2019 Stock Market Rally Runs To Resistance; Boeing, GM, Macy’s, American Airlines


The 2019 stock market rally marched higher, with the Nasdaq composite approaching its 50-day moving average. Macy’s (M), Kohl’s (KSS) triggered a retail rout on weak holiday sales report, while American Airlines (AAL) became the latest carrier to warn. Boeing (BA) trumped Airbus (EADSY) for deliveries and orders in 2018, with several other positives boosting the Dow Jones stock. GM (GM) soared on bullish guidance. Eli Lilly agreed to buy Loxo Oncology (LOXO), amid a busy week for drug and biotech news.


Stock Market Rally Runs, Hits Resistance

The 2019 stock market rally kept running, with strong weekly gains for the Dow Jones, S&P 500 index and especially the Nasdaq composite. The Nasdaq is just below its 50-day line. Some more top stocks broke out into buy zones, while Netflix (NFLX) and Amazon.com (AMZN) continued to climb. Macy’s led a big sell-off in retail stocks, but didn’t really dent the broader market. American Airlines hammered carriers. Software stocks were volatile but rising. Homebuilders rebounded on earnings reports. Crude oil continued to rebound.

Macy’s, Kohl’s Lead Retail Rout

Macy’s (M) led a slew of retail stocks that tumbled on weak holiday sales reports, with the likes of Kohl’s (KSS), Barnes & Noble (BKS) and Victoria’s Secret-parent L Brands (LB) all slipping. Even Target (TGT) fell, despite posting positive numbers for the period. However Costco (COST) was up after besting same-store sales estimates, while Bed Bath & Beyond (BBBY) moved higher on positive guidance. Ollie’s Bargain Outlet (OLLI) also gave solid holiday figures.

American Airlines Guides Low On Key Metric

American Airlines (AAL) tempered its fourth-quarter unit revenue forecast due to a “lower than anticipated improvement” over a strong domestic showing last year. The carrier also slashed its 2018 earnings-per-share outlook. Airline stocks went into retreat. The more cautious outlook from American Airlines follows a similar move by Delta Air Lines (DAL) earlier this month.

Boeing Beats Airbus In 2018

Boeing (BA) kept its title of No. 1 plane maker last year. The aerospace giant delivered 806 planes last year, up from 763 in 2017 but just short of its target for 810-815. Q4 deliveries of 238 were up from 209 a year ago and just above the FactSet consensus of 235. Boeing also racked up 893 net orders for commercial jets, valued at $143.7 billion. But that figure is down slightly from 912 net orders in 2017. Airbus (EADSY) hit its target to deliver 800 aircraft last year, but failed to beat Boeing. It also lagged Boeing on net orders, racking up 747, down from 1,109 in 2017. Meanwhile, Brazil approved Boeing’s deal to take an 80% stake in the commercial aircraft division of Embraer (ERJ). Finally, the Pentagon reportedly accepted a Boeing air tanker, despite flaws. Boeing stock rose sharply for the week.

GM Earnings Guidance Bullish

General Motors (GM) says it’ll top its 2018 earnings and issued a strong 2019 outlook as well. For full-year 2019, GM expects EPS of $6.50 to $7.00 and automotive free cash flow of $4.5 billion to $6 billion. The luxury Cadillac brand will lead its push into electric vehicles push. GM stock soared 7% Friday, reclaiming its 50-day and 200-day lines. Meanwhile Ford (F) is slashing thousands of jobs in Europe, a challenging market that GM exited entirely in 2017. Both GM and Ford are restructuring amid massive changes in the global auto industry. Jaguar Land Rover, the luxury British brand owned by India’s Tata Motors (TTM), also will cut 4,500 jobs, mostly in the U.K.

Eli Lilly Buys Loxo Oncology

Loxo Oncology (LOXO) rocketed nearly 70% on Monday after Eli Lilly (LLY) announced to pay $8 billion, or $235 a share, for the cancer-focused biotech. Lilly shares rose 1.3% for the week, near a buy point. The deal follows Bristol-Myers Squibb (BMY) agreeing to buy biotech giant Celgene (CELG) for $74 billion. Some expect biotech takeovers to continue in 2019.

Drug, Biotech News At J.P. Morgan Conference

During the J.P. Morgan Healthcare Conference, Celgene raised 2019 guidance. Regeneron Pharmaceuticals (REGN) also guided to $510 million to $560 million in collaboration revenue from Sanofi (SNY), which beat expectations, according to Leerink. Sage Therapeutics (SAGE) flew nearly 43% on Monday on positive data for its postpartum depression treatment. Exelixis (EXEL) popped more than 6% on Tuesday after its Japanese partner Daiichi Sankyo gained approval for a high blood pressure drug. Biogen (BIIB) said Wednesday that it “would love to get something larger” with Phase 3 drugs, raising speculation it’ll be a buyer.

CES: 5G, 8K, AI Are Buzzwords

The world’s biggest consumer technology show, CES, ended its four-day run on Friday with attendees coming away talking about 5G wireless, 8K television, artificial intelligence and other hot tech areas. Intel (INTC) and Qualcomm (QCOM) dueled over 5G chips while Verizon (VZ) and AT&T (T) touted their plans for fifth-generation cellular networks. TV makers like LG Electronics and Samsung wowed attendees with giant screen 8K televisions that offer twice the resolution of today’s 4K sets for supercrisp pictures. Alphabet (GOOGL)-owned Google Assistant and Amazon (AMZN) Alexa blanketed the show, with the voice assistants providing their computer smarts to everything from bathroom mirrors to kitchen appliances. First-time exhibitors included farm equipment giant Deere (DE), consumer products firm Procter & Gamble (PG) and plant-based meat innovator Impossible Foods. Other tech areas turning heads at CES 2019 included augmented reality glasses, robots, smart home devices, and electric scooters and bikes.

Constellation Brands Lands In Weeds

Constellation Brands (STZ) cut its full-year profit outlook, citing a drag from interest expenses related to the financing for its nearly $4 billion investment in Canadian pot producer Canopy Growth (CGC). The beer-and-wine company’s fiscal third-quarter earnings topped estimates. But its alcohol business suffered too. Management said it was exploring “strategic alternatives,” including a possible sale of some kind, to improve its wine business, which was been hit by weakness in cheaper offerings. Some analysts also expressed concerns about Constellation’s beer business, which includes Corona and Modelo.

Aphria CEO To Step Down

Canadian cannabis producer Aphria (APHA) said CEO Vic Neufeld will exit in the coming months. Management insisted the decision has nothing to do with short-seller allegations of company self-dealing. Neufeld will remain on the company’s board. Tilray (TLRY) soared Friday after Privateer Holdings, which controls the company, indicated that the supply of Tilray stock will remain limited after the IPO lockup expires next week. Aurora Cannabis (ACB) said it expected net sales of 50 million to 55 million Canadian dollars for fiscal Q2, a big jump helped by demand for recreational and medical marijuana in Canada and abroad. The forecast was below some estimates.

T-Mobile, Verizon Subscriber Growth Strong

T-Mobile US (TMUS) and Verizon Communications (VZ) pre-announced strong wireless postpaid phone subscriber additions in the fourth quarter. Verizon said it added 650,000 postpaid phone subscribers. Analysts had estimated 345,000 added subscribers. T-Mobile said it added more than 1 million users, topping estimates of 829,000. Amid a strong economy, analysts say more wireless phone users are upgrading from pay-as-you-go to postpaid plans. Postpaid customers are a closely watched financial metric because they are billed monthly, spend more on data services, and disconnect services less often.

Union Pacific Soars On ‘Precision’ Hire

Union Pacific (UNP) jumped after bringing Jim Vena out of retirement to be chief operating officer. The longtime rail veteran is expected to ramp up a recent efficiency drive. CSX (CSX) and other rail operators have boosted results by adopting the strategy, pioneered by the late Hunter Harrison, a mentor to Vena. Union Pacific also reported some strong figures for Q4.

Homebuilders Rally On Earnings

Lennar (LEN) ran higher after the biggest homebuilder stock by market cap beat views on Q4 earnings, even though it narrowly missed on revenue. Management said sales traffic is responding positively to lower mortgage rates. KB Home (KBH) topped on Q4 earnings, but said first-quarter orders are off to a slow start. Shares still rose. Meanwhile LGI Homes (LGIH) spiked after it revealed it closed 884 homes in December, a 14.8% year-over-year gain.

News In Brief

Dollar Tree (DLTR) rose Monday on news that Starboard Value has built a position. The activist fund reportedly is urging the specialty discounter to consider selling its Family Dollar chain or raising prices.

Tesla (TSLA) broke ground on a new factory in Shanghai where it will make the Model 3, which was followed by the opening of Model 3 orders in China. Tesla also plans to discontinue the low-end version of its Model S and X.

Private equity firm Apollo Global Management (APO) is reportedly seeking to buy all or part of General Electric’s aircraft-leasing business. The deal may be worth as much as $40 billion for the troubled GE (GE).

IT and consulting services provider DXC Technology (DXC), aiming to boost its top-line growth, agreed to buy Luxoft (LXFT) for $2 billion. Luxoft will retain its brand and its CEO, Dmitry Loschinin, will stay on to lead the company.


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