Mid-Morning Look: June 12, 2019

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Mid-Morning Look

Wednesday, June 12, 2019






DJ Industrials




S&P 500








Russell 2000






After major U.S. averages snapped their longest win streak in many months yesterday, U.S. stocks are slipping after initially kind of “marching in place” earlier, with pockets of strength and weakness as lingering trade tensions and questions over the direction of Federal Reserve policy continue to swirl. The calls for Fed rate cuts get louder, especially given the “tamer” than expected inflation readings the last 2-days with PPI in-line yesterday for May, while CPI today was in-line to slightly below views. PIMCO said today that “we don’t expect a Fed rate cut in June, but if downside risks to the economy escalate, a 50 basis point cut in July is possible, in our view.” Regarding policy, CNBC reported this morning, citing White House acting chief of staff Mick Mulvaney that Trump and Pelosi can still work together, but an infrastructure deal is likely not happening (weighing on building stocks). Trade also mixed as the Mexico tariff situation appears to be behind us (at the moment), but the China situation no way near fixed with President Trump saying he’s personally delaying a trade deal with China and won’t complete the accord unless Beijing returns to terms negotiated earlier this year. The upcoming G20 meeting at the end of the month is a focus for global stocks on hopes the two sides can come to a compromise. Semiconductors are lower early after a cautious analyst call on an equipment name (LRCX downgrade), while QCOM slides on FTC headlines. Banks fall further given the Treasury rise and yield decline, along with cautious comments from several big names yesterday (STT, C, MS) at a financial services conference on lower fees and trading revs. Energy stocks tumble (NBL, DVN, APA) as oil prices decline amid bearish inventory data overnight. Generic and Specialty Pharma names (TEVA, ENDP, and MYL) fall while large cap Pharma is strong (LLY, JNJ, MRK).


Treasuries, Currencies and Commodities

·     In currency markets, the dollar rebounds after early declines on the softer CPI inflation data, with the buck bouncing off lows (108.25) vs. the Japanese yen back above the 108.50 level, while Treasury yields slide to lows as expectations for Fed rate cuts increase given the tame inflation reports (10-year yield below 2.12%). Oil prices slide over 2% this morning as weekly inventory data from both the API and EIA came in bearish with bigger builds in weekly stockpiles. Gold prices resume upward momentum on sell-off in stocks and a dip in the dollar, with investors once again rotating into defensive assets.


Economic Data

·     Inflation data “tame” as CPI in-line to slightly below views: Consumer Price Index (PPI) Final MoM for May in-line at 0.1% vs. est. 0.1%; CPI Ex: Food & Energy (core) MoM for May slightly below at 0.1% rise vs. est. 0.2%; Consumer Price Index (PPI) Final YoY for May at 1.8%, below the est. 1.9%; CPI Ex: Food & Energy (core) YoY for May at 2%, below the est. 2.1%.







WTI Crude






Spot Gold









10-Year Note





Sector Movers Today

·     Housing & Building Products; housing stocks benefit (KBH, LEN, PHM) as weekly MBA mortgage data showed the applications index spiked 26.8% amid the recent plunge in rates while the purchase Index rose +10.0% vs. -2.0% and the refinance Index jumped +47.0% as the average 30 year mortgage rate was at 4.12% vs. 4.23%; building material names slumped early for a second day (VMC, USCR, MLM), this time as White House acting chief of staff Mick Mulvaney said that Trump and Pelosi can still work together, but an infrastructure deal is likely not happening

·     Transports; Deutsche Bank lowered Q2 earnings forecasts by 4% on average on rails, taking him below consensus for all the U.S. Class 1 Rails/despite estimate cuts, remains positive reflecting the sector’s volume-agnostic cost opportunity/cuts tgt for CSX to $87 from $89, KSU to $138 from $142, NSC to $196 from $198 and for UNP to $197 from $200; in airlines, JBLU said May traffic increased 5.7% YoY on a capacity increase of 5.4% and the load factor was 86%

·     Networking and Equipment; CSCO was downgraded to market perform from outperform at William Blair as sees signs of tightening demand across IT infrastructure, which he believes could pressure growth; COMM and JNPR both upgraded at Rosenblatt to buy and neutral respectively saying both stocks could see a tailwind from the trade tensions between the U.S. and China and sees 2019 U.S. wireline spending to grow +5% yoy, following a flat 2018

·     Asset managers with month end AUM data: LAZ said prelim assets under management of $228.67B at May 31, 2019 rises from $239.64B at April 30, 2019/AUM included market depreciation of $8.7B, net outflows of $1.4B, and foreign exchange depreciation of $0.9B; TROW reported assets under management of $1.07 trillion, +2.9% YoY/May client transfers from mutual funds to other portfolios $300M, -88% YoY; LM said prelim AUM of $757.9B at May 31, 2019 declines 1.3% from $767.5B at April 30, 2019; IVZ preliminary month-end assets under management (AUM) of $1,159.3B, an increase of 18.9%; APAM reports AUM $106.9B as of May 31; WDR says its assets under management at end of May was $68.6B, down from $72.9B at the end of April and total May outflows were $641M



·     BYND +5%; after Tim Hortons said it’s now offering faux-meat breakfast sandwiches at almost 4,000 locations across Canada after a strong consumer response to testing

·     CBAY +2%; after falling 45% yesterday on data, Raymond James upgraded to strong buy saying 1) NASH is now a “free call option”, 2) PBC provides “valuation floor,” 3) market reaction to surrogate endpoint data is “overblown”

·     CRWD ; priced its 18M share IPO at $34, above the expected range of $28-$30

·     ETR +2%; as defensive utility stocks are leading the gains today on falling yields and rising rate expectations, making dividend paying sectors more appealing

·     MAT +8%; after MGA Entertainment Inc. said Mattel last week rejected another merger offer from the Bratz doll maker; MGA’s CEO Isaac Larian had said offer would be a premium to Mattel’s current market price, according to Los Angeles Times https://cnb.cx/2KGHZpq

·     MX +10%; raises Q2 revenue view to at least $194M from $173M-$181M (est. $177M) and gross profit margin is expected to be at least 21% (up from prior view to be in the range of 16%-18%)



·     BTI -4%; as the tobacco company warns global cigarette sales volume ill fall around 3.5% this year (below prior view of down -3%), driven lower by a 4% to 5% drop in the U.S. market

·     CSCO -1%; pulls back from 52-week highs after William Blair downgraded to market perform as sees signs of tightening demand across IT infrastructure, which he believes could pressure growth

·     LRCX -3%; downgraded to In-Line at Evercore/ISI and cuts the target from $225 to $195 as sees the memory recovery as pushed back to H2 2020 (semi-equipment names fall)

·     PLAY -16%; on weak Q1 revs and comps as Q1 EPS $1.13/$363.6M vs. est. $1.13/$371.7M, while Q1 comp sales fell (-0.3%) vs. est. +1.6% and lowered year rev outlook

·     QCOM -4%; after LG Electronics and the U.S. FTC opposed Qualcomm’s efforts in separate filings to put a sweeping U.S. antitrust decision against the chip supplier on hold as it pursues an appeal

·     TTD -4%; downgraded to sell at Nomura with $144 tgt saying that expectations about the company’s prospects had gotten too far ahead of themselves

·     TSLA -3%; erases early gains; CEO Elon musk said at the company’s annual shareholder meeting on Tuesday that the company has “a decent shot at a record quarter on every level.” Musk also said the company was on track to hit its volume production goal by the end of this year


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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