Morning Preview: November 16, 2017

Scott GreenDaily Market Report

Early Look
Thursday, November 16, 17
  
U.S. stock futures are pointing to a rebound after major averages closed lower for a second session Wednesday with the Dow finishing at a near one-month low (down over -138 points) as crude oil prices extended losses on the heels of data that showed an unexpected rise in U.S. inventories. Worries over the progress of the tax reform bill also dragged on the market. U.S. Treasury prices rose on Wednesday, driving yields lower, as global stocks sink amid a rout in commodity prices, casting fresh doubt about consumer prices and inflation returning to levels considered normal. The Republican-controlled Congress was approaching a test later today of its ability to overhaul the federal tax code, as lawmakers prepared for their first full-scale vote on sweeping tax legislation. The market is also getting a barrage of economic data and Fed speeches along with a few key earnings reports (WMT). In Asian markets, The Nikkei Index rebounded 322 points to settle at 22,351, the Shanghai Index slipped -3 points to 3,399 and the Hang Seng Index rose 167 points to end at 29,018. In Europe, the German DAX is up around 70 points at 13,050, while the FTSE 100 is flat around the 7,375 level.
 
Events Calendar for Today
·      8:30 AM EST       Weekly Jobless Claims…est. 235K
·      8:30 AM EST       Continuing Claims…est. 1.9M
·      8:30 AM EST       Philly Fed Survey for November…est. 24.6
·      8:30 AM EST       Import Prices MoM for October…est. 0.4%
·      9:10 AM EST       Fed’s Mester delivers keynote address at Cato Conference
·      9:15 AM EST       Industrial Production MoM for October…est. 0.5%
·      9:15 AM EST       Capacity Utilization for October…est. 76.3%
·      9:45 AM EST       Bloomberg Consumer Comfort Index
·      10:00 AM EST     NAHB Housing Market Index for November…est. 67
·      10:30 AM EST     Weekly EIA Natural Gas Inventory Data
·      1:10 PM EST        Fed’s Kaplan speaks in Houston
·      4:45 PM EST        Fed’s Williams speaks at Asia Economic Policy Conference       
 
Market Closing Prices Yesterday
·      The S&P 500 Index dropped -14.25 points, or 0.55%, to 2,564.62
·      The Dow Jones Industrial Average fell -138.19 points, or 0.59%, to 23,271.28
·      The Nasdaq Composite dropped -31.66 points, or 0.47%, to 6,706.21
·      The Russell 2000 Index declined -7.16 points, or 0.49% to 1,464.09
   
World News
·      Boston Fed President Eric Rosengren said The Federal Reserve needs to continue to gradually raise interest rates, a view “which is quite consistent with market expectations of another increase in December. He said he believes rates should rise because the unemployment rate is likely to drop below 4%. Any unemployment rate below 4.7% is likely to increase pressures on inflation and asset prices, he added
·      U.S. Total Cross-Border Investment (TIC) outflows $51.3B in September, while U.S. net long-term portfolio securities inflows at $80.9B; China holds $1.18T of U.S. Treasuries, a decrease of $19.7B from last month while Japan holds $1.10T, a decrease of $5.7B from last month
·      U.K. retail sales rebounded in October, as the U.K. Office for National Statistics said that retail sales grew 0.3% on month in October, beating analysts’ expectations of 0.1% growth and bouncing back from September’s 0.7% decline.
·      Leonardo da Vinci’s portrait of Christ, “Salvator Mundi”, sold for a record-smashing $450.3 million on Wednesday at Christie‘s, more than double the old price for any work of art at auction.
 
Sector News Breakdown
Consumer
·      Mattel Inc (MAT) has rebuffed Hasbro Inc’s (HAS) latest takeover approach, people familiar with the matter said on Wednesday, casting uncertainty over the potential combination of the world’s two largest toy companies. – Reuters reported https://goo.gl/V4Zqbw
·      L Brands (LB) Q3 EPS 30c/$2.62B vs. est. 30c/$2.58B; Q3 comp sales fell (-1%); sees Q4 EPS $1.95-$2.10 vs. est. $2.03 and sees FY17 EPS $3.05-$3.20 vs. est. $3.14
·      RH raised its Q3 and fiscal 2017 guidance thanks to “a dramatically more efficient operating platform,” it said; raises Q3 adjusted EPS view to $1.02-$1.04 from 68c-80c (est. 79c) and raises Q3 revenue view to roughly $592.5M from $575M-$590M (est. $587.64M); raises FY17 adjusted net income view to $82M-$87M from $70M-$77M and narrows FY17 CapEx view to $120M-$130M from $120M-$140M
·      Nelson Peltz narrowly won a seat on the board of Procter & Gamble Co. (PG), an official tally showed after weeks earlier had claimed to have defeated the activist investor. Peltz quickly claimed a victory Wednesday but PG didn’t admit defeat, saying Peltz “is leading” but that the tally was still preliminary and subject to review and a challenge period
·      Smart & Final Stores (SFS) Q3 EPS 17c/$1.46B vs. est. 22c/$1.48B; sees Q4 adjusted EPS 14c, in-line with consensus 14c and sees Q4 revenue growth 6.25%-6.50%; lowers FY17 adjusted EPS view to 43c from 50c-52c and lowers FY17 revenue growth view to 5.0%-5.2% from 5.5%-6.0%
·      Spectrum Brands (SPB) Q4 EPS $1.35/$1.32B vs. est. $1.46/$1.3B; Q4 gross margin 37.5%, below Bloomberg estimate of 39.1%
·      Stein Mart (SMRT) Q3 EPS loss (31c) on revs $285.4 million; 3Q comparable sales -6.9% and 3Q gross margin 23.9%
·      Tesla’s (TSLA) Elon Musk will be pitching the company’s electric semitrailer truck even as his company is grinding through “production hell” with the Model 3 sedan, The Wall Street Journal reports https://goo.gl/nzzyLw 
·      Floor & Decor (FND) 6.5M share Secondary priced at $36.00
·      Jeld-Wen (JELD) 12.5M share Secondary priced at $33.75
·      Norwegian Cruise Line (NCLH) 10M share Spot Secondary priced at $54.35
 
Energy
·      Oil prices showed slight change Thursday, with the muted action coming after a slump in the prior session that was blamed on a surprise jump in U.S. supplies. On Wednesday, WTI declined by 37 cents, or 0.7%, to settle at $55.33 a barrel for its lowest finish since Nov. 2.
·      Helmerich & Payne (HP) Q4 EPS loss (21c)/$532M vs. est. loss (19c)/$491.66M
·      Australian gas producer Santos Ltd said on Thursday it rejected a A$9.5 billion ($7.2 billion) takeover approach in August, sending its shares up 13 percent on speculation another offer was likely to emerge. https://goo.gl/YHifAi
 
Financials
·      Fidelity & Guaranty Life (FGL) Q4 EPS $1.08/$435M in revs; GAAP book value per share at September 30, 2017 was $38.13 on a reported basis; book value per share excluding accumulated other comprehensive income was $28.92, an increase of 14% YoY
·      Regions Financial (RF) upgraded to Conviction Buy from Buy at Goldman Sachs
 
Healthcare
·      Achillion (ACHN) 18.367M share Secondary priced at $2.75
·      Arsanis (ASNS) 4M share IPO priced at $10.00
·      Nevro Corp. (NVRO) said it has received CE Mark for full-body magnetic resonance imaging (MRI) conditional labeling on the Senza Spinal Cord Stimulation (SCS) System delivering HF10™ Therapy
·      Diplomat Pharmacy, Inc. (DPLO) to acquire Leehar Distributors, LLC; Diplomat will pay LDI $515M cash and approximately $80M in Diplomat common stock; LDI is expected to generate approximately $388M in revenue and $41M in adjusted EBITDA in 2017
·      Mirati Therapeutics (MRTX) files to sell common stock
 
Industrials & Materials
·      Emerson Electric Co. (EMR) plans to boost its takeover offer for Rockwell Automation Inc. (ROK); Emerson is planning to send a letter as early as Thursday proposing a takeover at $225 a share, 60% in cash and 40% in stock for a total value of some $29 billion, the WSJ reported https://goo.gl/JT2DqG
·      Raytheon (RTN) increases share repurchase authorization by $2B; this is in addition to amounts available under the authorized repurchase program, which were approximately $900 million at the end of the third quarter of 2017
·      Gardner Denver (GDI) 22M share Secondary priced at $27.25
·      Aegean Marine (ANW) reports Q3 EPS loss (10c)/$1.34B vs. est. loss (4c)/$1.31B
·      Esterline (ESL) awarded U.S. Army contract for medium-caliber training ammunition 
 
Media & Telecom
·      Time Inc. (TIME) is said to be in talks to sell itself to the Meredith Corporation (MDP), in a deal backed by Charles G. and David H. Koch, the billionaire brothers known for supporting conservative causes, NYT Deal book reports. Talks between Time Inc., and Meredith, had fizzled this year. https://goo.gl/U3ocaa 
·      T-Mobile US (TMUS) will propose a “significant” share buyback that could start in December, finance chief Braxton Carter said on Thursday, a sign of confidence after the collapse of its merger with Sprint Corp. (S) – Reuters https://goo.gl/uBHaQS 
·      Federal Communications Commission chairman Ajit Pai is expected to unveil plans next week for a final vote at the FCC’s Dec. 14 meeting to reverse 2015 net neutrality rules banning the blocking or slowing of web content, Reuters reports, citing two people briefed on the matter. Internet providers including AT&T (T), Comcast (CMCSA)and Verizon (VZ) have said elimination of the rules could result in billions of additional broadband investments and end a future administration’s ability to regulate internet pricing https://goo.gl/Ns1pmP
 
Technology, Media & Telecom
·      Cisco (CSCO) Q1 EPS 61c/$12.1B vs. est. 60c/$12.11B; Q1 recurring revenue was 32% of total revenue, up over 3 points YoY; sees Q2 EPS 58c-60c vs. est. 58c and sees Q2 revenue up 1%-3%, vs. consensus $11.7B; sees 2Q adjusted gross margin 62.5% to 63.5%; sees recognizing additional restructuring charges in Q2
·      NetApp (NTAP) Q2 EPS 81c/$1.42B vs. est. 69c/$1.38B; Q2 adjusted gross margin 64.3%; sees 3Q adjusted EPS 86c-94con revs $1.43B-$1.58B vs. est. 85c/$1.44B
·      SMART Global (SGH) raises Q1 adjusted EPS view to 90c-93c from 79c-83c (est. 82c) and raises Q1 revenue view to $250M-$260M from $225M-$240M (est. $233.32M)
·      BlackBerry (BB) announced that it has entered into a strategic licensing agreement with Teletry, an independent operating company with expertise in building relationships between patent holders and licensees in the wireless technology industry
·      Appian (APPN) 3.8M share Secondary priced at $20.25
·      Vishay (VSH) raises dividend 8% to 6.75c

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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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