Mid Day Outlook: November 28, 2017

Scott GreenDaily Market Report

Mid-Morning Look
Tuesday, November 28, 17
  
Equities outperform early, with new record highs for major averages as Rep Brady said he is “confident” the Senate will come through on the tax bill as President Donald Trump was set to meet with Senate Republicans today. Markets also optimistic ahead of the Senate confirmation hearing for Jerome Powell, the Federal Reserve official tapped by President Donald Trump to replace Janet Yellen as Chair of the FOMC. In a positive update, the OECD overnight said the U.S. economy is expected to grow at 2.5% in 2018, up from this year’s rate of 2.2%, but then drop back to 2.1% growth in 2019. Another strong day of economic data with Richmond Fed manufacturing and Consumer Confidence (17-year highs) both handily topping estimates, keeping expectations of a Fed rate hike in December on track. Stocks continue to march higher as markets remain very complacent.
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar rebounds further (made a late day rally yesterday) helped by another round of better-than-expected economic data (manufacturing/confidence); Bitcoin up 2.5% as approaches $9,900 again (earlier high $9,940); the dollar index (DXY) at 2-day highs
·      Commodity prices: quiet thus far today, as both gold and oil prices slide amid a rebound in the dollar; OPEC meeting later this week (already some headlines out from members) will be key for oil price swings, which pulled back from 2-year highs yesterday; also inventory data tonight (API) and tomorrow morning (EIA)
·      Treasury markets remain steady, trading in a tight range the last few days ahead of the Powell Fed nomination hearing; stronger economic data has failed to weaken bonds, with the 10-year yield holding around 2.33% and the 2-yr little changed at 1.74% after surging the last few weeks
 
Economic Data
·      Consumer Confidence for November rose to 129.5, topping est. of 124.0 and 126.2 in the prior month; the Present situation confidence rose to 153.9 vs. 152.0 last month while the consumer confidence expectations rose to 113.3 vs. 109.0 last month
·      Richmond Fed’s November manufacturing survey at 30, well above the 12 reading last month and the 14 estimate; shipments rose to 33 after 9 the prior month while new order volume increased to 35 after 17 prior; order backlogs rose to 21 after 7 the prior month
·      Advanced trade deficit of goods for October widened to (-$68.3B) from (-$64.1B) in prior month, the Commerce Department said; Imports rose 1.5% in Oct. to $197.381B from $194.447B in Sept., while Exports fell 1% in Oct. to $129.084B from $130.334B in Sept.; Wholesale merchant trade inventories fell 0.4% in Oct. to $605.7B
·      S&P CoreLogic Case-Shiller National Home Price index rose 6.15% y/y in Sept. after rising 5.95% in prior month; the S&P/Case-Shiller 20-city NSA index at 203.5 after 202.68 in Aug.; the 20-city SA index rose 0.52% m/m in Sept. after rising 0.44% the prior month
·      National home price index rose 0.72% m/m in Sept. after rising 0.66% the prior month
   
Sector Movers Today
·      Large Cap banks; TCF announced after the close that it is exiting the auto business owing to a “less favorable” financial outlook compared to alternative uses of capital (said is taking an after-tax charge of between $80M-$85M) – Piper upgraded saying shares should garner more of “a peer-like multiple” due to less auto-related expense; the WSJ reported that WFC cheated a number of their foreign-currency exchange business customers by overcharging them; KBW upgraded Puerto Rico banks BPOP & OFG to Outperform from Market Perform; BNS offered $2.2B for a majority stake in the Chilean operations of BBVAhttps://goo.gl/A49c22
·      Large Cap Pharma; MRK and PFE said a late-stage trial of stomach cancer drug did not meet its main goals of overall survival; in managed care, UNH provided initial guidance for 2018 that missed some Street expectations (Cantor said forecast was “a touch light” but overall “not too concerning”, while Mizuho said midpoint was seen by some as “below consensus”)
·      Industrial & Machinery; ROK shares volatile after EMR withdrew its $29B offer to buy the company; EMR CEO said it may be interested in some GE assets and that it was seeking bolt-on-deals of $250M-$1B each/said sees no break-up of EMR’s two business units;  TXT shares were active after the company said it sees AMZN as a potential customer
 
Stock GAINERS
·      APEN +53%; said the FDA announced 510k clearance of the OverStitch Sx
·      BWLD +6%; agreed to be bought by Arby’s Restaurant Group, which is owned by Roark Capital, for $157 per share (up from prior offer of $150) in deal valued at about $2.9B including debt https://goo.gl/nHwH5P
·      NOMD +4%; posted its 3rd straight quarter of organic sales growth and raised guidance
·      RYB +10%; as Beijing police said there were no child abuse incidents found at RYB Education (recall shares fell 38% on Friday amid allegations of improper conduct enrolled there)
·      TCF +3%; after two analyst upgrades as company exits auto lending biz
·      TECD +10%; 3Q earnings came in better than expected while Avnet integration tracking well
·      THO +10%; quarterly revenue and EPS topped previously raised expectations, fueled by strong dealer orders (backlog up 70%)
 
Stock LAGGARDS
·      AMD -3%; as Mizuho said expect crypto-mining will be a much less meaningful market for AMD/NVDA in 2018 (~6-7% of revenues currently)
·      DPZ -2%; Longbow Research said U.S. checks point to slow start to Q4
·      MARA -23%; said it will issue around 127 million shares related to its merger with cryptocurrency miner Global Bit Ventures
·      MOMO -14%; Q3 results top views but midpoint of Q4 revs guidance falls short of estimates
·      PSA -2%; downgraded to Underperform at Baird largely due to valuation
·      ROK -1%; as EMR withdrew its $29B offer to buy the company
 

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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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