Mid-Day Outlook: May 4th, 2017

eOptionDaily Market Report

U.S. equities are mixed, paring overnight gains, while Europe holding on to its gains overnight. The Dow Jones Industrial Average is looking for its third straight gain, which would mark the blue-chip benchmark’s longest win streak since the period ended Feb. 27, when the Dow went 12 consecutive days in positive territory, then its longest such streak since 1987. There are lot of sectors active today on news/earnings: Healthcare sector will be in focus later as House Republicans plan to vote Thursday on their revised healthcare bill, (note hospitals THC, CYH, LPNT, UHS and Medicaid names MOH, CNC, WCG have moved on news in past). Commodity related stocks/sectors are among the biggest declines today, with oil, copper and gold prices dropping sharply on fears of China credit tightening/slowing demand. Weaker earnings results from a handful of oil E&P companies also weighing (APA, MUR). Financials leading, led by gains in insurers after better earnings (PRU, AIG) and higher yields lifting banks. Earnings barrage continued overnight/this morning, with another heavy dose tonight. Fb slides after better results, as stock pares gains from all-time highs.

Treasuries, Currencies and Commodities

  • In currency markets, the dollar weakens against the euro after following French presidential debate last night; euro trades highs of 1.095 (overnight low 1.0875), while the dollar holds steady against the Japanese yen around 112.80. Aussie dollar to lows vs. greenback at 0.7383 on lower copper and oil prices, while Canadian loonie also lower on oil prices decline
  • Commodity complex lower, led by biggest losses for energy (crude, gasoline) and industrial metals (nickel, copper), while gold extends recent declines down over 1.5%. Copper prices extend losses, falling over 2% to lowest levels since January. Oil prices drop as WTI falls below $47 per barrel and Brent falls to $50, lowest since March 22nd.
  • Supply really taking toll on oil sentiment as U.S. crude output increased for 11th week, climbing to 9.29m b/d, highest level since August 2015, according to EIA data released on Wednesday (Oil is heading for 3rd weekly loss ahead of OPEC meeting on May 25th)
  • Bonds slide as yields trade to best level in two-weeks, breaking out of recent tight range; the 10-year yield rises over 4 bps to above 2.36% and the 2-year 1.32%; the 30-yr long bond yield tops 3%. Bond weakness comes after FOMC meeting comments yesterday (no change to pace of rate hikes), better economic data today and initial stock strength

Economic Data

  • Productivity for Q1 fell a greater-than-expected (-0.6%) vs. est. (-0.1), the biggest in a year, as nonfarm output per hour rose 1.8% prior quarter. Unit labor costs rose 3% in 1Q vs. up 1.3% prior quarter (and above estimate for a 2.7% rise); Output rose 1% in 1Q vs. up 2.7% prior quarter; compensation per hour rose 2.4% in 1Q vs. up 3.1% prior quarter
  • Weekly Jobless Claims fell (-19K) to 238K, below the 248K estimate while the prior week claims were unrevised from 257K; continuing claims fell 23K to a 7-year low of 1.964M, while the 4-week moving average of jobless claims rose by 750 to 243K
  • The U.S. Trade Deficit narrowed to (-$43.7B) in March vs. est. (-$44.5B) and vs. (-$43.8B last month); trade deficit excluding petroleum at $35.82B in March; imports fell 0.7% in March to $234.69B from $236.41B in Feb. and exports fell 0.9% to $190.99B from $192.66B
  • Factory Goods Orders rise 0.2% in March, below the estimate for up 0.4% and were revised up to 1.2% in prior month. New orders ex-transportation for March fall (-0.3%) and new orders ex-defense for March fall (-0.2%) after rising 1.4% in February. Durables orders for March rise 0.9% after rising 2.4% in February
Sector Movers Today
  • Metals & Mining; industry broadly lower, with Chinese metals tumbling amid increasing worries that demand for commodities like steel and iron in the world’s No. 2 economy is weakening. The price of iron-ore traded closed down 8%, the daily trading limit, at 485 yuan (US$70.32) a ton, extending losses after a four-day rally was reversed on Wednesday. Shares of steel stocks (X, AKS), iron ore names (CLF) and gold miners (as gold plunges on dollar strength) all broadly lower; copper prices drop over -1.5% again today (FCX) as well
  • Oil E&P sector; natural gas levered CHK Q1 EPS beat by 5c on higher Ebitda and raised cap-ex view and production outlooks for the year; MUR Q1 EPS misses by 3c on revenue beat and reaffirmed production view; APA Q1 EPS misses by 6c while raises production forecast for year; PXD falls after missing production guidance, lowering oil mix; other E&P movers based on earnings included: CLR, CXO, JONE, LPI, MTDR, RICE, WPX, WTI
  • Insurance; several earnings reports in the sector, as AIG rallies as Q1 operating EPS beats by 30c and boosts share buyback plan by $2.5B; LNC Q1 operating EPS also beats by 30c on better revs $3.58B; MET on earnings and says plan to spin off unit will probably miss timetable; PRU jumps as EPS beats by 15c; HIIQ was upgraded at Raymond James after Q1 results topped expectations and speculated could be added to Russell 2000 and 3000
  • Optical names try and bounce back after LITE earnings and guidance miss views (group already hit hard this week after OCLR miss) but said it made substantial progress on 3D sensing for mobile devices applications/said that revenue from 100G QSFP28 transceivers “picked up materially” and commercial lasers business returned to growth (FNSR, IIV, AAOI rally)

Stock GAINERS

  • CF +5%; as earnings beat consensus expectations
  • CNAT +1%; after NVS exercised its option to an exclusive license for the global development and commercialization of CNAT’s Emricasan drug
  • FIT +12%; topping low expectations on stronger-than-expected demand/loss narrows
  • GPN +5% on revenue beat and raised outlook
  • PVTB +4%; after CIBC sweetens cash portion of bid by $3 https://goo.gl/IXrSTU
  • SQ +5%; 52-week high after quarterly beat and raise quarter/robust payment volume growth
  • TLRD +5%; reported a wind down of the company’s partnership w/Macy’s/raised guidance
  • ZTS +6%; on Q1 results topping views/guidance slightly lower

Stock LAGGARDS

  • CAKE -7%; Q1 EPS/revs/comp sales all fall short of consensus
  • CAR -3%; as Q1 loss misses views and said used car values declined in Q1/pricing was weak
  • CTL -5%; results slide in Q1 on costs, legacy services/downside guidance
  • DDD -6%; Q1 EPS missed views, though revs and margins were better
  • KHC -1%; said several calendar shifts hurt Q1 results as was hit by North American sales slump
  • LB -5%; April comp sales fell a greater (5%) vs. est. (3.3%)
  • VIAB -4%; better earnings but said seeing some “softness” in subscribers
  • SRC -20%; downgraded by six analysts citing a lack of growth after weak Q1 results

Syndicate

  • Antero Midstream (AMGP) 37.25M share IPO priced at $23.50
  • Aratana Therapeutics (PETX) sells 5.25M shares at $5.25 in a registered direct offering
  • Biohaven Pharmaceutical (BHVN) 9.9M share IPO priced at $17.00
  • Ignyta (RXDX) 12.5M share Secondary priced at $6.15
  • Lantheus (LNTH) 3M share Spot Secondary priced at $13.80
  • Milacron (MCRN) 12M share Secondary priced at $17.20
  • UroGen Pharma (URGN) 44.7M share IPO 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 conten

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