Mid Day Outlook: October 27, 2017

Scott GreenDaily Market Report

Mid-Morning Look
Friday, October 27, 17
Equities mostly higher, led by gains in technology after better earnings and a stronger-than-expected reading for Q3 GDP, rising to 3% vs. 2.6% estimate. All-time record highs for INTC, MSFT and GOOGL following much better-than-expected strong results out of the tech giants overnight, while AMZN also higher on results, but shy of its best record level – all helping lift the NASDAQ. However, the Dow Industrials slip (despite MSFT/INTC) after MRK sales missed and energy giants CVX and XOM production output also disappoints. Dollar Index hovers near three-month high after tax reform hopes and dovish ECB fuel Thursday’s biggest one-day rally since January. Asian stocks gain broadly with Nikkei reaching 22,000 for first time since 1996 while Europe volatile. European markets turned lower (Germany from record highs, France at 2-year highs), led by declines in Spain after Catalan’s parliament voted to declare independence from Spain this morning. Markets got another boost after Bloomberg reported that President Donald Trump is leaning toward appointing Federal Reserve Governor Jerome Powell to be the next chairman of the Fed. Industrials metals (steel) are broadly lower along with healthcare (Biotech down an 8th straight day) and retailers (hit by JCP), while energy and of course technology a bright spot.
Treasuries, Currencies and Commodities
·      In currency markets, the euro dropped below the 1.16 level against the dollar for the first time since July after the GDP data; the U.S. dollar continued its rally against major rivals, on track for its biggest weekly gain of the year, after encouraging signs for U.S. tax reform and a dovish take on Thursday’s action by the European Central Bank that pushed the euro lower. The surprise strength in the GDP data also lifted the dollar index; late morning rebound for euro after headlines that President Trump said to favor Powell as the next fed Chairperson – helped pares losses to -0.25% at 1.1619 (off lows 1.1578)
·      Precious metals modest bounce, but remain lower around the $1,270 an ounce level, while energy futures are higher as Brent crude traded above $60 per barrel for the first time since July 2015 and WTIU crude tops $53.50 per barrel, its highest levels since April
·      Treasury markets gain slightly as yields dipped after reports indicated that President Trump was leaning toward the Fed’s Powell as the next Fed Chairperson; the yield on the 10-yr dipped to 2.41% after the report, down from above 2.44% prior
Economic Data
·      GDP for Q3 tops views; the U.S. economy continued to grow at a steady clip during the third quarter, exceeding expectations despite the disruptions caused by hurricanes Harvey and Irma; Q3 GDP grew at a 3% clip, above views for 2.6% and only slightly below the 3.1% rate last quarter; personal consumption rose 2.4% in 3Q (vs. est. 2.1%) after rising 3.3% prior quarter, while GDP price index rose 2.2% in 3Q (est. 1.7%) after rising 1.0% prior quarter and core PCE in-line 1.3%
·      Final Michigan Sentiment reading for October rose to 100.7, in-line with estimates, slightly below the 101.1 preliminary reading, but well above the 95.1 reading last month; the expectations index rose to 90.5 vs. 84.4 last month while current economic conditions index rose to 116.5 vs. 111.7 last month.
Sector Movers Today
·      Energy giants and Dow components CVX and XOM fell after reporting disappointing production for Q3 though both companies’ profits surpassed analyst expectations; XOM said it churned out the equivalent of 3.97M barrels a day, short of the 4M estimate while CVX pumped the equivalent of 2.717M barrels a day, underperforming the 2.777M estimate
·      Healthcare services; ; PDCO and HSIC weak early after Piper said believe Amazon will enter the PBM industry and perhaps a small portion of the healthcare distribution industry focusing on commoditized consumables that make up 10% of HSIC and PDCO’s consumable book (ABC, ESRX, RAD, WBA, CAH also remain active
·      Hospital movers; THC announced a targeted cost reduction initiative which is intended to lower annual operating expenses by $150M/sees eliminating about 1,300 positions; LPNT drags peers lower after another earnings disappointment among publicly-traded hospitals adds to yesterday’s drop (UHS miss and lower guide hit hospitals yesterday)
·      Software; MSFT shares rally on top/bottom line beat and positive margin comments going forward; Internet security active as FTNT Q3 EPS/revs beat but Q4 revenue missed estimates; MULE 3Q results showed a sharp acceleration in billings growth and new subscription annual contract value (Q3 beat/Q4 guidance above views)
·      Telecom and media; broadcasters lower after WSJ article that the FCC is planning to make sweeping changes to media-ownership rules next month, eliminating or scaling back longstanding limits on local ownership of TV stations and newspapers, its chairman said Wednesday (NXST, SBGI among those moving) https://goo.gl/SXgFp2
·      ALGN +10%; 52-week high after reported higher profit and sales than estimates
·      AMZN +10%; reported revenue above expectations in all segments/better Q4 guidance
·      FSLR +21%; Q3 earnings beat and raised guidance for the year
·      GIMO +5%; to be acquired by Elliot for $38.50 per share/deal at $1.6B https://goo.gl/RDJ59P
·      GOOGL +6% opens at record high after top and bottom line results beat
·      INTC +6%; reported 3Q revenue and EPS ahead of consensus and better guidance
·      MSFT +8%; on top/bottom line beat and positive margin comments going forward
·      PLPM +17%; will be acquired by Fintrax Group for $4.50 a share https://goo.gl/bE7eq3
·      BIDU -6%; lower outlook as saw Q4 sales 22.23B-23.41B yuan, below 24.8B yuan view
·      CCJ -12%; posted surprise quarterly loss and also lowered its uranium production guidance
·      CERN -9%; reported weaker-than-expected 3Q bookings and gave preliminary guidance for a weaker-than-expected outlook for profitability in 2018
·      EFII -31%; shares plunged on earnings and outlook
·      EXPE -18%; Q3 EPS, revenue, and Ebitda trailed estimates, and room night growth slowed to 16%
·      GT -3%; cut its 2017 operating income view to ~$1.5B from the prior outlook of $1.6B-$1.65B
·      JCP –26%; reduced its year views and forecast a wider-than-expected third-quarter per-share loss
·      MAT -13%; 3Q fell significantly below expectations and suspended its dividend
·      SPG -3%; as year mid-point missed views/also JCP lower guide hits mall REITs
·      TSLA -1%; downgraded to in line at Evercore citing a more cautious view on Model 3 production
·      ForeScout (FSCT) 5.3M share IPO priced at $22.00
·      Merchants Bancorp (MBIN) 6.2M share IPO priced at $16.00
·      Nexa Resources (NEXA) 31M share IPO priced at $16.00



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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