Mid-Day Outlook: March 29th, 2017

eOptionDaily Market Report

Equities are once again struggling for direction just a day after stocks surged on better economic data. While the U.S. stock market is mixed, the story of the morning was in the UK, as Prime Minister Theresa May sent letter to European Council President Donald Tusk which invokes Article 50 of the Lisbon Treaty and officially notifies the European Union of the U.K.’s intent to withdraw (as expected). On 23 June last year, the people of the United Kingdom voted to leave the European Union. The dollar is higher as the Pound slipped and bonds pare early gains on another positive economic data point (housing data). There are a few select stocks moving on news (VRTX surges on positive trial data), but the main drivers for the broader stock market remains Washington and the hopes on tax reform, infrastructure spending (after the Healthcare Bill failed), while the Fed remains key as well as to the pace of interest rate hikes.

Treasuries, Currencies and Commodities
  • In currency markets, the U.S. dollar is higher for a second straight day after two-weeks of declines; the dollar index (DXY) jumps back above the 100 level, rising against the euro and British pound (as Brexit triggered), while slides against the defensive Japanese yen
  • Precious metals weak as gold futures fell for a second straight session as the dollar gained, adding to the pullback from a one-month high struck to start the week
  • Energy futures are gaining early after mixed inventory data, ignoring a jump in the dollar. The API  reported a rise of 1.9 million barrels in U.S. crude supplies for the week while the DOE reported a weekly, while the DOE reported a smaller than expected build of 867K barrels (vs. est. 2M)
  • Treasury yields pared early losses after the UK formally begins Brexit process, while also awaits several Fed speakers again today. On Tuesday, positive economic data took yields higher as stocks surged causing a rotation out of defensive bonds. The 10-yr yield down around 2.394%
Economic Data
  • Pending Home Sales for February rise 5.5% MoM, above the consensus view of up 2.5% (the highest level in close to a year). The NAR said the rising stock market and steady hiring helped, as did fears from homebuyers of rising interest rates.
Sector Movers Today
  • Restaurants; SONC Q2 EPS beat while sales missed and comp sales fell (-7.3%) vs. est. loss (-4.5%), while reaffirmed year (reversed earlier losses); PLAY Q4 EPS beat by 4c on slightly better revs, but comps rose 3.2%, slightly below estimate of 3.2%; DNKN was downgraded to sell at Goldman Sachs from neutral and tgt to $47 from $48 citing comp sales and unit growth risks in U.S. Dunkin’ Donuts stores (cuts estimates)
  • Housing & Building Products; home furnishing store RH shares jumped after Q4 results in-line with prior forecasts while margins were down and mixed guidance; in building materials, USG was downgraded to neutral at Macquarie citing commentary from contacts at the INTEX Construction Expo that US wallboard price increases are fading to +2-3% (from +5-10%); MLM and VMC were both initiated at buy ratings at Citi
  • Utilities; SCG shares fall to 52-week low after Westinghouse Electric Co., a major player in global nuclear construction, filed for bankruptcy protection on Wednesday/SO said it is working with Westinghouse to maintain momentum at Vogtle. Goldman Sachs said remain positive YieldCos on updated valuation views but downgrade NEP given outperformance; Goldman upgraded NRG to buy on cost cutting and FCF expectations…seeing upside to consensus; PPL was downgraded to neutral from buy at UBS
  • AAPL ; stock climbs to sixth record in March, and 12th record this year
  • CC +3%; upgraded to buy at Jefferies and tgt raised to $48 from $35
  • COWN +6%; CEFC China to buy 19.9% equity interest in Cowen for $18 https://goo.gl/XzkVHg
  • EXAR +22%; to be acquired by MXL for $13 per share, or about $700M https://goo.gl/wFYBhU
  • OLLI +2%; traded to 52-week highs after solid same-store sales growth and mid-20% EPS growth
  • RH +10%; Q4 results in-line with prior forecasts while margins were down and mixed guidance
  • TNXP +46%; on start of Phase 3 clinical trial of TNX-102 SL in PTSD
  • VRNT +9%; as Q4 EPS topped highest estimates on better revs of $299.5M
  • VRTX +20%; said it would seek regulatory approval for one of its experimental cystic-fibrosis drugs after the treatment met endpoints in two late-stage clinical studies
  • DEPO -2%; after Q1 rev guidance fell short of views and announced new CEO
  • DNKN -2%; downgraded to sell at Goldman Sachs
  • FFIV -4%; downgraded to sell at Deutsche Bank and tgt cut to $100
  • PTX -14%; says continues to assess various alternatives, including M&A/asset sales
  • SCG -2%; after Westinghouse Electric Co. filed for bankruptcy protection


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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