Mid Day Outlook: November 29, 2017

Scott GreenDaily Market Report

Mid-Morning Look
Wednesday, November 29, 17
The S&P 500 and the Dow Jones Industrial Average trade to new all-time highs, led by gains in consumer discretionary/retail and more gains for financials while the tech heavy NASDAQ underperforms. Markets helped by a higher than expected revision to U.S. third quarter GDP growth and rising hope that Republicans will be able to push through the tax reform legislation (after a positive step yesterday). Bonds are falling and yields rising following that 3.3% upwardly revised Q3 GDP reading. Tech a noticeable laggard, led by declines in ADSK on some disappointing guidance last night, though group broadly lower given likely rotation out of winners (Nasdaq up 28% YTD) and into laggards like retail (JWN, M, KSS big gains) and banks. A lot of talk about Bitcoin as after topping the $10,000 milestone Tuesday, the cryptocurrency already took out $11,000 on Wednesday (high was $11,434), up over 35% in just 3-days. Note all three benchmarks achieved record closing highs on Tuesday, as progress on a Republican tax overhaul appeared to offset worries about a North Korean missile test. Russell 2000 index also coming off record closing highs as small business seen as among biggest beneficiaries of tax reform. Several comments ahead of OPEC meeting tomorrow, with consensus thus far appearing to be an extension of production cuts another 6-9 months, though noting confirmed. Semiconductors among the biggest drag in tech, as the Philly semi index (SOX) falls as much as 3%, with all 30 components  lower, led by MU -7%, AMAT and LRCX off over 6%, NVDA down over 5%
Treasuries, Currencies and Commodities
·      In currency markets, the U.S. dollar bounces off earlier lows, posting modest gains following comments by outgoing Federal Reserve Chairwoman Janet Yellen and the second reading of third quarter GDP data, which was in line with expectations. The pound rose above $1.34, up from $1.3339, as the currency touched levels last seen in late September, building on yesterday’s gains
·      Commodity prices mixed, with declines in gold and oil prices, while natural gas prices rise; crude dipped on a big build in crude overnight y API (1.8M barrels) though EIA posted a larger drawdown of -3.4M barrels (but bigger builds in gasoline and distillates); gold slumps as the dollar perks up the last few days vs. most currencies (though falls vs Pound)
·      Treasury market’s fall as yields jump; Treasury yields moved higher and the dollar erased its earlier losses after the third quarter growth rate for the US economy was revised higher than expected on Wednesday; 10-yr yield touched highs around 2.39% an 2-yr above 1.77%
Economic Data
·      U.S. Q3 growth was revised to a three-year high of 3.3% from 3% under the government’s latest revision to gross domestic product (GDP); adjusted pretax corporate profits rose 4.3% to an annualized $2.22 trillion, marking the biggest gain in a year. Spending on equipment, especially in transportation-related areas, rose 10.4% instead of 8.6%. Consumer spending, biggest part of the economy, grew 2.3% (est. 2.5%); revised from 2.4%; down from 3.3% in 2Q
·      Pending Home Sales for October rise 3.5% MoM, above the 1% estimate; Northeast up 0.5%; Sept. rose 1.2%; Midwest up 2.8%; Sept. rose 1.4%; South up 7.4% (outperformance); Sept. fell 3% and West fell 0.7%; Sept. rose 1.5%
Sector Movers Today
·      Semiconductors among the biggest drag in tech, as the Philly semi index (SOX) falls as much as 3%, with all 30 components  lower; MRVL turned in another solid quarter with revenue slightly beating estimates combined with gross margins and expense control led to a beat on the bottom/also slight beat on top and bottom line for year; QCOM was downgraded to hold at Stifel as risk in the shares is now greater than the potential reward following the company’s recent rejection ofAVGO $70 bid; PLAB rises on earnings
·      Large Cap banks extend yesterday’s strong gains, as shares of big banks (JPM, C, MS, BAC) and regional banks (PNC, ZION, BANC, TCBI) all strong – group surged yesterday on tax reform pushing forward and comments by Powell at nomination about “too big to fail”
·      Retailers; massive rally on retailers today, leading markets (M, JWN, KSS, AAP, URBN); TIF reported mostly in-line 3Q results that included some “slight improvements,” as well as disappointing European comp. sales; DLA results missed mainly due to hurricane-related disruptions, while further declines in retail licensing offset continued growth for Salt Life and in fashion basics said Roth Capital; Wayfair (W) said its 5-day Holiday weekend direct retail sales up 53%; ShopperTrak’s 2017 Black Friday Weekend data indicate that traffic levels for holiday week as a whole (11/19–11/26) fell about 2% y/y, the same rate of decline during the 2016 Black Friday
·      Transports; in rails, at conference today, UNP said it sees Q4 coal volumes flat to slightly down, while CNI said Q4 expenses may be higher than normal but said may use tight capacity to raise prices; in airlines, UBS said U.S. airlines may raise Prasm guidance – AAL, DAL, LUV, JBLU all posting strong gains as UBS expects at least a few airline companies to raise guidance when they issue their November traffic reports next week
·      CMG +3%; founder Steve Ells to step down from CEO role, will become executive chairman
·      JWN +5%; on outperformance in the retail space today (KSS, M, HBI)
·      MRVL +2%; solid quarter with revenue slightly beating estimates
·      NUAN +8%; reported a strong 4Q results exceeding estimates across a majority of metrics
·      PETX +7%; after the company terminated its stock offering
·      PLAB +10%; on earnings results
·      RGC +4%; confirmed British movie theater operator Cineworld Group PLC offered $3.1B/$23 per share for chain https://goo.gl/gHAB62
·      ADSK -16%; after lower subscription guidance for year/announced a restructuring plan
·      LNDC -2%; reduced its Q2 EPS guidance while reiterating its full-year EPS and revenue guidance
·      MDCO -7%; after announcing a deal to sell its infectious disease portfolio to Melinta Therapeutics for $270m upfront
·      MU -7%; weakness in tech, semiconductors specifically
·      PSTG -5%; better Q3 results and Q4 guidance but analysts note FlashBlade “lumpiness”
·      RYB -6%; after announcing findings of maltreatment of children; says police found maltreatment of children with use of sewing needles
·      WAIR -12%; after Q4 results missed lowest estimates and guides year sales up low-single digit
·      Atmos Energy (ATO) 4.558M share Spot Secondary priced at $87.75
·      Independent Bank (IBTX) 2.136M share Spot Secondary priced at $64.00
·      ReTo Eco-Solutions (RETO) 2.8M share IPO priced at $5.00
·      Scorpio Tankers (STNG) 30M share Spot Secondary priced at $3.00


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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