Mid-Day Outlook: April 5th, 2017

eOptionDaily Market Report

Stocks surge in the early going, led by a much stronger-than-expected monthly private payroll report from ADP (263K jobs vs. est. 185K), overshadowing geopolitical concerns/fears ahead of President Trump meeting with China President Xi tomorrow and reports of another North Korean missile launch. There are several 52-week highs today for large cap tech names including AMZN (6th straight day), DIS, MSFT and AAPL as the Nasdaq Cop trades just shy of all-time highs. Deal news also lifting some stocks in the restaurant space (PNRA being acquired) and chemicals space (SYT gets EU approval). Defensive assets such as bonds, gold and the Japanese yen, which have benefitted from recent market concerns, are all losing steam early as stocks surge on the better economic report. Potentially market moving later today, the Minutes from the March 15th FOMC meeting (released at 2:00 PM).

Treasuries, Currencies and Commodities

  • In currency markets, the U.S. dollar strengthened against the euro and yen after ADP data showed private-sector employment expanded last month at a much stronger than expected pace. The dollar has been particularly sensitive to strong economic data in recent weeks as markets still look to direction from the FOMC for pace of interest rate hikes
  • Precious metals decline, on pace to snap its three-day win streak for gold prices, weighed lower early as stocks surge and the dollar jumps on jobs data, reducing the appeal for safe-haven and or defensive asset classes; drops below $1,250 an ounce
  • Energy futures rise early on continued momentum and inventory data: The American Petroleum Institute (API) said U.S. crude oil inventories fell by 1.8 million barrels last week. The Department of Energy (DOE) said weekly crude stockpiles rose 1.57M barrels vs. an expected draw of -150K. Crude pared gains following the DOE bearish report. DOE noted Cushing crude stockpiles rose to a record high of 69.1M barrels
  • Treasury market’s slide on the better jobs report, lifting yields; the 10-yr up around 2.37% (off lows of 2.31% yesterday) and above the 2.35% level late yesterday

Economic Data

  • Jobs data tops views as private-sector employment, according to ADP, surged 263,000 private sector jobs last month, up from a downwardly revised 245,000 in February (from 298K), and well above the 185,000 economist forecasts
  • ISM Non-Manufacturing for March falls to 55.2 from 57.6 last month and was below the est. for a 57 reading; Business activity fell to 58.9 vs 63.6 prior month, while new orders fell to 58.9 vs 61.2 and employment fell to 51.6 vs 55.2; Prices paid fell to 53.5 vs 57.7
Sector Movers Today
  • Chemicals; MON Q2 EPS and sales both easily topped consensus views and says outlook for year EPS at high end of $4.50-$4.90 range (est. $4.75); China National Chemical Corp. won EU approval for its roughly $43B takeover of SYT on condition of certain divestitures;  SHLM mixed Q2 as EPS beat/revs miss, with mixed guidance (year revs above view/Ebitda below); LNDC Q3 EPS missed by 5c and cut year forecast on heavy rains in California; PPG says ready to address Akzo Nobel objections to offer https://goo.gl/bylT9Q
  • Railcars mover higher after GBX quarterly results topped consensus citing the upward trend in rail traffic and order activity for the beat (shares of RAIL, ARII, TRN also active on report); GBX also guided 2017 revenue to a midpoint of $2.2B vs. estimate $2.13B
  • Refiners; Goldman Sachs added SU to its Americas Conviction List as sees strong growth from new projects including Fort Hills and Hebron, solid FCF, attractive valuation; downgraded IMO to sell from neutral and upgraded PBF to neutral from sell following recent underperformance and reiterates buy on MPC, VLO, CVX, HSE CN; sell on HFC
  • Oil services/equipment; NBR, PTEN were both upgraded to buy at Instinet/Nomura as U.S. “Super-Spec” land rig capacity will reach limits sooner than market anticipates. Continues to believe that consistent inventory draws will materialize in 2Q, which should help alleviate near-term concerns (says HP also can benefit as “Super-Spec” mkt share becomes more concentrated)

Stock GAINERS

  • AMZN +1%; makes it a 6th straight day of record all-time highs
  • GBX +11%; quarterly results topped consensus citing the upward trend in rail traffic
  • INNL +12%; agreeing to up to $209M acquisition by Gurnet Point https://goo.gl/agc9Fx
  • NEWR +3%; guides Q4 revenue $73M-$73.1M vs. est. $71.1M
  • PLUG +62%; as AMZN acquires the right to buy up to 23% of the hydrogen fuel cell maker
  • PNRA +13%; to be acquired by privately held JAB for $7.5B, with holders getting $315 a share in cash https://goo.gl/bwmLhg
  • SRPT +4%; upgraded to buy at SunTrust with $45 target
  • TASR +4%; after CEO said to make announcement later today around 12:00
  • VICL +5%; as signs research collaboration with AnGes MG
  • WYNN +1%; upgraded to buy and $135 tgt at Argus citing positive trends

Stock LAGGARDS

  • EXC -1%; downgraded to market perform at Wells Fargo
  • GNRC -2%; downgraded at KeyBanc on disappointing Residential standby checks
  • IPHS -1%; guides Q1 EPS below views on lower sales
  • NLNK -10%; extends yesterday’s -10% decline on data
  • WBA -1%; in-line Q2 EPS, but sales came in below views/authorizes $1B share buyback plan

Syndicate

  • Adecogro (AGRO) 9.1M share Block Trade priced at $11.25
  • Hess Midstream Partners (HESM) 14.78M share IPO priced at $23.00
  • Quotient (QTNT) 7M share Spot Secondary priced at $6.00
  • Stellus Capital (SCM) 3M share Spot Secondary priced at $14.10

 

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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