Morning Preview: October 3, 2017

Regal HelpdeskDaily Market Report

 
Early Look
Tuesday, October 3, 17
Stocks futures are at it again, as the S&P 500 remains on course for its sixth up session in a row and for another record close, just a day after the Dow, S&P 500, Nasdaq, Russell 2000 all ended at fresh record highs. The biggest advance was in the small-capitalization oriented Russell 2000, rising about 1.1% on the day as optimism around President Donald Trump’s tax overhaul proposal coming to fruition and expectations that third-quarter results will be strong, have powered stocks higher. Yesterday’s breakouts were also helped by a surprisingly strong ISM manufacturing survey for September. The euro slumped to a 6-week lows against many currencies after an independence referendum in Spain’s Catalonia region turned violent, leaving hundreds injured in clashes between police and voters. September figures for U.S. auto sales are due to roll out throughout the session today (note the group was strong yesterday behind an upgrade of General Motors – receiving another one today).
 
In Asian markets, The Nikkei Index rose 213 points (1.05%) to settle at 20,614, the Shanghai Index was closed for a week-long holiday and the Hang Seng Index surged 618 points (2.25%) to settle at 28,173. Asian markets had an unusually strong reaction to the central bank’s weekend decision to reduce the amount of cash lenders must hold as reserves. In Europe, the German DAX is up over 70 points at 12,900 after closing at a record high yesterday, while the FTSE 100 is up a few points around 7,450.
Market Closing Prices Yesterday
·      The S&P 500 Index gained 9.76 points, or 0.39%, to 2,529.12
·      The Dow Jones Industrial Average rose 152.51 points, or 0.68%, to 22,557.60
·      The Nasdaq Composite climbed 20.76 points, or 0.32%, to 6,516.72
·      The Russell 2000 Index advanced 18.61 points, or 1.25% to 1,509.47
 
Events Calendar for Today
·      7:45 AM EST       ICSC Weekly Retail Sales
·      8:55 AM EST       Johnson/Redbook Weekly Sales
·      4:30 PM EST        API Weekly Inventory Data
·      Monthly auto sales data throughout the day
 
World News
·      Australia’s central bank held interest rates at 1.5% (as expected) for a 14th straight month on Tuesday, prompting the Australian dollar to drop as much as half a percent against its US counterpart
·      Chinese bank shares got a big boost in Hong Kong, in an unusually strong reaction to the central bank’s weekend decision to reduce the amount of cash lenders must hold as reserves.  The planned cut, effective in 2018, will release around 300 billion yuan ($45 billion) in liquidity, help stabilize bond yields and bank funding costs, and support 2 to 3 basis points of net interest margin expansion at some banks according to one analyst.
·      IHS/Markit UK construction purchasing managers’ index that showed the sector unexpectedly contracted in September as the index came in at 48.1 from 51.1 in August, missing forecasts of a 50.9 reading. It’s also the first time in 13 months that the index has fallen below the 50 level
 
Sector News Breakdown
Consumer
·      Tesla (TSLA) Model 3 production was less than anticipated due to production bottlenecks’ in Q3; says it expects to deliver more than 100,000 Model S and Model X units combined in 2017; says it delivered 26,150 cars in Q3 as deliveries included 14,065 Model S, 11,865 Model X and 260 Model 3 (1st quarter of availability)
·      Lennar (LEN) Q3 EPS $1.06/$3.26B vs. est. $1.00/$3.26B; 3Q new orders +8%, Q3 backlog +10%, Q3 new home deliveries +12%, Q3 Gross Margin on Home Sales 22.8%
·      General Motors (GM) upgraded to Buy from Neutral at Bank America and raise tgt to $57 from $40
·      Herbalife Ltd. (HLF) boosted its Q3 EPS outlook to account for a self-tender offer of its shares that is scheduled to close on Thursday; now sees Q3 EPS 80c-90c vs. est. 87c and above prior view of 65c-85c
·      Note monthly auto sales for September to be released through the day today (GM, F, FCAU, TM, NSANY)
·      Sanderson Farms (SAFM) files common, preferred stock offering
 
Energy
·      Diamondback Energy, Inc. (FANG) announced Q3 production was 85.0 Mboe/d, an increase of over 10% from Q2 2017 average daily production of 77.0 Mboe/d; said Q3 production volumes were not affected by Hurricane Harvey. Viper Energy Partners LP, a subsidiary of Diamondback, also announced Q3 2017 production volumes of 12.6 Mboe/d, an increase of approximately 20% from Q2 2017 average daily production
·      Callon Petroleum Company (CPE) announced a revised production guidance range of 22,450 to 22,600 barrels of oil equivalent per day (“Boe/d”) for Q3, reduced from a previous guidance range of 23,000 to 25,000 Boe/d (prior guidance of 77% oil production and estimates for expenses and operational capital expenditures for Q3 are unchanged)
·      Refiners: Phillips 66 (PSX) upgraded to Buy at Goldman and they downgraded Marathon Petroleum (MPC) to neutral
 
Financials
·      Equifax Inc. (EFX) said late Monday that about 2.5 million more U.S customers were affected by a recent cyberattack than previously reported following a forensic analysis by security firm Mandiant
·      Bank of the Ozarks (OZRK) raises quarterly dividend 2.78% to 18.5c per share
 
Healthcare
·      Biotech stocks outperformed Monday, with the IBB rising around 1.5%, helping lead the Russell 2000 to a 1% gain, and also helped boost the Nasdaq Composite despite tech weakness. Part of the reason biotech’s are higher is Trump’s tax cut plan. Getting rid of the health-care reform debate removes the possibility of price controls and other changes that might lower prices. And then there’s the possibility of a corporate rate cut which could fatten the bottom line
·      Boston Scientific Corp. (BSX) to acquire Apama Medical Inc., a privately-held company that is developing the Apama Radiofrequency (RF) Balloon Catheter System for the treatment of atrial fibrillation for $175M in cash up-front
·      Zogenix (ZGNX) 4.3M share Secondary priced at $37.50
 
Industrials & Materials
·      AZZ Inc. (AZZ) Q2 EPS 32c/$190.4M vs. est. 44c/$196.76M; sees FY18 EPS $1.80-$2.30 on revs $825M-$885M vs. est. $2.20/$196.76M
·      Jeff Immelt retired as a director and chairman of the board of General Electric (GE) and elected Flannery to replace him effective Oct. 2. Immelt also retired as chairman of Baker Hughes and elected Lorenzo Simonelli to replace him
 
Technology, Media & Telecom
·      The U.S. Justice Department agreed to clear CenturyLink Inc.’s (CTL) $25 billion takeover of Level 3 Communications Inc. (LVLT)if the telecom providers shed some of their fiber-optic infrastructure, moving the deal one step closer to closing.https://goo.gl/TWf2Rt
·      Facebook Inc. (FB) estimates that 10 million people saw the advertisements that have been linked to Russian efforts to influence last year’s U.S. presidential election. About 44% of the ads were seen before the Nov. 8 election, Facebook’s vice president of policy and communications said
·      Park Electrochemical (PKE) Q2 EPS 12c/$29.8M vs. est. 13c/$28.0M
·      Alphabet Inc. (GOOGL) will look to impress gadget lovers Wednesday with a new line of devices for the holiday shopping season. Though much of what Google will unveil at the San Francisco event has been reported, thanks to a series of leaks last month. Two new Pixel phones — one larger than the other — a new high-end Chromebook, a mini version of Google’s Home smart speaker and an updated Daydream virtual-reality setup are expected.
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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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