Mid Day Outlook: October 26, 2017

Scott GreenDaily Market Report

Mid-Morning Look
Thursday, October 26, 17

U.S. equities are higher, with the Dow Industrials and S&P 500 rising early amid the busiest day of earnings this quarter (CNBC noted 64 of the 500 S&P companies reporting today), with financials and transports helping pace the gains. The Nasdaq Composite was under pressure early, led by a decline in biotech stocks (CELG plunge on outlook) and as investors brace for earnings results out of INTC, MSFT, GOOGL, AMZN, EXPE, and BIDU after the close tonight… but the index has since found sound footing, moving to the highs of the day. Equity futures slipped briefly early after Politico reported Janet Yellen will not be nominated for another term as Federal Reserve chair (appears the field has been narrowed to Jerome Powell and John Taylor). Also a lot going on overseas as the ECB kept rates unchanged at historic lows (as expected) while confirmed its plans to begin reining in its bond-buying program next year, cutting monthly purchases to €30B (also expected). In Spain, according to media reports, Catalan President Carles Puigdemont will dissolve the region’s parliament and call early elections. Economic data was better – but earnings the story today with a barrage of results still to come tonight. Tax reform, Fed Chair, political turmoil in Europe, ECB meeting, bonds yields and dollar jumping – lots of moving parts for markets and investors today.
Treasuries, Currencies and Commodities
·      In currency markets, the dollar gets a two-fold boost, rising on reports that current Fed Chair Yellen appears out of the race to keep her jobs (leaving hawkish Powell/Taylor as remaining candidates), while the euro falls following the ECB moves this morning; the dollar index trades around 94.20, up 0.5%; bitcoin prices back near $6,000 level up over 4%
·      Commodity prices; Precious metals trading lower as the dollar regains strength, while oil prices are little changed early, pulling back slightly but holding above $52 per barrel
·      U.S. Treasury prices rose, pulling yields lower, after the European Central Bank announced it would scale back its monthly asset-purchase program beginning next year, but extend the program. The yield on the 10-year Treasury note was at 2.423%, compared with 2.444%…but has since traded back to 2.44% as yields rally on Fed news above. On Wednesday, the benchmark hit an intraday high of 2.474%, highest since March.
Economic Data
·      U.S. jobless claims climb 10,000 to 233,000 a week after hitting 44-year low, slightly below the 235K estimate, while the prior week revised to 223K from 222K; the 4-week moving average fell by 9,000 to 239,500, the lowest since late August; continuing claims or the number of people already collecting unemployment benefits, fell by 3,000 to 1.89 million
·      Advanced Goods Trade Deficit for Sept was in-line at -$64.1B and widened from -$63.3B in prior month; imports rose 0.9% in Sept. to $193.720b from $191.996b in August while exports rose 0.7% in Sept. to $129.582B from $128.676B in August
·      U.S. Sept. Pending Home Sales unchanged from August, below estimate of up 0.5% with the Northeast up 1.2%, Midwest up 1.4%, South fell 2.3% and West up 1.9%
·      30-year fixed mortgage rate for week ended today rose to 3.94% from 3.88%, Freddie Mac said in statement; the 15-year rate avg 3.25%, up from 3.19% a week earlier
Sector Movers Today
·      Transports; index jumped back above 9,900 today on overall strength; what a busy day for group with package delivery giant UPS Q3 EPS in-line on better revs and slightly raised lower end of year EPS (though mid-point missed estimates); in rails, UNP Q3 EPS/revs just topped estimates, though CSX raises concerns for investors after it postponed its investor day meeting to a date in the future to be determined (rails fell yesterday after NSC volume growth outlook disappointed; in airlines,AAL, LUV and SAVE the latest to report earnings for the group all topping forecasts after ALK yesterday forecast for higher costs this year
·      Casino, Lodging & Leisure; in lodging, HLT Q3 results topped views and guided year higher (comes after weakness in group yesterday after WYN results); in boating,BC Q3 EPS missed lowest estimate and cut its yearly forecast (MBUU, MCFT, HZO, MPX other boat comps); CWH 6.7M share Secondary priced at $40.50; in gaming,LVS a mover on earnings and announced more than $1.1b in new capital projects over the next three years in the market
·      Autos Ford (F) reported a big beat and raise above consensus following results from GM and FCAU earlier in the week; in auto suppliers, LEA upgraded at RBC; BWAissues strong guidance, eyes strategic options while DAN raises year outlook as well; in auto retail, ORLY reported 3Q17 comps and gross margins that missed expectations, and guided these key metrics below consensus; ALV cuts full year organic revenue forecast (shares of AAP, AZO, SAH, MNRO active)
·      Large Cap/Specialty Pharma; BMY Q3 EPS missed by 2c on rev beat as sales of Opdivo ($1.27B) topped views while Yervoy revs of $323M missed views/also raised views; ALXN boosted year EOS and rev outlook after mixed Q3 (EPS beat/revs miss); MNOV reports that the SPRINT-MS Phase 2b Trial of MN-166 in progressive multiple sclerosis achieved both primary endpoints; HRTX gets FDA fast track designation for HTX-011; ALKS Q3 miss and guides total revenue down for rest of year/Vivitrol weak
·      Medical devices and equipment; IRMD rises as FDA clears IRADIMED’s MRI-compatible vital signs monitor; IART cuts year organic sales view to about 4% after Q3 EPS/revs miss; BSX Q3 EPS/sales better and raises guidance but 3Q pacemaker systems sales $149M vs. $151M QoQ and defibrillator systems sales $314M vs. $329M QoQ; other device makers moving on earnings: CSII, BCR, ABMD
·      BWLD +17%; posted much better-than-expected Q3 earnings and boosted guidance for year
·      ECHO +17%; lifting logistics and trucking names after beat and raise quarter
·      FFIV +5%; among top gainers in the S&P early after earnings
·      IRMD +29%; as FDA clears IRADIMED’s MRI-compatible vital signs monitor
·      MCK +5%; leads distributors higher as delivered 2Q revenue and EPS that beat analyst estimates
·      TREE +16%; on Q3 beat and raised guidance for the year
·      TWTR +11%; beat sales estimates and added more monthly users
·      BCS -8%; following earnings and trading rev declines
·      CELG -16%; missed expectations for Q3 sales and lowered its long-term targets
·      CHTR -5%; Q3 earnings below Wall Street expectations and a loss of 104,000 TV subscribers
·      CMC -7%; Q4 sales beat but adjusted EPS missed by 12c
·      OII –22%; after saying it sees 2018 earnings “significantly” lower vs 2017
·      ORLY -4%; 3Q comps and gross margins that missed expectations
·      NOK -18%; said its quarterly loss widened in the third quarter
·      UCTT -18%; as Q3 EPS misses estimate
·      BP Midstream (BPMP) 42.5M share IPO priced at $18.00
·      Camping World (CWH) 6.7M share Secondary priced at $40.50
·      Houlihan Lokey (HLI) 3.5M share Spot Secondary priced at $42.00
·      Idera Pharmaceuticals (IDRA) 33.3M share Secondary priced at $1.50
·      National Vision (EYE) 15.8M share IPO priced at $22.00
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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