Market Review: Nasdaq Notches 3-Day Winning Streak

eOptionDaily Market Report

Equity Market Recap
·      Stocks remain stuck near highs, with the Nasdaq Comp setting another new all-time closing high today, while the S&P pulled back from its record closing levels yesterday. While markets continue to push/hold higher, the story still remain the lack of market volatility and narrow trading ranges (S&P 500 has now failed to move outside of a 0.5% range for 15 straight sessions, while the Russell 2000 has traded in a range of 6.8% – the narrowest for the period going back to at least 1990). Stocks weakened late morning after a weaker reading on monthly housing starts and building permits, while the dollar dropped to 6-month lows after reports that President Donald Trump shared classified information with top Russian officials at a meeting last week (which the White House denied – while another advisor said the disclosure was “appropriate”).
·      Oil snapped its 4-day win streak while gold prices extended its gains to 5-straight days, and bonds gained. Markets continue to see the same winners leading them higher, as semiconductors back at 17-year highs and Internet giants at record levels (AMZN, GOOGL), while same laggards remain (retail and related mall REITs). Energy fails to gain with oil as sector faded yesterday despite oil rising a 4th day, while Dow component HD rises on earnings beat. More earnings coming up in retail, with URBN tonight and TGT tomorrow (follows earnings misses from DKS and TJX today. European stocks slipped, with declines in automobile shares and a rise in the euro drawing Germany’s benchmark slightly from its record high.
·      The top story remained Trump, as White House National Security Adviser H.R. McMaster rejected the conclusions of a Washington Post article which claimed the president had revealed sensitive classified information to Russia’s top diplomat during an Oval Office meeting last week, calling it false. Foreign Ministry spokeswoman denied reports that Trump revealed classified information to senior officials.

Economic Data
·      Housing Starts for April fell an unexpected (-2.6%) to 1,172K annualized, below est. 1,260K, while prior month downwardly revised to 1,203K (-6.6%) from 1,215K; single family starts rose to 835K, while multifamily starts fell to 337K in April. Building permits fell to 1,229K from 1,260K in March and was also below est. 1,270k (Permits fell 2.5% in April after rising 3.4% the prior month)
·      Industrial Production for April rose 1%, well above est. up 0.4% (while being revised down to 0.4% from 0.5% in March), while capacity utilization rose to 76.7% from 76.1% in March, which was unrevised from initial release. Note industrial production advance of 1.0% in April was largest gain since Feb. 2014
·      Delinquency rate for mortgage loans on 1-to-4 unit residential properties fell to 4.71% in the first quarter from 4.80% the prior quarter; foreclosure rate fell to 1.39% in the first quarter after 1.53% in the fourth quarter; this was the lowest foreclosure inventory rate since Q1’07
 
Commodities
·      Gold prices advance for a 5th straight session, gaining $6.40, or 0.5% to settle at $1,236.40 an ounce, settling at its highest settlement in about two weeks. The recent bounce in commodities has been in part to a weaker dollar, along with recent reports that China pledged to boost its infrastructure spending. Gold also got a lift today on safe haven buying after reports that President Donald Trump shared classified information with top Russian officials at a meeting last week (which was refuted back and forth by White House)
·      Energy futures slipped, snapping a 4-day win streak as WTI crude slipped 19c to close at $$48.66 per barrel (down from earlier highs of $49.38). The IEA said in a report that extending the oil output cuts may not help trim global stockpiles to the required five-year average. That potentially helped to limit oil’s price gains, while a weaker dollar helped prop prices higher early. Note prices are up about 13% in the last eight days ahead of the upcoming OPEC meeting and hopes that they will extend production cuts beyond the 6-months they have adhered to since November.
 
Currencies
·      The U.S. dollar was broadly lower, falling for a 5th day as the euro rises to a 6-month high. The euro touched highs of 1.1097 as the dollar slides, with nearly all of post-election gains in the dollar now being wiped away. The dollar also dropped vs. the Japanese yen, extending losses late morning to levels below 113 (down -0.65%). The USD touched lows of 1.3575 vs. the Canadian dollar, lowest since late April. Overall, the dollar index (DXY) nears 98 level to downside – a level last seen after the election in November, down over -0.8% on the day.
 
Bond Market
·      Bonds gained and yields slipped (though still remain in tight ranges) after mixed economic data showed the economy sees a slackened pace of new housing construction, but manufacturing reading hits its fastest monthly gain in more than 3 years. Bonds initially dipped as U.S. stocks set new records again (S&P 500 and Nasdaq Comp), but as stocks slipped, bonds got a little lift. The 10-year yield lost around 1 bps to 2.339%, after advancing as to 2.360% in early morning trading, while the 2-year held around 1.30% and the 30-yr around 3%. The 10-year yield did touch lows of 2.31%, its lowest since May 3rd before bouncing.
 
  
Sector News Breakdown
Consumer
·      Retailers; weak earnings/guidance results continues for space as sporting goods chain DKS shares drop after Q1 comp sales miss (+2.4% vs. est. 3.6%) and reduces low end of year comp sales forecast (Q1 EPS/revs in-line); shares of CAB, HIBB, SPWH among those moving in reaction; TJX Q1 was mixed as EPS beat, but revs missed while guided Q2 EPS 81c-83c below est. 92c (Q1 comps of up 1% missed est. 1.5%); SPLS Q1 sales missed, while guidance short of views as well; 52-week lows for M, AZO, BBBY, SIG, RL; URBN reports tonight, TGT and AEO tomorrow AM
·      Consumer Staples; DPS was upgraded to overweight at Morgan Stanley in pair trade, as they downgraded CHD to underweight driven by belief that DPS, CHD have fairly similar fundamental outlooks, but CHD trades at “a clearly too high” premium; PFGC 14.1M share Block Trade priced at $27.50; USFD reinstated outperform at Credit Suisse with $35 tgt; 52-week highs for MCD, STZ, CMG, PEP, in consumer space
·      Housing & Building Products; group gets solid earnings out of home improvement retailer (and Dow component) HD after 1Q EPS/sales and comp sales topped estimates/Q1 comp sales +5.5%, vs. est. +3.9% (shares of LOW, which reports next week, and other home improvement retailers such as LL, BECN, HDS, SHLD were active as well as suppliers SMG, MAS, AMWD, USG& others.
 
Energy
·      Energy sector just can’t seem to gain traction, as stocks fail to rally despite recent 4-day win streak for WTI crude (on dollar weakness/OPEC member commentary about extending production cuts for another three-months). Rising rig count data has weighed on oversupply concerns, while OPEC meeting on the 25th will be focus for the immediate future.
·      Refiners; Goldman Sachs upgraded DK to buy from neutral and raise tgt to $30 on Permian growth, balance sheet, while downgraded VLO to neutral from buy on valuation, ahead of OPEC meeting and reiterated its sell on HFC
 
Financials
·      Large Cap banks held up relatively well despite yields sliding on mixed economic data; HRB CEO Bill Cobb to retire effective July 3/co says search for new CEO underway, will consider external and internal candidates; new 52-week lows for mall REITs with retail weakness, as  MAC, SPG, SKT fell; overall quiet news day for financials
·      Insurance; AIG was upgraded to overweight at Morgan Stanley with $72 tgt after the insurer appointed industry veteran Brian Duperreault as CEO, saying a credible CEO and attractive valuation is a powerful combination for multi-year ROE improvement
·      Lending & Finance; OCN files amendment related to memorandum of understanding (MOU) with Multistate Mortgage Committee to annual report on 10-K for year ended Dec. 31/evaluating necessary changes to controls to remediate this weakness
 
Healthcare
·      Large Cap Pharma; PFE was downgraded to sell at Citigroup with $31 target on increasing pricing pressures for the drug-maker’s oncology drug franchise; AKBA rises after it and Vifor Pharma entered an exclusive license pact with Fresenius for vadadustat upon FDA approval; PTX Q1 net loss falls more YoY on lower revs/still analyzing alternatives
·      Managed care stocks slip, some from record highs in bout of profit taking; WCG, UNH and HUM among names sliding; group partly lower as the Justice Department has until the end of today to file a complaint for alleged overcharging of Medicare
·      Biotech movers; SGMO active after its gene therapy candidate for hemophilia A, SB-525, was granted the FDA’s fast track designation; NK was downgraded to sell at Citigroup
·      Healthcare services and equipment; EVH 7M share Spot Secondary priced at $24.65; ABT recalled certain lots of the NC Trek RX coronary dilation catheter, NC Traveler coronary dilation catheter and NC Tenku RX PTCA balloon catheter; BSX experimental Lotus heart valve offered significant benefits over MDT’s CoreValve in head-to-head study; ETRM dropped on lower Q1 revs
·      Other small cap movers on earnings: BDSI, EDIT, PTX, TEAR
 
Industrials & Materials
·      Industrials & Machinery; in a regulatory filing last night, GE Chairman and CEO Jeff Immelt disclosed that he purchased 88K shares of stock at average price of $28.08 and also purchased 12K shares at an average price of $28.03 on May 15 (stock recently at 52-week low); CR tgt raised to $92 and upgraded to buy at Canaccord given an improving top-line outlook, the increased opportunity in the Payment & Merchandising segment, and a material peak earnings opportunity; FRTA downgraded at RBC Capital and Citigroup after disappointing Q1 results
·      Chemicals; APD 4M share Block Trade priced at $142.90; RPM was upgraded to buy at Seaport Global and tgt upped to $60 from $55, as investor meetings highlighted more confident growth outlook, attractive risk-reward; Longbow said on FUL that slow volume growth and price lags limit upside opportunity
 
Technology, Media & Telecom
·      Internet; SNAP active as Goldman Sachs noted mobile unique visitors in the U.S. hit 91M in April, or up 80% YoY vs. up 100% in March, citing comScore data released on May 15; MELIdowngraded to neutral at JP Morgan following a 131% rally YoY; VIPS upgraded at JP Morgan to overweight after Q1 beat; WB beat top and bottom lines and guided higher, while SINA also strong beat out of China; FB’s Instagram announced in a blog post that it is introducing face filters in the camera (neg SNAP); BABA tgt raised to Street high $155 at MKM ahead of earnings;YNDX facing sanctions from Ukraine along with other Russian Internet firms; ETSY jumps as company said it is reviewing its strategic and operational plans; TWTR shares jumped midday on news that co-founder Biz Stone is returning to the company
·      Semiconductors; AMAT tgt raised to $51 at UBS ahead of earnings on May 18th; 52-week highs for several semiconductors today: LRCX, AMAT, QRVO, MCHP, AVGO, XLNX, NVDA; AMDshares surged ahead of investor day – group remains a market leader
·      Software & Hardware; 3D stocks slip after SSYS Q1 EPS in-line at 5c on better revs, but margins of 51.2% misses est. 53.9% (DDD, VJET active reversing earlier losses); XGTI moved higher on earnings; several names in software with 52-week highs: ADSK, CRM, ATVI, ADBE, RHT; VOXX drops on earnings; CRM, ADSK, report on Thursday; Bloomberg reported AAPL plans to announce an update to its laptop lineup at an annual conference for app developers in early June
·      Telco & Media; VOD active after guidance; VRTU fell after Q4 EPS/revs missed estimates and Q1 EPS guide (24c-30c vs. 36c) missed; RGC was upgraded to buy at Loop Capital; along with retail, media shares have remained under pressure last few weeks….DIS, CBS, DISCA, FOXA down today; VIAB which has lagged group, rises (touched 52-week lows of 33.60 yesterday)

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 con

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