Mid-Day Outlook: September 14, 2017

Regal HelpdeskDaily Market Report

Mid-Morning Look
Thursday, September 14, 17
U.S. equities are mixed early, with the tech heavy Nasdaq Composite underperforming, as all three major indices are coming off record closing highs. Energy stocks get a boost after WTI crude trades above $50 per barrel for the first time since mid-August, while rising inflation data (CPI) raises the talk of the FOMC and interest rate  hikes (though they have indicated in past most likely to hold rates steady remainder of year at this point). More rumblings overseas as the Nikkei reported earlier that North Korea is said to show signs of missile launch preparation citing an unidentified Japanese government official. Said the missile being prepared for launch has engine for liquid fuel, suggesting missile is an ICBM – but US markets have failed to react to headlines. Among the worst performers today, Equifax (EFX) again as the shares are down over 35% after the company last week revealed a data breach in which sensitive information of 143 million people was stolen. Markets look toward comments on tax reform out of Washington, FOMC meeting next week, as markets slide early on economic data. Today also appears more of a rotation out of winners (such as tech) and into sector laggards this year (energy) with the top gainers in the S&P 500 early all energy related stocks.
Treasuries, Currencies and Commodities
·      In currency markets, small gains for dollar vs. yen at 110.55 (after 3-day rally for greenback), while euro little changed after falling around 2% over the last week. News in crypto-currency space as Bitcoin plunges more than 11% and off about 30% from all-time highs of $4,921 on 9/1, hit by headlines from JPM CEO Dimon this week at a conference and after headline this morning that Bitcoin exchange BTC China says will stop all trading from Sept 30th (Reuters headline)
·      Precious metals are little changed most of the day, with gold looking to snap its 3-day losing streak after topping out at 1-year highs last week
·      Energy futures rise, as WTI crude futures topped $50 per barrel for the first time since August 10th (up over 2% early) as increase comes after both the IEA and OPEC boosted forecasts for demand; also follows bullish gasoline inventory data yesterday; also yesterday, EIA said product inventories drain fast as second storm hits
·      Treasury markets are flat after a three-day sell off that saw yields bounce off 10-month lows; the 10-year yield traded above 2.2% this morning after closing just above 2.19% yesterday
Economic Data
·      CPI rises; U.S. consumer prices for August rose the most in 7-months, more than expected as Hurricane Harvey shut down refineries along the Gulf coast and sent gasoline prices sharply higher. The headline consumer price index rose 0.4%, above the estimate of 0.3%, while core CPI (ex: food and energy) rose an in-line 0.2%
·      Weekly Jobless Claims fell 14K to 284K, below the 300K estimate while the prior week claims were unrevised at 298K; the 4-week moving average rose by 13,000 to 263,250, now at the highest level in a year; continuing claims fell 7K to 1.944M in the latest week; Labor Department says claims for 4 states were estimated last week due to Hurricane impact
Sector Movers Today
·      E&P sector; energy stocks surged yesterday on rising oil prices, gets another boost today as WTI topped $50 per barrel; in research, JP Morgan downgraded APA and IMO to underweight on valuation and downgraded HES to neutral on persistent spending gaps and premium valuation mitigate improving operating profile (said APC, CNQ, CVX, COP, NBL still screen favorably on company’s framework focused on a combination of sustaining FCF, balance sheet); JONE active after shareholder (Q Global Capital) calls for strategic alternatives
·      Housing & Building Products; in homebuilders, LEN said it expects delays to deliveries after hurricanes Irma and Harvey; in research, JP Morgan downgraded TOL to neutral, as the stock now trades at a premium to its peers, while upgraded smaller-capsBZH and CCS to Overweight, as both stocks offer attractive relative valuations (reit top pick on PHM); WLH 3.32M share Spot Secondary priced at $24.15
·      Healthcare services and suppliers; GKOS cuts 3Q and 2017 sales guidance views on its current assessment of certain transitory impacts to iStent procedure volumes (lowers FY17 revenue view to $155M-$160M from $162M-$167M); ABC and MCK were both downgraded to equal-weight at Morgan Stanley saying with continued increase in generic price inflation and a record pace of generic drug approvals, they see distributors’ EBIT growth at risk over the medium-term; Piper said AET announced on its news page yesterday that it is increasing its telemedicine services through TDOC, as it will now include dermatology, behavioral health and caregiver services
·      Auto movers; ALV rises after announcing a plan to split the company and new targets; in car rental, HTZ was downgraded to underweight at Morgan Stanley on valuation following a tripling of the shares over 3 months; the Financial Times reportedVLKAY and its joint venture partners in China will recall 4.86M vehicles in the country because of faulty airbags, China’s quality watchdog has said; TSLA is tentatively set to roll out its semi-truck in October, Elon Musk tweeted
·      Regional banks CFG, HBAN and KEY upgraded to outperform at Bernstein as still believe there is more likely to be upside to our ’18-’20 estimates than downside and valuations more attractive; SBNY tgt cut at Raymond James (stays OP) after the bank provided lower asset growth guidance and reduced NIM expectations; RJF was upgraded to outperform at Wells Fargo
·      ALV +11%; after announcing a plan to split the company and new targets
·      BA +1%; target price raised to Street high $300 at Deutsche Bank
·      CHK +5%; further rebound in energy stocks as oil tops $50 per barrel
·      HALO +16%; raises guidance after out-licenses ENHANZE to Roche and BMY for up to $455M
·      TDOC +7%; after Piper highlights Aetna contract expansion
·      THC +3%; has hired advisers to explore strategic alternatives, including a potential sale of the U.S. hospital operator, according to reports https://goo.gl/ejU4E4 
·      UNFI +8%; mixed Q4 as EPS, Ebitda in-line, while sales miss
·      ABC -4%; downgraded along with MCK to equal-weight at Morgan Stanley
·      EFX -4%; extends weakness as now FTC investigating its recent data breach of 143M American
·      GKOS -15%; cuts 3Q and 2017 sales guidance views on its current assessment of certain transitory impacts to iStent procedure volumes
·      HTZ -6%; downgraded to underweight at Morgan Stanley as triples over last 3-months
·      LSCC ; as President Trump officially rejected the Canyon Bridge acquisition offer
·      LXRX -13%; down a 2nd day after diabetes drug with SNY raised risk of serious complications
·      OPK -7%; downgraded to neutral at JP Morgan saying stalled Rayaldee launch and pipeline challenge growth thesis
·      VNDA ; reverses earlier losses/its Tradipitant study in Dermatitis missed primary endpoint
·      BiondVax (BVXV) 1.5M share Secondary priced at $6.00
·      Curis (CRIS) 20M share Spot Secondary priced at $1.85
·      Epizyme (EPZM) 9.18M share Spot Secondary priced at $15.25
·      First Data (FDC) 85M share Secondary priced at $17.75
·      Performance Food Group (PFGC) 5M share Spot Secondary priced at $28.40
·      Summit Therapeutics (SMMT) 1.459M share Spot Secondary priced at $12.00
·      Tiffany (TIF) 4.4M share Block Trade priced at $94.40
·      Tremont Mortgage Trust (TRMT) 2.5M share IPO priced at $20.00
·      US Foods (USFD) 40M share Spot Secondary priced at $27.50
·      William Lyon Homes (WLH) 3.32M share Spot Secondary priced at $24.15
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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