Monday, September 25, 17
Equities mixed in the early going, with large cap tech leading the Nasdaq Comp lower, while small caps outperform as the Russell 2000 index traded to fresh intraday record high – highest since July. Energy stocks extend gains, as Blomberg noted the S&P energy index is up 16 of the last 18 sessions and has gained 9.5%, the biggest rally over any 18-day period since April of last year. Broad weakness in large cap tech, with big declines again in semiconductors (on slower adoption fears of iPhone 8), along with notable slide in Internet giants FB, GOOGL, AMZN, NFLX (FANG). European stocks gain as the euro slides following Germany’s election result. William Dudley said further interest rate increases are “likely” given the recent weakness in inflation is mostly temporary. Plenty for the market to chew on this week with expectations of Healthcare Graham/Cassidy health care bill review ongoing (more Republican backlash this weekend), along with the tax reform blueprint expected mid-week. The euro dips after the German election results this weekend. Earnings season right around the corner as well.
Treasuries, Currencies and Commodities
· In currency markets, the dollar index higher (DXY), rising about 0.3% on gains against the euro following German election results overnight; bitcoin spike to highs up around 9% at $3,936; dollar also small gains vs. the yen holding above 112 level
· Precious metals little changed after gold declined more than 2% last week; gold prices remain under the $1,300 an ounce level on a mixed dollar
· Energy futures rise amid further outperformance in Brent, jumping to its highest level in more than 8 months as potential supply disruption is seen arising from the Kurdish independence vote. WTI crude topped $51 per barrel, while the spread between Brent and WTI grows to highest in about 2-years; WTI closed Friday at its highest weekly settlement of the past eight months – both WTI crude and Brent are poised to log a fourth-straight session climb.
· Treasury markets little changed, with the yield on the 10-year around 2.25% (same late last week), while the 2-year yield remains around 9-year highs above 1.43%
Sector Movers Today
· Lab companies; DGX and LH shares under pressure following the preliminary 2018 CLFS rates released Friday, which came in steeper than anticipated and will likely make it more difficult for the companies to achieve previously communicated 2020 targets. The U.S. released worse-than-expected draft Medicare payment rates, known as Protecting Access to Medicare Act (PAMA). Piper said PAMA was worse than expected for lab names as LH & DGX could see a ~8% headwind to Medicare revenue in 2018, 2019 and 2020/PAMA positive for GHDX, VCYT, CDNA
· Oil drillers; UBS upgraded offshore drilling stocks (RIG, DO, ESV, NE, RDC) to buy from neutral amid early signs of a slow recovery; said the sector has reached bottom in offshore utilization for floaters and jack-ups; demand will slowly increase in 2018, with greater demand growth not until 2019-2020
· Consumer Staples; CL upgraded to overweight at Morgan Stanley as sees a rare opportunity to buy a well-positioned business at a valuation level close to structurally less attractive peers; SODA tgt raised to Street high $90 at Susquehanna; UN agreed to buy Carver Korea, a Seoul-based maker of toners and moisturizers, for $2.7B https://goo.gl/tdNiYY; IRBT mentioned cautiously in Barron’s again noting a “formidable” new rival (SharkNinja)
· Auto movers; GM upgraded to buy at Deutsche Bank and raise tgt to $51 saying its autonomous vehicles will be ready for commercial deployment much sooner than widely expected; GPC agrees to buy Alliance Automotive Group for about $2Bhttps://goo.gl/iHKxd1 ; WSJ reported that China eyeing rule change that could aid TSLA; KMX downgraded at Goldman Sachs; auto suppliers positive at BMO Capital, raising targets on ALV, BWA, GM, DLPH, VC as view bulk of group undervalued despite strong performance
· Internet; early broad weakness in Internet giants, with FB, NFLX, GOOGL lower; in online travel, TRIP shares dropped after Raymond James said until their monetization trends improve, its shares are likely to remain range-bound; SNAP estimates trimmed at JP Morgan given a slower monetization ramp, bringing down 2017 & 2018 revenue estimates 10% & 15% (cut tgt to $14)
· GM +2%; upgraded to buy at Deutsche Bank and raise tgt to $51
· GPC +6%; agrees to buy Alliance Automotive Group for about $2B https://goo.gl/iHKxd1
· HIIQ +2%; said still in active talks on TPA license in Florida
· ICPT +1%; as its CEO defended the company’s Ocaliva drug during a conference call
· NBL +2%; raised Q3 sales volume outlook, which boosted year outlook
· OUT +11%; was recommended to be awarded a transit advertising concession agreement from the New York MTA, subject to approval from the MTA board
· RIG +7%; as UBS upgraded offshore drillers DO, ESV, RDC, RIG to buy from neutral
· STAA +10%; upgraded to buy with $15 target at Canaccord
· AZZ -9%; cuts FY18 EPS view to $1.80-$2.30 from $2.60-$3.10 (est. $2.62) and lowers FY18 revenue guidance to $825M-$885M from $880M-$950M (est. $873.13M)
· CATM -12%; said a plan by Australia’s 4 largest banks to remove all charges on ATM transactions may hurt its revenues in the near term
· CRUS-2%; weakness in AAPL chip suppliers as early reports suggest opening weekend sales of the iPhone 8 were weak vs. prior refreshes (probably awaiting Nov 3 launch of iPhone X)
· DGX -6%; down along with LH after CMS released worse-than-expected draft Medicare payment rates, known as Protecting Access to Medicare Act (PAMA)
· TRIP -7%; after target, Ebitda and revenue estimates cut at Raymond James
· TSS -4%; announced after the close on Sept. 22 that President and COO Pamela Joseph will be resigning, including her board position, effective Sept. 30.
· YUM -2%; Cleveland Research said its Taco Bell and KFC U.S. comps are likely below trend
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.