Mid-Day Outlook: April 20th, 2017

eOptionDaily Market Report

Equities bounce after posting solid losses on Wednesday, led today by a rebound in energy and financials shares, while earnings continue to grab headlines. Large cap continues to disappoint as Dow components VZ and TRV shares decline after quarterly results missed, while AXP shares help lift the index on its earnings beat. Crude rallies on headlines that OPEC members behind cuts and is likely to reach an agreement to extend the group’s production cuts into the second half of 2017, Saudi Arabia’s energy minister said. Bonds and gold are pulling back from multi-month highs as investors rotate back into stocks (for the time being), while the dollar extends its advance vs. most rivals for a second day (falls vs. Euro after French election polls).

Treasuries, Currencies and Commodities

  • In currency markets, the dollar near highs vs. yen as rebound from yesterday continues (trades highs of 109.45). Bloomberg noted Latin America currencies active as the Chilean peso is reacting to higher copper, but BRL and MXN are just rebounding from yesterday’s decline; the euro is trading higher vs. the dollar to 3-week highs after a poll indicated French centrist presidential candidate Emmanuel Macron was holding to a lead in what’s set to be a tight race on Sunday (euro touched intraday high of 1.0778)
  • Precious metals pullback further from recent 5-month highs but geopolitical jitters limit metal’s loss; gold prices only down fractionally, holding above $1,280 an ounce (but has failed to top $1,300 over the last few weeks despite strength in defensive assets
  • Energy futures edge slightly higher (a day after WTI crude fell around 4% on inventory data) as OPEC leader Saudi Arabia said the cartel is likely to reach an agreement next month to extend its production cuts. Saudi energy minister Khalid al-Falih said a preliminary agreement to continue cuts for another three or six months is within reach and could be approved at OPEC’s next meeting on May 25. Natural gas prices slip after bearish inventory data
  • Treasury market’s slide a second day (after surging the prior week), as yield creep higher to around 2.24% for the 10-year (off 5 ½ month lows of 2.16% on Tuesday). Economic data was mixed today, but investors taking a little off the table given strong run in bonds

Economic Data

  • Weekly Jobless Claims rose 10K to 244K vs. est. 240K; Continuing jobless claims fall to 17-year low of 1.98 million, while the four-week jobless claims average drops 4,250 to 243,000; prior week claims unrevised from 234k
  • Philadelphia Fed manufacturing survey tumbles more than 10 points to 22.0 in April and below est. of 25.5 (was at 33-year prior month); April prices paid fell to 33.7 vs 40.7 prior while new orders fell to 27.4 vs 38.6; the employment index rose to 19.9 vs 17.5 while shipments fell to 23.4 vs 32.9 in a mixed overall report from highs
  • The Leading Index for March rose a greater than expected 0.4% vs. est. up 0.2%
  • The 30-year fixed mortgage rate for week ended today fell to 3.97% from 4.08%, Freddie Mac said; the 15-year rate avg 3.23%, down from 3.34% a week earlier.
Sector Movers Today
  • Restaurants; SBUX was upgraded to buy at Stifel as says accelerating U.S. comp. sales growth should lead to multiple expansion; BWLD was upgraded to mixed by OTR Global while investor Marcato seeks ouster of Buffalo Wild Wings CEO; BJRI was upgraded to neutral at Wedbush given in-line checks and potential for comp growth; MCD tgt raised to Street high $146 at Nomura (stocks recently at all-time highs)
  • Housing & Building Products; homebuilder DHI reported Q2 EPS/revenue above consensus while net orders rose 14% vs. est. 12.6%/boosts year rev outlook – but sector failing to rally (KBH, PHM, MTH), while NVR with EPS beat Longbow boosted estimates for AWI moderately on stronger demand (+2% for 1Q vs. 1% before) and see a short term positive catalyst into the quarter; paint maker SHW Q1 EPS and sales topped consensus and updated guidance; SunTrust raises Q1 numbers on BLD & IBP above Street given exceptionally strong quarter for housing completions
  • Metals & Mining; STLD 1Q results were slightly better than estimates and segment earnings improved substantially QoQ, but guidance lacked clarity, Jefferies analyst noted; NUE mixed Q1 results as EPS miss by 4c, while revenue topped views; overall steel/metals sector rises as iron ore bounces after recent declines (CLF, AKS, X)
  • Restaurants; SBUX was upgraded to buy at Stifel as says accelerating U.S. comp. sales growth should lead to multiple expansion; BWLD was upgraded to mixed by OTR Global while investor Marcato seeks ouster of Buffalo Wild Wings CEO; BJRI was upgraded to neutral at Wedbush given in-line checks and potential for comp growth; MCD tgt raised to Street high $146 at Nomura (stocks recently at all-time highs)
  • Consumer Staples; in tobacco, PM shares fall on mixed Q1 results as EPS miss by 5c on better revenue, while boosts forecast on favorable tax/as prices hikes fail to offset smoking decline; in beverages, TAP was cut at Cowen as believe alcohol could be under pressure for the next decade, based on our data analysis covering 80 years of alcohol and 35 years of cannabis incidence in the U.S. (firm maintain Outperform for KSHB, WEED and TPB, as well as STZ)

 Stock GAINERS

  • ADS +6% after earnings beat
  • AXP +4%; reported a slight beat/maintained full-year guidance
  • CSX +5%; posted better EPS and revs as pricing growth drove better profitability/$1B buyback
  • DOV +2%; reported 1Q adjusted EPS above estimate helped by a rebound in energy market
  • KCG +11%; as VIRT agrees to acquire KCG in deal valued at about $1.4B, paying $20 per share https://goo.gl/zFBAQM
  • SCSS +20%; posted its first beat-and-raise quarter in two years

Stock LAGGARDS

  • EBAY -3%; mixed results as quarter topped views/mid-point of guidance short of consensus
  • HXL -4%; Q1 EPS and sales both fell well short of consensus and lowers FY17 revenue view
  • PLXS -7%; Q2 EPS beat while revenue missed as communication revs tumble
  • PM -4%; mixed Q1 as EPS miss by 5c on better revenue, while boosts forecast on favorable tax
  • QCOM -1%; Q2 top/bottom line beat, but Q3 mid-point guidance misses consensus
  • TRV -2%; core EPS miss of $2.16 (est. $2.35) on in-line revs/profit hurt by high catastrophe losses
  • TSRO -8%; rolls out cancer drug Zejula at $9,833 per month for the 200 mg dose
  • URI -6%; posted EBITDA miss on lower gross margins, driven by lower pricing
  • VZ -2%; posted its first ever quarterly net loss of wireless subscribers
  • WR -7%; as Kansas rejects GXP’s $8.6 billion plan to take over WR

Syndicate

  • Eagle Point Credit (ECC) 1.25M share Spot Secondary priced at $19.50
  • TCP Capital (TCPC) 5M share Spot Secondary priced at $16.84
  • Uniti Group (UNIT) 16.9M share Secondary priced at $26.50
  • Whitestone REIT (WSR) 8.1M share Spot Secondary priced at $13.00

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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