Mid-Day Outlook: April 27th, 2017

eOptionDaily Market Report

Equities are mixed early, with technology outperforming (another new high for the Nasdaq Comp) after the busiest morning of the earnings season thus far and ahead of results from major tech firms tonight (AMZN, GOOG, MSFT, INTC). Energy a big drag on markets early, with E&P and service names lower on mixed results in group and lower oil prices. Massive earnings barrage today has several sectors active, while economic data was mixed and the ECB held its policy meeting today. SmallCap names continue to outperform broader averages, as the Russell 200 index touches a fresh all-time highs, boosted lately on trump administration proposal to lower corporate taxes.

ECB President Draghi said that the risks to the EuroZone economy had diminished, initially rallying the euro…but the currency slipped after he  emphasized that the Eurozone’s economic outlook remains uncertain, even as its economy has shown signs of improving at its fastest pace in six years. The ECB today confirms asset purchase program at EU60b a month from April through at least December and kept its benchmark rates unchanged as expected. Upcoming catalysts, outside of more earnings, remains French centrist Emmanuel Macron and rightist Marine Le Pen will square off in a final May 7 election, along with monthly jobs data next week and an FOMC meeting

Treasuries, Currencies and Commodities

  • In currency markets, big reversal lower for the euro – just bouncing off lows of 1.0852 (after rising earlier on Draghi comments to highs of 1.0933); the dollar also higher against the yen. Overall, the U.S. dollar is higher vs. most rivals as the index rises about 0.25%
  • Commodity prices; group mostly lower, led by biggest declines in energy complex as gasoline and crude each fall over 2%, with precious metals little changed; industrial metals also lower top start with copper down about 1%
  • Treasury yields rose slightly initially to above 2.31% after ECB inaction at its policy meeting (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 – however, yields have since fallen back under 2.3% as bonds rally

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%); following the 5.5% rebound to 112.3 in February, which was the highest level since May 2006
Sector Movers Today
  • 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)
  • 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
  • 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, FWRD, KBX; KSU bounces as President Donald Trump said will pursue negotiations with Mexico/Canada and will not immediately terminate U.S. participation
  • 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
  • Auto’s; Ford (F) results mixed as profit tumbles 35% on recall costs; auto retailers active 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%; tire company CTB falls on results as EPS/sales missed
  • 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

Stock GAINERS

  • ALSN +3%; reported better-than-expected 1Q17 owing to robust demand from North America service parts, offsetting softness from the North American On-Highway Market
  • CMCSA +2%; Q1 EPS/revs and broadband net adds beat estimates
  • CSCO +1%: upgraded to outperform from underperform at Credit Suisse
  • EXAS +20%; posted beat and raise quarter
  • GRUB +16%; jump on Q1 beat and boosted guidance
  • WTW +2%; jumped after HSNI CEO Mindy Grossman leaves to become CEO in July
  • UAA +7%; Q1 results topped views but said on call it sees 2Q net sales growth of 8%, below

Stock LAGGARDS

  • AKAM -3%; downgraded at Morgan Stanley
  • AMGN -2%; 1Q sales for its new cholesterol drug Repatha, missed results
  • BWLD -3%; earnings results missed on top and bottom line and guidance falls short
  • CELG -1%; reported Q1 revenue that trailed some estimates/Revlimid sales slightly above expectations, other medicines didn’t perform as well as anticipated despite price increases.
  • CLF -11%; Q1 Ebitda of $92M missed views of $124M and lowered year outlook
  • FFIV -8%; reported soft Q2 results and guided FQ3 below consensus due to challenges in Europe and weaker services revenue
  • MLNX -11%; Q1 results missed Street expectations as did Q2 guidance
  • SNCR -48%; CEO and CFO are stepping down

Syndicate

  • Alcoa (AA) 12.959M share Spot Secondary priced at $36.15
  • Brookline Bancorp (BRKL) 4.8M share Spot Secondary priced at $14.50
  • China Rapid Finance (XRF) 10M share IPO price range lowered to $6.00-$7.00
  • Floor & Decor Holdings (FND) 8.824M share IPO priced at $21.00
  • Ichor Holdings (ICHR) 5.137M share Secondary priced at $19.50
  • Ocean Power (OPTT) 5.385M share Secondary priced at $1.30
  • TransUnion (TRU) 16.5M share Spot Secondary priced at $39.50
  • TrueCar (TRUE) 9M share Secondary priced at $16.50
  • Verona Pharma (VRNA) 5.77M share Secondary priced at $13.50

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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