Mid Day Outlook: October 31, 2017

Scott GreenDaily Market Report

Mid-Morning Look
Tuesday, October 31, 17
U.S. stocks resume gains, led by technology, staples and telecom shares, as the S&P 500 and the Dow headed for their seventh monthly advance, with major averages trading slightly higher ahead of several upcoming market catalysts. Tax reform tomorrow (Republicans are expected to unveil a much-awaited bill to overhaul the tax code) and the decision from two-day FOMC policy meeting highlight Wednesday (though no changes expected), while the Fed chair announcement from President Trump is expected Thursday and the monthly jobs report out on Friday. Speaking of data, consumer confidence data came in at 17-year highs today, with housing data (S&P) nearing record highs and manufacturing data out of Chicago soaring as well (yet interest rates remain not far from record lows – and no hike expected tomorrow). Overseas, the Bank of Japan keeps monetary policy steady as expected while China PMI was an all-round miss as both the manufacturing and non-manufacturing components fell from last month. The dollar, oil, and bonds are little changed ahead of the busy week. Another earnings onslaught tonight and rest of the week with food names jumping today on MDLZ and Kellogg results). Tech still expecting earnings from Facebook and Apple later this week.
Treasuries, Currencies and Commodities
·      In currency markets, the U.S. dollar regained some lost ground from the previous day, helped by some better-than-expected data; also got a boost vs. the Canadian loonie after Canada’s domestic August gross domestic product data came in below expectations. The euro slipped despite better-than-expected EuroZone GDP growth of 0.6% in Q3
·      Commodity prices; Gold prices trade near session lows after U.S. consumer-confidence data reaches near 17-year highs (gold trades under $1,270 an ounce); oil prices holding steady, with WTI crude down slightly but holding above $54 per barrel while Brent crude right around $61 per barrel ahead of inventory data tonight and tomorrow
·      Treasury markets are flat ahead of several upcoming catalysts the next few days; tax reform and the decision from two-day FOMC policy meeting tomorrow, Fed chair announcement Thursday and jobs report on Friday; 10-year yield little changed at 2.37%
Economic Data
·      Chicago PMI rises to 66.2 in October from 65.2 in prior month and well above estimates for a 60.0 reading; October Chicago PMI best reading since March 2011
·      Consumer Confidence for October rose to 125.9 (17-year highs), above est. 121.5 and 120.6 prior month; the present situation confidence rose to 151.1 vs. 146.9 last month and expectations rose to 109.1 vs. 103.0 last month
·      S&P CoreLogic Case-Shiller 20-City Index rises 5.92% YoY, in-line with estimates while National Home Price index rose 6.07% YoY in August after rising 5.88% in prior month; S&P/Case-Shiller 20-city NSA index at 202.87 after 202.02 in July; the 20-city SA index rose 0.45% m/m in Aug. after rising 0.38% the prior month. The national index surpassed the high it previously set at the peak of the housing bubble last year, and is now 5.6% higher.
·      Employment Cost Index (ECI) for Q3 rose 0.7%, in-lie with estimates, while the prior quarter unrevised at up 0.5%; said wages rose 0.7% q/q and benefit costs rose 0.8% q/q
Sector Movers Today
·      Machinery and Ag names; ALSN Q3 EPS and sales both topped the highest analyst estimates, helped by strong demand in the North America service parts and off-highway end markets/also raised full-year sales guidance (but did warn does not expect Q4 net sales to increase); CMI Q3 earnings and sales both topped highest estimates as N.A. revenue grew 25% due to higher demand in truck, oil and gas and construction markets (but softer margins); CNHI raises year adjusted EPS view; ETN Q3 sales beat and mid-point of year guidance slightly above views; AGCO Q3 results top views, but mixed guidance as year EPS misses while revs beat
·      REITs; OFC 8M share Spot Secondary priced at $31.00; busy night of earnings as AVB core FFO was toward the high end of management’s guidance and slightly below consensus;BRX reported in-line 3Q results, but management tweaked guidance lower by taking the top end of both the FFO and SSNOI growth off the table; CONE report marked another strong print for data center fundamentals, marked by a core FFO beat and a 2017 guidance; CUBE reported a strong 3Q result and increased guidance for the FY; MAC reported a slight 3Q miss despite $0.01/sh of accretion from stock buybacks, but management reaffirmed FY guidance; UDR results were largely in line with expectations; GGP falls as Q4 FFO view misses estimates
·      Semiconductors; QCOM shares fall after the WSJ reported that AAPL is designing iPhones, iPads that would drop Qualcomm components https://goo.gl/EFzVuG; semiconductor equipment manufacturers active (AMAT, KLAC, LRCX) after Samsung said it plans to almost double capital expenditures in 2017 with much of Q4 spending directed to the semiconductor business; Samsung said it will make a substantial portion of 4Q investments in the semiconductor business to build infrastructure related to new sites and clean rooms; AAPL supplier Murata cut its operating income forecast for the full year to 170.0 billion yen from 226 billion yen; MU shares outperforming early, leading the semi index
·      Casino, Lodging & Leisure; gaming stocks rally (MLCO, WYNN), as Bank America noted since their combined mass growth of 2.1% QoQ underperformed the overall market of 5-7% QoQ, they believe Galaxy, MLCO, and SJM are likely to outperform the market with high single digit mass growth/ Gaming Revenues for Nevada and Las Vegas rose in September; Nomura raises Macau gaming Oct GGR growth estimate to +19-21% y/y vs prior +18%
·      ALSN +1%; as Q3 EPS/sales both topped the highest analyst estimates, helped by strong demand in the North America service parts and off-highway end markets/raised full-year sales guidance
·      BURL +6%; preannounced 3Q comps and EPS ahead of Street expectations and comps up 3.1%
·      EXAS +9%; after posting a 3Q revenue beat and raising its 2017 view again
·      +6%; shares rise after earnings and revenue beat
·      MDLZ +6%; delivers sales growth for the first time since 2013 as results beat views
·      MOS +7%; Q3 EPS and revs handily topped views and lowers expense outlook
·      ROK +10%; CNBC David Faber said EMR made offer for the company that has been rebuffed https://goo.gl/b9CovS
·      WYNN +5%; broad strength in the casino sector (MLCO, LVS)
·      AKS -13%; posts surprise Q2 EPS loss (vs. est. 3 gains) and as revenue missed quarterly estimates
·      LL -1%; reported a surprise Q3 loss and sales that fell short of expectations
·      MAT -9%; follows recent earnings miss/downgraded by Fitch today to BBB-
·      NLS -7%; falls after missing revenue estimates with its Q3 report and cutting year revenue outlook
·      OHI -8%; as impairment related to tenant non-payment of rent weighed on earnings
·      QCOM -6%; after the WSJ reported that AAPL is designing iPhones, iPads that would drop Qualcomm components https://goo.gl/EFzVuG
·      SANM -14%; after Q4 EPS missed by 12c and guided neat quarter below views as well (though revs beat)
·      SHOO -7%; posts an unexpected decline in quarterly comp sales
·      UAA -16%; reported lower Q3 sales/profits and trimmed its full-year outlook as the company continues to struggle with slack demand and increasing competition in North America
·      VYGR -7%; after SNY opted against exercising its exclusive option for ex-U.S. development and commercial rights to VY-AADC



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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