Friday, September 15, 17
U.S. equities are edging slightly higher, holding at or near record highs for the three major indices, as this “Teflon” market continues higher. Nothing seems to stick or weigh on investor sentiment, not the potential for further rate hikes (ending more than a decade of super low rates), not geopolitical fears (North Korea), declining retail sales (retail sector has underperformed), or valuations. The Dow Industrials set another fresh intraday record (has closed at record highs for three straight session), while the Tech heavy Nasdaq Composite rebounds from earlier losses. Economic data today was mostly negative, as retail sales, industrial production and consumer sentiment all missed forecasts.
Two macro stories: An explosion Friday on a London Underground train during the morning rush hour has left at least 23 people injured and has been declared a terrorist incident by British authorities. Police say improvised explosive device did not fully explode in the London subway; at least 22 people injured. Overnight, Japan issued a temporary shelter-in-place alert following a North Korean ballistic missile firing (the second in the last three weeks), according to Japanese and South Korean news reports.
The FTSE 100 drops to 4-month low as pound soars to highest since Brexit vote, as Sterling up another 1.4% at 1.3584 vs. dollar (up over 2.8% last 2-days) after inflation data and UK Carney comments about rates yesterday during BOE policy meeting (hinting rate hikes could be coming).
Treasuries, Currencies and Commodities
· In currency markets, same action as yesterday for the dollar, down overall for the dollar index (DXY), amid declines against the British Pound (down over 2.8% the last 2-days) and euro, while rising for a 4th day against the safe-haven yen (trades above 111). Bitcoin falls as much as 10% as breached the $3,000 level to the downside earlier before rebounding up over 4% above $3,500
· Precious metals resume recent downward slide, falling for a 4th day in the last five, after touching 1-year highs last week o geopolitical fears and dollar weakness
· Energy futures little changed, but on track to close the week out with solid gains and finish around 6-week highs around the $50 per barrel mark. Oil strong this week both the IEA and OPEC boosted forecasts for demand and on bullish gasoline inventory data along with speculation around OPEC extending its production cuts – oil rig data later today as well
· Treasury markets little changed after raft of economic data (weaker retail sales and industrial production, with better NY manufacturing and inline sentiment data). FOMC meeting next week could potentially move the needle for bond market that has sold off this week, sending the yield on the benchmark 10-yr to 2.20% from lows of 2.03% last week.
· Retail sales for August fell (-0.2%) vs. an est. increase of 0.1%, while retail sales less autos rose 0.2% in August, well below the 0.5% forecast; the drop in retail sales marked the second time in three months, reflecting fewer car purchases and a reluctance by Americans to spend; Sales for July and June were also much weaker than originally reported; Sales at Internet retailers were also surprisingly weak, falling 1.1% in August. That’s the biggest decline since spring of 2014.
· The Empire State manufacturing survey slipped to 24.4 in September from 25.2 in August, the New York Fed said, retreated only slightly in September from a three-year high, but was above the consensus forecast for a reading of 18.0
· Industrial Production for August fell (-0.9%), well below the up 0.1% estimate and after rising 0.4% in July (upwardly revised from 0.2%). Capacity utilization fell to 76.1% from 76.9% in July, revised up from 76.7%; Factory production fell 0.3% in Aug. after no change in July
· The Preliminary Sept. Michigan Sentiment data fell to 95.3 from 96.8 prior, and was mostly in-line with est. of 95; the current economic conditions index rose to 113.9 vs. 110.9 last month, while the expectations index fell to 83.4 vs. 87.7 last month
· Business Inventories for July rose 0.2% MoM, in-line with estimates, while Business sales rose 0.2% in July after rising 0.2% the prior month; the three-month annualized change in inventories $76.9b in July
Sector Movers Today
· Healthcare services; dental related stocks HSIC, PDCO, XRAY have been pressured the last few days concern over the threat of Amazon entering the market – both Piper and Baird defend sector today on sell-off saying threat overdone and see potential for improvement in dental consumables based on our consumer surveys and management comments – Piper upgraded shares of HSIC to overweight and raised tgt to $193; WST upgraded to buy at Jefferies
· Transports; FDX downgraded to neutral from buy at UBS (ahead of earnings next Tuesday) as reward/risk appears roughly balanced in n-t; in airlines, JP Morgan upgraded LUV to overweight in airline space, but downgraded UAL, AAL and SAVE to neutral saying consensus estimates for sector appear increasingly unachievable
· Monthly Master Trust credit card data: 1) COF August net charge-offs 4.75% vs. 4.79% last month and said delinquencies were 3.97% vs. 3.81% last month; 2) SYF reports August net charge-off rate 4.86% vs. 4.73% last month and said the delinquency rate was 2.94% vs. 2.90% last month; 3) JPM August net credit losses 2.41% vs. 2.36% last month and said delinquencies were 1.16% vs. 1.15% last month; 4) ADS August net charge offs 6.4% vs. 6.0% last month and delinquency rate 5.3% vs. 5.17% last month
· Media & Telecom; CRTO shares rise early after two analysts (KeyBanc and BMO) believe shares are baking in a worst-case-scenario for AAPL ITP and recommend buying shares after event yesterday, Criteo detailed its Commerce Marketing Platform – Morgan Stanley said could see further pressure as it was confirmed that ad blockers will be the default on mobile & desktop for the new AAPL iOS Safari 11; ATUS downgraded to neutral at Guggenheim saying since initiated in July, believe that competition for video and high-speed data subscribers has intensified more than we originally anticipated; DISH was upgraded to neutral at Citigroup
· FSLR +5%; upgraded to buy at Deutsche Bank and tgt raised to $65 saying checks indicate that robust U.S. demand is driving module prices higher
· HSIC +5%; upgraded at Piper saying concerns related to AMZN entrance in market overdone
· ICPT +6%; initiated outperform and $244 tgt at RBC/also rebound after -23% drop last 3-days
· MRTX +134%; Leerink said reported an encouraging update from its ongoing early stage clinical trials of anticancer agent Sitravatinib
· NVDA +4%; tgt raised to Street high $240 at Evercore/ISI citing near-term outlook driven by Data Center growth, LT outlook driven by AI and Autonomous driving
· WEN +2%; upgraded to buy at Longbow Research as checks with US franchisees indicate Q3 domestic franchised comps above prior views
· ATUS -3%; downgraded to neutral at Guggenheim on video sub competition intensifying
· EFX -3%; remains pressured on data breach from late last week
· CCL -4%; downgraded to neutral at Credit Suisse
· FDX -1%; downgraded to neutral at UBS as reward / risk appears roughly balanced in n-t
· NTRI -3%; as CEO sold shares, paring stake
· NUE -1%; lowered its Q3 EPS view to 75c-80c, below Street at $1.03
· ORCL -6%; mixed earnings results as company cloud revenue increased to $1.5 billion, but revenue growth guidance of only 2%-4% fell short of expectations
· UAL -2%; airlines UAL, AAL, SAVE downgraded at JP Morgan
· Array BioPharma (ARRY) 20.9M share Secondary priced at $10.75
· Azul (AZUL) 13.5M share Secondary priced at $26.75
· Cummins (CMI) 1.786M share Block Trade priced at $165.45
· First Internet Bancorp (INBK) 1.65M share Spot Secondary priced at $29.00
· Marinus Pharmaceuticals (MRNS) 9.33M share Spot Secondary priced at $3.75
· Quintiles IMS (Q) 9M share Secondary priced at $95.25
· T2 Biosystems (TTOO) 4.38M share Spot Secondary priced at $4.00
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.