Mid-Day Outlook: September 22, 2017

Regal HelpdeskDaily Market Report

Mid-Morning Look
Friday, September 22, 17
 U.S. equities are little changed in early trading Friday, with the S&P 500 less than 1% away from a record reached on Wednesday while bonds strengthened as bank shares headed for the first decline in six sessions. Defensive assets such as gold, bonds and the yen see early strength after North Korea threatened to test a hydrogen bomb over the Pacific Ocean. The harsh comments came after Trump at a UN speech on Tuesday pledged to “totally destroy” North Korea if Pyongyang provoked the U.S. or its allies. Oil prices are flat amid an ongoing OPEC/Non-member meeting on output, while the British Pound pares recent gains after PM Teresa May speaks on Brexit plan (FTSE 100 bounced to highest level in over a week as dollar slipped). Defense stocks (BA, LMT, NOC, and RTN) trade to 52-week highs on increased North Korea tensions. Consumer staples attempt to bounce after several names hit 52-week lows yesterday on disruptions caused by latest natural disasters and GIS weak earnings. Stocks still posting a good week of returns, as the Dow Industrials snapped its 9-day winning streak yesterday.
Treasuries, Currencies and Commodities
·      In currency markets, the U.S. dollar is mostly lower, down a second session after jumping Wednesday following the FOMC announcement for 4-more rate hikes by end of 2018 and normalization of balance sheet starting in October; dollar falls vs. yen on flight to safety trade on North Korea increased tensions. British Pound falls after Theresa May to raise prospect of leaving EU before 2019 in Florence Brexit speech as she delivered critical address on Brexit.
·      Precious metals with a slight bounce on North Korea headlines, topping $1,300 an ounce early, but has since pared gains; on track for weekly decline
·      Energy futures flat after several headlines from various OPEC/non-members this morning on meeting about output; Brent Crude pares gains after touching 6-month high of $56.75 per barrel (best since early March), but still poised to gain for fourth consecutive week. Kuwait oil minister said there was no reason for deeper OPEC output cuts at meeting today
·      Treasury markets rebounded, sending yields lower after North Korea threatened to test a hydrogen bomb in the Pacific Ocean, escalating and boosting demand for assets seen as safe; the yield on the 10-yr slipped under 2.25% from 2.28% late yesterday, though the shorter term 2-yr holding above 1.43%, best levels since 2009
Sector Movers Today
·      Metals & Mining; Steel sector active as Cowen downgraded X to underperform and cut its price target to $20 based on expectations iron ore and U.S. HRC prices are heading lower, while cut MT to market perform (tgt to $27 from $32) based on expectations iron ore and global steel prices are heading lower; also Commerce Secretary Wilbur Ross said today the steel tariff bill (232) has been postponed until after the tax bill; AA was downgraded at Berenberg noting shares are up 43% over the last 6-months and recommends taking profits; TAHO announced a 6% increase in its 2017 gold output guidance and also announced 7% and 8% reductions in its 2017 total cash cost (TCC) and all-in sustaining cost (AISC) guidance; gold miners rebound (ABX, AEM)
·      Paper and Forest stocks; the containerboard space are moving lower after IP announced plans to invest $300M to convert its No. 15 paper machine at the Riverdale Mill in Selma, Ala. from uncoated freesheet to high quality whitetop linerboard and containerboard. The conversion is targeted to be completed by mid-year 2019 and will add 450,000 tons of annual capacity, with flexibility to shift between containerboard products (WRK, KS, PKG shares lower)
·      Auto movers; auto retailer KMX Q2 EPS and revs topped estimates while 2Q comp. stores used unit sales rose 5.3%, beating Consensus Metrix est. of +5.01% even though its 6 stores in Houston were closed for most of last week (PAG, SAH, LAD, GPIwere active)
·      Internet; GRUB shares slipped after AMZN announced a partnership with Olo, which could let it press deep into GrubHub’s delivery market space; CVNA initiated sell at B Riley saying strategy of below-market forward pricing to achieve scale and expand margins is risky and unproven – while firm initiates CARS with buy on accelerating revenue; SECO 8.5M share IPO priced at $13.00; Uber London Ltd.’s license to operate won’t be renewed, London’s transportation regulator said
·      Consumer Staples; group got slammed yesterday, led by declines in packaged food names (GIS, CPB, KHC); MCD raises quarterly dividend; CAG to buy Angie’s Artisan treats
·      Solar stocks including FSLR and SPWR active ahead of the International Trade Commission determining whether U.S. solar manufacturers are being harmed by imports
·      AAL +2%; upgraded to overweight at Barclays
·      ASND +45%; as VSAR’s somavaratan is no longer seen as a threat to Ascendis competing product, TransCon growth hormone; Wedbush raised tgt to $65 from $36
·      EFX +4%; upgraded to outperform at Wells Fargo after data breach send shares lower
·      FINL +7%; reporting in-line Q2 results from recently lowered outlook on August 28th
·      KMX +6%; Q2 EPS and revs topped estimates while 2Q comp. stores used unit sales also beat
·      Sprint (S) +4%; TMUS is close to agreeing tentative terms on a deal to merge with Sprint according to Reutershttps://goo.gl/RUK5cT
·      CMP -8%; cuts earnings view on Goderich mine output constraints
·      GRUB -1%; as online food ordering company Olo announces a partnership with Amazon Restaurants food delivery service
·      ICPT -16%; fresh 52-week lows following recent FDA communication about Ocaliva safety issues
·      IP -2%; paper stocks lower with International Paper adding capacity in 2019
·      PSDO -5%; as Q4 EPS were in-line but sales short of consensus
·      TIF -3%; downgraded to neutral at Goldman Sachs
·      VSAR -85%; announced that the VELOCITY Phase 3 clinical trial of somavaratan did not meet its primary endpoint of non-inferiority
·      X -3%; downgraded at Cowen and tgt lowered to $20 from $24
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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