Wednesday, November 22, 17
Lackluster trading ahead of the Thanksgiving Day holiday on light volumes, as U.S. major averages are trading just slightly below the all-time record highs posted late yesterday for the Dow Industrials, S&P 500, Nasdaq Comp and Russell 2000. Economic data came in mixed today with a surprising miss for monthly Durable Goods orders, while jobless claims were reported in-line and sentiment data dipped from the prior month, but markets await clues about whether the central bank will raise rates next month in the Fed minutes which are released at 2:00 PM EST today. The US dollar is broadly lower, while commodity prices gains (gold and oil) and bonds rising early. Mixed batch of earnings again overnight in what is wrapping an overall solid quarter of corporate results, with shares of DE and GME rising on results while tech players CRM, HPQ, HPE and retailers CAL and GES slide on results.
Treasuries, Currencies and Commodities
· In currency markets, the U.S. dollar falls to lows of 111.61 against the Japanese yen (lowest levels in slightly over a month); and euro highs as well vs. USD as nears 1.18 (up 0.5%); the pound slipped initially vs. the dollar as UK 2018 economic growth forecast was lowered to 1.4% from 1.6%, and the 2019 prediction of 1.3% is far below economist projections – but has since rebounded
· Commodity prices; Energy futures slip from highs after mixed inventory data; crude spiked overnight after the API inventory report showed a larger than expected drawdown in inventories of -6.4M barrels, but pared gains after the EIA showed smaller-than-expected draw of -1.85M vs. est. -2.2M and a surprise build in distillates of 269K (vs. est. -1.0M barrels). Crude also got a boost from the news of TRP’s decision to cut oil delivered to the US via the Keystone pipeline by 85% through the end of November; gold extends gains trading near $1,290 an ounce
· Bonds posting early gains as yields slip; the 10-yr yield slips about 2 bps to below 2.34%, while the 2-yr yield dips to 1.74% after trading near 1.77% yesterday; mixed economic data (weak durable goods data but inline jobless claims) and a small pullback from record highs boosting bonds. Overnight, Fed Chair Yellen said one of the “biggest challenges” to the central bank remained inflation staying below its 2% target.
· Weekly Jobless Claims fell 13K to 239K, mostly in-line with the 240K estimate while the prior week was upwardly revised to 252K from 249K; the 4-week moving avg. rose 1,250 to 239.75k in the week ending Nov. 18; continuing claims rose 36K to 1.904M in the week ending Nov. 11
· U.S. durable goods orders fall (-1.2%) in October, compared to an estimated gain of 0.3%, while the prior month was upwardly revised to 2.2% from 2%; new orders ex-trans. rose 0.4% in Oct. after 1.1% rise while new orders ex-defense fell 0.8% in Oct. after 2.4% rise; non-defense capital goods orders ex-aircraft fell 0.5% in Oct. after rising 2.1% in Sept.
· The U.S. November-Final Michigan Sentiment fell to 98.5 from 100.7 last month and was mostly in-line with an expected 98 reading; the expectations index fell to 88.9 vs. 90.5 last month, while the current economic conditions index fell to 113.5 vs. 116.5 last month
· The 30-Yr fixed mortgage rate for week ended today fell to 3.92% from 3.95%, Freddie Mac said; 15-year rate avg 3.32%, up from 3.31% a week earlier and 5/1-year ARM rate avg 3.22%, up from 3.21% a week earlier.
Sector Movers Today
· Industrial & Machinery; Agriculture machinery stocks active after DE posted Q4 top/bottom line results that handily topped estimates as did its 2018 net income forecast citing improving markets for farm and construction equipment (shares of CNHI, AGCO, LNN, CAT have performed well this year); ROK said today its Board of Directors has unanimously rejected EMR’s unsolicited proposal to acquire the company received on November 16, 2017 ($29B bid)
· Consumer Staples & Restaurants; BLMN was downgraded to neutral at Bank America following rally in shares as Jana revealed stake in company; CBRL was downgraded at Longbow; PG has notified independent inspector IVS Associates it will challenge the proxy vote recount that narrowly gave activist investor Nelson Peltz a victory and a board seat, CNBC reported
· AXTA +4%; Nippon Paint Holdings Co Ltd made an all-cash offer to acquire AXTA, ending merger talks between Axalta and Dutch peer Akzo Nobelhttps://goo.gl/zb8Ypx
· CPRT +11%; after Q1 EPS beat by 6c on higher revs of $419.2M
· DE +3%; posted Q4 top/bottom line results that handily topped estimates as did its 2018 net income forecast
· GME +11%; 3Q results exceeded estimates helped by an increase in new hardware and software sales/but analysts warn about lower pre-owned margins
· TIVO +7%; won a federal patent ruling against CMCSA as the U.S. ITC ruled that Comcast set-top boxes violated two patents of Rovi Corp
· BZUN -14%; after mixed Q3 results
· CAL -4%; posted 3Q sales and EPS softer than expectations due mostly to weather yet showed upside on gross margin and reiterated the FY17 outlook
· CRM -2%; strong Q3 results including a big billings beat of up 24% YoY vs. est. up 13%, but forward bookings and EPS outlook came in slightly light of street expectations
· GES -13%; after Q3 EPS sales missed forecasts while EPS was in-line, and guidance mid-point missed estimates
· HPE -8%; announced CEO Meg Whitman stepping down early next year and will be succeeded by President Antonio Neri/also guides Q1 EPS below views after Q4 beat
· HPQ -6%; mixed Q1 results as solid top line was offset by weaker margins and EPS was in line
· MNK -2%; downgraded to Perform at Oppenheimer saying he’s been “flat out wrong”
· ROK -1%; said today its Board of Directors has unanimously rejected EMR’s unsolicited proposal to acquire the company received on November 16, 2017 ($29B bid)
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.