Mid-Day Outlook: September 6th, 2017

eOptionDaily Market Report

U.S. stocks opened modestly higher, a day after posting its steepest drop in 3-weeks on North Korea macro fears and ahead of the expected impact from Hurricane Irma in Florida (and as Texas recovers from Hurricane Harvey). The Dow Industrials leading the market higher after falling over 200 points yesterday, while the NASDAQ Comp underperforms. Transports have managed to rebound after initial declines after several airlines (UAL, JBLU) and railroad CSX lowered guidance. Economic data was mixed as the US services sector expanded in August to its highest level in two months according to the ISM, while the trade deficit widened. Technology names underperform early, while markets keep a watchful eye on Hurricane Irma as it hits the Caribbean and the potential economic impact to retailers, restaurants, banks and leisure properties at it approaches Florida. The Bank of Canada raised its benchmark interest rate by a quarter of a percentage point on Wednesday, adding to a rate increase in July amid robust growth. The dollar is mixed, bonds remain strong, oil rises again and gold is steady. In Fed news, Stanley Fischer resigns effective mid-October.
 
Treasuries, Currencies and Commodities
·      In currency markets, the U.S. dollar was little changed overall as the dollar index (DXY) flattish around 92.30; the Canadian dollar initially  jumped to a 2-year high after the Bank of Canada raised its benchmark interest rate by a quarter of a percentage point; the greenback slipped against the euro as questions about further tightening by the U.S. Federal Reserve lingered (euro back above 1.1925), while the dollar rises back above 109 vs. the yen
·      Commodity prices; Precious metals are little changed as the dollar mixed; gold prices hold around 1-year highs above the $1,340 an ounce level; WTI crude rises for 4th session, climbing above $49 per barrel ahead of API inventory data due later that will offer initial insight into impact of Hurricane Harvey on U.S. stockpiles. Brent also gains, hitting highest level since day of last OPEC meeting in May, despite returning oil from Libya’s largest field.
·      Treasury markets are little changed, with the 10-yr yield up about 1 bps, but still holding below 2.10% as investors remain in defensive assets; the 10-year yield down around 2.07% after heavy bond-buying pushed long-dated Treasury yields to fresh 10-month lows on Tuesday
 
Economic Data
·      ISM Non-Manufacturing (services) for August rises to 55.3, mostly in-line with the 55.6 estimate; and came in above 53.9 the prior month; Business activity rose to 57.5 vs 55.9 prior month; segment breakdown showed: new orders rose to 57.1 vs 55.1, employment rose to 56.2 vs 53.6, prices paid rose to 57.9 vs 55.7 and backlog of orders rose to 53.5 vs 52
·      Trade Deficit for July widened to (-$43.7B) in July from (-$43.5B), but came in below estimates of (-$44.7B). The U.S. trade deficit is running almost 10% higher through the first seven months of 2017 compared to the same period in year before: $319.1 billion vs $291.2 billion. A bigger deficit subtracts from gross domestic product. Imports fell 0.2% in July to $238.07b from $238.49b in June and Exports fell 0.3% in July to $194.38b from $194.95b in June
Sector Movers Today
·      Airlines fall; JBLU lowers Q3 RASM growth to negative 1% to positive 1% vs. prior view of (0.5) to 2.5%; says the reduction in RASM guidance largely reflects the current competitive industry pricing environment (also lowers capacity growth); UAL lowers Q3 PRASM view to down (3%-5%), worse than prior view of down 1% to up 1%, while lowered pre-tax margin view to 8%-10% (from 12.5%-14.5%) and capacity; guidance follows lowered updates from DAL and SAVE yesterday)
·      Media & Telecom; ad agencies IPG (upgraded to buy) and OMC (upgraded to neutral) raised at Citigroup as believe the recent slowdown is both cyclical and structural…but don’t expect weakness to persist indefinitely (calls risk/reward attractive)
·      Housing & Building Products; RBC Capital said Homebuilders and building products 2H17 estimates are likely to move lower as near-term demand is delayed and management teams assess damage from Hurricane Harvey (USG, CBPX, FBM, GMS); JELDupgraded to overweight at JP Morgan as believe valuation more than discounts recent investor concerns regarding North American volume growth; NWL lowers year EPS view due to impact of Harvey storm
·      Semiconductors; INTC helps lead the Dow after it won a round in its eight-year fight with the European Union over a 1.06 billion-euro ($1.26 billion) fine/EU’s top court ruled that Intel’s appeal had to be reexamined by a lower tribunal; NXPI/QCOM EU merger review was suspended again (EU earlier this month had restarted the process after a suspension to demand missing info about the $47 billion tie-up); MCHP shares slipped early after reaffirmed forecast for year
 
Stock GAINERS
·      COUP +3%; Q2 results beat as billings growth (up 45% YoY) reaccelerated
·      CSX +3%; despite lowered 2017 EPS growth view to 20%-25%, down from prior of around 25%
·      DLTH +1%; with EPS beat driven by better-than-expected direct revenues/lower SG&A expenses
·      EFII +16%; said it does not currently expect to report any material error that would require a restatement of any of its previously-reported financial results for any period
·      FCAU +4%; after receiving upgrade to overweight at Barclay’s
·      GIII +8%; reported better-than-expected 2Q and increased year forecasts
·      LDR +10%; to be acquired by FTV for $67.25 per share/$770M deal https://goo.gl/jHV7WK
·      SRPT +10%; statistical significance met on primary/secondary biological endpoints for 4053-101
·      VSTM +32%; after an experimental cancer drug met its main goal of extending patients’ lives
·      VYGR +20%; announces positive results from Phase 1b Parkinson’s trial
·      XOM +1%; upgraded to neutral at UBS today on stock underperformance
 
Stock LAGGARDS
·      FRAN -3%; Q3 guidance of 0c-5c on revs $481M-$491M well below estimate 23c/$506.5M
·      GDDY -3%; 20M share Spot Secondary priced at $44.00
·      NWL -5%; lowers year EPS view due to impact of Harvey storm
·      PLAY -8%; Q2 results mixed as EPS topped views but overall revs and comps missed
·      PTLA -5%; now sees Bevyxxa launch in November at soonest and possibly as late as 1Q of 2018
·      RXDX -5%; following update on key candidate entrectinib/on track for 2H’18 NDA filing
·      TRVG -21%; lowered FY revenue growth view to around 40%, down from 50% growth prior
·      UAL -3%; lowers Q3 PRASM view to down (3%-5%), worse than prior view of down 1% to up 1%

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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