Mid Day Outlook: November 20, 2017

Scott GreenDaily Market Report

Mid-Morning Look
Monday, November 20, 17
After back-to-back weekly losses for the S&P 500 and Dow Industrials, indexes are mostly higher as investors continue to watch the progress on tax legislation, though hopes of a deal coming to pass before this week’s Thanksgiving Day holiday is highly unlikely. Technology and discretionary shares rose the most, offsetting losses from energy and health-care. Big news came out of Europe as German President Frank-Walter Steinmeier urged parties to return to the negotiating table and cooperate, rather than calling new elections, after coalition talks led by Chancellor Angela Merkel collapsed. Late Sunday, the Free Democrats walked out on coalition negotiations with Merkel’s Christian Democrats and the Green Party. There were no major economic data points this morning, with earnings out of retailers (LOW, URBN, BURL, DLTR), technology (ADI, PANW, INTU, CRM, HPQ, GME) and healthcare (MDT, A) expected the next two days before the Thanksgiving Day holiday. Commodity prices slump, with more than 1% declines in WTI crude and gold as the dollar rebounds. In M&A news, a deal in the semiconductor space as MRVL agreed to acquire CAVM in a $6B deal.
Treasuries, Currencies and Commodities
·      In currency markets, the dollar has erased overnight losses, extending gains this morning as global markets were surprised after Angela Merkel’s bid to form a new German government collapsed on Sunday night, sending the euro on its largest intraday drop since October 26 (down -0.4% vs. the USD); Bitcoin topped $8,000 for the first time as investors looked past technology concerns that saw it suffer a 29% plunge earlier this month; watch the Canadian dollar this week if Nafta talks fail (USD/CAD has traded between 1.26-1.29 for a few weeks)
·      Commodity prices: Precious metals lower; dollar index about a 30c move off overnight lows (93.57) – weighing on gold prices early down about -$10 around $1,286 an ounce. Energy futures slip, with WTI crude down over 1% below the $56 per barrel level, extending recent declines ahead of month-end OPEC meeting
·      Treasury market trading remains subdued, with the shorter term yields inching higher over the last few weeks on expectations of an FOMC rate hike at the December meeting; the 10-yr yield up about 1 bps at 2.355%, while the 2-yr yield above 1.73%
Sector Movers Today
·      Autos; Uber agreed to buy 24,000 sport utility vehicles from Sweden’s Volvo Cars to form a fleet of driverless autos; VLKAY raised its profit and revenue targets for 2020 as expects revs to rise more than 25% through 2020 and operating profit would increase 25% or more; GM was upgraded to buy at Guggenheim ahead of the company’s highly-anticipated event focused on its vision for an autonomous future; in auto suppliers, DLPH upgraded at Bank America saying the breakup of the company into two publicly traded entities increases the likelihood of a takeout
·      E&P sector; Barclays upgrades the mid-cap E&P sector to positive from negative, large-cap to neutral from negative, reflecting the “valuation disparity and the expectation that producers can capitalize on efficiency gains to deliver improved returns,/also upgraded FANG and EGN to Overweight and downgraded AR and GPOR to Equal-weight noting
·      Industrial & Machinery; heavy duty truckers/freight names fell on Friday in reaction to TSLA’s energy efficient semi-rig, as group tries to recover some losses today (CMI, PCAR, CHRW); GNRC and SPXC were downgraded to underperform by Wolfe Research
·      Leisure and Lodging; movie theater stocks active (RGC, AMC, CNK) after Warner Brothers’ “Justice League” generated $96M in box office revenue from its opening weekend in the U.S. below some estimates of above $125M (the opening weekend for “Justice League” was the lowest opening of a film in the D.C. Universe)
·      CAVM +7%; to be acquired by MRVL for $80 per share, in deal valued at around $6B https://goo.gl/NH8xCq
·      DDD +4%; upgraded to neutral at Piper saying new product introductions throughout 2018 should stem share loses
·      DGLY +19%; said that the Federal District Court of Kansas has rejected the request of AAXN to maintain the stay of the patent lawsuit brought by the company against it
·      GLPG +3%; reported positive top-line results from ALBATROSS, a Ph2 study of its CF corrector GLPG2222
·      IBM +1%; mentioned positively in Barron’s saying shares could make 30% or more over next year
·      ITCI +6%; receives FDA fast track designation for Lumateperone
·      BIVV -8%; and SHPG pressured in response to Roche’s positive Hemlibra data
·      CAH -2%; downgraded at Morgan Stanley saying it has outsized exposure to Amazon via its medical segment compared to its peers
·      CNK -2%; as movie theatres weak: after Warner Brothers’ “Justice League” generated $96M in box office revenue from its opening weekend in the U.S. below some estimates of above $125M
·      MRK -2%; also weak as Roche study of its Tecentriq with Avastin and chemotherapy met its primary target in patients with non-small cell lung cancer (NSCLC)
·      OMI -4%; Credit Suisse cuts tgt to street low $17 saying its core distribution business, hurt by contract losses and competition
·      RRC -3%; as energy related stocks extend last week’s declines

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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