Mid Day Outlook: November 27, 2017

Scott GreenDaily Market Report

Mid-Morning Look
Monday, November 27, 17
U.S. stocks moving upward, with major indexes on track for new all-time highs, as the focus today (and this week) remaining on tax reform and the holiday shopping season, as AMZN leads retailers higher (fresh record for the online giant) after strong Black Friday sales data and optimism on Cyber Monday sales. It is a fairly busy week out of Washington as the Senate may vote on its tax bill by the end of the week, although a vote is not set in stone and could lapse into following week. The Senate Banking Committee will also hold a hearing on Jerome Powell’s nomination to the Federal Reserve this week. It was a busy morning for M&A deals, with several announcement including: MDP to buy TIME in $2.8B deal, CUDA being taken private in $1.6B deal, and BV taken private in $521M deal.  NYMEX crude pulled back from Friday’s two-plus year highs ahead of the OPEC meeting this week in Vienna. Gold prices surge to around the $1,300 an ounce level as the dollar extends losses.
Treasuries, Currencies and Commodities
·      In currency markets, dollar posting monthly lows vs. the Japanese yen, dropping below 111 to lows of 110.88 before paring losses, while the dollar remains broadly lower vs. other comps (though has pared losses); Bitcoin remains a hot topic, surging 17% to above $9,700 earlier
·      Commodity prices; Precious metals extending recent gains, with gold trading around the $1,300 an ounce level, buoyed by the recent pullback in the U.S. dollar;Energy futures are lower, with WTI crude pulling back from Friday’s two-yr  highs of $59.05, trading to lows below $58 per barrel
·      Treasury markets little changed, with the yield on the 10-yr holding around last week closing levels of about 2.34% as markets await tax legislation news from the Senate sometime this week; bonds pared early gains following a better Oct reading for New Home Sales
Economic Data
·      New home sales for October rose 6.2% to 685K annual rate, well above the 627K estimate, though the prior month was downwardly revised to 645K from 667K; Median new home price rose 3.3% y/y to $312,800; average selling price at $400,200; new home sales on pace for 611k this year compared to a 2016 total of 561k; Months’ supply at 4.9 in Oct. compared to 5.2 MoM
Sector Movers Today
·      Semiconductors; Morgan Stanley downgraded WDC to equal-weight as believes the NAND industry is entering a downturn for the first time since early 2016. Part of Morgan call for European semi’s: downgraded TSM, HIMX ASM Pacific, and ASE as await better entry points – expect these four companies to benefit from long-term trends (TSMC: HPC demand; Himax: Android 3D sensing; ASM Pacific: dual cam, automotive semis; and ASE: OAST industry consolidation), but we believe that their stock prices now reflect high valuations
·      Retail movers; DECK said it would appoint at least two new independent directors to its board, bowing to pressure from activist investor Marcato Capital Management that is looking to replace entire board; gun stocks (AOBC, RGR) active after reports say that FBI gun background checks on Black Friday set a new record, rising to 200,000 requests vs 2016’s 185,713; FNKO initiated with buy rating equivalent from eight Wall Street analysts today (street high $14 tgt at JPM);GPS positive mention by Jefferies saying checks over the weekend leave them with the view that Old Navy and Gap were the biggest positive surprises
·      Housing & Building Products; LOW was upgraded to outperform at Raymond James saying shares more attractive following the Q3 beat and said underlying industry indicators, combined with industry supplier commentary, remain supportive of the home improvement industry heading into 2018; homebuilders pullback (TOL, LEN, DHI) from 52-week highs late last week
·      ALGN +2%; Morgan Stanley said expects company to capture 50% of the 400,000 case at home orthodontic market as raises tgt to $300
·      ALKS +5%; entered into a global license and collaboration agreement with BIIB to develop and commercialize ALKS 8700 for the treatment of relapsing forms of multiple sclerosis
·      AMD +2%; benefitting from crypto currency exposure, while other semi’s fall on analyst call
·      AMZN +1%; trades to new record all-time highs (above $1,200) on this Cyber Monday
·      BV +13%; Marlin Equity Partners to buy BV for $5.50 per share in cash for a total value of about $521M https://goo.gl/ZxKRrg
·      CUDA +8%; to be acquired by Thoma Bravo for $27.55 per share in deal valued at $1.6B https://goo.gl/zywVUN
·      EHIC +2%; received non-binding proposal from Goliath Advisors to be bought for $13.35 in cash per American depositary share https://goo.gl/5VU2VV
·      ROKU +10%; raised to street high tgt of $50 at Needham today
·      TEVA +4%; as announces major reorganization, leadership changes
·      TIME +9%; to be bought by MDP for $2.8B including debt in cash deal valued at $18.50 per share; Koch brothers also agreed to support offer with equity injection of $650M https://goo.gl/D7MSdj
·      KIM -3%; cut to neutral at Baird on reduced earnings growth outlook
·      MRO -3%; as oil prices fall from 2-year highs ahead of OPEC meeting later this week
·      NSC -2%; downgraded to sell at Loop Capital saying operating efficiency metrics look like a bit of a disaster and cuts tgt to $120
·      QDEL -16%; as Beckman Coulter said it plans in the future to sell directly to its customers a natriuretic peptide assay for its Access Family of Immunoassay Systems (currently, BNP assay is sold exclusively by Quidel and its designated distributors)
·      REGN -1%; after halting development for the combination of angiopoietin2 (Ang2) antibody nesvacumab and Eylea
·      SQ -4%; downgraded to sell with $30 target at BTIG saying that while the company’s bitcoin trial “makes it hip to be SQ,” the stock’s rally is overdone
·      WDC -7%; downgraded to equal-weight at Morgan Stanley as believes the NAND industry is entering a downturn for the first time since early 2016


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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