Market Debrief for US Session 8th of July 2019

Downgrades help take market down

The S&P 500 lost 0.5% on Monday, pressured by analyst downgrades and waning hopes for a 50-basis points rate cut at the end of the month. With the major indices near record highs, investors adopted a cautious mindset in front of speeches from several Fed officials this week. 

The Dow Jones Industrial Average lost 0.4%, the Nasdaq Composite lost 0.8%, and the Russell 2000 lost 0.9%. 

With more market participants presumably back from the holiday break, the market had a more comprehensive day to digest the better-than-expected June employment report that was released on Friday. Unlike Friday, though, where stocks rallied from session lows despite the subdued rate-cut expectations, Monday’s session exhibited a lack of buying conviction.

Contributing to this lack of conviction were a slew of negative-minded analyst recommendations, which featured Apple (AAPL 200.02, -4.21, -2.1%) being downgraded to Sell from Neutral at Rosenblatt. Morgan Stanley, meanwhile, downgraded global equities to Underweight from Equal-Weight, citing a poor outlook for equities over the next three months. 

Weakness in Apple contributed to the underperformance in the S&P 500 information technology sector (-0.7%). Losses from the materials (-1.1%), communication services (-0.9%), health care (-0.8%), industrials (-0.7%), and financials (-0.6%) sectors also hindered the broader market. 

Selling was kept in check though, with the real estate sector (+0.4%) providing offsetting support, as the market was able to stay above Friday’s session lows.

The market also appeared willing to wait to hear from several Fed officials throughout the week. Fed Chair Powell will speak three times this week, but most attention will likely be centered on his semi-annual monetary policy testimony on Capitol Hill on Wednesday and Thursday. 

In other corporate news, shares of Boeing (BA 351.12, -4.74, -1.3%) underperformed the broader market amid news that a Saudi airline opted out of a $5.9 billion 737 Max order in favor of Airbus. 

U.S. Treasuries finished little changed in a quiet session. The 2-yr yield increased one basis point to 1.89%, and the 10-yr yield declined one basis point to 2.03%. The U.S. Dollar Index increased 0.1% to 97.41. WTI crude increased 0.2% to $57.40/bbl.  

Reviewing Monday’s lone economic data, the Consumer Credit report for May:

  • Consumer credit increased by $17.1 billion in May (Briefing.com consensus $17.7 billion) on the heels of an unrevised $17.5 billion in April.
    • The key takeaway from the report is that the increase was driven by growth in both nonrevolving and revolving credit.

Looking ahead, investors will receive the NFIB Small Business Optimism Index for June and the JOLTS – Job Opening report for May on Tuesday.

  • Nasdaq Composite +22.1% YTD
  • S&P 500 +18.7% YTD
  • Russell 2000 +15.8% YTD
  • Dow Jones Industrial Average +14.9% YTD

Overseas: 

  • Europe: DAX -0.2%, FTSE -0.1%, CAC -0.1%
  • Asia: Nikkei -1.0%, Hang Seng -1.5%, Shanghai -2.6%

Commodities: 

  • Crude Oil +0.11 @ 57.51
  • Nat Gas +0.01 @ 2.41
  • Gold -1.10 @ 1399.85
  • Silver +0.06 @ 15.06
  • Copper unch @ 2.66

News Summary:

  • Earnings/Guidance:
    • AZZ (AZZ) beats by $0.14, beats on revs; reaffirms FY20 EPS guidance, revs guidance
    • BASF AG (BASFY) says Q2 EBIT before special items considerably below expectations, FY19 outlook revised lower
    • MDC Holdings (MDC) sees Q2 new home orders increasing 32%
    • Silicon Motion (SIMO) sees Q2 revs below consensus
  • General News:
    • President Trump renews his criticism against Fed Chair Jerome Powell and is preparing to replace him in 2022 if he wins re-election, according to Bloomberg
    • US and China have not made any progress toward trade deal since their last meeting, according to South China Morning Post
    • Morgan Stanley chief cross-asset strategist downgraded global equities allocation to Underweight from Equal-Weight given forecast for limited upside
    • Study shows deeper links between Huawei and Chinese military and intelligence, according to FT
    • Both US parties are still deadlocked ahead of September deadlines for budget and debt ceiling increase, according to Politico
    • CBO releases impacts of raising minimum wage to $15/hour; would eliminate 1.3 mln jobs at median estimates
    • Iran has begun to enrich uranium above JCPOA limits, according to CNN
    • The 5th Circuit Court of Appeals will hear case Tuesday seeking to declare the entire Affordable Care Act unconstitutional, according to The Hill
    • Former Vice President & Presidential candidate Joe Biden says he would raise corporate tax rate to 28% from 21% and move top tax rate to 39.5% from 37%, according to CNN
    • Turkish President Recep Erdogan has fired the head of the country’s central bank, according to BBC
    • Greece has elected a new center-right government, according to FT
    • A Saudi airline cancelled a $5.9 bln Boeing (BA) 737 Max order in favor of Airbus. according to FT
    • Cardinal Health (CAH) CFO Jorge M. Gomez notifies that he will leave the Company effective August 9
    • Deutsche Bank (DB) outlines significant strategic transformation and restructuring plans; will suspend dividend until 2022 and exit its Equities Sales and Trading business; aims to cut 18,000 jobs by 2022
    • Google (GOOG) spokesperson has denied reports it is discussions with Dish (DISH) to create mobile carrier, according to 9to5Google

Notable Ratings Changes:

  • Upgrades:
    • Cabot Oil & Gas (COG) upgraded to Outperform from Market Perform at Wells Fargo; tgt $28
    • Edgewell Personal Care (EPC) upgraded to Buy from Hold at SunTrust; tgt raised to $40
    • Flowserve (FLS) upgraded to Buy from Neutral at Citigroup; tgt raised to $61
    • JetBlue Airways (JBLU) upgraded to Neutral from Underperform at Credit Suisse; tgt raised to $19
    • Johnson Controls (JCI) upgraded to Neutral from Underweight at JP Morgan; tgt raised to $35
    • Life Storage (LSI) upgraded to Outperform from Mkt Perform at Raymond James; tgt $106
  • Downgrades:
    • Advanced Energy (AEIS) downgraded to Neutral from Buy at DA Davidson; tgt lowered to $55
    • American Airlines (AAL) downgraded to Underperform from Neutral at Credit Suisse; tgt lowered to $30
    • Apple (AAPL) downgraded to Sell from Neutral at Rosenblatt; tgt $150
    • Applied Materials (AMAT) downgraded to Neutral from Buy at DA Davidson; tgt lowered to $45
    • Blackstone (BX) downgraded to Mkt Perform from Mkt Outperform at JMP Securities
    • BNY Mellon (BK) downgraded to Underweight from Overweight at Morgan Stanley
    • Boot Barn Holdings (BOOT) downgraded to Neutral from Outperform at Robert W. Baird
    • F5 Networks (FFIV) downgraded to Sell from Neutral at Goldman; tgt lowered to $120
    • Huntington Banc (HBAN) downgraded to Underperform from Market Perform at BMO Capital Markets; tgt $14
    • Juniper Networks (JNPR) downgraded to Sell from Neutral at Citigroup; tgt lowered to $24
    • Lam Research (LRCX) downgraded to Neutral from Buy at DA Davidson; tgt lowered to $200
    • Lennox Int’l (LII) downgraded to Underweight from Neutral at JP Morgan; tgt $231
    • MSCI (MSCI) downgraded to Neutral from Buy at UBS; tgt raised to $258
    • NetApp (NTAP) downgraded to Sell from Neutral at Citigroup; tgt lowered to $55
    • SVB Financial Group (SIVB) downgraded to Mkt Perform from Outperform at Keefe Bruyette; tgt lowered to $255
    • State Street (STT) downgraded to Underweight from Overweight at Morgan Stanley
    • Verizon (VZ) downgraded to Neutral from Buy at Citigroup; tgt $62
  • Others:
    • American Express (AXP) resumed with a Buy at Deutsche Bank; tgt $142
    • Best Buy (BBY) initiated with a Buy at Guggenheim; tgt $80
    • Cabot Micro (CCMP) initiated with a Buy at Goldman Sachs; tgt $148
    • Capital One (COF) resumed with a Hold at Deutsche Bank; tgt $98
    • CrowdStrike (CRWD):
      • initiated with a Buy at Needham; tgt $80
      • initiated with an Overweight at Piper Jaffray; tgt $75
      • initiated with an Overweight at Barclays; tgt $80
      • initiated with a Buy at Stifel; tgt $80
      • initiated with a Buy at Mizuho; tgt $80
      • initiated with a Hold at SunTrust; tgt $69
      • initiated with an Outperform at Macquarie; tgt $75
      • initiated with a Neutral at Goldman Sachs; tgt $66
      • initiated with a Hold at Jefferies; tgt $71
      • initiated with a Neutral at Credit Suisse; tgt $70
      • initiated with an Outperform at Oppenheimer; tgt $90
      • initiated with a Sector Perform at RBC Capital Mkts; tgt $70
      • initiated with an Overweight at JP Morgan; tgt $100
    • Discover Financial Services (DFS) resumed with a Hold at Deutsche Bank; tgt $87

Upcoming Events:

  • Econ Data (Tuesday):
    • 06:00 ET: NFIB Small Business optimism Index for June (Prior 105.0)
    • 10:00 ET: JOLTS – Job Openings for May (Prior 7.449M)
  • Earnings:
    • Monday (July 8)
      • Pre-Market: AZZ
      • After-Hours: None of note
    • Tuesday (July 9)
      • Pre-Market: LNN, PEP
      • After-Hours:  HELE, KSHB, WDFC
    • Wednesday (July 10)
      • Pre-Market:  ANGO, MSM
      • After-Hours: AIR, BBBY, PSMT, YRD
    • Thursday (July 11)
      • Pre-Market: DAL, FAST
      • After the close: None of note
    • Friday (July 12)
      • Pre-Market:  INFY
      • After-hours:  None of note
Please follow and like us:
error