Mid-Day Outlook: May 17th, 2017

eOptionDaily Market Report

Equities drop sharply, with the S&P 500, DJIA and Nasdaq on pace to log its worst daily decline in about eight weeks as concerns about President Donald Trump’s FBI controversy weighed on investor sentiment. The New York Times late Tuesday reported that Trump in February asked then-FBI Director James Comey to stop his investigation into former National Security Adviser Michael Flynn. The report cited a memo from Comey. It is the second controversial report in as many day that the White House is dealing with (yesterday Washington Post said Trump shared classified information with top Russian officials at a meeting last week). The controversy has raised questions about the president’s ability to implement pro-market policies (infrastructure spending, tax cuts/reform) that have driven stocks to recent records. The stock weakness has boosted volatility as the VIX jumps 20%, while defensive assets such as bonds and gold have surged, while the dollar has softened. Sectors leveraged to the pro-market policies including metals, financials, industrials, are leading markets lower, while tech strength takes a breather (NASDAQ came into the day at all-time highs). Retail mixed as TGT reports strong results, but weakness in teen apparel with soft URBN/AEO results). Note the S&P 500 finished yesterday down -0.1% to finish at 2,400.67, for its 15th straight session with a daily change of 0.5% or less, the longest such streak since February 1969, according to Dow Jones data…that streak appears in jeopardy today.
Treasuries, Currencies and Commodities
·      In currency markets, the dollar extending losses on the concerns out of Washington as it raises sentiment issues; euro highs vs. dollar up at 1.142 (up 0.53% now at best levels since the November election), while the dollar plunges vs. the safe haven yen to lows of 111.41 (down around -1.5% today), lowest levels since early May
·      Precious metals jump, among the top performing asset classes today on safe haven buying interest, as stocks fall broadly amid problems in Washington; gold prices rise around $20 (or 1.5%) to get back above the $1,250 an ounce level (best levels in over 2-weeks); gold trades above its 200-day resistance of $1,256 an ounce and 50-day at $1,248 an ounce
·      Energy futures advanced on mixed inventory data out of the API and DOE this morning; also supportive was a weaker US dollar (OPEC meeting the 25th of May)
·      Treasury markets broadly higher as stocks sell-off, sending yields higher after reports of an old memo from former FBI chief Comey showed Trump asking him to drop an inquiry investigating links between Russia and the White House’s ex-national security adviser Michael Flynn. Treasury yields for the 2-year note lost 5.3 bps to 1.246%, the 10-year yield fell 7.2 bps 2.257%, while the 30-year bond lost 6.3 bps 2.930%.
Sector Movers Today
·      Financials under pressure as bond yields tumble (lower lending margins) as well as concerns the ongoing FBI controversy with the Trump administration will cause delays with his push forward with his pro-growth agenda (tax reform, etc.); shares of BAC, GS, MS, JPM among those falling
·      Semiconductors; after jumping over 11% yesterday ahead of its analyst day, shares of AMD are paring those gains, after the company highlighted components of the company’s core strategy with a primary focus on developing high-performance technologies/is targeting gross margins of 40%-44% and annual adjusted earnings of greater than 75c a share long-term/showed off its coming “Epyc” CPU offering and Radeon GPU product for data-center servers; PLAB Q2 EPS/revs missed consensus and Q3 guidance also below estimates; QCOM files lawsuit against four ofAAPL’s suppliers for non-payment of royalties; overall pullback in semi’s after group strength has fueled the tech advance to all-time highs as of yesterday
·      Media & Telecom; DISH and AMZN are in talks that would make the giant internet retailer a foundational customer of the wireless network Dish Network hopes to launch within the next few years, Satellite Business News has learned  https://goo.gl/8eyFgR; WIN upgraded to outperform at Raymond James noting shares have fallen ~52% since 8/5/16 compared to a 10.9% gain in the S&P 500; BZUN in-line Q1 results, while Q2 rev guidance mid-point misses estimates; DIS was downgraded at Macquarie and cut tgt to $105
·      Teen retailers AEO and URBN both reported 1Q EPS that missed analyst’s estimates, while AEO also provided a 2Q EPS forecast that also trailed consensus (GPS, LB, ANF, ZUMZ among movers in space); AEO noted mall traffic headwinds, especially early in the quarter, while URBN Q1 results missed revenue, margin, and earnings expectations;
·      CHRS +8%; as prevails in challenge to AbbVie Humira patent
·      CL +2%; NY Post reports CEO considers sale https://goo.gl/WLkSR6
·      CLVS +1%; upgraded to overweight at JP Morgan with $72 target
·      JACK +6%; news of a potential Qdoba sale drove shares higher following mixed results/and management lowering FY17 guidance
·      OMER +11%; announces completion of IgA Nephropathy Cohort in OMS721 phase II clinical trial
·      RRGB +15%; better than expected 1Q results (EPS beat by 32c) on better comps/raised year outlook
·      TGT +2%; Q1 EPS beat by 20c on better revs and comp sales falling less than expected
·      ABBV -2%; PTAB ruled against ABBV/invalidated Humira rheumatoid arthritis method use patent
·      AEO -8%; 1Q EPS missed estimates/provided a 2Q EPS forecast that also trailed consensus
·      AMD -6%; gives back some of yesterday’s 11% gains following details at analyst day last night
·      BZUN -9%; in-line Q1 results, while Q2 rev guidance mid-point misses estimates
·      CNCE -9%; as FDA places Concert Pharma’s mid-stage study of CTP-543 in hair loss disorder on clinical hold pending review of non-clinical toxicology studies
·      PLAB -14%; as Q2 EPS/revs missed consensus and Q3 guidance also below estimates
·      VIVO -9%; as FDA and CDC warned about risk of inaccurate results from certain lead tests manufactured by Magellan Diagnostics, a division of VIVO
·      WBA/CVS; shares trade lower after a CNBC report that Amazon may be seeking to enter the pharmacy market
·      XLRN -8%; initiated new sell at Goldman Sachs with $20 tgt citing lack of catalysts
·      Alcentra Capital (ABDC) 2.5M share Spot Secondary priced at $13.68
·      Financial Institutions (FISI) 1.29M share Secondary priced at $31.00
·      G1 Therapeutics (GTHX) 7M share IPO priced at $15.00
·      Smith Micro (SMSI) 2.1M share Secondary priced at $1.05

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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