Mid-Day Outlook: April 10th, 2017

eOptionDaily Market Report

Equities are broadly higher to start the week, with transports outperforming amid consolidation in the trucking sector, as increased M&A prospects following a few deals is lift sentiment. Stocks rise after major averages traded flat last week, falling slightly after a weaker jobs report last Friday and geopolitical concerns (Syria gas situation). Markets remain in holding pattern, not far from record highs for some averages (NASDAQ touched all-time high early last week before slipping) as investors remain complacent with markets at highs into the start of earnings next week (though some big banks report Thursday but bulk of data coming over the next 4-weeks). Several M&A headlines grab market attention today. There was a large deal in the transport space, as logistic/trucking giants KNX and SWFT merge, while a deal in the Telco space grabs opens eyes after AT&T’s more than 150% premium paid for STRP in spectrum deal. Between the two deals, and lack of economic data, Fed speakers (though Yellen has a speech later this afternoon), stocks remain higher along with oil.

Treasuries, Currencies and Commodities

  • In currency markets, the dollar lost overnight gains (was only barely higher overnight), as the dollar index slid to lows, back down near the 101 level. No major economic data or Fed speakers affecting currency markets in the early going; euro pops to highs, trading just under 106
  • Precious metals are slightly lower to start the day/week as investors rotate back into riskier assets (stocks and energy); gold trades down from recent 5-month highs mid-last week
  • Energy futures rise early after Libya’s NOC declares force majeure on loadings at Zawiya terminal and Russian Energy Minister Novak says Russia is discussing output cut extension with nation’s producers; WTI crude trades highs around $53 per barrel as recent strength continues
  • Treasury markets little changed as yields in a very tight range to start the week despite a bounce in stocks/no economic data; 10-yr 2.36%

Sector Movers Today

  • Trucking sector soars active after an announced deal; SWFT said it would merge with trucking and logistics company KNX in an all-stock deal, with a combined enterprise value of $6 billion, that will create the industry’s largest full-truckload operator https://goo.gl/JsTNpc (shares of other logistic companies moved in reaction JBHT, LSTR, WERN, MRTN, HTLD, USAK, CVTI)
  • Lodging sector; Goldman Sachs initiated hotel REITs with neutral DRH, LHO, PEB and sell on SHO) while also continue to expect US RevPAR to accelerate as 2017 progresses due to a combination of improving corporate demand and consistent leisure growth. However, with occupancy already at peak levels and supply poised to ramp in 2018, particularly in urban markets, any sequential improvement could prove fleeting, leaving a more balanced risk-reward; they swap MAR (downgraded)/HLT (added to conviction buy), and upgrade HST to Neutral
  • Equipment rental movers; RCII shares jumped after company announced strategic plan to strengthen its core U.S. business, grow its AcceptanceNow operation and expand its distribution channels with retail and online offerings; KeyBanc said after Q1 checks produced stronger evidence that market conditions have improved, they upgraded HRI citing a more robust backdrop, though downgraded RBA saying auction volumes are likely to continue to be pressured due to lower disposition activity
  • Internet; AMZN upgraded to buy at Needham, while a few analysts further take targets above $1,000; GRUB up on day after positive analyst comments (JMP said believe consumer demand for online food ordering is ramping – reit OP and $47 tgt); after touching lowest levels since June of 2016 ($14.20), TWTR shares moved higher

Stock GAINERS

  • AKRX +10%; shares extend Friday’s rally after Bloomberg first reported FMS is in talks to acquire the generic drug maker that is currently valued at about $3.7B https://goo.gl/waO85R
  • BHP +3%; said the cost of a proposal from hedge fund manager Elliott Advisors to unlock shareholder value would outweigh any benefits
  • ENDP +6%; guides Q1 revs $1.015B-$1/035B vs. near mid-point est. $1.025B
  • RCII +9%; announced strategic plan to strengthen its core U.S. business
  • STRP +152%; agrees to be acquired by AT&T (T) for $95.63 per share in stock, in deal valued at $1.25Bhttps://goo.gl/FOFWjV
  • TSLA +3%; upgraded to Overweight at Piper Jaffray and raised price target to $368 from $223
  • XCRA +7%; sells for $580M to Chinese private equity group https://goo.gl/YaT4y1

Stock LAGGARDS

  • GKOS -6%; cautious mention in Barron’s saying shares could fall 30%
  • HMN -4%; downgraded at KBW on valuation
  • NFG -6%; after the NYSDEC rejected NFG’s planned N. Access Pipeline at Saturday, denying it necessary permits by citing adverse impacts to water quality & related wildlife
  • OMED -34%; after Bayer said it will not exercise option to license two cancer drugs
  • SJM -1%; downgraded at Morgan Stanley
  • TXMD -20%; FDA found deficiencies in its new drug application for TX-004HR drug candidate

 

 

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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