Mid-Day Outlook: October 11, 2017

Regal HelpdeskDaily Market Report

Mid-Morning Look
Wednesday, October 11, 17
Equities are little changed early with markets awaiting minutes from the last Federal Reserve meeting (released at 2:00 PM EST) for clues on the timing of an interest rate increase. Markets are mixed to start with the dollar slipping again and investors bracing for the start of earnings season as big banks report the next 2-days (JPM, C, WFC, and BAC). In Europe, relief rally seen in Spanish assets in reaction to Catalonia looking for negotiations rather than immediate independence. Upcoming catalysts later today include focus on FOMC minutes though few surprises expected as many Fed members have suggested a rate hike in December is likely (Kaplan today though said is keeping an open mind on U.S. rate hikes) and subsequent three hikes in 2018.  Oil, bonds and gold prices flat ahead of Fed.
Treasuries, Currencies and Commodities
·      In currency markets, the U.S. dollar weakens for a 3rd straight session as potential tax delay concerns arise this week due to President Trump/Corker dispute; the euro jumps to 1.185 to best level in 2-weeks, while dollar dips vs. yen and Pound as well ahead of FOMC minutes later; as for the Mexican Peso, after weakening every day for the past week, the currency bounced off its 200-DMA yesterday
·      Precious metals little changed after rising over 0.7% yesterday to best level in 2-weeks; gold has been helped by a declining dollar the last few days, with gold prices rising 3-straight days coming into the day (longest streak in 5-weeks); the FOMC minutes may move needle later
·      Energy futures little changed despite reports that OPEC crude oil production jumped last month by nearly 90,000 barrels a day, complicating the cartel’s efforts to limit output and curb the global supply glut. Reminder no DOE oil inventory data at 10:30 today – pushed out to tomorrow morning at 11:00 AM due to Columbus Day holiday (API data out tonight)
·      Treasury markets up slightly, with the yield on the 10-yr down slightly just under 2.34% and the 2-yr yield steady at 1.51% ahead of the Fed minutes later today; also a 3-yr bond auction at 1:00
Sector Movers Today
·      Internet; BABA said it sees over $15B in R&D investment over the next three years; AMZN is launching a monthly payment option for college students priced at $5.49 per month after a six-month trial and with no annual commitment; Goldman Sachs assumes names in Internet sector with buys on IAC and ANGI though sell rated on GRPNAMZN and GOOGL tgt raised to Street high $1,350 at Credit Suisse as well as high for FB to $235 and SNAP tgt upped to $20
·      Asset managers with monthly AUM data: AB said preliminary assets under management (AUM) increased to $535B from $529B MoM; IVZ preliminary month-end AUM was $917.5B, an increase of 1.2% MoM; APAM prelim AUM, as of September 30 totaled $113.7B; LM reports September preliminary AUM $754.4B; TROW prelim Sept AUM $948B vs. $934B end of August; VRTS Sept prelim AUM $90.6B, up from $88.5B QoQ; in earnings, BLK operating revenues were above forecast mainly due to higher performance fees
·      Cards, Finance and Lending; MA and Visa (V) both assumed coverage with outperform ratings at Wells Fargo while AXP named top pick; PYPL was upgraded to overweight at Morgan Stanley and raise tgt to $76 saying it has a long runway of high teens rev growth and manageable risk from EBAY contract renegotiation; GDOT downgraded to hold on valuation but tgt raised to $55 from $44 at LakeStreet
·      Airlines; DAL Q3 EPS beat by 5c on better revs of $11.06B, while Q3 passenger unit revenue up 1.9%/said sees continued pressure on margins as its unit revenue momentum catches up to the rise in fuel prices that began in July; JBLU says the hurricanes lopped off $44M from revenue and about $30M to $35M from operating income, while traffic fell -4.4%
·      Retailers; group buoyed by positive investor day comments/stock buyback out of WMT yesterday (several analysts raised tgts on stock); CHS downgraded to underperform at Bank America; Morgan Stanley said in Smartphone survey that fewer respondents plan to purchase new smartphones in big box stores (neg read-through BBY); UAA tgt cut to $14 at Piper after semi-annual teen survey indicated a further softening in athletic apparel; sporting goods stores weaker after Wells Fargo said that despite DKShaving slashed forecasts for rest of this year, thinks next year’s estimates need to come down (HIBB, SPWH also moving)
·      CL +2%; upgraded to buy at SunTrust and raised tgt to $85 from $65
·      JNJ +1%; upgraded to buy at Jefferies
·      KR +3%; reaffirmed forecast and said is considering sale of its convenience stores
·      PYPL +2%; upgraded to overweight at Morgan Stanley and raise tgt to $76
·      RRC +2%; upgraded to overweight at Barclays to reflect a sharp contraction in the multiple
·      TGT +2%; adds to yesterday gains following WMT positive investor day comments
·      CRY -15%; guides Q3 revs about $44M below $47M estimate and acquires JOTEC for $225M
·      CUDA -9%; Q2 results beat with 20% core billings growth, but margins fall YoY/rev guidance miss
·      FAST -2%; in-line EPS but said sales Q3 sales and gross profit was hurt by the effects of hurricanes
·      GE -1%; tgt cut to $20 at JP Morgan as firm said they now see a dividend cut increasingly likely
·      HDSN -12%; guided Q3 EPS and revs below estimates (3c-5c on revs $25M vs. est. 10c/$40.97M)
·      HIMX -6%; downgraded to neutral at Mizuho saying shares reflect the 3D sensing story in 2018-19
·      MU -1%; announced that it is raising roughly $1 billion by selling stock
·      RHI -4%; downgraded to hold at SunTrust
·      UAA -2%; tgt cut to $14 at Piper after teen survey indicated a further softening in athletic apparel
·      VOXX -22%; after earnings
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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