Mid-Day Outlook: April 4th, 2017

eOptionDaily Market Report

Equities again trading in a tight range, sliding for a second day, as the Nasdaq Composite Index is on pace to log its longest stock-market skid–three straight sessions–in more than three months. The tech-heavy index’s previous lengthiest slide was the three-day slump ended Dec. 30. Early decliners include transport/airlines after DAL monthly metrics update and lowers CASM guidance, retailers fall again after softer URBN guidance/update (M, KSS, and JCP fall), no rebound in auto/parts makers after March auto sales disappointed yesterday, crushing the sector. The continuation into defensive/perceived safe haven investments such as gold, bonds and the yen also notable again today. With markets trading not far from recent record highs, investors remain complacent into earnings season, while they await more clarity from the Fed on rate hike pace and policy news out of Washington. Note, since President Donald Trump’s election win in November, the NASDAQ has risen 13.5%, compared with 10.3% for the broad-market S&P 500 and a 12.6% rise in the Dow over the same period.

Treasuries, Currencies and Commodities

  • In currency markets, the dollar is mixed, falling against the “safe-haven” yen, but trades better against the euro early. Bloomberg noted that April is the cruelest month for the dollar, as the DXY Index dropped in every April since 2011 by an average 1.7% (bouncing back in May each time)
  • Commodity prices; gold prices advance early, taking out the $1,260 an ounce level to the upside before paring gains on a mixed dollar/demand for defensive assets. Energy futures leading the commodity complex higher initially, with natural gas outperforming, and WTI crude holding above the $50 per barrel mark
  • Treasury markets extend gains as the 10-year yield hits a low of 2.314%, lowest level since 2/24, before rebounding off lows – last trades around 2.34%

Economic Data

  • Factory Goods Orders for Feb rises 1%, (in-line with estimates) while Factory orders for January were revised up to 1.5%; new orders ex-trans for Feb. rise 0.4% and new orders ex-defense for Feb. rise 1.2% after rising 1.4% in January. Capital goods non-defense ex aircraft new orders for Feb. fall 0.1% after rising 0.2% in January
  • The Trade Deficit for Feb narrowed to (-$43.6) from (-$48.2B) last month and vs. est. (-$44.6B); Imports fell 1.8% in Feb. to $236.43B from $240.69B in January and Exports rose 0.2% in Feb. to $192.87b from $192.51b in January
Sector Movers Today
  • Airlines lower; DAL guidance weighing – DAL PRASM for the month of March increased 0.5% YoY marking the first positive monthly PRASM since November 2015, but cuts 1Q CASM and unit revenue views to up 5%-6%, saw up 5.5-6.5%; sees March quarter passenger unit revenue down about 0.5%, had seen 1Q unit revenue unchanged (AAL, UAL, LUV, JBLU)
  • Industrials & Machinery; ETN was upgraded to buy at Longbow based in part on a stronger than expected 2017 outlook from electrical products distributors; CAT was added to Conviction List, remains buy rated at Goldman Sachs saying it has an “attractive combination” of higher mid-cycle EPS, exposure to underinvested machinery markets in early stages of recovery; AYI shares fall after 2Q adjusted EPS and sales fell below analysts’ estimates, on continued weakness in smaller, short-cycle projects in the lighting market; CX upgraded to overweight at Morgan Stanley
  • Semiconductors; Pacific Crest upgraded both CRUS ($75 tgt) and SWKS ($120 tgt) to overweight on recent channel checks indicating accelerating growth in next-generation iPhones in 2H17; checks indicate lean carrier iPhone 7 inventories and little or no pricing pressures; NVDA was downgraded to underweight at Pac Crest due to signs of desktop GPU market saturation, lower margins from incremental Nintendo Switch revenue and a possible pause in its Datacenter business this summer; TER was initiated outperform and $73 tgt at Baird
  • Consumer Staples; Goldman Sachs with a few changes in sector as upgraded MDLZ to Conviction Buy and up tgt to $52 from $49 as expects an inflection in gross margins and sees Q1 marking a trough on weak industry growth; EL upgraded to buy and raised price target to $103 from $85 as expects Lauder’s diversified channels of growth to drive sales acceleration in2H and removed KHC from conviction buy list saying fundamental thesis has largely played out

Stock GAINERS

  • AFSI +14%; after filing delayed 10-K w/restated 2014-2015 results and says that it’s up to date
  • CONN +26%; after reporting unexpected Q4 profit
  • GNCMA +65%; to be acquired by LVNTA for total valued $32.50 per share https://goo.gl/47gPWh
  • MSGN +6%; James Dolan’s MSG Networks is sounding out suitors, NY Post https://goo.gl/IlQMZI
  • ONTX +14%; on positive pre-clinical data for cancer drugs
  • PRTK +31%; announced positive Phase 3 data from the highly anticipated community acquired bacterial pneumonia (CABP) study for Omadacycline
  • SPLS +12%; explores sale after failed Office Depot deal, WSJ reports https://goo.gl/hiZ1ah
  • TEVA +1%; FDA approves Austedo (deutetrabenazine) for the treatment of chorea associated with Huntington’s Disease
  • TTMI +7%; upgraded to overweight at JP Morgan

Stock LAGGARDS

  • AYI -15%; after 2Q adjusted EPS and sales fell below analysts’ estimates, on continued weakness in smaller, short-cycle projects in the lighting market
  • KATE -15%; after reports that talks with COH have slowed https://goo.gl/dmQb6n
  • NKE -1%; cut to hold at Argus as expect Nike’s revenue and EPS growth to slow over the next 12
  • NLNK -19%; after interim results for a phase 2 trial for advanced melanoma.
  • NVDA -5%; downgraded to underweight at Pacific Crest
  • SDRL -40%; after warning restructuring may involve chapter 11 proceedings
  • URBN -3%; said thus far during 1Q, retail comps are down mid-single-digits (cut at Citigroup)

 

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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