Mid Day Outlook: October 23, 2017

Regal HelpdeskDaily Market Report

Mid-Morning Look
Monday, October 23, 17
Equities again making new record highs, with the S&P 500 and Dow Industrials rising for a 7th straight session, while the tech heavy Nasdaq Comp underperforms despite a strong beat from STX in the chip and hard drive sector. The Nikkei 225 equity index closed higher for the fifteenth straight day on Monday, marking its longest winning streak on record as the yen fell on election victory for Japan’s ruling party. Today saw a few highlight earnings reports, with STX, VFC driving higher after results, while HAS, ARNC, STT slide on mixed results – but week going to get a whole lot busier. Note Friday marked the 24th time in 2017 that all three main benchmarks simultaneously closed at records, with major averages mixed today. Highlights this week include President Trump could make his Fed chair decision (the market continues to assume the job will go to Powell as per Politico report last week), while the House is expected to vote successfully on the Senate budget resolution. There are also several geopolitical issues (Japan election, Catalonia issue and North Korea ongoing) – but earnings should be the main driver this week (one of, if not the busiest week of the quarter).
Treasuries, Currencies and Commodities
·      In currency markets, the dollar edges higher vs. most currencies, as euro slips on Spain and dollar rises vs. Japanese yen after election in Japan; Bitcoin falls over 4% after Saudi Prince Alwaleed in a CNBC interview today compared to Enron; British pound flat
·      Precious metals fall to two-week lows as the dollar and stocks extend latest advance; gold prices suffered their biggest weekly loss in a month last week (down nearly 2%), as the greenback rallied after passage of a budget healthcare blueprint that’s seen helping to clear the way for the stock market-strengthening tax cuts promised by President Trump
·      Energy futures are posting gains, with WTI crude holding above $52 per barrel
·      Treasury markets inch higher as yields slip as investors weigh Spanish tensions, Japan election; the 10-yr yield down about 1 bps under 2.37%; there was only one small piece of economic data but no Fed speakers all week as they remain in “blackout period” ahead of decision
Sector Movers Today
·      Medical devices and equipment; EXAC acquired by private equity investment firm TPG Capital in a deal valued at $625M, with holders receiving $42 per share in cash https://goo.gl/nZpNJm;  ILMN upgraded to buy at Deutsche Bank and raise tgt to $250 which reflects a view that they see bias to the upside for numbers over the next 6-12 months; QDEL received 510(k) clearance from the FDA to market its Sofia Lyme FIA; ALGN tgt raised to $225 at Stifel
·      Multi industry/Machinery; CAT said Sept. rolling 3-mo. retail machine sales rise 13% vs Aug. 11% rise, July up 12% while North America machine sales up 2% after rising 1% in August; ITW Q3 EPS easy 20c beat on better revs and stronger guidance; LII EPS and revs also top consensus and raised year rev outlook with FX boost but margins disappoint; ARNC boosts full year outlook; GEdowngraded by a few analysts after earnings miss last week (upgraded by one analyst)
·      Internet; EBAY active as StubHub to become designated NFL ticket resale market place replacing Ticketmaster (owned by LYV);NFLX to sell $1.6B in senior notes; MELI downgraded at KeyBanc as the Company enters a multiyear profitability transition that could be a step function down; ETSY shares were active after AMZN announced a handmade gift shop
·      Retailers; VFC reported a beat and raise quarterly results and lifted year forecasts saying rev strength driven by broad-based strength across VF’s international and direct-to-consumer platforms; FL downgraded to neutral at Buckingham Research and cut tgt to $29 from $47 citing no near-term catalysts; COH positive mention in Barron’s saying shares could rise more than 25% amid chance to grow newly acquired Kate Spade brand; HAS leads toy retailers lower after Q4 revs guided 4%-7%, below est 11% (MAT falls)
·      AIMT +28%; benefits from DBVT trial failure
·      BSFT +1%; acquired by CSCO for about $1.9B, getting $55 per share https://goo.gl/Vn5s3N
·      DEL +5%; to be bought by PCH in deal valued around $1.16B  https://goo.gl/o6NjCA
·      DVA +3%; upgraded to outperform by Wolfe Research
·      EXAC +31%; acquired by private equity investment firm TPG Capital in a deal valued at $625M, with holders receiving $42 per share in cash https://goo.gl/nZpNJm
·      PETS +23%; as the pet pharmacy reported Q3 profit and sales that rose well above expectations
·      STX +8%; Q1 EPS topped consensus by 10c on better revs of $2.63B
·      VFC +6%; reported a beat and raise quarterly results and lifted year forecasts
·      WDC +2%; moves high on sympathy with STX earnings beat
·      ARNC -5%; Q3 EPS missed by 2c on slightly better revs
·      DBVT -47%; announced top-line data for its Phase 3 PEPITES trial of Viaskin Peanut showing that the study missed the primary endpoint
·      GE -4%; downgraded by two analysts after Friday earnings miss
·      HAS -8%; leads toy retailers lower after Q4 revs guided 4%-7%, below est 11% (MAT falls)
·      HIG -2%; to buy AET’s U.S. life and disability unit for $1.45B https://goo.gl/sjzGXL
·      STT -3%; operating results topped estimates but large miss in servicing fees
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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