Mid-Day Outlook: June 7th, 2017

eOptionDaily Market Report

U.S. stocks bouncing early following two days of small declines, as investors remain on edge ahead of several key events tomorrow, including former FBI director James Comey’s testimony before the U.S. Senate, the U.K. snap election results and The European Central Bank (ECB) meeting/press conference tomorrow morning (7:45 AM ET/8:30 respectively).  U.S. equities have since come under pressure, led by a decline in energy stocks after weekly inventory data showed an unexpected weekly build, sending oil prices lower by over 4% to around $46 per barrel. Bonds are little changed, the dollar mixed and stocks sliding ahead of tomorrow’s key news items. The Organization for Economic Cooperation and Development has cut its economic growth forecasts for the U.S. this year and next, saying stimulative measures it had expected from the Trump administration would now likely be implemented later (cut to 2.1% from 2.4% this year and lowered next year to 2.4% from 2.8%).
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar mixed ahead of busy day of political/macro news tomorrow; the euro dropped to as low as $1.1204 after Bloomberg reported that the ECB will cut its inflation forecast through 2019 (down from overnight high of 1.1281) – but has since rallied back to near flat on the day. The Aussie dollar is the best performer today among major currencies ahead of expected 1Q GDP data. The dollar erases gains vs. the yen
·      Precious metals slip, but pare losses as dollar falls from highs; gold prices come into the day at 7-week highs, currently trading down a few dollars around the $1,295 an ounce level
·      Energy futures plunge, falling over 4% after the EIA reported a surprise weekly build of 3.3M barrels vs. an expected drawdown of over -3.2M, while gasoline and distillate supplies also unexpectedly rose last week (the gasoline build is first since April). Last night, the API reported a decline of -4.6M barrels in U.S. crude supplies for the week ended June 2, but showed a climb of 4.1M barrels in gasoline supplies, and build of 1.8M barrels of distillates
·      Treasury markets little changed after surging the past few weeks – the 10-yr yield holds around the 2.15% level, while the 2-yr just under 1.3% and 30-yr 2.81%. All eyes on Thursday’s news
   
Sector Movers Today
·      Hospitals; HCA, LPNT and THC upgraded to outperform at Leerink and up tgts for HCA to $100 from $90, LPNT to $74 from $73 and maintains a $27 for HCA – saying ANTM’s announced exit yesterday from the key swing state of Ohio’s healthcare exchange could bring further attention to the need for stabilization funding through legislation
·      Airlines active after monthly metrics for some: LUV May traffic up 3.4%, capacity up 4.0%; still sees 2Q Rasm up 1%-2%; said May load factor 85.4% vs 85.8% YoY; UAL May load factor fell 0.9% points YoY/traffic up 2.6%; capacity up 3.7%/reaffirms 2Q consolidated passenger unit revenue up 1-3%; HA raises 2Q forecast for operating revenue per ASM growth to up 7.5%-10.5% from up 5.5%-8.5% prior; DAL says unit revenue tracking at upper end of original view up 1%-3%
·      Consumer Staples; beverages active on earnings/research; BF/B Q4 EPS missed by 3c on lower sales ($694M vs. $738M est.); KO & PEP both downgraded to Market Perform from Outperform following a double-digit increase in share prices, while upgraded DPS and COT to outperform; in food, UNFI mixed Q3 results as EPS beat/revs miss and lowers its year revenue outlook
·      Managed care; Morgan Stanley initiates sector, expect M&A to accelerate, with focus on vertical integration vs. scale and is overweight rated on UNH, HUM, AET, CI, and CNC – favor managed care companies with diverse revenue streams and exposure to value based services, but see structural challenges for hospitals; UNH boosted its dividend
 
Stock GAINERS
·      AMD +6%; brings 3-day gain to over 17%
·      CVNA +19%; posted Q1 results slightly ahead of expectations, and provided Q2 and full-year guidance that were above Street consensus
·      HA +5%; raises 2Q forecast for operating revenue per ASM growth to up 7.5%-10.5% from up 5.5%-8.5% prior
·      JAZZ +4%; after its Phase 3 narcolepsy study of 150mg and 300mg doses of JZP-110 met co-primary endpoints
·      KITE +6%; after a competitive study by NVS failed to treat 40% of the enrolled population without an explanation
·      PLAY +1%; mixed Q1 as sales top consensus/comps miss, raised year revenue, Ebitda and net income outlook
·      X +1%; as JP Morgan says believes shares at current levels reflect a far too negative view
 
Stock LAGGARDS
·      ALOG -10%; mixed Q3, but lowered its year outlook for revs/EPS/op margins
·      AMBA -11%; posted Q1 EPS/revenue beat, but guided Q2 revs $69M-$72M, below $72.52M
·      DLTH -17%; as Q1 mixed (EPS miss/revs beat)/reaffirms forecast
·      DVA -1%; after Kynikos’ Jim Chanos said he’s shorting dialysis companies
·      IDT -18%; after earnings results
·      IRM -3%; downgraded to sell at Deutsche Bank citing seasonal summer slack of catalysts
·      NAV -1%; Q2 sales slightly top views at $2.1B, but Ebitda for quarter misses at $65M
·      SIGM -3%; reported soft results and weaker guidance due to continued TV headwinds
·      UNFI -2%; mixed Q3 results as EPS beat/revs miss and lowers its year revenue outlook
 
Syndicate
·      Athene Holding (ATH) 16.2M share Secondary priced at $49.00
·      Exact Sciences (EXAS) 7M share Spot Secondary priced at $35.00
·      Golub Capital (GBDC) 1.75M share Spot Secondary priced at $19.30
·      National Commerce (NCOM) 960K share Spot Secondary priced at $37.00
·      ShotSpotter (SSTI) 2.8M share IPO priced at $11.00
·      Upland Software (UPLD) 1.86M share Spot Secondary priced at $21.50

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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