Market Review: November 24, 2017

Scott GreenDaily Market Report

Closing Recap
Friday, November 24, 17
  
Equity Market Recap
·      Stocks gained across the board on this holiday shortened trading session, with retailers leading the gains (AMZN new all-time high) amid optimism and euphoria the retail holiday season will bring to the sector. The S&P 500 and Nasdaq Composite both rise to new all-time highs in what was (as expected) a low volume, light news related day. Several news items out of Europe with better-than-expected economic data (German sentiment data) hitting another record high and slight progress in German government negotiations. The dollar was broadly lower, while gold slipped and oil prices touched fresh 2-year highs ahead of the OPEC meeting next week. According to one report today, President trump to meet with Senate Republicans on Tuesday to discuss tax plan, which is the next market catalyst with earnings now behind us for more than a month. Adobe Analytics forecast online Black Friday sales of $5-billion, which would be a record high. Online retailers will rake in an additional $6.6-billion on Cyber Monday, according to Adobe
 
Commodities
·      Oil prices rose again on Friday, its 3rd session in a row with gains amid falling stockpiles, a softer dollar, disruptions to oil supply from the Keystone pipeline and expectations for extended supply cuts by OPEC when they convene next week in Vienna all boosted optimism in the market. WTI crude traded as high as $58.92, up around 90c, fresh 2-year highs, though natural gas prices dropped sharply, falling over 11c to $2.85 mln Btu’s. Prices have rallied this week on data from the U.S. EIA that showed crude stockpiles fell by 1.9 million barrels last week
·      Gold prices slipped despite a sharp decline in the dollar index to two-month lows on likely profit taking following strong returns the last few days despite rising rate hike expectations. Though gold got a boost Wednesday after Fed minutes from their November meeting signaled a cautious approach to interest-rate tightening into next year, though seemed set for a rate hike next month. After a see-saw week, gold was on track to log a roughly 0.4% weekly decline.
 
Currencies & Bonds
·      The dollar was broadly lower as the U.S. dollar index (DXY) dropped below the 93 level, touching lowest levels since mid-Oct; the euro touched 2-month highs above 1.19 as Chancellor Angela Merkel restarts talks on forming a new coalition government and after better European economic data (PMI’s and German confidence). Sterling rises above $1.3357 to its best levels since October 2nd, before paring gains, while the dollar advanced vs. the yen. Emerging markets advance again as the dollar falls -0.5% against the Peso. Overall, the dollar fell for a 3rd straight week amid a data-supported stronger euro and lingering reaction to the Federal Reserve’s concern about stubbornly low inflation. Bonds slip with the 10-yr up at 2.34% and 2-yr 1.74%.
 
Macro news
·      The best-performing sector this week in corporate bond markets, according to Bloomberg’s all cash indexes, has been materials, with energy and financials the laggards. Energy has been consistently the worst sector in junk since the end of Q1.
·      At least 235 people were killed and more injured when gunmen armed with explosives attacked a Sufi mosque in Egypt’s restive Sinai Peninsula, according to officials quoted by the state media
·      Late morning in the UK, Police called at 16:38 to a number of reports of shots fired Oxford Street & underground at Oxford Circus tube station. Police have responded as if the incident is terrorist related. Armed and unarmed officers were on scene
   
Sector News Breakdown
Consumer
·      Retailers; news today dominated by news on holiday sales thus far from Black Friday: Macy’s (M) CEO said he “feels good” about real estate portfolio and that apparel is still driver of traffic; AMZN that Thanksgiving was one of its biggest mobile shopping days, as orders placed through its app increased more than 50% over last year. Best selling items included micro SD cards, Keurig coffee makers, smart outlet plugs and its Echo speaker devices
·      On Thanksgiving Day, U.S. consumers have spent $1.52B shopping online as of 5pm, up 16.8% y/y, according to Adobe Analytics data. Adobe’s forecast for Thanksgiving Day online shopping is $2.8B, up 15% y/y. Avg order value (AOV) is up 3.2% for this year’s Thanksgiving Day at $132. A record 46.0% of all traffic to retail sites are coming from smartphones (up 15.2% y/y) as of Thanksgiving afternoon. Share of traffic from desktop (44%) fell 11% y/y, and tablet shares (10%) is down 5.7% from last year.
·      Consumer Staples; shares of European consumer goods companies including DANOY, LRLCY, NSRGY were active amid steps by China to lower import taxes for a broad range of consumer goods, including baby formula, as a way to spur more domestic consumption –
·      Education services; RYB shares plunged more than 35% following updates on the alarming allegations of improper conduct toward children enrolled in a class at a kindergarten it operates in Beijing. The company says it immediately provided security monitoring content and surveillance devices to police authorities (shares ofEDU and REDU also moved in reaction)
 
Energy
·      All quiet in energy on this shortened session; Baker Hughes weekly rig data was released on Wednesday due to the shortened week (rig count showed total rigs rose 8 to 923 in the latest week, with oil rigs up 9 to 747, while nat gas rigs slipped 1 to 176)
·      Couple of news movers: WFT has appointed advisers including Morgan Stanley to sell units starting in the first quarter of 2018, Reuters reported. It did not specify which businesses, but said it expected to raise about $500 million from these divestitures https://goo.gl/QHqULjSSL said it is abandoning all of its gas-to-liquids Greenfield projects, including a planned Louisiana project that was expected to cost as much as $15B, saying the low oil price environment and a volatile marketplace make the project “uneconomic.” SSL also will pull out of its Canadian shale gas assets on which it took a 9.9B rand ($715M) impairment on its 2016 earnings.
 
Financials
·      Large Cap banks were mixed on lack of news, bond yields holding low and markets awaiting tax reform news next week; Online lender WeLab Ltd., backed by Credit Suisse Group AG is working on a listing just weeks after closing a private funding round according to Bloomberg; Chinese online lenders extends earlier weekly losses after Bloomberg News reported that regulators and police are investigating a data leak that may have affected more than a million students (shares of QD, YRD, XRF and HX among movers)
 
Healthcare
·      Pharma and Biotech movers; NKTR shares fell after a late-stage Bayer study of a drug-device combo in pneumonia failed/the combo known as Amikacin Inhale used Nektar’s proprietary Synchronized Inhalation System under a 2007 accord with the German drug maker (however, shares rallied midday to turn higher); TEVAshares active amid reports that generic drugmaker is prepping massive job cuts in both the United States and its home market of Israel; HOLX said it has received 510(k) FDA clearance for its Quantra™ 2.2 Breast Density Assessment Software; DVA is exploring a sale of its physician network business for as much as $4 billion, Reuters reported; CERN shares extended Wednesday gains after CNBC first reported of an upcoming “huge” partnership with AMZN’s AWS service
 
Industrials & Materials
·      AG & Machinery; Baltic Dry Index rises 0.9% to 1,458 Points in London; DE was upgraded to buy from hold at Deutsche Bank following Q4 results and raised tgt to $167 from $149 saying positive earnings revisions should drive share outperformance from here; 52-week highs for homebuilders LEN, DHI, PHM
·      Chemicals; BASF SE (BASFY) confirmed that it is discussing a potential merger of its oil-and-gas activities with those of DEA, which belongs to LetterOne/in such a combination, BASF would hold the majority of the shares (BASF’s oil-and-gas activities are part of Wintershall, which focuses on exploration and production)https://goo.gl/AdrK8q ; Clariant AG (CLZNF) rejected many demands of its largest shareholder in the wake of the failed $15 billion merger with HUN escalating a battle with activist investors https://goo.gl/mrDnc5
 
Technology, Media & Telecom
·      Tech movers; YNDX shares volatile after received local antitrust approval to merge its ride-hailing business with Uber’s in the country; NTNX shares rise early as RBC Capital raised tgt to $37 as considers valuation reasonable as analysts and investors watch for opportunity related to the shift to software; AMZN trades to fresh all-time highs amid Black Friday buzz
·      Media & Telecom; DISH and CBS agreed to a new multiyear contract, ending a blackout that would have left millions of satellite-TV subscribers without the nation’s most-watched network

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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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