Mid-Day Outlook: October 3, 2017

Regal HelpdeskDaily Market Report

Mid-Morning Look
Tuesday, October 3, 17
U.S. stocks open higher Tuesday, extending record gains for the four major averages, while consumer stocks rose and utilities and real estate shares slid. The S&P 500 index trying to make it a 6th straight day of gains after setting new record intraday high early, the Dow Industrials come into the day with a 4-day win streak, the Nasdaq Composite with a current 5-day win-streak and the SmallCap Russell 200 Index comes into the day with a seven-day win streak, as small caps seen as biggest beneficiaries of the Trump tax reform proposals, which has juiced markets over the last week. After snapping 9-day win streak yesterday, the DJ Transport index surpasses Friday’s all-time levels on 9,934.81, led by a spike in airline stocks early. Autos highlighted today following strong September U.S. auto sales, with GM, Ford (and others) topping consensus estimates. MKM Partners noted today that if as of yesterday, 171 (or 34%) of the S&P 500 Index components had gained 20% or more on the year. Forty-four are up more than 40%. In Fed news, Politico reported that Mnuchin is said to favor Powell for Fed Chair, noting that Kevin Warsh and Jerome Powell are frontrunners for next Fed chair.
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar takes a breather after the dollar index (DXY) traded to 1-month highs yesterday on increased interest rate hike expectations given strong economic data (ISM report best level in 13-years yesterday), and new tax reform policies; euro slumped to a 6-week lows against many currencies after an independence referendum in Spain’s Catalonia region turned violent
·      Precious metals extend losses, falling further in to negative territory as Treasury yields extended their climb, and as assets considered risky drew buyers vs. sellers of safe haven assets; December gold prices closed at its lowest level in about 2-months yesterday
·      Energy futures little changed above $50.50 per barrel after slipping over 2% yesterday, down from best levels since April in a bout of profit taking. Inventory data after the close with API and EIA reports tomorrow
·      Treasury markets again little changed, with the yield on the benchmark 10-year holding between 2.32%-2.35% for a third day; no major economic data today to move markets after strong ISM manufacturing report yesterday; 2-yr yield remains at 1.47% (holding near 9-year highs)
 
Sector Movers Today
·      Auto sales; monthly auto sales for September released today for major autos: GM Sept U.S. auto sales rose 11.9% to 279,397 vehicles vs. est. 7.9%; Ford (F) said Sept U.S. light vehicle sales rose 8.9% to 169,544 vehicles vs. est. up 2.3%; FCAU Sept U.S. auto sales fell (-9.7%) to 174,266 vehicles vs. est. drop of (-13%); TM Sept U.S. sales were up 14.9% to 226,632 vehicles vs. est. up 9.3%; NSANY Sept U.S. auto sales rose 9.5% vs. est. decline (-8.7%)
·      Other auto news; TSLA announced 3Q17 deliveries of 26,150 units, delivered 14,065 Model S vehicles (down 12% YoY, up 17% MoM) and 11,865 Model X (up 35% YoY and 19% MoM) in the quarter; GM upgraded to buy at Bank America (follows positive commentary by both Citigroup and Deutsche bank yesterday that lifted shares by over 4%); auto supplier LEA downgraded to hold at UBS on valuation while raising tgt; FCAU recalls more than 700K SUVs that at risk for a brake defect according to DJ
·      Housing & Building Products; homebuilder LEN quarterly profit beats on higher home sales, prices (EPS tops highest estimate n in-line revs of $3.26B), while new orders rise 8% to 7,610 homes; LGIH was downgraded to neutral at Wedbush as price target achieved; MTH said net orders increased approximately 8% to 1,874 in Q3, though noted it lost two weeks of production and sales in Houston due to hurricane which delayed 30-35 closings; WHR will receive a decision by Oct. 5th from the ITC on its safeguard petition against LG/Samsung for the dumping of washers in the US; TTS shares plunge as 3Q prelim sales of about $84M miss est. $87.1M and said prior expectations for full-year 2017 are no longer applicable
·      Internet; Wayfair (W) positive mention at Piper which raised its estimates citing an analysis of Google Search trends that indicated 3Q direct retail revenue growth of 56% vs average estimate of 42%; TRIP estimates cut at Citigroup and added to negative catalyst watch list; FB said it estimates that 10 million people saw the advertisements that have been linked to Russian efforts to influence last year’s U.S. presidential election
 
Stock GAINERS
·      AVXS +1%; rises after positive Initial phase 1 trial data for AVXS-101
·      CTL ; U.S. Justice Department agreed to clear CTL’s $25B takeover of LVLT if they shed some of their fiber-optic infrastructure, moving the deal closer to closing https://goo.gl/TWf2Rt
·      ECYT +52%; adds to yesterday’s 157% gain after reports phase III ready prostate cancer therapy pact (shares were upgraded to outperform at Wedbush today)
·      GM +3%; Sept U.S. auto sales rise 11.9% vs. est. 7.9%; also upgraded to buy at Bank America
·      LEN +3%; quarterly profit beats on higher home sales, prices (EPS tops highest estimate)
·      PAYX +3%; as Q1 EPS topped consensus on in-line revenue
·      TA +6%; rises in sympathy after Berkshire said it is buying a 38.6% stake in Pilot Travel Centers LLC (Pilot Flying J), an operator of travel centers in North America https://goo.gl/ibvAVU
·      +4%; positive mention at Piper which raised its estimates
 
Stock LAGGARDS
·      CPE -1%; as lowers Q317 and FY17 production guidance
·      CPTA -8%; announced a 25c per share distribution for 4Q, down from 39c in Q3
·      ERIC -2%; downgraded to underperform at Credit Suisse as sees sales/margins disappointing
·      FFIV -2%; tgt cut to $90 from $100 at Deutsche Bank and reiterated sell rating
·      GPS -2%; as retailers underperform broader sector movers
·      TSLA -1%; Q3 deliveries overall solid but Q3 Model 3 production falls short; increases prior Model S/X delivery guidance (Tesla delivered 26,150 vehicles in Q3, of which 14,065 were Model S, 11,865 were Model X, and 220 were Model 3)
·      TTS -34%; 3Q prelim sales of about $84M miss est. $87.1M and said prior expectations for full-year 2017 are no longer applicable; gross margin guidance misses.
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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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