Mid-Day Outlook: April 6th, 2017

eOptionDaily Market Report

Equities are little changed in the early going, holding steady after posting its biggest one day reversal lower in over a year yesterday (the S&P 500 hadn’t been up more than 0.75% intraday and finished down on the day in more than a year (2/10/16) until yesterday). Stocks are looking for direction after several potential market concerns popped up late yesterday that caused the market swoon. Weighing on sentiment were comments from House Speaker Paul Ryan saying that tax reform could take longer than health care overhaul…while the Fed said in its Minutes from its March meeting that several participants now anticipate meaningful fiscal stimulus would likely not begin until 2018. The concerns of “reflation trades” that have buoyed markets since the election would be later than anticipated, frightened markets initially. Next up, President Trump’s meeting with China President Xi today as well as monthly nonfarm payroll jobs data tomorrow! Market gains early being led by beaten up retailers/consumer discretionary stocks, playing catch-up while media and telecom names among top decliners early. Commodity prices broadly higher (oil, gold, lumber), while bonds are little changed.

Treasuries, Currencies and Commodities

  • In currency markets, the euro dropped to a three-week low against the dollar overnight after European Central Bank President Mario Draghi rules out any imminent rate hikes and said it’s too early to “declare success on inflation. (has since pared losses to trade flat – after touched low of 1.0629), while the dollar gains slightly vs. the yen (still below 111)
  • Commodity prices; Precious metals rise as gold gains for the fourth time in the past five sessions, amid concerns ahead of a meeting between President Donald Trump and his Chinese counterpart which could impact future currency and trade interactions between the two nations. Lumber futures surged by $10 exchange limit to 4-year highs; Oil prices extend recent gains, while natural gas inventory data was slightly bullish on smaller 2 bcf build in week (vs. est. 6 bcf)
  • Treasury markets are little changed, slipping from earlier highs, as stocks look for direction; 10-year bonds slipped a few bps early before recovering back above the 2.35% level

Economic Data

  • Weekly jobless claims dropped -25,000 to 234K, well below estimates for 250,000, while the prior week was slightly revised to 259K from 258K; the four-week jobless claims average drops 4,500 to 250,000; continuing claims fell 24k to 2.028m in the week ending March 25
Sector Movers Today
  • Aerospace & Defense; Morgan Stanley said there are structural and cyclical risks for air lessors as they downgraded AER to underweight and AL to equal-weight – says lessor shares are trading ~5% off multi-year highs while structural and cyclical risks remain more present than ever. They take a cautious view on upside potential from here, leading to downgrades
  • Housing & Building Products; Longbow positive on MAS and FBHS, upgrading both to buy from neutral citing strong cabinets checks, and think the underlying R&R fundamentals translates to both companies’ plumbing segments as well; Baird said channel checks suggest that Q1 non-residential roofing volume increased low-single-digits yoy, slightly above views while pricing was flattish (+ for CSL); home furnishing company BBBY beat on reasonable comp and low tax rate but guidance fell short of views; HOFT surges after earnings results
  • Leisure movers; WGO293M share Spot Secondary priced at $26.80; in amusement Parks, Goldman Sachs initiated FUN with a buy and $81 tgt as multiple growth drivers are not reflected in consensus, initiated SEAS with a sell and $16 tgt as believe cost cuts are already consensus, and it will take longer for outlined initiatives to drive a top-line inflection, and neutral on SIX

Stock GAINERS

  • AKTX +45%; was initiated at Outperform and $37 fair value estimate at William Blair
  • BBBY +5%; after mostly better earnings/guidance slight miss
  • COST +2%; reported March same-store-sales up 6%
  • FRED +13%; on Q4 results/said committed to buying up to 1,200 RAD stores
  • JAZZ +6%; as adopts poison pill provision after Xyrem patent settlement
  • MUSA & CASY; both rise after SUN sold convenience stores to Japanese 7-Eleven
  • RIG +1; announced that the Transocean Spitsbergen was awarded two contracts with Statoil.
  • STZ +6%; as Q4 EPS and sales top consensus and guidance $7.70-$8.00 tops $7.51 estimate
  • SUN +11%; as Seven & i Holdings Co. agreed to pay $3.3 billion for some Sunoco LP shops and gasoline retailers https://goo.gl/3Cv1aZ
  • YUMC +10%; China’s comp (+1%) came in above consensus, driven by beats at both PH (+2% vs +0% cons) and KFC (+1% vs -2.4% cons)

Stock LAGGARDS

  • AMD -3%; after Goldman Sachs initiated sell and $11 tgt on valuation
  • CAFD -10%; few analyst downgraded after FSLR said it was exploring alternatives of its interests in CAFD and “removal” of two 2018 utility projects, which over-shadowed a positive quarter
  • GPRO -2%; as announces is selling $150M in 5-year convertible senior notes
  • RARE -2%; downgraded to hold and $66 tgt at Jefferies (from prior buy and $109 tgt)
  • RECN -11%; as Q3 EPS missed by 5c on lower revenue of $143.8M (misses est.)
  • TDOC -2%; downgraded to hold at Cantor

Syndicate

  • Colony NorthStar (CLNS) 21.9M share Block Trade priced at $12.65
  • Everbridge (EVBG) 3.264M share Secondary priced at $19.85
  • FibroGen (FGEN) 5.229M share Secondary priced at $22.95
  • Santander Brasil (BSBR) 80M share Secondary priced at $8.085
  • Schneider National (SNDR) 28.947M share IPO priced at $19.00
  • Synacor (SYNC) 5.7M share Secondary priced at $3.50
  • Winnebago (WGO) 2.293M share Spot Secondary priced at $26.80

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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