TheChek News Flow

Chemours misses by $0.18, misses on revs; guides FY19 EPS below consensus (18.14   -0.94)

• Reports Q2 (Jun) earnings of $0.72 per share, excluding non-recurring items, $0.18 worse than the S&P Capital IQ Consensus of $0.90; revenues fell 22.5% year/year to $1.41 bln vs the $1.53 bln S&P Capital IQ Consensus.
• Co issues downside guidance for FY19, sees EPS of $2.37-3.08, excluding non-recurring items, vs. $3.88 S&P Capital IQ Consensus.
• Co says Q2 was challenging on a number of fronts, including softer than expected Ti-Pure demand and the "continued impact of illegal imports of HFC refrigerants into Europe...Both issues impacted our volumes in the second quarter and more than offset increasing adoption of Opteon mobile refrigerants in the United States and Asia, as well as productivity efforts. We are clearly not satisfied with these results and remain firm in our commitment to grow our businesses and improve the financial performance of Chemours."

Closing Stock Market Summary

The stock market gave up a healthy lead and finished noticeably lower on Thursday after President Trump announced a 10% tariff rate on another $300 billion of Chinese imports, effective September 1. The S&P 500 had nearly recovered all its losses from Wednesday, but renewed growth and trade concerns left the benchmark index down 0.9% for the session. 

The Dow Jones Industrial Average lost 1.0%, the Nasdaq Composite lost 0.8%, and the Russell 2000 lost 1.5%. 

Economic growth concerns were made most apparent in the steep drop in U.S. Treasury yields and oil prices ($53.99/bbl, -$4.39, -7.5%), both of which had already been on the decline in the wake of the Fed's rate cut yesterday. The 2-yr yield dropped 16 basis points to 1.72%, and the 10-yr yield dropped 13 basis points to 1.89%. The U.S. Dollar Index lost 0.2% to 98.36. 

In turn, the lower rates and oil prices drove the broad-based selling in the S&P 500 financials (-2.3%) and energy (-2.3%) sectors. The decline in yields, however, did contribute to the gains in the utilities (+1.0%) and real estate (+0.2%) sectors.

Initially, the lower rates had presumably been the catalyzing force behind the rally in equities. That narrative was quickly upended after the tariff announcement brought back familiar trade concerns that the market had set aside during its run to record highs. 

Concerns that trade tensions would undercut corporate earnings prospects were evident in the following groups: The S&P 500 industrials sector (-2.0%), which is home to many transportation companies with foreign business; Apple (AAPL 208.43, -4.61, -2.2%), which previously had some of its high-growth products except from tariffs; and the semiconductor stocks, many of which derive a large of portion of their revenue from China. 

The Dow Jones Transportation Average lost 2.5%, and the Philadelphia Semiconductor Index lost 2.0%. The SPDR S&P Retail ETF (XRT 41.21, -1.38) was another laggard, losing 3.2% amid fears that strong consumer spending may be adversely affected by the tariffs. 

Economic data released today certainly didn't help the mood, although some investors may have seen the results as a case for the Fed to step up its easing efforts, especially after the latest tariff threat. Specifically, the ISM Manufacturing Index for July declined to 51.2% (consensus 51.9%), which is its lowest level since Aug. 2016, and total construction spending for June unexpectedly declined 1.3% (consensus +0.4%). 

Reviewing Thursday's economic data, which included the ISM Manufacturing Index for July, Construction Spending for June, and the weekly MBA Mortgage Applications Index: 

• The ISM Manufacturing Index for July checked in at 51.2% (consensus 51.9%) after crossing at 51.7% in June. The dividing line between expansion and contraction is 50.0%, so the July reading indicates slower growth in the manufacturing sector. The July reading is the lowest level since August 2016.
  • The key takeaway from the report is that it marked the fourth straight month of a deceleration in growth, which corroborates the view that business activity has softened for the manufacturing sector.
• Total construction spending declined 1.3% in June (consensus +0.4%) following an upwardly revised 0.5% decline (from -0.8%) in May. This was the second straight monthly decline and the third straight year-over-year decline in construction spending, which is something that hasn't been seen since 2011.
  • The key takeaway from the report is that the weakness in June was spread across both private construction and public construction activity.
• The latest weekly initial jobless claims count totaled 215,000, which was in-line with the Briefing.com consensus. Today's tally was above the prior week's revised count of 207,000 (from 206,000). As for continuing claims, they increased to 1.699 million from a revised count of 1.677 million (from 1.676 million).

Looking ahead, investors will receive the Employment Situation Report for July, the revised July reading for the University of Michigan Index of Consumer Sentiment, the Trade Balance report for June, and Factory Orders for June on Friday. 

• Nasdaq Composite +22.2% YTD
• S&P 500 +17.8% YTD
• Russell 2000 +15.0% YTD
• Dow Jones Industrial Average +14.0% YTD