Equity Market Recap
- Today was a whole lot of waiting for a whole lot of nothing. Stocks were higher most of the session on hopes the Healthcare Bill vote would take place and pass today…but after press conferences were delayed and hopes dimmed, reports late day showed the House vote was indeed delayed amid doubts it would pass. The House will hold procedural votes tonight and vote planned now for tomorrow. Following the late day news, U.S. stocks erased their gains, as the Trump administration (and markets) have a lot riding on this bill. As the day progressed, House Speaker Paul Ryan’s planned news conference was postponed for a second time today as White House and House leaders struggled to find support for their health-care bill. The late day decline comes as stocks experience their first pullback in more than four months. The importance of this bill is high as it sets the stage for future Trump administration policies (tax reform, regulation and infrastructure spending). There are some earnings tonight (MU) and tomorrow (FINL), with autos weak on a profit warning from Ford, and healthcare stocks sliding late day…but Washington remains the key driver for major averages still.
- Weekly Jobless Claims rise 15k to 258k (a 7-week high) and above est. of 240k (prior week claims revised up to 243k from 241k); the four-week claims average rises 1,000 to 240,000; continuing claims fell 39k to 2.000m in the week ending March 11; no states were estimated last week
- New Home Sales for Feb rose 6.1% to 592K, well above the 564K est., the previous three months’ new home sales data revised down 4K; median new home price fell 4.9% YoY to $296,200; said 18% of new homes sold in Feb. cost more than $500,000, up from 17% last month; months’ supply at 5.4 in Feb. compared to 5.6 in January
- Oil prices pared losses, but ended in negative territory for a 3rd straight day, slipping 34c or 0.7% to settle at $47.70 per barrel, its lowest levels since late November. U.S. stockpiles of crude oil fueled concerns over a global glut of supplies after bearish inventory data again yesterday.
- Gold futures fell -$2.50, or 0.2%, to settle at $1,247.20 an ounce, erasing earlier gains and snapped the 5-day win streak for the yellow metal. Stocks traded somewhat higher early, reducing the appeal of defensive precious metals, while the dollar ended mixed. Overall, gold remains in favor ahead of Healthcare bill outcome as a major policy test for the Trump administration and a Republican-led Congress.
Currencies & Bonds
- The U.S. dollar was mixed following a week of declines vs. major counterparts; the dollar fell below the 111 level against the yen (4-month lows of 110.63) before paring losses, while the British pound held above the 1.25 level most of the session. The euro however was slightly lower after recently touching 7-week highs vs. the USD. Fairly quiet trade, as markets awaited Healthcare Bill vote
- Bonds traded in a narrow range, as yield on the 10-year bounced slightly above 2.41% (down from 2-yr highs of 2.61% just last week) as economic data mixed today (jobless claims rise, housing better), but all eyes were waiting on the healthcare bill vote, which did not come during trading hours as markets had hoped for.
Sector News Breakdown
- Retailers; group tries to rebound after NKE guidance/futures orders yesterday weighed on beaten up industry; PVH better results last night as Q4 EPS and sales topped consensus; BEBE said it hired financial advisers to help it explore strategic alternatives, according to a news release; CTRN CEO resigns to pursue another opportunity
- Dollar stores active; FIVE reported Q4 EPS/sales above consensus views on in-line comps of up 1%, while 1Q guidance better than feared and the long-term growth view intact; in research, Credit Suisse downgraded DG to underperform from neutral calling the company’s long-term algorithm unachievable as increased competition and rising cost pressures should weigh on earnings for some time; CSFB upgraded DLTR to neutral with $73 tgt
- Consumer Staples; in food, CAG reported mostly in-line Q3 results; WFM initiated with a sell at UBS; in consumer products at RBC, they raised price targets for PEP/CL/KMB/PG as we incorporate special situations into our valuation framework, while says believe KO still has the most upside given the combination of low expectations and early evidence that its many initiatives are working; in tobacco, MO was downgraded at RBC Capital and upped shares of SVU and KR in grocer space to outperform
- Auto’s; Ford (F) guides Q1 EPS 30c-35c, below est. 47c, which weighed on auto industry (GM, FCAU, and suppliers BWA, LEA, AXL); Ford also said that used car values will fall more this year than last (ALLY had made similar comments earlier in week – which hit auto retailers/suppliers etc.); two positive analyst notes on RACE, as was upgraded to buy at Citigroup, while Morgan Stanley said bull case raised to $100-share in the next 12-18 months, EPS of EU5 “should be within striking distance by the year 2020.”
- Housing & Building Products; furniture makers SCS and MLHR were both upgraded at Raymond James (notes risk/reward more balanced following the Q3 MLHR report); in housing, KBH to report earnings after the close tonight; BBBY mentioned cautiously by Cleveland Research; the 30-year fixed-rate mortgage averaged 4.23% in the past week, down from last week when it averaged 4.30%, and the 15-year fixed-rate mortgage averaged 3.44%, down from 3.50% a week ago. According to Freddie Mac
- Casino, Lodging & Leisure; in gaming, PENN raises Q1 rev guidance to $770M-$771M vs. est. $759.8M citing strong property operating performance to date; WYNN shares came into day with 9-day win streak which was snapped; cruise lines RCL and CCL touched 52-week highs; hotels and lodging names also outperformed
- E&P sector; several changes at UBS as the firm assumes/initiates coverage on many; says group of E&Ps are part of what OPEC has dubbed “green shoots” in the U.S. that are growing oil by 20-25% CAGR over the next 3 years, with growth driven by highly prolific, low-cost shale assets (predominantly the Permian) they upgraded EGN, RSPP, and ECA to Buy and downgrading WLL to Sell…said top picks are PE, WPX, and EGN
- Some top movers on news; Trump administration will approve Keystone XL oil pipeline by Monday, Politico reported; MTDR increases 2017 total production view to 12.4M-13.0M BOE from 6.7M-7M BOE; GPOR downgraded to Neutral at Goldman Sachs as anticipate negative 1H17 production revisions could keep a ceiling on shares near-term and see better upside in RICE. MLPs overall edged higher (Alerian MLP Index up a few points); utilities pared gains throughout the afternoon, ending near the lows
- Large Cap banks; in Euro bank news, Bloomberg reported CS is said to consider stock sale to raise over CHF3B; RBS said it would close 158 branches in the UK and cut 470 net jobs; RJF said total securities commissions and fees of $324M increased 16% compared to February 2016 but declined 3% compared to January 2017; overall, a rebound in bank shares today
- Finance & Lending; ONDK shares higher after a Reuters report said small U.S. business online lender Kabbage Inc. is in talks to raise a new round of equity funding that could be used for potential acquisitions/said on of targets under consideration is ONDK https://goo.gl/7dol9s; SC shares fell hard after Ford comments that used car values will fall more this year than last (SC an auto lender like ALLY). Also, the Federal Reserve ordered the U.S. unit of Banco Santander SA to improve the oversight of its troubled subprime auto-lending company (SC).
- REITs; Retail REITs snap recent losing streak; DDR was upgraded to neutral at UBS saying risks seem to be priced in, new management team is well-regarded and offers potential long-term solutions; group has been battered over the last month amid several store closings in retail space (JCP, M, BEBE, others), which have hurt shares of MAC, GGP, SKT, SPG
- Healthcare bill/Large Cap Pharma/Managed care; it was a no go today regarding the vote for the healthcare bill, as investors eagerly awaited an outcome from the House all day (maybe tomorrow); CNC was downgraded at Citigroup saying the company is in the crosshairs of where it appears Republicans are seeking savings; LJPC 3.7M share Secondary priced at $33.50
- Biotech movers; RARE shares slip after saying Phase II study of UX007 in glucose transporter type-1 deficiency syndrome in patients with seizures did not meet primary endpoint; HTGM shares rise it obtained CE marking in the European Union for its in vitro diagnostic assay used to measure and analyze gene rearrangements in lung tumor specimens; HTBX 5M share Spot Secondary priced at 80c; FLXN shares rise after website fiercepharma said SNY on verge of $1B-plus deal for the arthritis-focused biotech https://goo.gl/82QEfX (both companies said they do not comment on speculation)
- Medical equipment and devices; TNDM 18M share Secondary priced at $1.25; MMSI 4.5M share Secondary priced at $28.25; VLRX 5.25M share Secondary priced at $10.00
Industrials & Materials
- Industrial & Machinery; Baird noted the February ABI reading came in just above 50, design strong. The ABI improved in February, though overall trend still remains mixed(said top ideas in nonresidential exposure include DOOR, MHK, and JCI)
- Transports; in rails, NSC was downgraded to underperform at RBC Capital citing premium valuation and elevated risks to achieving 2020 operating targets (expects 2017 and 2018 EPS to come in below expectations); AAL was added to Select List at Stifel calling it significantly undervalued (airlines have fallen over the last 2-weeks)
- Metals & Mining; MT was upgraded to Outperform at Cowen and raised tgt to $11; CMC lifts steel names early after quarterly earnings/revs topped consensus; NUE said to invest $85M to upgrade rolling mill in Marion, Ohio
Technology, Media & Telecom
- Internet; GOOGL shares weaker breaking below the 50-day moving average for first time this year after Bank America one of many analysts concerned over advertising controversy which is growing and a “cascade of major brand boycotts” of GOOGL ad spending has emerged, mostly in non-search ads (says boycotts raise concerns about 1Q and 2Q results); ZG shares fell after Deutsche Bank said see risk to Zillow estimates if the CFPB cracks down on mortgage co-advertising, which has been a growing source of funds for real estate advertisers on Zillow; SNAP rises after positive OTR research rating (shares up nearly 15% over the last 5 days); BABA, VIPS, JD all rated new overweight ratings at Pacific Crest/KeyBanc; STMP falls a 6th day
- Semiconductors; MU to report earnings after the close tonight; QUIK 11.3M share Secondary priced at $1.50; INTC slightly raised dividend to 27.25c from 26c; NVDA cutting GPU prices due to sluggish demand, Digitimes said
- Software & Services movers; in Internet security, Goldman Sachs upgraded FEYE to buy from sell and boosts price target to $15 from $10 saying mix shift to recurring revenue occurring faster than expected, while downgraded PFPT to sell saying screens as one of the most expensive stocks in Software; PTC shares fell midday after cautious comments from SprucePoint Capital; VRNS shares jumped after Stifel upgraded to a buy rating citing the EU’s General Data Protection Regulation (GDPR) as a potential growth catalyst; ACN Q2 revs of $8.32B misses estimate of $8.34B and guides mid-point of Q3 revs below views and lower year EPS outlook
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.