Mid Day Outlook: November 16, 2017

Scott GreenDaily Market Report

Mid-Morning Look
Thursday, November 16, 17
  
U.S. stocks surging early, getting a big boost from Dow components WMT and CSCO  after each reported better-than-expected quarterly earnings and upbeat guidance, while technology shares spike on the CSCO and NTAP reports. Today marked the first time in seven days that the S&P 500 index opened higher, reversing recent weakness from major averages ahead of the tax reform vote today. Oil & Gas stocks fell after Bloomberg reported Norway’s $1 trillion sovereign wealth fund proposed dumping about $35B in oil and gas stocks, to make the economy “less vulnerable” to a drop in oil. The dollar is flat along with commodity prices, while bonds slip on the rotation back into equities (yields higher). Several stocks benefitting from earnings beats, lifting consumer staples (SJM, SPB) housing (RH) and the aforementioned tech. Economic data was mixed today (full rundown below), though all eyes on Washington this afternoon as House leaders are poised for a Thursday vote on their tax-overhaul bill.
 
Treasuries, Currencies and Commodities
·      In currency markets, after trading higher overnight, the dollar index has pared gains to trade flat around the 93.80 level, while the greenback slid to morning lows against the yen at 112.74 (off overnight highs 113.33); the euro climbing off its lows, down slightly around 1.178; the tax reform bill the main driver for the dollar at this point, as uncertainty has pushed the buck lower this week
·      Commodity prices are little changed with a small bounce in precious metals, though energy stocks are flat to little changed after some early selling pressure this week; the EIA reports first weekly fall in U.S. natural-gas supply since March (-18 bcf) on colder weather
·      Treasury markets slip as yields rise given a bounce in U.S. stocks, as the recent flight-to-quality trade reverses; the 10-yr yield up about 2 bps at 2.35% while the 2-yr back above 1.70%
 
Economic Data
·      Weekly jobless claims climb 10,000 to 249,000 (6-week highs) following delayed effects from hurricane Maria on Puerto Rico, Virgin Islands and topping the 235,000 estimate; the prior week was unrevised at 239K; the 4-week moving average rose by 6,500 to 237,750, while the number of people already collecting unemployment benefits, fell by 44K to 1.86M
·      Philadelphia Fed Index for Nov falls to 22.7 from 27.9 the prior month and was below the 24.6 estimate; prices paid rose to 39.0 from 38.1, new orders rose to 21.4 vs 19.6 and employment fell to 22.6 from 30.6; shipments fell to 21.7 vs 24.4 and inventories fell to -8.6 vs 6.0
·      Import price index rose a mild 0.2% in October, below the 0.4% estimate, following large gains in the prior two months tied largely to the higher cost of oil. Excluding fuel, import prices also rose 0.2%, the government said, while export prices were flat. Over the past 12 months the increase in the import price index slowed to 2.5% in October from 2.7% in the prior month
·      Industrial Production for October rose 0.9% MoM, topping the 0.5% estimate after rising 0.4% in September; last month, industrial production was revised up to 0.4% from 0.3% in Sept.; Capacity utilization rose to 77% from 76.4% in Sept., revised up from 76%
·      In Housing, the NAHB Builders’ Confidence index in November rises to 70 vs. 68 last month and topping the 67 estimate; the present single family sales rise to 77 vs 75 last month and future single family sales falls to 77 vs 78 last month
   
Sector Movers Today
·      Casino, Lodging & Leisure; lodging REITs LHO, SHO, CHSP downgraded to Underweight at JP Morgan, maintain underweight on HST, Neutral on RHP, and OW on PK saying prices have experienced relative outperformance QTD, and think year-end short covering and tax reform benefits are already baked into the stock prices; Bernstein downgraded MAR to market perform citing lack of catalysts; in leisure, NCLH 10M share Spot Secondary priced at $54.35; in casinos, Nomura raised its 2018 GGR growth est. to 13% from 10% driven mainly by continued strength in VIP, but the discussion around concessions, which could begin in 2018, may increase the group’s volatility (says best 2018 risk/reward: MLCO and MGM)
·      Other retail; WMT rises on earnings leading the Dow higher while BBY slides on outlook; Reuters reported that MAT has rebuffed HAS’ latest takeover approach, casting uncertainty over the potential combination of the toy companies https://goo.gl/V4Zqbw ; DG was upgraded to buy at Deutsche Bank; DSW upgraded at Susquehanna; in upcoming earnings: GPS, ROST, SPWH, WSM report tonight and ANF, BKE, DXLG, FL, HIBB tomorrow
·      Healthcare suppliers and services; DPLO agreed to acquire LDI Integrated Pharmacy Services, a full-service PBM for $515M in cash and $80M in stock (DPLO cut at Baird saying sees many risks in the deal to buy LDI); Cleveland Research said ESRX is off to a surprisingly strong start; AFAM spikes after merging with LHCG https://goo.gl/LwkXLwUHS authorized $400M share buyback; in research, PDCO was upped at Stifel  to hold, while SYK was upgraded to outperform at Baird
 
Stock GAINERS
·      AFAM +11%; in response to the news that it will merge with LHCG https://goo.gl/LwkXLw
·      CSCO +6%; overall a better-than-feared quarter result and guide, with Jan revenue outlook of up 1-3% was about flat for the street
·      GOGO +7%; as Cathay Pacific chooses its 2Ku solution
·      NTAP +15%; quarter and guide were strong across all metrics driven by strength in sales of all flash arrays/product revenue grew for the fourth consecutive quarter
·      PTCT +7%; upgraded to neutral at JP Morgan after sell-off in shares
·      PYPL +3%; agreed to sell SYF nearly $6 billion in loans it made to online shoppers
·      RH +20%; raised guidance for the 3Q and the 4Q and provided preliminary guidance for 2018, which includes a substantial y/y improvement in operating margin.
·      ROK +4%; as EMR again boosted its takeover offer by $1.4B to $225 per share ($135 cash and $90 in stock), up from its initial bid of $200 in August https://goo.gl/1g28Fw
·      SGH +23%; as raises Q1 EPS and revenue forecasts above prior outlook
·      TIME +25%; said to be in talks to sell itself to the MDP, in a deal backed by Charles G. and David H. Koch, the billionaire brothers, NYT Deal book reports https://goo.gl/U3ocaa
·      WMT +8%; Q3 top/bottom line results beat forecasts while comps of up 2.7% topped views and raised its year EPS view
 
Stock LAGGARDS
·      BBY -6%; Q3 revs just miss estimates while its year EPS view of $1.89-$1.99 missed the $2.03 Street estimate
·      DPLO -23%; agreed to acquire LDI Integrated Pharmacy Services, a full-service PBM for $515M in cash and $80M in stock (DPLO cut at Baird saying sees many risks in the deal to buy LDI)
·      DUK -2%; utilities top S&P sector decliner
·      VIAB -5%; after forecasting domestic affiliate revenue to be down in mid-single-digits in FY18 before returning to growth in FY19
·      XOM -1%; Bloomberg reported Norway’s $1 trillion sovereign wealth fund proposed dumping about $35b in oil and gas stocks
 
Syndicate
·      Achillion (ACHN) 18.367M share Secondary priced at $2.75
·      Appian (APPN) 3.8M share Secondary priced at $20.25
·      Arsanis (ASNS) 4M share IPO priced at $10.00
·      AxoGen (AXGN) 700K share Spot Secondary priced at $21.00
·      Floor & Decor (FND) 6.5M share Secondary priced at $36.00
·      Gardner Denver (GDI) 22M share Secondary priced at $27.25
·      Jeld-Wen (JELD) 12.5M share Secondary priced at $33.75
·      Mirati Therapeutics (MRTX) 2.016M share Spot Secondary priced at $13.00
·      Norwegian Cruise Line (NCLH) 10M share Spot Secondary priced at $54.35
·      Talend (TLND) 2.75M share Spot Secondary priced at $40.25
 

 

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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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