Mid-Day Outlook: June 8th, 2017

eOptionDaily Market Report

Equities little changed, trading sideways as markets remain glued to testimony by former FBI head James Comey to the Senate panel now (still ongoing), related to President Trump and Russia. Comey has said that President Trump didn’t ask him to stop the probe of Russian interference in 2016 election. Comey at Senate Intelligence Cmte hearing says he found the conversation with Trump over letting the probe of Michael Flynn go disturbing and that Flynn was in legal jeopardy at the time. Also later today, the UK snap elections expected which will likely move currency markets (Europe little changed thus far as FTSE 100 down a few points). Defensive asset gains (bonds, gold) unwinding early. Few stock stories today, as retail gets a bounce as well as financials (on rates), while energy prices bounce off lows.
One of the other big news stories for today out was the European Central Bank left rates unchanged at 0% (as expected) and maintained its QE asset purchase program at EU60B a month through at least December (as expected), saying that rates to stay at present levels past QE horizon, sees QE running until end of December or beyond if needed. The ECB also cuts inflation expectations (also expected) for 2018 and 2019 mainly due to energy prices. The ECB also removed a reference to the possibility of it lowering interest rates in its regular monetary policy statement.
Treasuries, Currencies and Commodities
·      In currency markets, the euro slipped from six-month highs (1.1269 earlier) against the U.S. dollar after ECB President Mario Draghi said a substantial degree of monetary accommodation was still needed in the EuroZone. Draghi said the ECB was ready to increase its asset-buying program if needed, though he added that the risks to the economic outlook were “broadly balanced” and the ECB slightly raised its growth projections – euro fell to 1.12. The euro is up 6.5% against the dollar index in 2017. The dollar bounced against the Japanese yen back above the 110 level, while the British Pound will be watched ahead of the UK “snap” elections later today
·      Precious metals leading the decline in the commodity space, with both gold and silver prices dropping over 1% after recently trading to their best levels in months
·      Energy futures holding steady, failing to rally (or fall further) after posting its biggest decline in 3-months yesterday, falling to 7-month lows after Wednesday’s unexpected increase in U.S. crude inventories sent prices down over 5% under $46 per barrel
·      Treasury markets slipping from recent highs, as the yield on the 10-yr trades back above the 2.2% level (touched lows below 2.14% earlier this week), as markets unwind safety trades on day (gold/yen/bonds all pulling back)
Economic Data
·      Initial jobless claims dropped by 10,000 to 245,000, slightly above estimates for 240,000; the four-week jobless claims average rises 2,250 to 242,000, while prior week claims revised up to 255k from 248k; continuing claims fell 2k to 1.917m in the week ending May 27
Sector Movers Today
·      Consumer Staples; SJM Q4 top and bottom line results topped consensus while mid-point of year guidance came in above consensus; POST announced a $250M stock buyback; beverage sector still reeling from yesterday comments by TAP at investor conference where they saw underlying EBITDA margin up 30-60 bps per year on average over the next 3-4 years; DTEA Q1 sales beat but comp sales were down (-5.7%) and trends remain weak in Q2, while also said its CFO resigned
·      CAR-T sector; BLUE came into the day riding a 5-day win streak following positive results at ASCO conference over the weekend; KITE was upgraded to buy at BTIG ($100 tgt) citing Axi-Cel manufacturing edge after JUNO/NVS data failed to deliver any recognizable differentiation; JUNO downgraded to sell at BTIG saying treatment for CD19 and hematologic malignancies is on track to hit the market later than competing products
·      Metals & Mining; busy day of news/research; KeyBanc said the U.S. steel industry’s next hope for some supply side relief will be via Section 232 decision as Dept of Commerce (DOC) lowered its countervailing duties (CVD) levied on select Turkish rebar exporters; Jefferies downgraded several mining names on fading economic momentum in China (BHP, S32, FSUGY, VDNRF) but said they continue to like FCX given structural supply constraints for copper and because they believe the share price incorrectly discounts a low probability of a favorable outcome to the Indonesian negotiations; CMC was downgraded to neutral at Bank America as recent trade case results likely fail to stem continued steep rebar imports; BHP was upgraded to buy at UBS
·      BABA +8%; at investor day presentation said expects revenue growth of 45-49% in the FY18 (vs. 56% revenue growth posted for the 2017), but Jefferies said about 10%-14% above views
·      JWN +10%; said it would explore going private transaction https://goo.gl/3R6w1W
·      NVDA +3%; tgt raised to Street high $180 at Citi saying bull case scenario is $300 per share
·      OKTA +3%; posted smaller-than-expected Q1 loss on higher revenue
·      SCLN +7%; acquired for $11.18 per share by a consortium led by GL Capital https://goo.gl/gNJEhu
·      VRX +8%; said it would sell its iNova Pharmaceuticals business for $930M https://goo.gl/adczYs
·      VSTO +9%; upgraded to buy at DA Davidson as believe fundamentals are bottoming
·      YHOO +6%; rallying in sympathy with BABA guidance outlook
·      DTEA -2%; Q1 sales beat but comp sales were down (-5.7%) and said CFO resigned
·      FNSR -1%; could see impact from Huawei price cuts, according to Rosenblatt
·      GEF -6%; Q2 results below consensus on EBITDA and EPS with a disappointing 1H17 cash flow result, leading to a slightly reduced FY17 FCF guidance on higher CAPEX
·      JUNO -3%; downgraded to sell at BTIG
·      MZOR -9%; after reports some offices searched connected to investigations disclosed in 6K
·      NLNK -29%; after Genentech said it planned to return the rights to NewLink’s IDO inhibitor GDC-0919 (navoximod), an immuno-oncology product candidate
·      SNAP -5%; ahead of the first lockup expiration on the shares on July 30
·      SYMC -4%; under pressure amid ongoing analyst day
·      URBN -8%; said 2Q comp retail segment net sales to date are high single-digit negative vs. est. of (-2.5%)
·      BWX Technologies (BWXT) 3.2M share block priced at $47.90
·      Corcept Therapeutics (CORT) 3M share Block priced at $11.85
·      Hilton (HLT) 15M share Spot Secondary priced at $65.95
·      MidSouth Bancorp (MSL) 4.583M share Spot Secondary priced at $12.00
·      USD Partners (USDP) 3M share Block Trade priced at $11.60

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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