Mid-Day Outlook: April 17th, 2017

eOptionDaily Market Report

U.S. stocks open the week higher, rising after declines last week, but moving on light volume as European markets were closed for holiday. The S&P 500 closed at a two-month low last week, with cyclicals drastically underperforming defensives once again. The Nasdaq Comp also comes into the day with its first 3-day losing streak of 2017, but is higher today. The VIX ended last week at 16, its level since the week of the U.S. election in November amid heightened geopolitical tensions. North Korea put on a massive parade showing its military capability over the weekend, followed by a failed missile launch (lifts gold early, holding above 5-month highs). The dollar slides following weaker economic data points. While markets remain hesitant to rise given the macro concerns, quarterly earnings got underway last Thursday with better results in the banking sector (JPM, C), but things pick up this week with some large cap tech (NFLX tonight, IBM tomorrow), transports (UAL tonight) and banks (BAC, GS tomorrow) getting busier. In an interesting comment, Thomas Lee at Fundstrat notes that 10 stocks account for 50% of the S&P’s 4.7% gain this year, FB NFLX AMZN GOOGL account for 15% of the SP price gain per Dow Jones.

Treasuries, Currencies and Commodities

  • In currency markets, the U.S. dollar is broadly lower, extending overnight declines vs. major rivals after weaker economic data points this morning (manufacturing/housing); the dollar index (DXY) slides to just above the 100 level, while falling vs. the yen, euro and pound
  • Precious metals holding steady, helped by the weaker dollar, but remains strong given the uncertain political/geopolitical environment (Russia, Korea, Afghanistan) over the last two weeks; gold holding near 5-month highs on safety trade
  • Energy futures are little changed, down slightly after rising over 2% last week; WTI crude trading around the $53 per barrel level
  • Treasury markets slightly pare earlier gains, with the yield on the 10-year back above 2.22% (off earlier lows around 2.20%), as markets remain in “wait and see” mode; yields on the 10-yr are near 2017 lows, and more than 40 bps off highs about a month ago

Economic Data

  • Empire State manufacturing survey fell to a reading of 5.2 in April, from a two-year high of 16.4 in March, and well below consensus for a 15.0 reading. Prices-paid component rose to 32.8 from 31, while the component on number of employees rose to 12.4 from 8.8.
  • April Home Builders’ Confidence (NAHB) falls to 68 from 71 last month and below estimate of 70; the present single family sales falls to 74 vs 77 last month and future single family sales falls to 75 vs 78 last month while prospective buyers traffic falls to 52 vs 53 last month
Sector Movers Today
  • Transports; truckers active after JBHT Q1 EPS topped estimates though revs narrowly missed for the quarter saying benefits from volume growth and new customer contracts were more than offset by lower customer rates from competitive pricing (CHRW, EXPD, LSTR, FWRD, ECHO, LSTR, WERN, among those names active); in airlines, UAL to report after the close
  • Healthcare Services & facilities; hospital stocks active after HCA pre-announces Q1 results below consensus views (Q1 EPS $1.74/$10.6B vs. est. $1.80/$10.7B), with Q1 same-facility admissions up ½% (shares of UHS, CYH, LPNT, THC lower on guidance headlines)
  • Master Trust credit card monthly data: 1) COF March Credit-Card Net-Charge-Offs 5.44% vs. 5.09% MoM; delinquencies 3.71% vs 4.04% MoM; 2) JPM March Credit Card Net Charge-Offs (NCO) 2.47% vs. 2.28% MoM and March credit-card delinquencies 1.21% vs. 1.23% MoM; 3) DFS March net-charge-offs (NCOs) 2.8% vs. 3.1% MoM and delinquency rate unchanged at 2.1% MoM; 4) SYF March Credit Card Charge-offs 4.71% vs. 5.48% MoM; credit card delinquencies fell to 2.95% vs. 3.14% MoM; 5) ADS March net charge offs 6.3% vs. 6.5% last month  and delinquency rate 4.8% vs. 5.1% last month

 Stock GAINERS

  • ALR +16%; agrees to be bought by ABT for lower price of $51 (down from $58)
  • ARNC +6%; after CEO Klaus Kleinfeld to step down after battle with Elliott Management
  • CBLI +50%; as the EMA accepted its pediatric investigation plan (PIP) related to radiation countermeasure entolimod
  • CIR +9%; Stifel upgraded to buy saying 2H likely to see refinery/chemical turnaround
  • HTGM +12%; after entering separate agreements with Daiichi Sankyo and Centre Léon Bérard which utilize the HTG EdgeSeq technology
  • MGI +7%; after Ant Financial boosted its offer to $18 per from $13.25 https://goo.gl/6jQvc4
  • MOCO +37%; to be acquired by AME for $30 per share cash/$182M deal https://goo.gl/dle5se
  • STRP +14%; AT&T may face bidding rival in $1.6B deal for company https://goo.gl/DQYirv

Stock LAGGARDS

  • ABMD -3%; as CMS proposes lower Impella reimbursement in certain uses
  • HCA -3%; after pre-announcing Q1 results below consensus views
  • HNR -2%; as it extends Thursday’s decline after liquidating distribution
  • INCY –11%; after the FDA issued a complete response letter for the company’s baricitinib drug for moderate-to-severe rheumatoid arthritis
  • LLY -4%; and partner ICY fall after the FDA issued a complete response letter for the company’s baricitinib drug for moderate-to-severe rheumatoid arthritis
  • LNCE -20%; after cutting its year revenue view after 1Q miss
  • OMED -18%; as its tarextumab failed mid-stage )phase II PINNACLE study) lung cancer study, as it failed to achieve its primary endpoint of progression-free survival or secondary endpoints
  •  PACW -6%; after Q1 EPS missed consensus views

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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