Mid-Day Outlook: March 30th, 2017

eOptionDaily Market Report

Equities opened flat, but have picked up steam to the upside, rallying across the board as the S&P erases its March losses on better economic data, rebounding oil and dollar, and investors continuing to “buy the dip” following the pullback over the last two weeks. Markets got a slightly better reading for Q4 GDP, inching higher to 2.1% (up from prior est. of 1.9%). The Nasdaq Comp looks to make it a 5th straight day of gains as the Nasdaq 100 touches new all-time intraday highs. Volumes still remain light despite the market bounce, with much still yet to be seen out of Washington and President Trump’s policy push (failing on Healthcare Bill, but hopes for tax reform, etc.). Markets overall fairly quiet regarding news, as we remain in “wait-and-see” mode regarding policy, debt ceiling, FOMC rate of interest rates, and developments overseas including elections, as well as OPEC stance on further extended cuts.

Treasuries, Currencies and Commodities

  • In currency markets, lot of volatility early – the dollar moved after President Trump said to study way to penalize currency manipulators; the Russian ruble climbed to its strongest level against the dollar in 18 months; the euro slid (to nearly 2-week lows to 1.0721) on the day after touching 4-month high vs. the dollar earlier this week (1.089); the dollar touched highs of 111.54 against the yen this morning after lows of 110.94 earlier
  • Precious metals on pace for third straight day of gains as the dollar continues to rebound post FOMC meeting/market pullback; gold adds to early loss after jobless claims, GDP revision (data this week has been better again for the most part in U.S.)
  • Energy futures rise early, trading above $50 per barrel for WTI crude, the first time above that levels since March 10th after Bloomberg reported OPEC in talks to include all members in meeting consensus citing Kuwait’s oil minister
  • Treasury markets slip as yields climb following several comments out of Fed members regarding rates, economic data points (US and Europe), and big currency fluctuations; the yield on the 10-yr up nearly 2 bps to around 2.40% again (touched lows 2.34% earlier in week – but right in-line where yields finished last Friday)

Economic Data

  • U.S. Q4 GDP was raised to 2.1% from second estimate of 1.9% (vs. est. 2%), after GDP rose 3.5% in prior quarter; Personal consumption rose 3.5% in 4Q after rising 3.0% prior quarter and the GDP price index rose 2.1% in 4Q after rising 1.4% prior quarter. Core PCE q/q rose 1.3% in 4Q after rising 1.7% prior quarter (vs. est. 1.2%)
  • Weekly Jobless Claims fell 3K to 258K, above estimate of 247K, while prior week claims unrevised from 261k; the less volatile four-week claims average climbs 7,750 to 254,250; continuing claims rose 65k to 2.052m in the week ending March 18

Sector Movers Today

·      Industrials & Machinery; California’s Governor announced the latest transportation infrastructure package driving an incremental $5.2B of spend on the state’s decrepit civil infrastructure system. The proposed increase takes the current $2B in annual spend to $7.2B (+360%) for 10 years to cover the majority of the state’s $56B deficit (shares of GVA, MLM, FLR, TPC among active); GWW was downgraded at BMO Capital; in machinery, LNN shares rise on earnings beat; TTCwas upgraded to buy at Cleveland Research; TITN with mixed Q4 results

·      Metals & Mining; positive steel call out of Jefferies today, raising the tgt on X to $50 from $45 and maintains a Buy rating amid a positive steel analysis, predicting the company will guide 2017 EBITDA of $1.4B-$1.8B vs. consensus of $1.25B. The firm said the cyclical recovery in O&G, coupled with favorable secular trends, should drive stronger steel-related demand growth (said other beneficiaries of O&G recovery include: TMST, NUE, MT, STLD, VOE, EVR, RS & RYI); WOR shares dropped after quarterly results missed top and bottom line estimates; FCX higher after reports its Indonesian unit is close to reaching a deal that will allow the mining giant to temporarily resume copper concentrate exports from its Grasberg mine in Papua

·      Internet Security; Goldman Sachs upgraded CYBR to buy from neutral, PT to $64 from $57, saying the company is one of the best secular growth stories in security today; Morgan Stanley initiated coverage on QLYS with an overweight and $43 tgt and an equal-weight on CYBR with $55 tgt; (FTNT had been upgraded at Baird yesterday)

Stock GAINERS

  • AEZS +5%; said it intends to file a new drug application with the U.S. FDA later this year for its Macrilen growth hormone deficiency treatment
  • CMG +1%; 1Q/full-year comp estimates raised by William Blair citing encouraging channel checks
  • COP +6%; selling its Canadian assets to CVE for $13.3B
  • EXTR +15%; buying Brocade unit from AVGO
  • GVA +5%; as California bill could return momentum to Granite Construction, Cowen said
  • LNN +7%; Q2 EPS and revenue both top consensus estimates
  • NQ +13%; on deals to divest FL Mobile, sell Showself business
  • OMER +4%; after reports more positive data in OMS721 phase 2 trial in renal diseases
  • PRGS +3%; % after Q1 earnings top consensus views/names new CFO

Stock LAGGARDS

  • CF -2%; after Cleveland Research said shares have downside to $25 on weaker urea pricing
  • CRBP -10%; mixed market commentary after company said Phase II of CF study met main goal
  • CY -1%; downgraded to underweight with $12 tgt at Morgan Stanley
  • FRTA -1%; after Q4 revenue, Ebitda and gross margins all fall short of consensus
  • GT -1%; downgraded to neutral at Goldman Sachs with $33 tgt
  • HALO -7% after temporarily halting enrollment in a pancreatic cancer study
  • LULU -21%; several analyst downgraded after weak Q1 outlook that included negative comps and Q1 EPS and sales that were well below expectations
  • SAIC -10%; shares drop after mixed Q4 results, as EPS beat, but revs missed
  • SCWX -4%; downgraded by several analyst after earnings results
  • WOR -8%; dropped after quarterly results missed top and bottom line estimates

Syndicate

  • Blueprint Medicines (BPMC) 5M share Secondary priced at $40.00
  • Cenovus Energy (CVE) 187.5M share Spot Secondary priced at $12.00
  • OFS Capital (OFS) 3.5M share Spot Secondary priced at $14.57
  • Tonix Pharmaceuticals (TNXP) 1.8M share Spot Secondary priced at $4.45

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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