Market Review: Nasdaq Closes At A Record High Ahead of Major tech Earnings

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Equity Market Recap

  • Equities ended slightly higher, with new all-time highs for the Nasdaq Composite heading into a pivotal evening for tech space as AMZN, GOOGL, MSFT and INTC (among others) are expected to report quarterly results in a week that has been dominated by stronger earnings thus far. The Russell 2000 index, which has outperformed other major averages over the last week, slipped on the day, while the Dow and S&P 500 index remain not far from record highs. A stellar night of earnings could push markets over the hump tomorrow, while a weak showing could cause a near-term pullback. Energy remains a big drag on markets, with oil sliding over 1% (though off worst levels), while several E&P and service names fell (NBR, HP, FTI, NOV, EQT) after results. Over in Europe, ECB President Draghi said that the risks to the EuroZone economy had diminished, initially rallying the euro…but later slipped after he emphasized that the Eurozone’s economic outlook remains uncertain, even as its economy has shown signs of improving. Defensive haven such as bonds and gold managed small gains today, while the dollar was higher. It was a busy day of headlines covering topics such as Nafta (Trump said will delay pulling out of it) to tax reform, the budget and health care – heading into a potential gov’t shutdown this week. Economic data was mixed today as investors brace for GDP data tomorrow morning.

Economic Data

  • Durable Goods Orders for March rose 0.7%, below est. for up 1.3% and durable goods were revised up to 2.3% for Feb from 1.8% prior; new orders ex-trans. fell (-0.2%) in March after 0.7% rise and new orders ex-defense rose 0.1% in March after 2.7% rise
  • Weekly Jobless Claims rose 14K to 257K (highest in 5-months), above estimates for 245K; while prior week claims were revised down to 243k from 244k; Four-week claims average drops by 500 to 242,250; continuing claims rose 10k to 1.988m in the week ending April 15
  • Advanced Goods Trade Deficit for March fell (-$64.8B) vs. est. (-$65.2B); and from (-$63.9B) in the prior month; imports fell 0.7% in March to $190.305B from $191.660B in Feb while exports fell 1.7% in March to $125.500B from $127.731B in Feb.
  • Pending Home Sales for March fell (-0.8%) MoM vs. est. down (-1%)

Commodities

  • Oil prices dropped on Thursday, falling 65c, or 1.3% to settle at $48.97 per barrel, but ended well off earlier lows of $48.20 per barrel Ongoing inventory data, as growing U.S. crude production and news of the restart of Libya’s biggest oil field helped send prices to their lowest since the end of March. The move also comes ahead of weekly rig data tomorrow afternoon which has shown 14-straight weeks that oil rigs have been added (adding to already full supply). Note the $48.97 settlement on WTI crude was right around the 200 day of $48.94. U.S. gasoline and distillate stockpiles rose by most since January, EIA data showed Wednesday.
  • Gold prices ended higher by $1.70, or 0.1%, to settle at $1,265.90 an ounce, small gains but enough to snap the precious metal three-day losing skid (and off  nearly 3-week lows) despite a bounce in the dollar. July silver fell by 9.7c,  or 0.6%, to $17.334 an ounce, extending its loss from a day earlier

Currencies

  • The U.S. dollar opened strong and rallied early in the session (DXY highs of 99.95), but sipped in the afternoon, with the dollar index ending up only slightly (99.10 level). The euro was volatile, rising earlier on Draghi comments to highs of 1.0933…but later slid to lows of 1.0852 on more commentary before settling a little lower on day around 1.088. The dollar also ended higher against the yen, holding above the 111 level.

Bond Market

  • Bonds gained, reversing earlier losses, as yields slipped; the yield on the benchmark 10-year slipped to 2.29%, down from earlier highs around 2.32%, and in a narrow range throughout the session. Bonds were initially weak after ECB policy inaction at its meeting today (as expected) and largely upbeat remarks from its President Draghi which eased demand for lower-risk global bonds in favor of riskier assets. Draghi said he saw “diminished” downside risks to the EuroZone economy, after the ECB said it would keep interest rates unchanged
Sector News Breakdown

Consumer

  • Auto’s; Ford (F) results mixed as profit tumbles 35% on recall costs; auto retailers fall as ORLY posted a big miss in 1Q17, coming in at a 0.6% comp, which was lower than consensus of 3.2% and ABG Q1 results mixed on 10c EPS beat, though revs missed on new comp sales up 1% (AZO, AAP move); tire company CTB falls on results as EPS/sales missed
  • Retailers; UAA Q1 results topped views but said on call it sees 2Q net sales growth of 8% vs est. up 10%/sees 2H sales growth at mid-teen percentage rate and Q4 being strongest; BBW rises on earnings beat and positive comments about improved traffic in quarter; CRI shares rallied after EPS topped highest estimates; TSCO slipped on earnings
  • Consumer Staples; WTW shares jumped after current HSNI CEO Mindy Grossman will become CEO in July; NTRI Q1 EPS and sales beat views on stronger guidance, but downgraded at Wunderlich on valuation; DPZ rises as Q1 results top expectations
  • Restaurants; BWLD downgraded at Baird to neutral after earnings results missed on top and bottom line and guidance falls short; MCD upgraded to buy at Argus which reflects our improved revenue expectations for 2017, driven in part by the launch of new promotional offers; SBUX to report earnings after the close
  • Housing & Building Products; new IPO as FND 8.824M share IPO priced at $21.00; home goods and furniture-related stocks active after ETH Q3 results trailed estimates and noted customer expectations for higher discounting (WSM, LZB, PIR, BBBY moved); FBHS downgraded at Evercore despite 1Q EPS that topped the highest estimate on the Street.
  • Casino, Lodging & Leisure; a day after strong results from WYNN, shares of MGM and LVS active on earnings; MGM Q1 EPS beat by 9c on higher revs while LVS mixed results as revs in-line for Q1; other casino related movers on earnings (GLPI, PENN); in leisure movers, boat company BC reported, as did CHDN

Energy

  • Energy complex was hit hard across the board after mixed earnings results in equipment and E&P space and as oil prices resumed downward momentum (though finished off worst levels)
  • E&P sector on earnings; EQT guidance was lower than most Street ests., including flat 2Q production, higher costs, wider differentials; WLL solid execution given beats in production, pricing, costs, however concerns remain if oil prices remain sub-$55 said UBS; APC shut-in more than 3,000 wells in Colorado following an explosion; RRC assumed overweight at Piper and $49 tgt as believe they are increasingly well positioned for longer term investors
  • Oil equipment; NBR slides on earnings miss and incurred high costs; FTI shares fell as revenues of $3.39B missed views while orders were also below expectations; HP shares plunge missed slightly but guided to a better-than-expected 25% increase in U.S. Land revenue days; OII earnings beat in Q1:17 and improving operating income outlook in Q2; PTEN reports Q1 EPS loss, though beat on pressure pumping revs; NOV EPS beat expectations, but operating segments and orders disappointed
  • Utilities/Solar; FSLR upgraded to market perform at JMP Securities; AMSC tumbles to new 52-week low after results and lower guidance; CSIQ mentioned as near-term short call at Morgan Stanley citing section 201 being filed, permitting U.S. President to grant temporary import relief by increasing import duties or imposing non-tariff barrier on goods entering U.S.

Financials

  • Large Cap banks; DB results disappointing due to revenues, while overall banks with a little profit taking today after solid gains of late; INTU and HRB shares shook off tax simplification concerns revealed yesterday from new tax plan by Trump administration
  • Insurance; mortgage insurers dropped after RDN earnings/revs trailed consensus views amid higher operating expense, lower earned premium (shares of ESNT, NMIH fell)
  • Finance & Lending; SC upgraded to buy at Compass Point after Q1 results and raise tgt to $16; PYPL posted better-than-expected 1Q results and raised 2017 outlook driven by robust growth in TPV and strength in key metrics/$5B stock buyback; ALLY results miss citing softer used vehicle values, higher insurance weather losses; AXP was upgraded at Nomura/Instinet; TREE shares jumped as Q2 revs topped consensus
  • REITs; AVB Q1 FFO missed by 2c and guidance missed views; DRE Q1 core FFO beat the Street and raised 2017 guidance by $0.03 to $1.27 at the mid-point; HTA FFO missed by a penny; ESRT Q1 core FFO beat by a penny primarily the result of termination fees; KIM in-line report and maintained guidance; KRG FFO beat as core NOI drove the beat; SPG Q1 FFO missed by 3c on weaker revs and backs year outlook
  • Asset managers/advisors; KKR shares rally after Q1 EPS/revs and AUM’s topping views (OZM, APO active on results); advisory firms as LAZ after 1Q results featured weak M&A, restructuring rev. that more than doubled on U.S. energy sector activity, and a lower tax rate; EVR drops a 2nd day after firm said they see sustained pressure on equities unit; RJF slides despite Q2 EPS and revenue beat (MC, GHL, PJT weak as well)

Healthcare

  • Large Cap Pharma strength on earnings; ABBV Q1 results beat with Humira  and affirms year EPS view; BMY relief rally after Q1 EPS beat by 11c on higher sales and boosted year outlook/Opdivo sales also strong at $1.13B, topping views; ALXN Q1 top and bottom line results top consensus and boosted year rev view; LLY downgraded to hold at Argus following regulatory setbacks; PFE next-gen ALK/ROS1 Inhibitor, Lorlatinib, granted breakthrough therapy designation from FDA; ALKS Q1 results missed estimates but reiterates Vivitrol 2017 sales outlook $280M-$300M
  • Biotech movers; CELG reported Q1 revenue that trailed some estimates/Revlimid sales slightly above expectations/other medicines didn’t perform as well as anticipated despite price increases; AMGN falls as 1Q sales for its new cholesterol drug Repatha, missing Bloomberg estimates of $71.6M (MDCO, ALNY, ESPR have competing treatments being developed and REGN with its Praulent); Enbrel sales $1.18B well below consensus of $1.38B
  • Life science equipment/devices; EXAS shares jump on beat and raise quarter (now sees 2017 revenue of $195M-$205M from prior $170M-$180M) says 10K additional providers ordered Cologuard during quarter, insurance coverage expanded to 78%; BRKR upgraded at Cleveland Research; ortho maker ZBH falls after earnings beat, weaker outlook; PACB posted wider EPS loss

Industrials & Materials

  • Industrials & Machinery; ALSN reported better-than-expected 1Q17 owing to robust demand from North America service parts, offsetting softness from the North American On-Highway Market; GGG posted Q1 revenue and EPS beat; other industrial/defense names reporting today included PH, RTN, JCI, and PH
  • Transports; UPS Q1 EPS beat by 3c on better revs as package delivery daily volume was up 2.6%; rails slipped yesterday on Nafta concerns, and move today after UNP Q1 EPS beat by 9c on higher revs $5.13B (NSC posted strong results yesterday); ECHO posts larger Q1 loss; handful of trucking related companies with earnings overnight including: LSTR, ODFL, FWRD, KBX; KSU bounces as President Donald Trump said will pursue negotiations with Mexico/Canada and will not immediately terminate U.S. participation
  • Airlines weaken; LUV shares drop after Q1 EPS/revs missed expectations, and operating unit revenues (RASM) declined YoY citing competitive fare environment and shift in Easter travel demand; AAL Q1 topped views but said decision to increase hourly base pay for crewmembers outside of contract negotiations raised concerns about costs (JBLU, DAL, UAL active)
  • Metals & Mining; CLF Q1 Ebitda of $92M missed views of $124M and lowered year outlook to $700M from prior view $850M; X downgraded to hold at Deutsche Bank; AA 12.959M share Spot Secondary priced at $36.15; gold miner CDE earnings below views
  • Chemicals; DOW posted Q1 EPS 5c above consensus as boosts plastic sale; fertilizer/ag stocks, active after POT reported 1Q EPS above the highest estimate and boosted 2017 forecast.

Technology, Media & Telecom

  • Internet; will be important today with results from GOOGL, EXPE and AMZN due after the close; AKAM downgraded to underweight at Morgan Stanley and tgt to $54 citing ramping investments, falling margins, and the execution risk of entering new competitive businesses; SHOP downgraded at BTIG on valuation; GRUB shares jump on Q1 beat and boosted guidance; YNDX raises its year revenue outlook after earnings top views
  • Semiconductors; INTC and SWKS to report earnings after the close; MLNX shares tank after Q1 results missed Street expectations as did Q2 guidance citing a delay in x86 chip availability, technology transitions, and disruption from customer consolidation activity; MU, WDC active after Samsung comments on DRAM capacity and a tight NAND market; XLNX strong beat results and in-line guidance, as stronger-than-expected defense and auto revenue more than offset slightly muted communications; UCTT rises on earnings and guidance; CAVM reported the fourth straight solid growth quarter on the back of new product strength; TER jumped on earnings
  • Networking & Equipment; ANET downgraded to neutral at Credit Suisse on valuation, while they upgraded CSCO to outperform (from underperform) as believe that the company is assembling a portfolio of businesses, which should allow it to produce low single digit revenue growth and continued operating leverage; FFIV reported soft FQ2 results and guided FQ3 below consensus due to challenges in Europe and weaker services revenue
  • Software movers; MSFT reports earnings after the close; NOW strong results, providing another beat and raise quarter; SNCR shares plummet after CEO and CFO step down; CTXS Q2 results were mixed as EPS beat by 2c but missed on revs and backed year views
  • Hardware movers; Recode reported AAPL said to be in talks to launch Venmo competitor; shares of NOK, AVT, NTGR all movers on earnings
  • Media & Technology movers; DISH upgraded to overweight at Barclays; in towers, AMT reported results; HSNI falls on results and as CEO leaves for WTW; cable giant CMCSA Q1 EPS/revs and broadband net adds beat estimates; movie theatres slip after RGC eps missed – AMC, CNK lower; MDP reported Q4 EPS in-line

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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