Mid-Day Outlook: October 12, 2017

Regal HelpdeskDaily Market Report

Mid-Morning Look
Thursday, October 12, 17
Equities posting only modest losses after mixed earnings out of banks (JPM and C), and despite a slew of profit/rev warnings overnight (ETH, JILL, JNPR, NSTG, T, FBM) as markets continue to hold at record levels. After a slightly dovish takeaways from the FOMC minutes, market-implied odds for hike by year-end are at 75%, based on January 2018 Fed fund futures…and today’s data should only reinforce that view (jobless claims lower, hotter PPI inflation). President Donald Trump is scheduled to sign an executive order Thursday to expand health insurance options for some Americans, in a move that may also hurt coverage for those who remain in Obamacare (shares of hospitals, services and managed care active early). In Fed news, the normalization of monetary policy in the United States and other advanced economies should be manageable for emerging markets, Federal Reserve Governor Jerome Powell said on Thursday, although he cautioned on high levels of corporate debt. Semiconductor stocks continue to push higher, with the SOX index trading to another fresh 17-yr high and up for a 12th consecutive session. UK stocks rise (FTSE hit the highest level since June — when it reached an all-time high) and Pound loses ground as the EU said talks hit an impasse over what the U.K. owes when it leaves, increasing the chances of a messy departure as time is running out to clinch a deal. The dollar gains, oil falls and gold prices inch higher.
Treasuries, Currencies and Commodities
·      In currency markets, the dollar rebounds after 4-days of declines, with the dollar index moving to highs early on stronger inflation reading out of PPI/boosting expectations further for December rate hike by Fed; Bitcoin explodes to new record high over $5200 (up over 7%)
·      Commodity prices; precious metals gain early, while oil prices fell following a report (API) showing an increase in U.S. crude stockpiles last week — another sign that the market’s recovery will be slower than expected. Also Thursday, the International Energy Agency said global oil supply rose in September, while demand growth slowed; WTI crude now down over 1.5% (note the DOE inventory report set to be released at 11:00 today – pushed out a day due to holiday)
·      Treasury markets inch higher despite better economic data and higher inflation reading out of PPI; many macro/global factors influencing bond markets (Spain, UK, Fed, North Korea, tax reform and healthcare in US); 10-yr holding around 2.33%
Economic Data
·      Producer Price index (PPI) for September rises 0.4%, in line with estimates and above prior month of up 0.2%, while core prices (ex food and energy) rises 0.4% as well, but coming in above the 0.2% estimate; final demand ex food, energy rose 2.2% y/y vs. est. up 2% (comes ahead of the Consumer Price Index tomorrow morning)
·      Weekly Jobless Claims fell 15K to 243K vs. est. 250K; the 4-week moving average m dropped by 9,500 to 257,500 in the week ended Oct. 7; Prior week claims revised down to 258K from 260K; the number of people already collecting unemployment benefits, or continuing claims, fell by 32,000 to 1.89 million (lowest since 1973)
Sector Movers Today
·      Auto movers; GM plans to close the Detroit-Hamtramck assembly plant for 6 weeks starting in mid-November through end of year, WSJ reports, as move will temporarily lay off around 1,500 workers; SAH guides Q3 EPS 39c-42c, below consensus of 52c citing the effect of hurricanes; auto suppliers DLPH and BWA downgraded to hold from buy at Deutsche Bank; CARG 9.4M share IPO priced at $16.00; KNDI files $300M mixed securities shelf; MNRO cut to hold at Jefferies saying 2018 earnings growth is likely to slow
·      Furniture stocks; sector two negative pieces of news as ETH guides Q1 EPS 27c-28c on sales $181.3M below estimates 45c/$198.4M; WSM was downgraded to underperform at Credit Suisse (HOFT, LZB, PIR, BBBY, RH, LEG were active); Bloomberg reported that SpendTrend data show Sept. sales of soft home-furnishings fell 4.4%, adding that hardlines sector was “hard hit” last month as hurricanes ravaged Texas, Florida
·      Heavy duty truckers; Longbow downgraded CMI, ALSN and MTOR to neutral from buy following a recent truck dealer survey that suggests initial 2018 sales growth is below current industry forecasts, partly due to driver shortage concerns; said contacts expect 2018 Class 8 sales increase of 10% versus FTR Associate’s build forecast of up 21%
·      Large Cap banks; JPM reported a Q3 EPS beat, though revs of $3.16B just missed as FICC sales & trading revenue missed the average analyst estimate ($1.36B vs. Bloomberg est. $1.41B), while investment banking revenue $1.71B beat $1.65B est.; analysts notes beat driven mostly by JPM’s retail banking, stronger results in Cards, and better loan growth; Citigroup (C) Q3 EPS and revs top consensus helped by lower spending; CBSH in-line quarter with positives including better cost control and lower credit costs, though offset by lower than expected revenues; earnings tomorrow from BAC, FHN, PNC, WFC
·      ARDX +40%; said second phase III study of tenapanor meets statistical significance for primary endpoint and all secondary endpoints
·      DXC +3%; will spin its U.S. Public Sector business & combine it with two privately held entities
·      FAST +2%; rebounds after decline yesterday post earnings
·      HST +2%; upgraded to buy at Deutsche Bank
·      INFI +55%; upgraded to outperform ($5 tgt) after its submission of an IPI-549 late-breaking abstract was accepted for oral presentation
·      KR +2%; upgraded o equal-weight at Stephens on possible convenience store sale
·      ZEN +6%; positive mention at Piper ahead of earnings and raised tgt to $35
·      ACRX -58%; shares plunge as the FDA rejects its marketing application for pain med DSUVIA
·      DPZ -6%; despite having reported 3Q EPS/revs/comp sales that topped analysts’ expectations
·      HAWK -15%; Q3 results missed on revs/beat EPS, even when factoring in a one-time tax benefit
·      JILL -46%; cuts Q3 adjusted EPS view to 8c-10c from 18c-20c and cuts Q3 comp sales view
·      JNPR -5%; guided q3 EPS and revenues below consensus citing lower demand in its cloud vertical
·      MELI -6%; on reports AMZN is recruiting for several positions in Brazil
·      NSTG -23%; reports Q3 preliminary revenue $25.9M-$26.9M vs. est. $27.68M
·      ULTA -6%; downgraded to neutral by Cleveland Research as expects industry slowdown in cosmetics and increasing competitive promotions to pressure near-term results
·      T -3%; warned of Q3 lower revenue and profit after several devastating hurricanes
·      VIAB -4%; 52-week low and downgraded at Guggenheim/company also warns CHTR customers they may lose some channels if the two companies can’t resolve a contract dispute
·      CarGurus (CARG) 9.4M share IPO priced at $16.00
·      Flexion (FLXN) 4.8M share Secondary priced at $25.50
·      OrthoPediatrics (KIDS) 4M share IPO priced at $13.00
·      Restoration Robotics (HAIR) 3.575 share IPO priced at $7.00
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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