Mid-Day Outlook: May 9th, 2017

eOptionDaily Market Report

U.S. stocks holding near best levels, as the S&P 500 and Nasdaq Comp both achieve new all-time record highs, as investor sentiment remains strong amid better economic data, positive earnings results, hopes for tax reform/cuts from Trump administration and an upbeat outlook on the economy following Fed commentary over the last week. Stocks have extended recent gains as defensive asset classes (bonds and gold) have pulled back amid a pursuit of higher returns. Softer oil prices remain the main laggard of the market, as energy stocks failing to participate with this latest “leg-up” for stocks. European stocks touch record highs as calm backs risk rally. There also remains no fear in the market, as the CBOE Volatility index (VIX) traded to a fresh multi-decade low today (of 9.56) before bouncing, as investors feel no need to hedge. Tech remains the standout, with all-time highs on a daily basis for AAPL, while Internet giants AMZN, GOOGL extend gains. Healthcare also outperforms, led by strength in managed care (52-week highs CI, AET, HUM).

Treasuries, Currencies and Commodities

  • In currency markets, the U.S. dollar trades above the 114 level vs. the yen for the first time since March 15th, while the euro dips below 1.09 for the first time in 2-weeks; the stronger dollar a product of positive FOMC member comments the last few days on economy/as rate expectations jump for the June meeting
  • Precious metals slide initially as stocks remain near record levels and the dollar rebounds after recent weakness, making commodities priced in the currency, like gold, less attractive to buyers using weaker monetary units; gold drops $10 to around $1,217 an ounce
  • Energy futures slip amid global glut concerns with Libya pumping the most oil in more than 2 years (yesterday was reported Libya’s NOC chairman says goal is to reach 800k b/d by year-end); ongoing supply fears ahead of OPEC meeting at end of month, has driven oil prices lower
  • Treasury market’s slide as yields continue to edge higher; the yield on the 2-yr rises for a 5th straight day, up above 1.34% (six-week highs), while the benchmark 10-yr yield tops 2.40% this morning; bonds yields rising amid abating geopolitical concerns as pro-European centrist Emmanuel Macron beat Le Pen in the runoff of the French presidential election on Sunday. Also continued strength in stocks creating rotation out of more defensive assets. Treasury Department’s auction of $24 billion worth of three-year government paper at 1:00 PM ET

Economic Data

  • Wholesale Inventories for March rose 0.2% in March, above est. (-0.1%) as inventories increased to $594.B from $593.5B in prior month. Wholesale sales unchanged in March after rising 0.7% the prior month; wholesale sales excluding automobiles fell 0.1% in March
  • U.S. IBD/TIPP May Economic Optimism Index fell to 51.3 after April’s 51.7; Economic outlook fell to 49.6 vs 51.1 last month; Personal finance fell to 57.1 vs 61.3 last month; Federal policies rose to 47.1 vs 42.6 last month
  • U.S. job openings rose to 5.743M in March from 5.682M prior month; March job opening rate (job openings as a % of total employment plus openings) 3.8% vs 3.8% prior month; March pace of hiring 3.6% vs 3.6% prior month
Sector Movers Today
  • Large Cap Pharma; specialty pharma gets a bounce today (fell yesterday on HZNP guidance) as VRX Q1 revs missed views but raised its year Ebitda forecast and cut debt/CFO said can meet all of its debt obligations and ENDP Q1 EPS topped views as Opana revs beat as well; REPH said top-line results from a Phase 3 study of IV meloxicam 30mg keep the co. on track to file an NDA during early 3Q17; AGN Q1 EPS beat and raised forecast; PAHC reported Q3 rev beat and EPS 9% above consensus, driven mainly by a lower tax rate
  • Hotels and lodging names higher as MAR boosts 2017 RevPAR and adjusted Ebitda guidance and reporting 1Q adjusted EPS that beat the highest estimate (shares of H, CHH, STAY, HLT, LQ all active on the report/guidance)
  • Asset managers & advisors; BEN prelim month-end AUM of $741.0B, up from $740.0B as of March 31 and $747.1B as of April 30 2016; CNS prelim AUM $59.2Bn as of April 30, 2017, an increase of $696M MoM; PZN reports preliminary April AUM $32.3B
  • Consumer Staples; DF Q1 EPS missed by 4c though sales slightly beat/reaffirmed year views; TA and CST shares both weak after quarterly results missed estimates; IFF downgraded by one analyst after mixed Q1 (EPS beat/sales miss); POST Q1 EPS missed views; some earnings tonight after the close from BETR, BUFF, TWNK
  • Aerospace & Defense; SPR was upgraded to buy at UBS saying the stock reflects 35% decline in 737/777 cash, but they now see a favorable risk-reward; aircraft parts maker TDG missed sales estimates for Q2, but guided year EPS, Ebitda and sales above views; BA, GD, RTN 52-week highs
  • Internet; Wayfair (W) posts narrower Q1 EPS loss on better revs $961M; Pandora (P) is shaking up its board and stepping up efforts to find a possible buyer, noting it received a $150 million infusion from private equity firm KKR & Co. (falls as also guided Q2/year revs below views); YELP, TRIP, PCLN report earnings tonight after the close; 52-week highs for AMZN, GOOGL

Stock GAINERS

  • AAL +3%; boosted Q2 Trasm to up 3.5%-5.5% from prior 3%-5% and raises pre-tax margin view
  • FN +8%; rally despite mixed quarterly results/guidance as analysts say China concerns overplayed
  • MTW +13%; reporting 1Q results, including 17% YoY order growth, and affirming outlook
  • MAR +5%; all-time highs after earnings beat and raised rev/Ebitda guidance
  • PNR +3%; announces plan to separate Electrical via tax-free spin-off
  • TDOC +17%; Q1 metrics exceeded expectations on better results/visits at the top end of guidance
  • VRX +16%; Q1 revs missed views but raised its year Ebitda forecast and cut debt
  • Wayfair (W) +20%; posts narrower Q1 EPS loss on better revs $961M

Stock LAGGARDS

  • AFSI -19%; dropped after Q1 operating EPS missed the lowest estimates
  • ALLT -6%; after Q1 EPS loss of (11c) missed estimates on lower revs
  • CBI -13%; cut its 2017 EPS view following a 91% y/y drop in 1Q engineering & construction segment’s adjusted income from operations
  • DISCA -3%; Q1 missed views as subscriber losses accelerate
  • HTZ -13% reported an extremely weak 1Q, missing consensus estimates by a wide margin
  • JCOM -2%; slides as Q1 EPS/revs/Ebitda missed views, but reiterated year outlook
  • NVRO -7%; reported a wider Q1 EPS loss of (50c) and missed on revenue
  • OTEX -5%; rev miss related to timing of January acquisition of Dell’s Enterprise Content Division
  • SCYX -31%; downgraded at Needham after FDA wants to see more data on IV SCY-078, mid-stage study in invasive Candida delayed until 2018
  • SEE -6%; downgraded at Bank America after company cut FY17 EPS guidance by wide margin

Syndicate

  • Armada Hoffler (AHH) 6M share Spot Secondary priced at $13.00
  • Black Knight Financial (BKFS) 5M share Spot Secondary priced at $39.00
  • Cytokinetics (CYTK) 5.26M share Spot Secondary priced at $14.25
  • ENDRA Life Sciences (NDRA) 1.68M unit IPO priced at $5.00
  • Gladstone Investment (GAIN) 2.6M share Spot Secondary priced at $9.38
  • Guaranty Bancshares (GNTY) 2M share IPO priced at $27.00
  • Preferred Apartment (APTS) 2.75M share Spot Secondary priced at $15.25

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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