Mid-Day Outlook: April 13th, 2017

eOptionDaily Market Report

Equities are mixed early as safe-haven demand appears to be waning in the early going after gold, bonds and the yen surged to multi-month highs the last few days given the geopolitical developments from France (elections) to Russia and North Korea. Late day comments from President Trump on the future of Fed Chair Janet Yellen and his stance that the dollar was “too strong” has also swayed markets over the last 24-hours. Economic data came in mostly positive this morning, helping lift the dollar following its late day swoon yesterday after the Trump comment. Seeing a small bounce in beaten up sectors yesterday (such as semiconductors), but overall, markets still seem hesitant to move higher into the long holiday weekend with stock markets closed tomorrow in observance of Easter. Influential bond investor Bill Gross on Thursday stepped up his warning to investors not to be tempted into buying equities, high-yield junk bonds and other asset classes, given the possibility that U.S. President Donald Trump might fail to enact policies that fuel economic growth.

Treasuries, Currencies and Commodities

  • In currency markets, after a late day swoon in the dollar following comments from President Trump that the greenback was “too strong”, the dollar has regained some footing early, rising vs. most rival currencies; dollar trades highs of 109.39 vs. the yen (touched low of 108.73 overnight) – bouncing off the 200 day MA of 108.75, while the euro slips
  • Precious metals pare earlier gains following a rebound in the dollar off lows; gold still on track to finish the week with strong returns on geopolitical fears, and is currently higher by about 0.5% at $1,285 level (earlier traded highs above $1,290 an ounce); Energy futures are little changed early after a strong week of gains, holding around $52.35 per barrel
  • Treasury markets on track for a strong week of gains, as yields are now down nearly 40 bps from highs just a few weeks ago for the benchmark 10-year; 10-yr yield trading around 2.25% after economic data this morning

Economic Data

  • Weekly Jobless Claims fell 1K to 234K, below the 245K estimate; the four-week claims average drops 3,000 to 247,250; the prior week claims revised up to 235k from 234k; continuing claims fell 7k to 2.028m in the week ending April 1
  • Producer Prices for March fell (-0.1%) vs. est. for unchanged (prior month rose 0.3%); final demand ex food, energy was unchanged MoM below estimate for a 0.2% rise, while final demand rose 2.3% YoY vs. est. up 2.4% and core year PPI was 1.6% vs. est. 1.8%
  • Michigan Sentiment prelim April reading rises to 98.0 from 96.9 prior month and above est. 96.5; the current economic conditions index rose to 115.2 (highest since Nov 2000) vs. 113.2 last month and expectations index rose to 86.9 vs. 86.5 last month.
Sector Movers Today
  • Banks dominate headlines with earnings from several large cap names: 1) JPM EPS beat by 5c as topline beat on higher fee income & NII & better NII outlook; 2) WFC EPS beat by 4c but missed on revs (on mortgage lending slowdown); 3) Citi (C) results top expectations, helped by a jump in fixed income trading (highest totals in 3-years) as overall revs rise 19% YoY; 4) PNC EPS beat by 13c driven by higher fee income and NIM of 2.77% was up 2 bps YoY and provides upbeat guidance; 5) FHN reported in-line quarterly earnings on weaker-than-expected revenue
  • Optical sector jumps; AAOI guides higher as sees Q1 EPS $1.00-$1.02, above prior view of 80c-88c and est. 83c; guides prelim Q1 revenue approximately $96.2M, above consensus $89.77M; shares of other optical names OCLR, ACIA, NPTN, LITE, FNSR rallied in reaction
  • Semiconductors; sector in rebound mode ahead of some earnings next week and after recent pullback (down nearly 4% from 16-year high on March 21st for SOX), led by gains in AVGO (top decliner yesterday), CAVM, SWKS and XLN

Stock GAINERS

  • AAOI +13%; pre-announced that its March quarter was much better than previously projected
  • AERI +4%; reported the successful six-month topline safety and efficacy results of its Rocket 4 Phase 3 clinical trial for product candidate Rhopressa
  • DIS +0.5%; touches 52-week high after RBC comments today/speculates AAPL could buy
  • HBI +1%; prelim 1Q results in-line with consensus estimates
  • MTZ +3%; upgraded to buy at Davidson citing approaching Q1 earnings
  • NVET +63%; to be acquired by ZTS for $6.72 per/$85M https://goo.gl/TAhqyT
  • PNC +3%; as sees 2017 revenue growth at upper end of mid-single-digit range
  • SKYW +7%; upgraded to strong buy at Raymond James on margin/FCF views

Stock LAGGARDS

  • APOG -6%; Q4 EPS/revs top consensus, but year guidance midpoint misses estimates
  • DXCM -1%; AAPL has team working on tool to check blood sugar levels
  • GKOS -6%; after Noridian, a Medicare Administrative Contractor, proposed to cut the physician reimbursement for its iStent procedure for glaucoma treatment
  • INFY -3%; said revenue growth for the current FY would likely slow after in-line quarterly results
  • MOSY -40%; announces restructuring, will cut 60% of workforce after failing to get proposals
  • PIR -6%; says it sees flat to slightly negative sales growth for Q1 after Q4 sales miss
  • WFC -1%; Q1 revs miss and mortgage banking down $189M reflects lower mortgage origination
  • WFT -1%; downgraded at Goldman Sachs to neutral saying catalysts played out

Syndicate

  • Adecogro (AGRO) 9.4M share Block Trade priced at $11.50
  • Aehr Test Systems (AEHR) 3.846M share Secondary priced at $3.90
  • Cadence Bancorporation (CADE) 7.5M share IPO priced at $20.00
  • DelMar Pharmaceuticals (DMPI) 2.77M share Spot Secondary priced at $3.25
  • Hostess Brands (TWNK) 20.1M share Secondary priced at $15.25
  • Tocagen (TOCA) 8.5M share IPO priced at $10.00
  • Warrior Met Coal (HCC) 16.666M share IPO priced at $19.00
  • Yext (YEXT) 10.5M share IPO priced at $11.00

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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