Mid-Day Outlook

eOptionDaily Market Report

Equities are mixed early, as the Dow and S&P 500 index look to snap their 4-day losing streak after posting their first 1% decline in over 110 days yesterday. The Nasdaq Comp, which until yesterday had closed in a 1 point range the prior 4-days, is outperforming this morning (after underperforming on Tuesday). After leading the S&P lower yesterday, banks are trying to rally back despite another rally in bonds (and drop in yields), while transports are mixed on FDX mixed earnings report/weak airlines (after analyst downgrade). Energy prices a drag early after bearish weekly inventory data (oil touched Nov lows), while gold rises a 5th day on a weaker dollar. Consumer discretionary/retail stocks weighed down by NKE outlook/revenue/futures orders and SHLD comments that it may be unable to continue as a going concern is having a ripple effect on shares of retail REITs.

 

Treasuries, Currencies and Commodities

  • In currency markets, the dollar sell-off continues from last Wednesday’s FOMC meeting; the dollar index (DXY) has already given up about 75% of its rally since Trump’s victory in November. The dollar fell below the 111 level against the yen, first time since late November, while the euro trades around 7-week highs vs. the dollar
  • Precious metals steady, with gold rising for its 5th straight gain as riskier assets slump; gold futures top the $1,250 an ounce level, holding around a 3-week high. The weaker dollar and flight to safer/defensive assets given stock pullback helping prices
  • Energy futures fall on another round of bearish oil inventory data: last night, the API reported a climb of 4.5M barrels in U.S. crude supplies for the week ended March 17…the DOE with similar build of 4.95M barrels (vs. est. 3M build); oil prices fall below $47.50 per barrel, lowest since mid-November, while Brent crude drops below $50 per barrel for first time since December
  • Treasury market’s rise as yields touch 3-week lows amid market uncertainty surrounding the key health-care vote and as investors rotate into more defensive assets (gold up a 5th day) such as bonds, and out of riskier assets (for now) such as stocks; the yield on the 10-yr drops below 2.4% after trading at 2-year highs more than a week ago above 2.61%

Economic Data

  • Existing-Home Sales for Feb fell (-3.7%) to 5.48M rate, below estimate of 5.55M (January was unrevised at 5.69M); there were 3.8 month’s supply in Feb. vs. 3.5 in Jan as inventory rose 4.2% to 1.75M homes; said 1st-time buyers 32% of total sales; all cash 27%; investors 17%; distressed sales 7% of total sales; of which foreclosures 6%; median home price rose 7.7% YoY to $228,400

Sector Movers Today

  • Metals & Mining; iron ore maker CLF has been under pressure after ore with 62% content in Qingdao fell to $84.99/dry ton, trimming YTD gains at 7.8% after benchmark peaked at $94.86 on Feb. 21; in steel sector, JP Morgan raised estimates and price targets for X, STLD, NUE, and AKS to reflect conviction that the companies are poised for stronger earnings growth over the next several quarters; SLW rises on better earnings results; SCHN guides Q2 EPS 34c-37c vs. est. 33c
  • Transports mixed; FDX managed to rally despite Q3 EPS missed lowest estimate on in-line revs of $15B, while reaffirms outlook as sees rebound in ground unit as E-commerce fuels growth; airlines open weak after Morgan Stanley downgraded the sector to in-line from attractive due to increasing domestic supply, estimated at +4-5% for 2017/2018, margin deterioration stagnated pricing (firm downgraded AAL in conjunction with call) – group pared recent losses; ZNH rises on Bloomberg report that as AAL in talks for $200M stake in China Southern Airlines
  • Retailer news; SHLD shares plunged after the company warned of “substantial doubt” about its ability to keep operating/added that actions taken in 2016, early 2017 will enhance liquidity, financial flexibility; SQBG CEO stepped down; DLTH shares surge as Q4 EPS and revenue results topped expectations; PERY revenue forecast below consensus; and in research: KATE downgraded at Citigroup, while KeyBanc upgraded URBN to overweight, but cut LB to underweight and ASNA to sector weight
  • Mall REITs; shares of SPG, MAC, SKT, GGP among those active after another warning in retail, as SHLD disclosed that it may be unable to continue

 

Stock GAINERS

  • DLTH +12%; as Q4 EPS and revenue results topped expectations
  • FDX +1%; Q3 EPS missed lowest estimate on in-line revs of $15B, while reaffirms outlook
  • RUN +2%; upgraded to buy at UBS saying pitfalls with 4Q are behind, sees accelerating prospects
  • SNAP +5%; gets second analyst upgrade as Drexel initiates buy and $30 tgt
  • WGO +1%; rises after Q2 earnings beat expectations
  • ZNH ; as AAL in talks for $200M stake in China Southern Airlines – Bloomberg

 

Stock LAGGARDS

  • AAL -1%; downgraded to equal-weight at Morgan Stanley/downgraded airline sector
  • AYI -1%; mentioned cautiously at Roth Capital after checks indicate weak start to 2017
  • FTR -10%; downgraded to sell at Goldman Sachs with street low tgt of $1.50 (from $3)
  • NKE -5%; Q3 EPS beat, but revenue and margins missed views, while futures orders fell (1%)
  • SHLD -13%; as company warned of “substantial doubt” about its ability to keep operating
  • TDG -3%; downgraded at Cowen citing outside prospect of a DoD inquiry, among other things
  • WIN -7%; reinstated with a sell rating and $4.50 tgt at Goldman Sachs

 

Syndicate

  • Adaptimmune (ADAP) 14M share Spot Secondary priced at $4.20
  • Calithera Biosciences (CALA) 6.83M share Secondary priced at $10.25
  • Easterly Government Properties (DEA) 4.3M share Spot Secondary priced at $19.00
  • REGENXBIO (RGNX) 3.75M share Spot Secondary priced at $20.50
  • Taylor Morrison (TMHC) 10M share Secondary priced at $21.00
  • Therapix Biosciences (TRPX) 2M share IPO priced at $6.00
  • TRI Pointe (TPH) 11.986M share Secondary priced at $12.76
  • Vital Therapies (VTL) 8.75M share Spot Secondary priced at $4.00

 

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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