Mid-Day Outlook: April 7th, 2017

eOptionDaily Market Report

Stocks get a triple dose of negative/cautious news, though U.S. markets taking it all in stride, trading well off their overnight session lows (actually turning positive). Markets came in to today with news that the U.S. Navy launched dozens of cruise missiles against targets in Syria on Thursday night. More than 50 Tomahawk missiles were launched, and at least one airfield was hit. The attack comes days after the Syrian regime used chemical weapons against an opposition-held town. That news had futures down -0.5% overnight, but rallied throughout the morning. Stocks then got hit by a weaker-than-expected monthly jobs report, as the U.S. added only 98K jobs, well below the expected 180K estimate, while unemployment dipped to 4.5%. Stocks dropped and bonds climbed on the headline before paring losses again (some economists cited to one-off report miss due to weather related concerns – which softened market weakness). Finally, there were reports of an apparent terror attack in Europe as a small truck rammed into a department store in Stockholm, killing at least three people and leaving “a large number” injured, reports said. Markets have taken the news rather well (an understatement), with major averages only little changed. The dollar is higher, gold/oil are higher and bonds also remain up on the day ahead of a holiday shortened week coming up, with earnings in banks highlighting the week.

Treasuries, Currencies and Commodities

  • In currency markets, after small initial declines overnight, and another leg lower after the weak jobs report, the dollar index remain up about 0.2% on the day
  • Commodity prices; gold prices jumped, briefly touching 5-month highs of $1,273.30 an ounce before paring gains following the weaker jobs report/U.S. attack on Syria; gold pares gains to around $1,269 an ounce, up over 1.2%. Oil prices rise (sine pared gains) on the air strike news in Syria, with WTI futures touching an overnight high of $52.94 (up over 2%) initially
  • Treasury markets are still higher, but off best levels earlier; the yield on the 10-yr fell to lowest levels since November (2.269% low) after monthly jobs data came in well below consensus views. Bonds had already gained overnight after the U.S. attacked Syria in response to its chemical weapons use a few days ago on civilians in its country; the yield on the 2-yr dropped to 1.225% and the3-yr 1.387% lowest since December (yields have since pared losses) – 10-yr 2.31%

Economic Data

  • Jobs data disappoints; the change in non-farm payrolls rose just 98K, well below the forecast for 180K jobs added (Revisions cut 38k jobs from Feb/Jan payrolls), while the unemployment rate dropped to 4.5%, below estimate/prior month reading of 4.7%. Average hourly earnings rose 0.2% MoM, which was in-line with estimates (vs. 0.3% prior). Nonfarm private payrolls rose 89K, below prior month of 221K and est. 170K while Manufacturing payrolls rose 111 after rising 26K
  • Wholesale Inventories rose4% in February, in-lie with estimates (inventories increased to $594.2B vs. $591.8B in prior month), while January inventories unrevised at -0.2%. Wholesale sales rose 0.6% in Feb. after rising 0.3% the prior month
Sector Movers Today
  • Banking stocks among biggest decliners early following the weaker than expected jobs report, which sent bonds higher and yields lower (weighing on lending margins for banks); shares of large cap banks (BAC, C, WFC, JPM) as well as regional banks (ZION, KEY, PNC) and brokers (SCHW, ETFC) were among decliners on data
  • Shipping/Dry Bulk; The Baltic Dry Index snapped a six-session losing streak, rising due to stronger rates for smaller vessels, even as capesize demand fell (index rose 8 points, or 0.66%t, at 1,223 points). JP Morgan boosted targets and upgraded DSX and GOGL to overweight as believe the recovery in dry bulk shipping is real and can be sustained for some time. With supply growth largely fixed through 2018 (low in 2017 and flat in2018), they see plenty of runway for rates to continue to strengthen. SBLK remains top pick, and raise tgt to $20 from $10
  • Casino, Lodging & Leisure; casino stocks have been rising over the last few weeks on better Macau data; today, UBS said Macau gross gaming rev. (GGR) estimates for 2017/2018 raised to 11%/9% from 9%/8%, respectively (has buys on WYNN, MPEL and MGM…neutral on LVS); in cruise lines, CCL authorized a $1B stock buyback and raised its dividend

Stock GAINERS

  • GVA +8%; to benefit from the Ca. transportation bill that was passed on April 6, said FBR
  • NEM +1%; as gold prices jump to 5-month highs on Syria news/weak jobs
  • OCLR +3%; will replace United Bankshares in the S&P SmallCap 600 index
  • RTN +1%; after U.S. missile strikes against a Syrian air base overnight (RTN makes Tomahawk)
  • RYI +10%; after providing Q1 net income guidance of $12M-$15M
  • SUN +3%; extends yesterday gains after Barclays upgrades shares on convenient store sales
  • TWLO +5%; was upgraded to overweight at JP Morgan citing strong competitive position

Stock LAGGARDS

  • DPZ -4%; as MScience said Q1 retail sales growth trending below consensus
  • DRYS -23%; after announcing a 1-for4 reverse stock split
  • PSMT -3%; posted in-line Q2 EPS of 90c on slightly better sales
  • RT -11%; as quarterly revenues fall again and reports Q3 EPS loss of (6c) vs. 3c YoY
  • WDFC -3%; cut its year revenue forecast after Q2 results missed

Syndicate

  • AngioDynamics (ANGO) 2.35M share Spot Secondary priced at $16.20
  • C&J Energy Services (CJ) 7M share Spot Secondary priced at $32.50
  • Catalyst Biosciences (CBIO) raises $18M in a common unit, pricing at $5 per unit
  • Codexis (CDXS) 5.5M share Spot Secondary priced at $4.00
  • Okta (OKTA) 11M share IPO priced at $17.00
  • VEON Ltd (VEON) 70M share Spot Secondary priced at $3.75

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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