines over the last month). Regarding trade, White House economic adviser Larry Kudlow said the U.S. and China are still set to sign and unveil the details of the phase one trade agreement on Wednesday. Earnings the next market catalyst with earnings for the quarter kicking off next week with big banks (JPM, C, GS, WFC, BAC, ONC, USB among them). All is well for now for global stocks, with tech continuing to outperform and energy and retailers lagging.

 

Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar maintaining its gains from the last few sessions, holding steady vs. the euro and Pound while inching even higher against the safe-haven yen despite a weaker jobs report earlier. Gold prices are steady, holding at $1,555 an ounce, down from weekly highs above $1,600 but strong with macro geopolitical factors keeping a bid in prices. Oil prices dip, adding to yesterday losses with WTI crude down around the $59 per barrel level (and well off weekly highs above $65 on Wednesday) – inventory data this week bearish as well as easing of Iran tensions after attacks from U.S. (killing top general last week) and response by Iran (hitting two U.S. based tgts overseas, but no casualties). Treasury market’s up slightly on the weaker economic report, with yields down modestly around 1.83% (off highs 1.9% Thursday).

 

Economic Data

·     Nonfarm Payrolls for December rose 145K, below the estimate of 160K jobs (prior month revised to 256K from 266K), private payrolls added 139K jobs vs. est. 254K) and manufacturing jobs fell -12K vs. est. rise of 5K (prior revised to 58K from 54K). The unemployment rate steady at 3.5% (in-line with estimates) while average hourly earnings rose a less-than-expected 0.1% vs. est. 0.3% (YoY rose 2.9%, prior 3.1% and vs. est. 3.1%) – Underemployment rate 6.7% vs prior 6.9%. wholesale inventories declined -0.1% in November while sales surged 1.5%.

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.35

59.21

Brent

-0.16

65.21

Gold

0.90

1,555.20

EUR/USD

0.0003

1.1109

JPY/USD

0.08

109.60

10-Year Note

-0.017

1.837%

 

 

Sector Movers Today

·     Transports; RBC Capital changed prices targets for several railroads (raised for CNI, CP while lowered tgts for CSX, NSC and UNP) as believe that the US rails’ outlook will be very negative on coal – and cause them to back off providing any guidance at all for 2020; in airlines, AAL lowered top end of Q4 TRASM outlook to 0% to +1%, from prior view 0% to +2% due primarily to lower than planned yields in the pre-Thanksgiving period and higher completion factor; RYAAY raised its full-year FY20 guidance to be in the range of 950M-1.05B euros from EUR800M-900M

·     Semiconductors; QRVO and SWKS both upgraded to buy at Mizuho as sees upside from launch of 5G handsets that will require 50% to 60% more radio frequency content compared to 4G/expects radio frequency market to benefit from 2-3 Apple iPhone models that will support 5G and potential for Huawei settlement; Bank America with several changes in semi space as they upgraded equipment names AMAT, LRCX to buy, raised tgt on NVDA to $300, NXPI tgt to $155, upgraded MCHP to buy as the upcoming December quarter is likely the cycle trough, while downgraded XLNX to underperform and cut tgt to $100 from $105 increasing competitive risks in 5G from MRVL and NVDA; NXPI tgt also raised at Credit Suisse, upping to $150

·     Consumer Staples; LK 13.8M share Secondary priced at $42; STZ was downgraded to hold from buy at Argus saying despite a strong 3Q20, they think further upward revisions to guidance are unlikely in FY21; MNST positive analyst comments for a second day as Credit Suisse reiterate outperform and tgt $77 saying long-term growth story consists of solid U.S. industry growth with innovation-driven share gains plus overseas expansion

·     Healthcare services and providers; in the CRO industry, Goldman Sachs upgraded CRL to buy from neutral as support exposure to a preclinical market leader, with a favorable setup vs other CROs, and a smoother margin trajectory ahead while downgraded PRAH to neutral as think the recovery in Clinical conversion and bookings trends are well appreciated by investor; MCK was upgraded to overweight at Morgan Stanley and raise tgt to $162 following underperformance

·     Casino & Leisure movers; in autos, TSLA tgt raised to $553 from $423 at Piper saying market is undervaluing TSLA’s potential in China, despite the recent rally; in amusement parks, SIX shares slump after warned of a Q4 revenue shortfall and disclosed “challenges” with the development of parks in China (now sees Q4 revs to be $8M-$10M less than a year ago, in which it reported revenue of $269.5M which is lower than consensus for $285.8M (SEAS, FUN fell in sympathy)

 

Stock GAINERS

·     ACRS +17%; after reported positive effectiveness results from an early-stage trial of its experimental medicine ATI-450; co is developing ATI-450 to treat rheumatoid arthritis as well as another immune system condition

·     DERM +5%; as LLY agrees to acquire Dermira (DERM) for $18.75 per share in deal valued at about $1.1B https://on.mktw.net/39XdXIg

·     MRNA +9%; announces positive safety and effectiveness interim results 7 months into an early-stage trial of its experimental vaccine mRNA-1647, targeting cytomegalovirus

·     ISRG +3%; upbeat Q4 preliminary results with revenues of $1.28B coming in above consensus ($1,216B), driven by 19% procedure growth, improving ASPs and roughly in-line system placements (336)

·     RARE +27%; reported topline Cohort 3 data from the DTX301 Ph1/2 study which led to 3 out of 3 patients (two females and one male) showing response in patients with ornithine transcarbamylase deficiency

·     SNX +12%; reported sales and EPS significantly above Street on upside from its cloud-server-integration business; and it announced plans to split into two public companies – the Concentrix services business and Synnex Technology Services, the core IT distribution segment.

·     SRNE +32%; after announcing it received a non-binding proposal from a private equity fund to acquire a majority or all shares of the company for up to $7.00 https://on.mktw.net/39Z3g88

 

Stock LAGGARDS

·     AAL -2%; lowered top end of Q4 TRASM outlook to 0% to +1%, from prior view 0% to +2% due primarily to lower than planned yields in the pre-Thanksgiving period/higher completion factor

·     GRUB -7%; company said “we felt it was important to clarify that there is unequivocally no process in place to sell the company and there are currently no plans to do so” (comes in response to recent reports suggesting they were pursuing a sale) https://on.mktw.net/39ZRfiw

·     KBH -3%; after 4Q revenue missed the lowest analyst estimate even as earnings beat, driven by a lower tax rate (KeyBanc downgraded KBH to a sector weight)

·     PTLA -44%; announced preliminary Q4 and 2019 earnings and says expects global revenue from its bleeding complications drug Andexxa to decline to $28M in Q4 compared to est. $24M

·     SIX -17%; warned of a Q4 revenue shortfall and disclosed “challenges” with the development of parks in China (now sees Q4 revs to be $8M-$10M less than a year ago, in which it reported revenue of $269.5M which is lower than consensus for $285.8M

·     SPWH -14%; as sees Q4 EPS 17c-21c below prior 29c-35c and sales $250M-$254M below the $274.3M est. and sees Q4 comp sales growth down (-6%-7%)

·     URBN -5%; latest to report disappointing holiday sales (follows that of JCP, KSS, LB) with greater-than-expected margin pressure as comps at its flagship Urban Outfitters stores falling 1%

_________________________________________________________________

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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