Mid-Day Outlook: October 5, 2017

Regal HelpdeskDaily Market Report

Mid-Morning Look
Thursday, October 5, 17
U.S. stocks rally again in early trading, with the S&P advancing for an eighth day, as investors await the Friday jobs data for additional clues on the pace of interest rate increase. New record highs for the S&P, Dow Industrials and Nasdaq Comp, while the Russell 2000, which snapped its 8-day win streak yesterday, is higher, but not quite yet at fresh record. There are several Fed member speaking today (Harker and Williams) talking about rates and inflation which has the dollar higher along with better economic data. Bonds slip, dollar rises, while oil on track to snap 3-day losing streak and the volatility index (VIX) extends its weakness with zero fear in the market.  If the broad-market benchmark finishes with a record on Thursday it will market its longest string of all-time high closes, six consecutively, since 1997, according to WSJ Market Data Group. Philadelphia Fed President Patrick Harker said he is expecting on additional rate hike in December, during a speech in Austin. Spain’s Ibex 35 extends rally to as much as 3%, most since aftermath of first round of French presidential election, after reports said Catalan separatists may stall a push for independence.
 
Treasuries, Currencies and Commodities
·      In currency markets, the euro falls to lows around 1.1715, down over -0.4%; The British pound extended its drop against the dollar on Thursday to hit a 4-week low (down around 1.313) amid BoE rates and political uncertainties; dollar slips slightly vs. yen
·      Commodity prices; oil on track to snap its 3-day losing streak after falling to 2-week lows yesterday despite bullish inventory data; gold prices modest gains, holding above $1,275 an ounce despite a bounce in the dollar
·      Treasury markets slip early following better jobless claims data and commentary from various Fed speakers indicating expectations to raise rates gradually )Fed Harker comments); the yield on the 10-year inch back above 2.34% while shorter term 2-yr rises above 1.48%
 
Economic Data
·      Weekly Jobless Claims fell 12K to 260K, below est. 265K and prior week unrevised figure of 272K; the 4-week moving average declined by 9,500 to 268,250, a figure still inflated by hurricanes Irma, Maria and Harvey; continuing claims rose 2K to 1.938M in the week ending Sept. 23
·      The U.S. trade deficit dropped (-2.7%) in August to -$42.4B from -$43.6B in July and was slightly below estimates of -$42.7B deficit; Imports slipped 0.1% to $237.7B while exports rose 0.4% to $195.3 billion, the Commerce Department said
·      Factory Goods Orders for August rise 1.2% vs. est. up 1.0%, while Factory orders for July unrevised at -3.3%; new orders ex-trans. for Aug. rise 0.4% and new orders ex-defense for Aug. rise 1.4% after falling 3.7% in July
Sector Movers Today
·      Retailers; COH downgraded to neutral at Piper as they expect the stock to enter into a period of digestion as the company integrates Kate Spade; in monthly comp sales data: BKE Sept comp sales fall (-5.7%) vs. est. down (-7.5%), while CATO comps fell (-11%) vs. est. (-10%); LB Sept comps fell (-2%, with weakness in Victoria Secret and strength in Bath & Body works
·      Media movers; Movie theatres RGC and CNK were upgraded to equal-weight from underweight at Morgan Stanley noting shares have lagged the market YTD by ~31% and ~16%, respectively, thanks to a disappointing summer box office and P-VOD concerns…but think fears of the implications of the former are overdone and of the latter reasonably priced in
·      Medical devices, equipment and services; ABC upgraded to buy at Baird saying that the company brings the cleanest story among its peers over the near- and intermediate-term, and warrants a valuation premium; MDT, PODD, active after JNJ said its Animas has discontinued the sale of all insulin pumps in the U.S. and Canada
·      Biotech movers; SNY and REGN won a new trial in their fight with AMGN over the cholesterol drug Praluent after an appeal court said they can raise issues related to the validity of the Amgen patents; BIIB was upgraded to overweight at Morgan Stanley (tgt to $375 from $311) saying the base business is underappreciated and Ocrevus share loss is slower than expected, while the firm downgrade CELG to underweight given underappreciated generic risk and a cautious view on 2018 pipeline potential; PBYItgt raised to $156 at Citigroup on buyout thesis
·      Asset managers; Morgan Stanley boosted Q3 EPS estimate +0.5% for the group and are 2.8% above consensus as they upgradedTROW to equal-weight but downgraded HLNE (to EW) and LM  (to UW) on valuation/says they continue to see a supportive backdrop for ebrokers, traditionals, and alternatives while they favor IVZ and CG into the quarter on potential topline and EPS beats
 
Stock GAINERS
·      ABC +4%; upgraded to outperform at Baird
·      BIIB +3%; upgraded to overweight at Morgan Stanley
·      FCX +4%; as copper prices jumped
·      NFLX +3%; raising prices in U.S. starting today: standard $9.99 plan will be $10.99/month, premium $11.99 plan will be $13.99
·      RECN +8%; after earnings results
·      SHW +1%; double upgraded to buy from underperform at Bank America with $435 tgt
·      STZ +3%; Q2 results top views, as EPS beats by 30c on revs of $2.08B, while boosted its year EPS
 
Stock LAGGARDS
·      CELG -4%; downgraded to underweight and $120 tgt at Morgan Stanley
·      GE -1%; cautious comments on GE at both Deutsche Bank and Morgan Stanley
·      NAVI -11%; as Pennsylvania Attorney General Josh Shapiro filed a lawsuit over widespread abuses in student loan origination and servicing businesses
·      NPTN -10%; guidance for 3Q gross margin has been lowered to 14-17%, down from 23-26% and also announced restructuring actions that will lead to job cuts
·      SEAS -2%; active after report of possible sale to Merlin Entertainment https://goo.gl/HRgBU6
·      SHOP -7%; extends yesterday losses after Citron Research negative comments
·      SNAP -1%; Needham said sees 10%-20% near-term downside, based on fundamental weakness
·      UPS -1%; after Bloomberg reported Amazon said to test its own delivery service
 
Syndicate
·      CareDx (CDNA) 4.342M share Secondary priced at $4.00
·      Matador (MTDR) 8M share Spot Secondary priced at $26.35
·      Rigel Pharmaceuticals (RIGL) 18.1M share Secondary priced at $3.35
·      Rhythm Pharmaceuticals (RYTM) 7.05M share IPO priced at $17.00
·      Tronox (TROX) 19.5M share 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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