Mid Day Outlook: November 15, 2017

Scott GreenDaily Market Report

Mid-Morning Look
Wednesday, November 15, 17
U.S. stocks under pressure with the Dow Industrials falling over -150 points at its worst level, while Small Caps underperform the most with the Russell 2000 falling over 1% as markets still await the clarity on the tax reform bill (small businesses seen the most to gain) which seem unlikely at this point before the Thanksgiving Day holiday. Energy shares tumble for a second session, resuming the risk-off feel, after an unexpected increase in U.S. crude stockpiles overnight. There are very few pockets of strength thus far, with investors turning to defensive and safe haven sector early, with bonds and gold prices rallying. Retail mixed, with TGT shares falling on a weaker outlook and margin comments, but group overall holding up well as much of the bad news partially “baked into” weak prices. Transports are down about -0.5%, though airlines a bright spot early (rails weak). Lots of economic data this morning with readings on CPI (inflation), manufacturing (Empire) and retail sales (details below). Stocks have already begun rallying off their lows of the morning, with the Nasdaq Comp up 30 points off 6,667 low.
Treasuries, Currencies and Commodities
·      In currency markets, the U.S. dollar still fading, edging lower the last few days as markets await final detailed tax reform plan push, while mixed economic data in the U.S. weighs; strong reading out of Europe economy the day prior lifted the euro to best levels in weeks; Bitcoin prices jump again after payment service company Square (SQ) is allowing users of the Square Cash app to buy and sell bitcoin (Bitcoin rises over 9% topping $7,200)
·      Commodity prices; outside of precious metals (gold and silver looking for 3rd straight advance) most commodity prices trending lower on the “risk off” following the weak China data the day prior and rotation into defensive assets; oil prices slip after touching 2-year highs mid last week, falling on a bearish IEA demand forecast yesterday and was followed up by weekly bearish inventory data out of the API
·      Treasury markets jumping as yields dropping with investors rotating out of riskier assets for the time being and moving into more defensive/safe haven plays; the 10-yr yield down over 7 bps from yesterday’s highs, while the 2-yr modestly slips from near 8-year highs, holding around the 1.68% level amid mixed inventory data and as markets await tax reform news
Economic Data
·      Consumer prices (CPI) data for October was reported in-line with expectations as overall prices rose 0.1%, while core prices (minus food and energy) rose an in-line 0.2% MoM. Over the past 12 months, core consumer inflation has risen 1.8%, up from a 1.7% gain in September, That’s the highest rate since April. The drop in energy prices in the CPI pushed the yearly rate of inflation down to 2% from 2.2% in September
·      Retail sales rose 0.2% in October (vs. an est. of unchanged) on modest across-the-board gains after an upwardly revised 1.9% surge in the prior month (from the prior estimate of a 1.6% gain), boosted by post-hurricane spending. Excluding autos, sales rose 0.1% after a 1.2% gain in September. Sales excluding autos and gasoline climbed 0.3% after being up 0.6% prior
·      The Empire State index fell -10.8 points to 19.4, missing the economist estimate for a 25.4 reading, and moving back from a three-year high but still pointing to a solid manufacturing environment in the New York area. The new-orders index rose to 20.4 and shipments fell to 18.4
·      Business Inventories for September were unchanged MoM, in-line with consensus while Business sales rose 1.4% in Sept. after rising 0.8% the prior month
Sector Movers Today
·      Monthly credit card Master Trust data shows uptick in net-charge offs: COF October net charge-offs 4.70% and October 30-plus day performing delinquencies 4.13%; JPMOctober net card losses 2.35% vs. 2.32% last month and said October 30-plus day delinquency rate 1.24% vs. 1.22% last month; SYF October net charge-off rate 5.23% vs. 4.16% last month and said October 30-plus day delinquencies 3.16% vs. 3.19% last month; ADS October net charge offs 6.3% vs. 4.1% last month and the delinquency rate 5.2% vs. 5.4% last month
·      Retailers; TGT a drag on retail early after Q3 EPS and sales come in slightly above estimates on better comps of 0.9%, but guided next quarter EPS $1.05-$1.25 vs. est. $1.24 and said sees pressure on gross margins continuing into Q4; PLCE posted Q3 top and bottom line beat on comp sales 5.1% topping the 2.8% est and better guidance;BOOT was upgraded to outperform at JP Morgan with a $17 tgt; LB reports earnings tonight and BBY, SSI and WMT tomorrow morning; DKS was upgraded at JP Morgan after mixed results yesterday and cut by Evercore/ISI
·      Consumer Staples; food related stocks CAG, CPB, SJM were under pressure early after AMZN and its Whole Foods unit announced addition price cuts into the holidays season on organic, no antibiotic turkeys throughout Thanksgiving; TSN was upgraded to buy at Argus as expect growing demand for beef, chicken, pork and turkey to result in better-than-expected operating income; SBH slipped early as its Q4 EPS and sales both missed consensus views on comp sales down (-1.4%); THS was downgraded to market perform at BMO Capital
·      Industrial & Machinery; BA and Airbus secured more than $75 billion in single-aisle plane commitments today at the Dubai Air show; JCI was cut to neutral at Susquehanna citing weaker earnings growth outlook and less apparent upside to multiples; GE shares look to stabilize after setting new multi-year lows amid weak market sentiment following recent management announcements to turn business higher (cut dividend, lowered view, to sell assets)
·      BOOT +6%; upgraded to outperform at JP Morgan with a $17 tgt
·      CARG +11%; after its first earnings report since IPO beat on top and bottom line with upside guidance and said U.S. avg annual rev. per subscribing dealer (AARSD) up 16% to $11,526
·      FL +3%; getting a lift ahead of earnings later this week
·      GE +1%; small bounce after days of selling pressure sent shares to mulita-year lows
·      PLCE +5%; on earnings and sales beat
·      SGMO +8%; raised to overweight and $19 tgt at Piper after Sangamo says patient received therapy intended to precisely edit DNA of cells directly inside body​ (SGMO)
·      SQ +2%; is allowing users of the Square Cash app to buy and sell bitcoin
·      AAPL -1%; on track for its 5th straight daily decline
·      ACOR -36%; said it halted new enrollment for studies of its Parkinson’s disease treatment tozadenant following some patient deaths
·      JCI -3%; cut to neutral at Susquehanna citing weaker earnings growth outlook
·      MPC -3%; energy stocks weak as oil slides/also downgraded to neutral at UBS
·      MTSI -13%; as revenue and EPS came in at the low-end of management’s guidance due to a number of factors, including continued weakness in China as well as supply chain constraints
·      SBH -5%; Q4 EPS and sales both missed consensus views on comp sales down (-1.4%)
·      SD 19%; agreed to acquire BCEI for $36.00 per share in cash and stock ($19.20 in cash and $16.80 of shares), in total deal valued at $746M https://goo.gl/iaiHuF
·      TGT -8%; posted Q3 EPS/sales/comps above views, but Q4 guidance and margin comments sink shares; guided next quarter EPS $1.05-$1.25 vs. est. $1.24



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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