Mid-Day Outlook: September 27, 2017

Regal HelpdeskDaily Market Report

Mid-Morning Look
Wednesday, September 27, 17
U.S. equities open higher, with the Dow trying to prevent its longest losing streak since March (comes in with 4-day decline – hasn’t lost 5-straight days since 8-day losing streak 3/16-3/27), led by a rebound in tech following strong earning and guidance from chip maker Micron (MU). Financials also among top gainers, rising with the jump in yields and ahead of tax-reform proposal (52-week highs for PNC, ETFC, SCHW, TROW, C, MET, AXP). Markets also getting a boost from better Durable Goods orders data and as investors await the official release of the Republican’s tax reform plan later today, though many details from the plan have already been leaked. Big moves a day later in bonds, currencies and commodity markets following Fed Chair Yellen comments yesterday, warning the Fed should be wary of tightening policy too gradually while offering little clarity on a December rate hike. Yellen went on to say in Q&A the Fed path is subject to a great deal of uncertainty. The comments have weighed heavily on bonds, with yields jumping globally, while the dollar rises and gold prices tumble back below the $1,290 an ounce level. Markets opened broadly higher, but have pared gains throughout the morning thus far. Dow component Nike (NKE) weighing early, falling around 4% after cautious outlook.
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar extends gains, topping yesterday’s intraday high for the dollar index (DXY), trading above 93.50 level (up 0.6%), its best levels in over a month following comments by Fed Chair Yellen yesterday and speed of hikes; the dollar tops the 113 level against the yen (first time since mid-July), while the euro slipped to 1.172 (lowest in a month)
·      Precious metals tumble, with gold falling more than 1% to trade under $1,290 an ounce as the dollar spiked and Fed Chair Yellen suggested they may go more aggressively with rate hikes; raising expectations for a December hike
·      Energy futures active on headlines that Iraqi Kurds choose independence by vote of 92% in historic referendum, as well as mixed inventory reports as API said weekly supplies unexpectedly fell by -761K barrels while gasoline stockpiles rose 1.5M barrels and distillates dropped by -4.5M barrels; the EIA said this morning, showed a surprise oil drawdown of -1.85M barrels vs. est. build 3.1M, while gasoline rises 1.1M barrels and distillates fall a smaller -814K vs. est. -2.05M
·      Treasury markets with a big decline early, as the yield on the 10-year jumps over 8 bps to top 2.30%, while the shorter term 2-yr rises above 1.47% (fresh 9-year highs); the move in yields joins a global selloff in bonds as investors boost expectations on a December rate rise after Fed chair Janet Yellen reiterated her views yesterday
 
Economic Data
·      Durable Goods orders jump; U.S. orders for long-lasting goods bounced back in August after suffering their worst monthly drop in nearly three year; Durable-goods orders climbed 1.7% last month, topping the 1% estimate by economists (vs. last month -6.8% report); the increase stemmed mainly from a big batch of orders for commercial aircraft. Bookings surged 45%; Business investment has surged at an 8% annualized rate in the past three months
·      Pending home sales fell (-2.6%) MoM to 19-month lows, greater than the expected decline of (-0.5%); pending home sales declined in all 4-regions as the Northeast fell 4.4%, Midwest fell 1.5, the South fell 3.5%, and the West fell 1%
Sector Movers Today
·      Internet; TWTR will lift its 140-character limit on tweets to 240 characters in an experiment with a small group that may expand to the entire social media platform; in online travel, TRVG downgraded to neutral at JP Morgan and lower estimates on TRIPsaying they are increasingly cautious on metasearch platforms in 2H17 and heading toward ‘18 as financial visibility is limited until they understand more around PCLN’s meta bidding strategy; FB positive mentions by several analysts (tgt raised to $200 at Cowen); OSTK said its subsidiary tZero is joining forces with Argon Group and RenGen to form a digital token exchange; Wells Fargo either initiated or resumed coverage on several Internet names (AMZN, BIDU, EBAY, BABA, GOOGL, FB, NFLX, JD all with outperform ratings – street high tgt on AMZN of $1,400)
·      Semi-equipment names active after MU capex hike– RBC said believe the continued NAND spending will benefit AMAT andLRCX the most. ICHR is likely to be an indirect beneficiary of increasing spend dynamic as AMAT/LRCX account for 90%+ of its sales; MU said it sees FY18 capex $7.5B up from a forecast for 2017 spending of $4.8B-$5.2B; Micron said the spending would be divided equally between DRAM and NAND
·      Financial technology; Raymond James downgraded INTU to Underperform from Market Perform and firm adjusts FDC and PYPLestimates for this year and next, while slightly lowering 2018 earnings estimate for VNTV; Bernstein said they believe PYPL will likely make a strategic acquisition in the coming months – one of the high-probability upcoming catalysts for the stock that motivated the to upgrade PayPal in early July (said top candidates may include Adyen, Klarna, Square and Stripe)
 
Stock GAINERS
·      AMAT & LRCX +3%; after MU boosted capex spending
·      AMBA +5%; Morgan Stanley said shares could rise to $115 powered by computer vision (CV), a video analytic technology that may be used in autonomous vehicles
·      CTAS +5%; trades to 52-week high after quarterly earnings beat/raised guidance
·      HUBS +11%; raised its Q3 guidance at its analyst day
·      MU +8%; after reported Q4 results that beat expectations across the board, fueled by healthy memory demand and supply trends/raised cap-ex outlook which lifts equipment names
·      OSTK +10%; said its subsidiary tZero is joining forces with Argon Group and RenGen to form a digital token exchange
·      SCHW +3%; as financials jump across the board on higher yields and tax reform hopes
·      TWLO +6%; as several analysts suggest that the new Amazon AWS Pinpoint service is also powered by Twilio (shares fell late yesterday)
 
Stock LAGGARDS
·      KRNT -17%; lowers Q3 revenue view to $27.0M-$28.5M from $34.0M-$38.0M
·      NKE -4%; reported slightly better quarterly results/but cautious on Q2 North America outlook
·      SCG -4%; fresh 52-week lows as SC Office of Regulatory Staff filed request Sept. 26
·      TRVG -2%; downgraded to neutral at JP Morgan
·      TTS -15%; downgraded at Piper and based on concerns of another comp/EPS miss for Q3
·      WOR -6%; after missing expectations for FQ1 earnings and revenues.
 
Syndicate
·      Ascendis Pharma (ASND) 3.8M share Spot Secondary priced at $35.50
·      Catalent (CTLT) 6.4M share Secondary priced at $39.10
·      Grupo Financiero (GGAL) 11M share Secondary priced at $50.00
·      RYB Education (RYB) 7.8M share IPO priced at $18.50
·      Westlake Chemical Partners (WLKP) 4.5M share Spot Secondary priced at $22.00
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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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