Mid Day Outlook: November 1, 2017

Scott GreenDaily Market Report

Mid-Morning Look
Wednesday, November 1, 17
Stocks are surging to start the month, with the Dow Industrial Average topping the 23,500 for the first time after closing out October with its best monthly gains since February (Dow rose 4.3%, S&P 500 up 2.2% and the Nasdaq ended up 3.6% for October). Consumer staples leading for a second day on better earnings out of CLX and EL (yesterday it was food names MDLZ and K that lifted the sector). Markets get mixed economic data today with a stronger private payroll report out of ADP (added 225K jobs), while ISM manufacturing missed estimates (ahead of nonfarm payroll report Friday). Still lots of catalysts (outside of the ongoing earnings release onslaught) including FOMC meeting results today, BOE meeting tomorrow, tax reform details today from Republicans and Fed chair announcement. Major U.S. averages, after reaching fresh intraday record levels, have since pulled back. Bonds edge higher, the dollar pares gains and gold getting a lift after recent weakness.
Treasuries, Currencies and Commodities
·      In currency markets, the dollar jumped initially on better ADP jobs report, slipped after the weaker ISM reading; currency markets still awaiting FOMC meeting results today, BOE meeting tomorrow, tax reform details today from Republicans and Fed chair announcement; Bitcoin tops $6,500 today, new all-time highs; dollar generally higher early
·      Precious metals rise early, rebounding off recent losses to trade back around $1,280 an ounce
·      Energy futures rose above $55 per barrel in the longest winning streak in three months as U.S. industry data showed both crude and gasoline inventories declined last week. Futures advanced for a fifth day, having added 5.5% since Oct. 25, while in London Brent crude rose to a new two-year high. The American Petroleum Institute (API) reported bigger weekly draws: U.S. crude supplies dropped by -5.1M barrels for the week ended Oct. 27, while also showed a decline of -7.7M barrels in gasoline stockpiles, while inventories of distillates lost -3.1M barrels
·      Treasury markets slip initially as 10-year Treasury yield rises back to 2.4% after ADP data comes in above consensus views (ahead of nonfarm payroll report Friday) and ahead of expected tax reform news later today out of Washington – yields reversed lower, back below 2.37% after softer ISM manufacturing data missed views, came in below prior month
Economic Data
·      Private payroll data from ADP comes in above views, saying that U.S. firms added 235K Jobs in October, topping the 200K estimate; the Sept. report was revised by -25k to 110k from 135k as reported last month; d Small private-sector businesses employment rebounded to show a gain of 79,000 jobs in October, medium-sized businesses added 66,000 and large businesses added 90,000. Most of those gains were in the service sector; note nonfarm payrolls report on Friday
·      ISM Manufacturing for October falls to 58.7 from 60.8 last month, and slightly below the 59.5 estimate; breakdown showed: New orders fell to 63.4 vs 64.6, while employment fell to 59.8 from 60.3; inventories fell to 48.0 from 52.5 and prices paid fell to 68.5 from 71.5
·      Construction Spending for September rose 0.3%, above the expected decline of (-0.2%), while August gain revised to 0.1% from 0.5%; Private construction fell 0.4% in September while private residential construction little changed and private nonresidential construction fell 0.8%
·      Oct. Manufacturing PMI 54.6, in-line with flash reading of 54.5; index rises to 54.6 from 53.1 in September and year ago 53.4
Sector Movers Today
·      Autos; monthly auto sales data reported for October: automakers were expected to report strong sales for October with consumers continuing to replace vehicles damaged during the devastating hurricanes earlier this year. GM Oct U.S. auto sales fell (-2.2%) vs. est. (-1.5%); Ford (F) U.S. light-vehicle sales up 6.4% vs. est up 1.4% as SUV sales +5.3% to 63,339 units and truck sales +11.4% to 93,248 units; FCAU Oct U.S. auto sales fell (-13%) of 153,373 units vs 176,609 YoY, vs. est. decline of (-12%), led by Fiat down (-33%) and Chrysler Brand (-22%); NSANY Oct U.S. auto sales rose 8.4% vs. est. down (-5.7%); TM Oct U.S. auto sales rose 1.1% vs. est. 4%; in research, GMwas cut to neutral at Nomura; GT downgraded at Guggenheim; TSLA to report earnings tonight
·      Retailers; UAA falls early on several analyst downgraded and lower tgts after weak earnings hit the sportswear apparel company; ANF downgraded at JP Morgan; PBIreported disappointing small business solution results, showing declining recurring revenues streams; DKS downgrade at Wolfe Research as the sporting goods sector continues to contract and the landscape has become more promotional; BGFV with in-line results better than feared; DSW downgraded at Wedbush; gun stocks volatile after RGR Q3 top and bottom line results fell short of consensus views (AOBC was active on the report along with sporting goods stores DKS, SPWH)
·      Casino, Lodging & Leisure; casinos surge for a second day in a row (WYNN, LVS, MGM, MLCO) after casino gross gaming revenue (GGR) for October rose 22.1% y/y vs. Bloomberg consensus Metrix estimate +15.9% (avg of 10 ests.) – gambling revenue jumps to 3-year high, notching 15th straight month of gains and beating expectations. Mainland China visitor traffic during the holiday week (Oct 1-8) rose 11% from year ago
·      Abstracts from the American Society of Hematology conference (ASH), out today for a few companies: AGIO unveils new leukemia drug data to support end-of-year FDA approval filing; JUNO saw a best overall response rate (ORR) of 75% in its ongoing trial of JCAR017 in 68 patients with diffuse large B-cell lymphoma; BLUE active after early Phase 1/2 “HGB-206” results of its gene therapy showed it was able to increase the number of gene-corrected cells in patients with severe sickle cell disease at ASH
·      Several E&P names report earnings; BBG beat 3Q17 production by ~10% after recently raising guidance in September; CXO’s 3Q production came in at 193.2 MBOED, higher than prior guidance and beating ests and now leans toward the upper end of FY17 production at 24-26% YoY; NFX 3Q results exceeded estimates on account of better than expected volumes from the Anadarko Basin and a surprise contribution from China (raised full-year guidance); DVN mixed results as 3Q17 earnings and CF beat on in-line production, 4Q17 production guide lower on higher capex; APC beat attributable to other taxes and other operating costs, stronger realizations, offset by lower production;
·      BGFV +12%; in-line earnings allay fears after recent misses by UAA and sporting good stores
·      BLUE +10%; after releasing new sickle-cell therapy data at ASH conference
·      CXO +3%; earnings (see E&P above)
·      EL +11%; high quality earnings beat driven by strong 9% org sales or 13% including acquisition
·      FCX +3%; rebound in metals after X results
·      GRMN +5%; on earnings/guidance
·      WYNN +3%; positive Macau gaming data for October
·      X +10%; beat and higher guidance out of US Steel
·      CHKP -9%; better Q3 results but Q4 revenue guidance below views
·      DDD -26%; Q3 revenue fell short of consensus and withdrew its guidance
·      EAT -4%; reported Chili’s, Maggiano’s comp. sales that missed estimates
·      EVHC -36%; reported weak volumes and disappointing Q3 earnings and says that new contracts are below expectations (noting that hurricanes played a big part in the quarterly results)
·      FORM -11%; drops after Q3 beats, guidance down on the quarter
·      PBI -12%; reported disappointing small business solution results, actually showing declining recurring revenues streams
·      PZZA -7%; 52-week lows after trimming its sales and profit Forecast
·      ZBH -5%; as the company cut its annual EPS outlook/posts earnings miss
·      Altair (ALTR) 12M share IPO priced at $13.00
·      Constellium (CSTM) 25M share Spot Secondary priced at $11.00
·      Loma Negra (LOMA) 50.2M share IPO priced at $19.00



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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