Mid Day Outlook: October 25, 2017

Scott GreenDaily Market Report

Mid-Morning Look
Wednesday, October 25, 17
U.S. equities are lower following a handful of earnings results from S&P 500 companies (CMG, AMD, EW, JNPR) weighing on prices early, while markets await tomorrow’s ECB policy meeting, results on the next Fed Chairperson from President Trump and conclusion of the tax reform saga. Economic data today coming in well above consensus, with new home sales surging nearly 19% to the strongest pace in a decade in September as robust demand buoyed builders, while Durable Goods orders also top economist estimates. Asia equities ended higher on Wednesday following overnight US gains. Japan underperformed, with the Nikkei ending its record winning streak at 16 sessions. Mainland China gained momentum after opening in negative territory. Defensive assets slide as gold drips lower and bonds fall again, with the 10-year yield touching its best level since May (above 2.47% earlier). Another round of earnings expected tonight and tomorrow to conclude the busiest week of quarterly results. Modest move lower thus far after stocks traded near record highs again yesterday.
Treasuries, Currencies and Commodities
·      In currency markets, the Canadian loonie falls against the dollar after the BoC held rates steady, but said will be cautious with future rate increases; euro back above 1.18 level vs. dollar, rising over 0.4% ahead of ECB meeting tomorrow; British Pound rises vs. counterparts after stronger UK data, raising rate hike possibilities (trades high 1.3272, up about 0.75% now); the dollar falls vs. yen and other comps as markets await Fed Chair decision and tax reform follow-through
·      Precious metals little changed, bouncing off earlier 3-week lows as the dollar pares gains; gold prices holding above $1,275 an ounce. Financial markets, including metals, continued to trade somewhat cautiously amid uncertainty surrounding the next leadership for the U.S. Federal Reserve and what a shift there could mean for the course of higher interest rates into 2018.
·      Energy futures hold declines following mixed inventory data; oil remained firm overnight after last night’s bullish API stats; huge product draws gasoline -5.7M barrels and distillate -5M barrels while crude was flat – this morning the DOE said crude stockpiles rose an unexpected 856K barrels vs. est. draw of -3.0M with over -5M barrel draws for distillates/gasoline
·      Treasury markets remained under pressure, with yield on the benchmark 10-year paper briefly topping 2.47% for the first time in seven months amid continued optimism over the global growth outlook/tax reform/rising rates; the 2-year yield at 1.607%; 10-year yield at 2.45% (up over 4 bps); 30-year yield around 2.97%
Economic Data
·      Durable Goods Orders for Sept rise 2.2%, topping the 1% estimate; new orders ex-trans. rose 0.7% in Sept. after 0.7% rise while new orders ex-defense rose 2% in Sept. after 2.6% rise; inventories rose 0.6% in Sept., largest gain since June 2015
·      New Home Sales for September rose 18.9% to 667K, far surpassing the 554K estimate; the previous three months’ new home sales data revised up by 8K; the median new home price rose 1.6% y/y to $319,700 vs. year ago $314,700; average selling price at $385,200; 19% of new homes sold in Sept. cost more than $500,000, up from 16% last month
Sector Movers Today
·      Aerospace & Defense; busy day of earnings with Dow component BA Q3 was mixed with EPS beat, but revs short of consensus while mid-point of year EPS view misses views; GD similar results as EPS tops views but revs miss estimates/raises year view by 5c; NOC outperforms as top/bottom line Q3 results handily beat and boosted its year view well above estimates
·      Card sector active after COF, DFS and Dow component Visa (V) all report earnings; Visa grew its revenues and profits at a more rapid clip than forecast, driven by growth in payment processing and the purchase of Visa Europe
·      Internet; GRUB Q3 EPS and revenue topped consensus as 3Q daily average grubs up 14% y/y to 304,500 and guided Q4  results above consensus;AKAM beat on quarterly EPS, revs and Ebitda with improved guidance 4Q18 driven by stabilization in Media; in online travel, TRVG falls as cut 2017 total revenue growth view to 36%-39%, saw about 40% in Sept after Q3 beats; SABR cut at KeyBanc because it lacks prospects for upside, and as the potential for downside to numbers remains; BIDU upgraded to positive at OTR Global
·      Telecom; AT&T (T) 3Q results were weaker than expected despite pre-releasing some of its results two weeks ago (shares traded to 52-week lows);Sprint (S) topped analysts’ estimates by adding 168,000 subscribers last quarter, rebounding from losses in the first half
·      IT Services; Wells Fargo upgraded CACI, LDOS and SAIC to outperform while reiterating Outperform ratings on BAH and favorite idea CSRA as sees an improving fundamental backdrop for funding levels and pricing amid a rising global threat environment
·      Consumer Staples; KO Q3 top/bottom line beat on weaker margins and unit case volume was 0%; DPS falls as core Q3 EPS and sales missed consensus and cut its yearly forecast; beer stocks fall (BUD) after Heineken Q3 results disappointed citing poor weather in Europe and a challenging beer market in the U.S.; IPAR with better sales outlook for Q3 and year
·      AKAM +7%; beat on quarterly EPS, revs and Ebitda with improved guidance 4Q18 driven by stabilization in Media
·      ANTM +5%; followed strong results from comps CNC and UNH recently as managed care sector with good earnings this quarter
·      ESRX +3%; earnings results/guidance
·      GRUB +10%; Q3 EPS and revenue topped consensus as 3Q daily average grubs up 14% y/y to 304,500 and guided Q4  results above consensus
·      LL +6%; settles class action on Chinese-made flooring
·      MGNX +35%; scores $900M Checkpoint PD-1 R&D deal with INCY
·      SNPS +2%; raised to top pick at RBC Capital with $100 tgt
·      TSS +3%; reported Q3 beat and raise guidance
·      ACHC -25%; reported disappointing Q3 results and cut guidance for year impacted by higher than forecasted staffing costs, below budget volumes in the UK and modest rev shortfall in the U.S.
·      AMD -9%; due to guidance for flat GM in 4Q and concerns around cryptocurrency revs
·      CMG -13%; after Q3 earnings that showed softer margins more than offsetting in-line comps
·      DPS -5%; core Q3 EPS and sales missed consensus and cut its yearly forecast
·      EW -10%; after Q3 showed slowing US TAVR growth and a delay in its transcatheter mitral valve replacement (TMVR) program
·      JNPR -5%; earnings that missed estimates and made additional cuts to an already negative pre-announcement
·      MANH -10%; shares fall early as revenue outlook for year below views after Q3 beat
·      MDCO -2%; announced plans to restructure the company, including laying off more than 85% of its workforce
·      TRVG -18%; as cut 2017 total revenue growth view to 36%-39%, saw about 40% in Sept
·      Ablynx (ABLX) 11.43M share IPO priced at $17.50
·      Bank of New York (BK) 4.5M share Block Trade priced at $52.45
·      Immune Design (IMDZ) 19.5M share Secondary priced at $4.10
·      PennantPark Floating Rate (PLFT) 6M share Spot Secondary priced at $14.15
·      uniQure (QURE) 5M share Secondary priced at $18.25
·      Sachem Capital (SACH) 3.75M share Secondary priced at $4.00
·      Savara (SVRA) 5.25M share Spot Secondary priced at $7.85
·      Sunesis (SNSS) 7.5M share Spot Secondary priced at $2.00

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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