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Fly Intel - Mid-Day Brief - Tuesday Dec 17, 2019

Stocks a bit higher as U.S. economic data impresses

Stocks are mildly higher at midday following U.S. data that beat estimates and added to the growing optimism about the economic outlook beyond the likely big Q1 hit to GDP and the factory sector from Boeing's (BA) troubles. On that front, the planemaker confirmed what many expected to be coming, namely that it will temporarily pause making new 737 MAX jets as regulators take longer than the planemaker forecast to release the plane from its current grounding orders.

ECONOMIC EVENTS: In the U.S., November housing starts rose 3.2% to a 1.365M home pace, which was much stronger than forecast. Industrial production rebounded 1.1% in November, which was more than double the estimate, while capacity utilization rose to 77.3% from 76.6% previously. The JOLTS report showed job openings rose 235,000 to 7.27M positions in October.

TOP NEWS: Boeing confirmed last night that it will prioritize the delivery of stored aircraft and temporarily suspend production on the 737 program beginning next month, driven by "a number of factors, including the extension of certification into 2020, the uncertainty about the timing and conditions of return to service and global training approvals, and the importance of ensuring that we can prioritize the delivery of stored aircraft." This morning, Southwest (LUV) said in a regulatory filing that based on "continued uncertainty around the timing of MAX return to service," the company is proactively removing the MAX from its flight schedule through April 13, 2020. Last night's 737 MAX production halt announcement should be the end of the negative news flow for Boeing, said Jefferies analyst Sheila Kahyaoglu, who keeps a Buy rating on the shares with a $420 price target. Meanwhile, JPMorgan analyst Seth Seifman lowered his price target for Boeing to $370 from $400 after the company announced the 737 Max production halt.

Shares of Eli Lilly (LLY) are up 3% after the drugmaker hosted a financial guidance conference call and gave a better than expected outlook on its sales and profits in the new fiscal year.

In M&A news, the Federal Trade Commission closed its investigation into Roche Holding's (RHHBY) proposed acquisition of Spark Therapeutics (ONCE), concluding that the evidence "did not indicate that Roche would have the incentive to delay or terminate Spark's developmental effort for its hemophilia A gene therapy, or that the acquisition would affect Roche's incentives regarding Hemlibra."

In management change news, Bed Bath & Beyond (BBBY) announced what it called "an extensive restructure of its leadership team," including the departure of six senior members. Meanwhile, Roku (ROKU) announced that CFO Steve Louden plans to step down after helping the company hire his successor, which has sent the stock down 1% near midday.

MAJOR MOVERS: Among the noteworthy gainers was ImmunoGen (IMGN), which rose 13% after it announced an accelerated approval pathway for mirvetuximab soravtansine. Also higher was LogMeIn (LOGM), which gained 4% after it agreed to be acquired by affiliates of Francisco Partners and Evergreen Coast in a deal valued at $86.05 per share.

Among the notable losers was DMC Global (BOOM), which slid 18% after it lowered its fourth quarter and fiscal 2019 guidance and said that DynaEnergetics will close distribution facilities in Canada and Oklahoma. Also lower was Groupon (GRPN), which fell 9% after Goldman Sachs analyst Michael Ng downgraded the stock to Sell from Neutral. 

INDEXES: Near midday, the Dow was up 80.28, or 0.28%, to 28,316.17, the Nasdaq was up 2.14, or 0.02%, to 8,816.37, and the S&P 500 was up 3.86, or 0.12%, to 3,195.31.


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Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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