Summary:
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US stocks drift lower ahead of the opening bell
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DJIA continues to underperform the NASDAQ100
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Latest analyst calls on Disney, US Steel and Facebook
There’s been a bit of a pause in the rally for global stocks with Monday’s session seeing mixed fortunes for the large-cap US benchmarks. The Dow Jones Industrial Average (US30 on xStation) ending a three day winning streak in closing lower, while both the S&P500 (US500) and Nasdaq (US100) managed to eke out further gains after initial weakness. The recovery was also seen in the Dow which managed to end the day closer to its highs than its lows despite a red close. Most European markets are trading lower ahead of the US session with the German DAX (DE30.cash) back below the 11900 mark and this can be seen to weigh on the indices across the Atlantic which are also in the red ahead of the cash session.
After rising together for several months the DJIA is starting to open up a notable divergence with the NASDAQ. Source: xStation
Reports overnight that the US is considering imposing new levies of roughly $11B worth of EU goods has come as a timely reminder that trade tensions aren’t reserved solely for the US and China. The move comes in response to subsidies support Airbus with the World Trade Organisation (WTO) finding these have a negative impact on the United States. Airbus is one half of what in effect is a duopoly with Boeing in airline manufacturing and the latter continues to feel the fallout from the recent crashes for its 737 max planes.
The short-term trend for the Dow may now have turned lower with price below the H1 cloud for the first time in almost 2 weeks. Source: xStation
A selection of the biggest calls on Wall Street can be found below (source CNBC):
Cowen upgrades Walt Disney to outperform
"We view Disney's catalyst path for the next year as highly attractive, and believe Thursday's investor day will likely be a deck-clearing event for sentiment. Upgrade to Outperform with our PT going from $102 to $131. Note however that we continue to have longer-term concerns about the the Fox acquisition and the ability of DTC video to improve deteriorating content aggregation economics."
Credit Suisse downgrades US steel to underperform from neutral
"We downgrade X to Underperform and cut our target price to $13 from $21. Our new target price assumes X trades at 4.5x EV/EBITDA on blended 2019 and 2020 estimates, which we view as more normalized. Note we use pension adjusted framework and HRC value of $700/ton average in 19/20, levels we view above mid-cycle. In this report we perform deep dive analysis on US Steel Flat Rolled segment and conclude the step-function rise in unit costs the past several years coupled with loss of automotive share suggests X is in a weaker competitive position versus peers entering the "Sheet Tsunami" period in the US from 2021-2022. We see the market awarding a lower multiple on medium term earnings given this dynamic. We lower 2019 EBITDA to $1.06bn."
Morgan Stanley raises price target for Facebook
"Instagram commerce is top of investors' minds. We see the ~$4bn+ opportunity but believe a stronger payments offering is key to capitalize, which takes time. Monetizing Stories took time too; good news is we believe Stories are monetizing now, as we raise '19 EPS by 1%, PT to $195 and remain OW."
