Monday, September 18, 17
After another record close for the S&P 500 on Friday, U.S. futures and European stock markets are rallying, while safe haven assets (gold, bonds) are under pressure once again, as this week’s focus turns to the Federal Reserve meeting where officials are expected to announce the start of the reduction of the central bank’s balance sheet, while keeping the benchmark rate unchanged. WTI crude drops back under $50 per barrel following its highest close in 6-weeks after seeing the biggest decline in the U.S. oil rig count since January. The U.S. dollar jumps to 8-week high week against yen as North Korea fears fade. After devastation from Hurricane Harvey and Irma the last 2-weeks, markets are keeping a watchful eye on two more powerful storms, with Jose and Maria making their way up the towards the Northeast the next few days. In Asian markets, The Nikkei Index was closed, the Shanghai Index gained 9 points to settle at 3,362 and the Hang Seng Index gained 352 points to end at 28,159. In Europe, the German DAX is higher by 40 points at 12,560, while the FTSE 100 is higher by about 15 points at 7,230.
Treasury yields stabilized on Friday after a week of fluctuating yield prices, as inflation data (PPI/CPI) bolstered the view that the U.S. central bank may signal at this week’s upcoming policy meeting its desire to normalize monetary policy remains intact. For the week, Treasury yields were 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. The 10-year yield rose over 14 bps for the week to around 2.20% and the 2-yr gained over 11 bps for the week.
On Friday, the Dow industrials logged a fourth-straight record close and a sixth-straight gain. At the same time, The S&P 500 index logged a fresh record finish, its 34th of 2017. Weekly gains for those indexes — up 2.16% and 1.58%, respectively — were the best for the DJIA and S&P 500 since late 2016 and early 2017 – Marketwatch.com
Market Closing Prices Yesterday
· The S&P 500 Index gained 4.61 points, or 0.18%, to 2,500.23
· The Dow Jones Industrial Average rose 64.86 points, or 0.29%, to 22,268.34
· The Nasdaq Composite climbed 19.38 points, or 0.30%, to 6,448.47
· The Russell 2000 Index advanced 6.69 points, or 0.47% to 1,431.71
· 10:00 AM EST NAHB Housing Market Index for September…est. 67
· 4:00 PM EST Net-Long term TIC Flows for July…prior $34.4B
· U.K. lowers terror threat after second arrest in subway bombing. On Friday, the UK government raised the national terror-alert status to critical, its highest level, after a bomb blast injured more than two dozen people in London’s subway last week
· Tropical Storm Maria was upgraded to Hurricane status on Sunday afternoon, on track to hit a large portion of the Caribbean that was slammed by Hurricane Irma less than two weeks ago.
· A tropical storm watch is in effect from Fenwick Island, Delaware to Sandy Hook, New Jersey, the National Hurricane Center reported in a Hurricane Jose Forecast Advisory.
· The average price of new homes in 70 Chinese cities rose 0.2% in August from July; that compares with a 0.5% on-month gain in July.
Sector News Breakdown
· Walgreens Boots Alliance Inc. (WBA) is poised to revise its agreement to buy individual Rite Aid Corp. (RAD) stores, a move that may be enough to resolve outstanding antitrust concerns and clinch U.S. approval for a deal the companies have been pursuing in different forms for two years, said people familiar with the matter – Bloomberg https://goo.gl/WgLHyk
· Lumber futures have climbed about 20% year to date on the CME and may not be done rising, with demand up following six Atlantic hurricanes and supply also potentially hit by damage to Florida’s commercial forests. Among lumber-focused ETFs, Guggenheim MSCI Global Timber (CUT) is up 21% and iShares Global Timber & Forestry (WOOD) added almost 23% – Barron’s
· Equifax (EFX) announced that the Chief Information Officer and Chief Security Officer are retiring. Mark Rohrwasser has been appointed interim Chief Information Officer
· Equifax (EFX) breach unsettles online investors, with brokers stressing the need for getting rid of Social Security IDs and for close monitoring of accounts for unusual activity – Barron’s
· Cullen/Frost Bankers (CFR) mentioned positively in Barron’s saying shares are a bargain for patient investors, according to SunTrust Robinson Humphrey analyst who has a buy on the stock, calling Frost “arguably the premier Texas banking franchise.” (12-month price target is $110)
· E*TRADE (ETFC) is a likely takeover target according to Barron’s, with market value half that of TD Ameritrade Holding (AMTD)and less than a quarter of Charles Schwab (SCHW). Deutsche Bank analyst Brian says ETFC could be bought out at anywhere from 8%-40% above current price.
· Affiliated Managers Group (AMG) opportunity isn’t over according to Barron’s. The money-manager’s current average 12-month target on stock is $202.13, about 13% above recent levels.
· Sanofi (SNY) and Regeneron (REGN) announced positive results from the Phase 3 CAFE study of Dupixent, or dupilumab, in adults with moderate-to-severe atopic dermatitis who are inadequately controlled with or intolerant to the broad immunosuppressant drug cyclosporine A, or CSA, or when this treatment is medically inadvisable
· Align Technologies (ALGN), which designs and sells Invisalign braces, has benefited from a surge in North American orthodontics treatments; its $185 shares fetch 48 times forward earnings estimates, which could double in three to four years – Barron’s
Industrials & Materials
· Northrop Grumman (NOC) has agreed to acquire Orbital ATK (OA) for approximately $7.8B in cash, plus the assumption of $1.4B in net debt. Orbital ATK shareholders will receive all-cash consideration of $134.50 per share https://goo.gl/FhSzGr
· Caterpillar (CAT) upgraded to Buy from Neutral at UBS and raise tgt to $140
· Scorpio Tankers (STNG) Q2 EPS loss (9c)/$118.42M vs. est. loss (8c)/$130.8M
· FedEx (FDX) is set to report first-quarter earnings on Tuesday, and almost no one is expecting them to be good, according to Barron’s. But article argues, however, that just because FedEx is “an express shipper doesn’t mean we need to rush to judgment,” and says sitting back and waiting to see how TNT plays out looks like the best strategy
· Caterpillar’s (CAT) new target of $55b yearly revenue with 14% to 17% operating profit margins imply $9 to $11 in earnings per share, according to BMO Capital Markets analyst said – Barron’s
Technology, Media & Telecom
· New Line Cinema and Warner Bros. (TWX) horror movie “It” grossed $60M in its second weekend, from 56 markets for a foreign tally of $152.6M and a stunning $371.3M worldwide
· Alphabet’s (GOOGL) Waymo self-driving car unit said given the critical new evidence recently obtained in a trade secret lawsuit against Uber, a U.S. judge should postpone a trial of the case set to begin next month, according to Reuters
· Apple’s (AAPL) product announcement was that its iPhone X cannot be pre-ordered until late October and will not start shipping until November, has analysts predicting supply shortages, according to The Wall Street Journal
· AT&T (T) is mulling a sale of its pay TV operations in Latin America as it looks to reduce debt following its planned $85.4B takeover of Time Warner (TWX), Reuters reports. AT&T, which is working with a financial adviser, could bring in over $8B for the assets https://goo.gl/E5gU8N
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.