Mid-Day Outlook

eOptionDaily Market Report

U.S. stocks opened at highs, adding on to the Fed induced gains from yesterday, but have struggled to hold those gains in choppy early trading. Markets everywhere have been in rally mode since the Fed decision yesterday, with big gains in Asia and Europe overnight, but the U.S. has failed to hold gains given weakness in healthcare. The Federal Reserve on Wednesday lifted benchmark interest rates for only the third time in about a decade, but remained vigilant that the pace of hikes would remain gradual. Nevertheless, the combination of rising rates (albeit how small) with low growth (latest Atlanta Fed projection is for 0.9% growth in Q1), is a cause for trepidation. Economic data again this morning was however positive as jobless claims remain low, while housing starts jumped and business survey showed strong gains. Tech boosted early from better ORCL results in software.

In macro news: The Bank of England kept rates unchanged at 0.25% by vote of 8-1 and Gilt purchase plan at 435B pounds; in the Netherlands, preliminary Dutch election results backed up the earlier exit polls, showing that Prime Minister Mark Rutte had likely held off the challenge of a far-right rival Geert Wilders, lowering the threat of a common currency breakup

Treasuries, Currencies and Commodities

·      In currency markets, the dollar is lower vs. the British pound, though only little changed vs. the euro and yen following a broad pullback in the greenback yesterday after the FOMC boosted interest rates, but noted futures hikes would be gradual

·      Precious metals with a nice recovery today, with gold and silver the top performers in the commodity complex (both over 2%) on dollar weakness/call from Fed to raise rates at a gradual pace; gold trades above the $1227 an ounce level. Energy futures slip after jumping more than 2% yesterday on promising inventory data/weaker dollar

·      Treasury markets with a small pullback, as yields inch higher after 10-year Treasury yields fell the most in two months yesterday following the Fed moves; the 10-yr yield up around 2.53% and the 2-yr 1.32%

Economic Data

·      Weekly Jobless Claims fell 2K to 241K vs. est. 240K; Two weeks ago, new claims had fallen to the lowest level since early 1973. And they’ve come under the key 300,000 threshold for 106 straight weeks; four-week average of initial claims rose by 750 to 237,250; continuing claims fell 30K to 2.030M in the week ending March 4

·      Housing Starts for Feb rose 3% to 1,288K annualized rate, above estimates for 1,264K (comes after starts fell -1.9% in prior month); single family starts rose to 872K and multifamily starts fell to 416K in Feb; building permits fell a greater -6.2% to 1,213K vs. 1,293K in Jan (est. 1,268K)

·      Philly Fed index falls to 32.8 in March from 43.3 in February but above estimates for reading of 30.0; prices paid rose to 40.7 from 29.9 prior, while new orders inched higher to 38.6 from 38.0; the employment index rose to 17.5 from 11.1 while inventories rose to 11.8 vs -4.7 prior

·      The 30-year fixed mortgage rate for week ended today rose to 4.30% from 4.21%, Freddie Mac said in statement; 15-year rate avg 3.50%, up from 3.42% a week earlier

Sector Movers Today

·      Semiconductors; sector slips from 17-year highs of 1,006 for SOX index; LRCX upgraded to overweight at Pacific Crest/KeyBanc saying expects a sharp spike in NAND supply by the end of 2017, but by the end of 2018, they expect shortages to resume and to be the norm; NVDA announced that it’s working with PCAR, a leading global truck manufacturer, on developing solutions for autonomous vehicles; AXTI cuts Q1 revenue view to $18M-$18.5M from $19.5M-$20.5M after fire at plant stopped production; SYNA upgraded at Northland to outperform given current valuation, strength in the TDDI and biometrics business, and the likelihood that Synaptics keeps the LCD versions of the upcoming iPhone’s in late CY17

·      Retailers; dollar store DG Q4 EPS beat by 8c on higher sales and comps, while boosts dividend; GOOS 20M share IPO priced at C$17.00; CATOfalls on Q4 earnings and said sees Q1 earnings significantly below last year; GES shares fall on Q4 miss, and lower Q1 and year EPS guidance; BKS announced a $50M share buyback plan; ICON disclosed material weakness in 10K filing; Macy’s (M) weak early after Reuters reported Starboard Value said to sell its stake

·      Optical sector; Goldman Sachs upgraded INFN to conviction buy list, replacing CIEN which they downgraded to neutral citing upcoming new products which should drive revenue growth and margin expansion; also expects revenues to bottom in 1Q and to return to positive y/y growth in 2H; firm also upgraded LITE to neutral citing more upside optionality from the 3D-sensing oppty

Stock GAINERS

·      FRSH +8%; as Q4 profit topped consensus views

·      GPRO +14%; says jobs cuts (cut 270 jobs) may lead to profitability (upgraded at Citigroup)

·      KCG +4%; as VIRT made an unsolicited offer to buy the company https://goo.gl/mgSqld

·      LC +4%; upgraded to buy at Guggenheim with $7 target

·      NUE +3%; sees Q1 EPS $1.10-$1.15 with charges vs. est. 75c

·      ORCL +6%; delivered strong results across the board, including Cloud ARR acceleration, upside to both GM’s and operating margins, and solid EPS growth (upgraded at JP Morgan)

·      TSLA +2%; announced $1.15B stock and convert offering

·      WSM +2%; despite mixed Q4 results and lower Q1 and year guidance

Stock LAGGARDS

·      BGS -6%; as CFO resigned/Credit Suisse lowered estimates

·      BIIB -4%; downgraded at Leerink and Morgan Stanley citing slow start to Spinraza sales

·      GES -14%; shares fall on Q4 miss, and lower Q1 and year EPS guidance

·      KSU -1%; as Mexico finds lack of competition in rail services network

·      ILMN -3%; after Donald Trump’s budget proposal included deep cuts in spending

·      PTCT -10%; after deal to buy Marathon Pharma’s Emflaza which carries a $89,000 price tag

·      TROV -25%; downgraded at both Piper and Maxim after quarterly results

Syndicate

·      Acadia Healthcare (ACHC) 3.02M share Block Trade priced at $41.75

·      Bioptix (BIOP) sells $2.25M of units at price of $2.50

·      Canada Goose (GOOS) 20M share IPO priced at C$17.00

·      Intrepid Potash (IPI) 43.5M share Spot Secondary priced at $1.20

·      Talend (TLND) 3.29M share Secondary priced at $28.50

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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