Morning Preview: October 4, 2017

Regal HelpdeskDaily Market Report

Early Look
Wednesday, October 4, 17
U.S. stocks on track to take a breather after major indexes booked another round of records on Tuesday, with the S&P 500 notching its sixth positive session in a row, The Nasdaq Composite Index made it a sixth gain in a row, the Dow Industrials a 5th straight day of gains and the Russell 2000 Index closed at an all-time peak for a second day in a row and an 8th straight overall gain. The index of small companies has outperformed its larger-benchmark peers over the past 30 days, up nearly 7%, compared with a 3% rise for the Dow and a 2.3% gain for the S&P in that same period. Gains were led from upbeat data, including reports on vehicle sales. Private payroll jobs to be released at 8:15 AM this morning, ahead of the nonfarm payroll report on Friday. Some big moves in the healthcare sector given FDA news (MYL, CATB, CTMX higher, TEVA lower). Fed chief Janet Yellen is due to give brief opening remarks at a conference on community banking at the St. Louis Fed at 3:15 PM EST. In Asian markets, The Nikkei Index rose 12 points to settle at 20,626, the Shanghai Index remains closed for a week-long holiday and the Hang Seng Index rose 205 points to end at 28,379. In Europe, the German DAX is up a few points (after being closed yesterday) above the 12,900 level, while the FTSE 100 is flat around 7,465.
Market Closing Prices Yesterday
·      The S&P 500 Index jumped 12.58 points, or 0.65%, to 2,140.45
·      The Dow Jones Industrial Average rose 98.58 points, or 0.59%, to 18,836.10
·      The Nasdaq Composite spiked 44.58 points, or 0.05%, to 5,296.23
·      The Russell 2000 Index advanced 22.72 points, or 0.55% to 1,243.94
 
Events Calendar for Today
·      7:00 AM EST       MBA Mortgage Applications Data
·      8:15 AM EST       ADP Employment Change for September…est. 135K
·      9:45 AM EST       Markit US Services PMI, Sept-F…est. 55.1
·      9:45 AM EST       Markit US Composite PMI, Sept-F…prior 54.6
·      10:00 AM EST     ISM Non-Manufacturing Composite for September…est. 55.5
·      10:30 AM EST     Weekly DOE Inventory Data
·      3:15 PM EST        Fed’s Yellen to speak on Community Banking in St. Louis
World News
·      Japan’s services sector expanded in September at the slowest rate in 11 months as the pace of new orders eased. The Markit/Nikkei survey showed its Japan Services Purchasing Managers Index (PMI) fell to a seasonally adjusted 51.0 from 51.6 in August.
·      Investor Intelligence Poll shows newsletter writers classified as bulls rise to 57.5%, remains at highest since August 9, from 54.3% last week; three weeks of gains come after falling to 47.1% on September 13; bearish sentiment little changed at 17.0% vs 17.1% last week, remains at lowest level since August 9 and those expecting a correction tumbles a third week to 25.5 from 28.6%
·      The Reserve Bank of India held its benchmark rate steady at 6% at its bi-monthly monetary policy committee meeting on Wednesday
·      Iceland’s central bank has cut its benchmark interest rate by a quarter of a point to 4.25%, noting tamer inflation, weaker growth and cooling tourism
 
Sector News Breakdown
Consumer
·      PepsiCo (PEP) Q3 core EPS $1.48/$16.24B vs. est. $1.44/$16.31B; now sees FY17 core EPS $5.23 vs. est. $5.16 and now expects full-year organic revenue growth to approximate YTD rate of 2.3% vs previous expected growth rate of “at least” 3%
·      Ford (F) said it is starting an aggressive “fitness” program of cost cuts and plans to shift production to products and services with highest growth potential; will focus more on trucks and SUVs and fewer passenger cars; said plans to accelerate introduction of connected, smart vehicles and services; by 2019 forecasts that 100% of its new vehicles in U.S. will have modern connectivity; plans to reduce automotive cost growth by 50% through 2022; plans $10B in incremental material cost reductions through use of common parts, targets $4B in engineering cost cuts over the next 5 years; reaffirms 2017 forecasts
·      Office Depot Inc. (ODP) said it planned to buy IT company CompuCom Systems Inc. for $1 billion. Office Depot also said it was lowering its outlook for 2017, saying it expects adjusted operating income to be between $400 million and $425 million, from an estimate of $500 million https://goo.gl/wr8puu
·      Tesco PLC (TSCDY) reported an eight-fold rise in first-half pretax profit and returned to the dividend list after a three-year hiatus.
·      Advance Auto Parts (AAP) downgraded to Market Perform at Raymond James
 
Energy
·      The American Petroleum Institute (API) reported that U.S. crude supplies fell for a second week in a row, by -4.1M barrels for the week ended Sept. 29; gasoline stockpiles rose 4.2 million barrels, while inventories of distillates declined by 584,000 barrels
·      Venezuela’s oil minister said on Wednesday he has invited up to 12 more oil-producing countries to join Opec-led output cuts, as oil prices slip back towards $55 a barrel – Financial Times
·      Patterson-UTI (PTEN) reported that for the month of September, the company had an average of 161 drilling rigs operating. For the three months ended September 30, the company had an average of 161 drilling rigs operating
 
Financials
·      Texas Capital Bankshares (TCBI) downgraded to Neutral from Outperform at Wedbush based solely on valuation. Lowering 12-month price target to $87 from $88
·      Net 1 Ueps Technologies (UEPS) files for sale of 9.98M in shares
 
Healthcare
·      Mylan NV (MYL) rises 15% as the FDA approved its generic versions for Teva Pharmaceutical Industries Ltd.’s (TEVA) multiple sclerosis drug Copaxone, a drug for people with relapsing forms of multiple sclerosis (TEVA shares fall over 9%)
·      Amgen (AMGN) and CytomX Therapeutics (CTMX) entered a strategic collaboration in immuno-oncology to co-develop a CytomX Probody T-cell engaging bispecific against the epidermal growth factor receptor (EGFR). AMGN to make an upfront payment of $40M and purchase $20M of CTMX shares while CTMX eligible to receive up to $455M in milestones (CTMX shares up over 30% on the collaboration)
·      Rigel Pharmaceuticals (RIGL) announces offering of $40M of common stock
·      Catabasis Pharmaceuticals (CATB) gains 28% after data from a mid-stage study showed that its therapy for Duchenne muscular dystrophy (DMD) slowed progression of the disease. The drug developer is planning to start a late-stage registrational study in the first half of next year.
·      NewLink Genetics (NLNK) 5M share Spot Secondary priced at $10.25
 
Industrials & Materials
·      RPM International (RPM) Q1 EPS 86c/$1.35B vs. est. 84c/$1.34B
·      Greenbrier (GBX) said sees exceeding FY2017 EPS forecast (saw FY EPS $3.45-$3.65) vs. est. $3.55; 4Q new orders 2,500 railcar units, valued at $200M
·      Paccar (PCAR) upgraded to Overweight from Neutral at JPMorgan
·      Japan’s Toshiba Corp (6502.T) said it is buying back a 10% stake in Westinghouse Electric Co from minority shareholder Kazatomprom for 59 billion yen ($522 million), taking full ownership of the bankrupt U.S. unit.
 
Technology, Media & Telecom
·      The European Commission has ordered Luxembourg to recoup €250 million ($294 million) from Amazon.com Inc. (AMZN) in back taxes, saying the company received illegal state aid.
·      Verizon Communications Inc. (VZ) said that a 2013 hack into Yahoo’s network affected all Yahoo accounts, roughly 3 billion, after previous estimates said 1 billion accounts were affected.
·      The massive data breach at Equifax Inc. (EFX) could have been prevented with Oracle Corp.’s (ORCL) automated databases, Larry Ellison said Tuesday
·      Shares of Japan Display Inc jumped as much as 24% after the Nikkei business daily reported the company had developed a way to mass-produce lower-cost organic light-emitting diode (OLED) screens and would start as early as in 2019.
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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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