Mid-Day Outlook

eOptionDaily Market Report

Equities slipping to start the week amid a lack of financial news, no major economic data, no major earnings, a winter storm headed to the Northeast, and in anticipation of the FOMC two-day meeting (starts tomorrow with decision on Wednesday afternoon). The meeting is expected to end with a 25 basis point hike from the FOMC, with a bullish outlook on the economy given the recent positive jobs data. In market news, one big deal in the tech space/auto as Dow component Intel (INTC) agreed to buy MBLY for around $15B, which is moving a few semi and auto related names in the space. Industrial metals one of biggest winners early, led by gains in steel and copper stocks. Markets appear a little tired after posting its first losing week in six last Friday, as the S&P 500 fell -0.44% for its biggest weekly decline of the year. Energy stocks were a big drag on markets last week on the overly bearish inventory data and rig count results on Friday. Markets appear to be in wait-and-see mode right now.
Treasuries, Currencies and Commodities
·      In currency markets, the euro is down slightly ahead of a Dutch election seen as a possible risk to the shared currency, while the British pound strengthened as the U.K. government looked poised to trigger Brexit. The euro touched the $1.07 level earlier in Asia and into Europe’s morning, its highest level since Feb. 9, but has since fallen to lows of the session around 1.0665·      Precious metals up slightly, holding above the $1,200 an ounce mark

·      Energy futures are down slightly early after falling last week to lowest levels of 2017 on bearish inventory data; WTI crude dropped under $48 per barrel earlier, but trading back above now

·      Treasury markets are little changed early, with the yield on the 10-yr up less than 1 bps, holding just under the 2.6% level ahead of the FOMC this week. Note the yield on the 10-year was up around 9 bps to last week

Sector Movers Today

·      Brokers and advisors; RJF to be added to the S&P 500 index; in online brokers, AMTD was downgraded to neutral at UBS while reinstates/initiates SCHWand ETFC with buys; TD downgraded by three analysts citing recent reports of questionable sales practices

·      REITs; ARE was added to the S&P 500 index; last week, the REIT index dropped sharply on rising rate expectations (RMZ decreased 4.5% last week), which lifted the yield on the 10-year 9 bps to end the week at 2.57%

·      Multi industry; Goldman Sachs said since the November elections, cyclicals have outperformed defensives by 600bp bps as investors have been willing to buy stocks with troughed out growth, anticipating that the cycle would turn. Of late, this has turned into reality as a plethora of data has improved buoying OEM, customer, and investor sentiment. However, multiples reflect the good news as the Multi’s are trading at the 98th percentile vs. history over the last 10 years on P/E NTM. That said, concerns are also mounting and think EPS quality will matter more in C1Q. Against this backdrop, they reinstate PH at Buy and downgrade JCI to Neutral

·      AMD +3%; to be added to the S&P 500 index·      HLF +2%; as Carl Icahn reports slightly increased 24.57% stake

·      HTBX +14%; met the efficacy endpoint for its phase 1b trial evaluating HS-110 in combination
with BMY’s anti-PD-1 checkpoint inhibitor, Opdivo, for treatment of NSCLC

·      KRO +10%; after quarterly earnings beat

·      MBLY +29%; to be bought by INTC for about $15B, paying $63.54 per share https://goo.gl/q9gt2e

·      SALT +9%; upgraded to outperform at Credit Suisse

·      AIG -1%; was downgraded to sell at Deutsche Bank citing resignation of CEO Hancock·      FSLR ; after being removed from the S&P 500 index

·      GME -2%; downgraded to market perform at Telsey amid weaker than expected holiday sales

·      HZN -5%; downgraded at Seaport Global after lower guidance last week

·      INTC -2%; after acquisition of MBLY (details above)

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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