Mid-Day Outlook: September 18, 2017

Regal HelpdeskDaily Market Report

Mid-Morning Look
Monday, September 18, 17
Equities soaring to new highs again, as concerns over the political situation with North Korea appeared to ease, with the Dow Industrials, S&P 500 and Nasdaq Composite all setting new record highs ahead of Fed meeting this Wednesday. Officials are expected to announce the start of the reduction of the central bank’s balance sheet, while keeping the benchmark rate unchanged.  Absolutely no fear at all again in stock markets, with the CBOE Volatility Index (VIX) falling back below the 10 level. There are two new storm systems on the way, with Tropical storm Jose on track for the Northeast over the next two-days and Maria on track to hit the already shaken Caribbean after Irma (airlines, cruise lines, lodging, and insurers again in focus). Tech leading early with the semi-index at another fresh 17-year high, led by NVDA after more positive analyst comments. There was one big M&A story today in the defense sector as NOC agreed to buy OA in a $7B deal (over $9B with debt). Quiet week of earnings and data, with central focus the FOMC meeting on Wednesday.
Treasuries, Currencies and Commodities
·      In currency markets, the dollar index little changed (DXY), trading around the 91.90 level after falling last week. Decline last Thursday and Friday came at the hands of the rising British Pound. The dollar today up again against the safe have yen, while slipping vs. the euro. Bitcoin prices up around 10% at $4,100, up from lows below $3,000 early Friday
·      Precious metals slip further, sliding around -$10 to $1,315 an ounce as defensive assets come under pressure a second weak as North Korea fears ease; higher inflation reports late last week, raise small prospect for potential rate hike in December, which weighs on gold as well
·      Energy futures coming off 6-week highs last Friday, rising over 5% for WTI crude last week after both the IEA and OPEC boosted forecasts for demand, bullish gasoline inventory data. Prices are holding just under $50 per barrel for WTI today
·      Treasury markets extend losses; Yields jumped and bonds slipped last week with Treasury yields solidly higher as markets looked past the fears that previously drove the 10-year Treasury yield to lows of 2.03% the week prior, including tensions surrounding North Korea and damage from Hurricane Irma; 10-year yield up around 2.21% today
Sector Movers Today
·      Semiconductors; NVDA tgt raised again, this time by Bank America to $210 from $185, citing upside in 2H 2017 and in 2018 driven by accelerating data center capex, as well as early positive feedback on upcoming Volta products; SYNA slides as comp Fingerprint Cards pre released negative today with Q3 now roughly flat q/q, which was significantly below Street estimates due to FP chip over-supply and lower ASPs as smartphones switch to cheaper FP solutions on the back of the phone instead of in the home button; CRUS initiated underperform at Bank America and $50 tgt citing muted growth outlook for audio specialist; Morgan Stanley said they would add to ADI/TEL/MCHP while taking profits on MXIM/CY, where multiples look full
·      Healthcare services; WBA is poised to revise its agreement to buy individual RAD stores, a move that may be enough to resolve outstanding antitrust concerns https://goo.gl/WgLHykTDOC downgraded to neutral at Baird on valuation as positive near-term thesis has mostly played; HSIC to buy back up to $400M in stock; QDEL in revised agreement for pending purchase ofALR’s B-type Naturietic Peptide (BNP) Assay business
·      Chemicals; HUN said it expects Q3 results to be better than Q2, despite impact of Hurricane Harvey disruptions; PAH was upgraded to buy at SunTrust noting company plans to IPO the Ag segment in mid-2018, and they view the separation positively;Yara was upgraded to buy at Danske Bank from sell as sees limited downside to nitrogen prices, long-term potential of improvement program and expansion projects in focus (CF, MOS shares also active)
·      AMAT +2%; upgraded to outperform with $55 target at RBC Capital
·      CF +8%; as nitrogen/potash names outperform early (MOS as well)
·      DMTX +9%; as RARE proposes to buy company for $138M/$5.50 per share https://goo.gl/Xg6RVo
·      HUN +1%; expects Q3 results to be better than Q2 despite impact of Hurricane Harvey disruptions
·      NBRV +92%; positive top-line results from a Phase 3 clinical trial, LEAP 1 (pneumonia drug trial success)
·      NVDA +3%; extends record highs earlier after Bank America raises tgt to $210 (shares jumped last week after Evercore ISI raised to Street high $250)
·      OA +20%; as NOC agreed to acquire the company for approximately $7.8B in cash, plus the assumption of $1.4B in net debt/deal valued at $134.50 per share https://goo.gl/FhSzGr
·      PAH +3%; upgraded to buy at SunTrust as view planned IPO/separation of units positively
·      SSNI +24%; to be acquired by ITRI for $16.25 per share in cash/$830M https://goo.gl/UrscSs
·      AAN-6%; rated new sell by Off Wall Street with $30 target
·      CRUS -2%; initiated underperform at Bank America and $50 tgt citing muted growth outlook
·      SYNA ; as comp Fingerprint Cards pre released negative today with Q3 now roughly flat q/q, which was significantly below Street estimates
·      TCO -2%; tgt by 16% to $47 at Morgan Stanley and see 11% downside citing several headwinds
·      UBNT -6%; after negative comments by Citron Research
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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