Mid-Day Outlook

eOptionDaily Market Report

U.S. stocks opened broadly higher after jobs report impresses again, now starting to increase Fed rate expectations to four possible hikes this year from an earlier view of between two-three, as next week’s 2-day FOMC meeting (results Wednesday) is pricing in a 25 bps hike. Nonfarm payrolls added a solid 235K jobs, above consensus views for 200K, while the unemployment rate held steady at 4.7%, though wages rose less than expected. The news was “music to the ears” of markets as economy keeps humming along, while inflation expectations remain steady. However, bonds gained and the dollar slide despite the good report, as each had rallied into the number. Markets than pared gains after headlines that the European Central Bank said to have discussed whether rates can rise before QE comes to an end. Following the comments, Europe extended losses, while US stocks dropped and the euro spiked. After better jobs – focus next week turns to the FOMC, where rate hikes and outlook will be key.

Given the 8-year anniversary yesterday for the S&P 500 March 9th low of 2009, Bespoke noted Wyndham Worldwide (WYN) is up the most of any stock that was in the S&P 500 on 3/9/09 with a gain of 2,548%.  CBS Corp. (CBS) ranks second with a gain of 2,091%, followed by Expedia (EXPE), Fifth Third Bancorp (FITB), TGNA (formerly Gannett), and Pioneer Natural Resources (PXD). Amazon.com (AMZN) ranks seventh with a gain of 1,310%, Starbucks (SBUX) ranks tenth with a gain of 1,235%, and Apple (AAPL) ranks twentieth with a gain of 1,068%.

Treasuries, Currencies and Commodities

·      In currency markets, the dollar moved modestly lower after payrolls report which likely solidified Fed rate hike expectations; after surging into the jobs number overnight and earlier this week, the dollar is pulling back in a bout of “profit-taking”; the dollar falls to lows of 114.80 against the yen after overnight highs of 115.51 (first time above 115 since January), while the euro rises as well. The dollar is still on track for its 5th straight weekly advance (up 2% over that stretch for the DXY index). Bitcoin prices jumped more than 6% earlier, above $1300 for the first time (has since pared gains), ahead of SEC decision next week regarding an ETF

·      Commodity prices; Precious metals rebound from earlier lows as the dollar drops on profit taking; gold looking to snap its 8-day losing streak, dropping below the $1,200 an ounce level earlier, but has since rebounded above. Oil prices also looking to rebound after a sharp 7% sell-off the last 2-days on oversupply concerns – however after bouncing early, WTI crude is once again leading the commodity complex lower, falling below $49 per barrel (Baker Hughes rig count data at 1:00 PM)

·      Treasury markets actually rise despite the better nonfarm payrolls report earlier; bond yields have sunk above 3 bps from highs to around 2.58% (was previously trading just shy of 2.61% prior to the healthy jobs report. Yields have jumped above last year closing highs over 2.59% as Fed rate hike expectations have surged for this year. The weaker than expected hourly earnings data helped rein in inflation expectations, which have been partly responsible for the jump in yields since the Nov election.

Economic Data

·      Nonfarm Payrolls for Feb rose 235K, above estimates of 200K, while the unemployment rate held steady at 4.7%. The participation rate inched higher to 63% from 62.9% prior, while average hourly earnings rose 0.2% MoM vs. est. 0.3%. Non-farm private payrolls rose 227K vs. prior 221K and compares to 215K estimate; Manufacturing payrolls rose 28K after rising 11K prior

Sector Movers Today

·      Asset managers; more companies out with monthly assets under management, most driven higher by favorable market returns, net long-term inflows; AB said prelim Feb AUM increased to $498B from $489B at the end of January; IVZ Feb AUM was $836.8B, an increase of 1.4% MoM; LM prelim Feb AUM $722.9B vs. $713.8B MoM; APAM Feb prelim AUM totaled $101.5B vs. $100.3B MoM; MN Feb AUM was $32.1B vs. $32B MoM

·      Optical components under pressure after FNSR Q3 EPS and revs both miss consensus views and guides Q4 EPS 50c-56c on revs $360M-$380M below estimates 58c/$393.1M; FNSR attributed to a handful of issues including seasonality in China, technical issues with CFP at certain customers and a decline in 10G and below Datacom; shares other optical component stocks volatile on the FNSR report (OCLR, LITE, AAOI, ACIA, NPTN)

·      Frac sand industry; Jefferies positive on industry as they believe that a recent selloff in OFS, amidst oil price concerns, is overdone. Firm said they believe that markets are choosing to ignore better US E&P economics and the likelihood of demand offsetting sand capacity additions. Jefferies upgraded FMSA to Buy with top picks including: HCLP, SLCA, SND and FMSA

·      Airlines; group been messy this week given softer monthly guidance reports from DAL and AAL (both lowering guidance); JBLU today said Feb traffic rose 0.1%, and capacity increased 0.7%, while sees 1Q RASM down 4%-5%; LUV Feb traffic up 1.1% and capacity up 1.2%, but lowers Q1 RASM data to down (2%-3%) from prior unchanged to down 1% citing loss of traffic from heavy California rainfall and a better-than-expected February trip completion rate

·      Retailers with earnings today: BKE, CTRN, GCO, HIBB, KIRK, ULTA and ZUMZ all out with results today; retailers have bounced the tail end of the week despite generally weak results and investors look to buy beaten up sectors

·      Mall REITs; little bounce today for names after the sector has been hit by double whammy of retailers closing stores (recent store closures from JCP, M and SIG comments), while REIT sector in general under pressure from rising interest rate environment (shares of SPG, MAC, GGP, SKT, WPG, TCO have been volatile)

·      Semiconductors rise; the semi index (SOX) touches new 52-week highs today of 991.78….up over 1% on day (best levels for the index since 2000), led by gains in ASML on UBS upgrade to buy, and continued upward momentum in shares of AMD and MU; KLAC tgt raised to $100 today at Credit Suisse, while NVDA was defended at Citigroup after recent pullback

·      Software movers; NPD reported Feb software down (25.6)% which was much weaker than expected & we attribute to tax refund delays & weak titles; note shares of EA and ATVI both posted 52-week highs again today

Stock GAINERS

·      ABBV +2%; Goldman Sachs adds to conviction buy and ups tgt to $80

·      ASML +2%; upgraded to buy at UBS considering renewed confidence into the EUV outlook

·      BP +2%; on report of Exxon bid speculation in London’s Evening Standard https://goo.gl/H2Q1yd

·      EL +2%; after ULTA announced an Estee Lauder MAC brand deal

·      GCO +12%; mixed Q4 results as EPS beat/sales miss and comps better in beaten footwear space

·      HIBB +5%; on earnings and guidance outlook

·      MTN +6%; shares rise as earnings blow past estimates, company raises dividend by 30%

·      TTPH +17%; upgraded to outperform at BMO Capital

·      ULTA +3%; reported Q4 beat on better comps, while Q1 sales guidance initially hit shares

Stock LAGGARDS

·      DISH -1%; said to sell $1B in convertible notes for strategic deals

·      FNSR -19%; Q3 EPS and revs both miss consensus views and guides Q4 EPS lower

·      GFI -1%; warns that Q1 production at its South Deep mine could be lower than expected

·      IONS -9%; downgraded to sell at Goldman Sachs as question the commercial viability of Ph3 volanesorsen and recognize Ph3 TTR-Rx faces clinical and competitive risk

·      LUV -3%; lowers Q1 RASM data to down (2%-3%) from prior unchanged to down 1%

·      RDUS -7%; said is still in labeling discussion with FDA on Abaloparatide

·      TDG -2%; more weakness after cautious comments by Citron Research

·      WGO -7%; downgraded to market perform at BMO Capital

·      ZUMZ -15%; drops sharply after Q1 guide of (17c-21c) loss vs. est. (4c) loss weighs

Syndicate

·      Alexandria Real Estate (ARE) 6.1M share Spot Secondary priced at $108.55

·      BioCryst (BCRX) 5.29M share Secondary priced at $8.50

·      MeetMe (MEET) 8M share secondary priced at $5.00

·      Ooma (OOMA) 2.86M share Spot Secondary priced at $8.85

·      Presidio (PSDO) 16.67M share IPO priced at $14.00

·      Sinclair Broadcast (SBGI) 12M share Secondary priced at $42.00

Market commentary provided by Hammerstone Markets, a division The Hammerstone Group, a firm separate from and not affiliated with Regal Securities L.P.  Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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