Mid-Day Review: September 21, 2017

Regal HelpdeskDaily Market Report

Mid-Morning Look
Thursday, September 21, 17
Equities slipping from record highs for the Dow Industrial Average and S&P 500 Index, paring recent gains after markets digest the news that the Fed will start paring its $4.5 trillion portfolio next month. The FOMC kept alive the likelihood of one more 2017 rate increase and dot plots pointed to three additional hikes in 2018. FOMC Chair Yellen pledged to shrink the central bank’s balance sheet gradually and said low inflation this year was due to transitory factors. Outside of the FOMC follow through (gold slides over 1.5%, while the dollar pares gains and bonds pare losses), several other factors worth watching the next few days including: tax reform blueprint set for release next week, and the Graham/Cassidy repeal and replace (of ACA Obamacare bill) is getting attention and is within a couple of votes of passage. Markets are also dealing with devastation the last few weeks from Hurricanes Harvey, Irma and Maria and the magnitude 7.2 earthquake that rocked Mexico City the other day. Technology prices underperform a second day, led by weakness in AAPL and its chip suppliers on lower pre-orders for its iPhone 8 according to an analyst report yesterday. Overseas, S&P downgraded China’s rating to A+ from AA-, outlook stable; while the Bank of Japan kept policy steady overnight.
 
Treasuries, Currencies and Commodities
·      In currency markets, the U.S. dollar eased vs. most rivals after jumping yesterday on the FOMC dot plots, rate hike outlook, and its plan to unwind its massive bond-buying program. The dollar index (DXY) slips about -0.2%
·      Precious metals plunge over 1.6%, with gold dropping below the $1,300 an ounce level on dollar strength yesterday as the FOMC gets more aggressive with normalization of balance sheet and guides at least four rate hikes by the end of next year
·      Energy futures little changed, as WTI crude oil holding above $50 per barrel (off highest level in 4-months) as markets await results from the OPEC ministerial meeting in Vienna on Friday. Inventory data came in mixed yesterday, with bullish distillate data offsetting mildly bearish crude data; natural gas prices weak after bearish inventory data
·      Treasury markets pare some of yesterday’s losses, with the 10-yr falling to 2.24% from nearly 2.28% late yesterday, while the 2-yr slips 1.5 bps to around 1.425% (off highest levels since 2008 reached yesterday on hawkish rate comments from FOMC)
 
Economic Data
·      Weekly Jobless Claims fell 23K to 259K, well below the 301.5K estimate; the drop reflecting a smaller-than-expected increase in new jobless claims in Florida following hurricane Irma; the 4-week moving average rose by 6,000 to 268,750; continuing claims rose 44k to 1.980m in the week ending Sept. 9
·      Philly Fed Survey for September rose to 23.8 from 18.9 prior month and was above expectations for a reading of 17.1; the current indicators for general activity, new orders, and shipments all increased this month
·      The 30-year fixed mortgage rate for week ended today rose to 3.83% from 3.78%, Freddie Mac said; the 15-year rate avg 3.13%, up from 3.08% a week earlier
Sector Movers Today
·      Industrial & Machinery; TEX downgraded to hold at Deutsche Bank on valuation; Baird notes the August ABI improved from July and was above 50 for the seven consecutive month., while the commercial/industrial index also hit a recovery high, suggesting solid design activities (says MHK is top idea with non-resi exposure/other OP rated include DOOR, JCI, CSL, and LII); cement stocks (EXP, CX, SUM, MLM) active after CRH Plc to buy Ash Grove for $3.5B https://goo.gl/3xZp14CAT rolling 3-months August machine sales up 11% vs up 12% in July/N.A. sales up 1% vs. 4% MoM
·      Utilities; the group was pressured yesterday as the Fed forecast one more rate hike in 2017 and three in 2018, sending bond yields higher and weighed on interest rate sensitive/dividend paying sectors such as utilities, which fell to 5-week lows; today, Morgan Stanley upgraded ETR to equal-weight, and upgraded PEG to overweight after underperformance as sees compelling risk/reward; SCG said it has been served with a subpoena issued by the United States Attorney’s Office for the District of South Carolina seeking documents relating to the Company’s new nuclear project at V.C. Summer Nuclear Station
·      Solar sector lower ahead of ITC decision; Roth Capital notes all eyes are on the ITC given its upcoming 201 injury vote this Friday. Module vendor stocks appeared to be down today in anticipation of a yes vote. That said, our checks on both sides of the case suggest a yes vote is highly likely, and we believe this is mostly priced in. We see the 11/13 remedy recommendation as the more important catalyst (FSLR, JASO, SPWR, and CSIQ among those active). JPM issues tactical trades for CSIQ, FSLR and SPWR ahead of ITC Section 201 decision tomorrow – they says they believe a determination of “injury” would probably get a favorable reception by the U.S. Administration, leading to tariffs on imports. Most upstream solar companies that we spoke with at the recent SPI Conference expect an “injury” ruling
 
Stock GAINERS
·      AKTX +83%; said it plans to advance Coversin towards Phase III studies in Q1
·      APC +7%; after reporting a $2.5B share repurchase program
·      APRN +2%; privately held Albertsons Cos Inc. said it would buy meal-kit delivery service Plated
·      BCRX +8%; receives FDA expanded approval for flu medicine RAPIVAB
·      CCC +62%; to be acquired by Japanese chemical manufacturer Kuraray Co Ltd for $1.107B, paying $21.50 per share, a premium of about 63% to yesterday’s close https://goo.gl/8z6irb
·      PEG +2%; utilities rebound after sharp decline yesterday; PEG and ETR upgraded at Morgan
·      SEE +2%; upgraded to buy at Bank America
 
Stock LAGGARDS
·      AAPL -1%; extends yesterday losses after analyst report yesterday suggested that iPhone 8 preorders are substantially lower than iPhone 7 and six levels
·      BIIB -1%; downgraded to market perform at Raymond James as neurology survey feedback depicts continued headwinds for the MS franchise
·      EROS -11% content deal with Dharma Productions, a leading Indian film production group (had rallied this month on speculation of AAPL deal)
·      HBI -1%; downgraded at Nomura Instinet citing challenging holiday outlook
·      MDXG -9%; provides information on interaction w/SEC related to whistleblower allegations
·      NVDA -3%; on the AMD/TSLA AI report from CNBC (mentioned above)
·      SCHL -9%; after earnings results
·      SPWR -7%; ahead of ITC Section 201 decision tomorrow
 
Syndicate
·      Acceleron (XLRN) 5.405M share Secondary priced at $37.00
·      Beacon Roofing (BECN) 6.325M share Secondary priced at $47.50
·      Iovance Biotherapeutics (IOVA) 7.69M share Secondary priced at $6.50
·      Oasis Midstream Partners (OMP) 7.5M share IPO priced at $17.00
·      Veon (VEON) 90M share Spot Secondary priced at $4.15
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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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