Mid Day Outlook: December 1, 2017

Scott GreenDaily Market Report

Mid-Morning Look
Friday, December 1, 17
U.S. equities jostling back and forth from gains and losses, moving in conjunction with every headline out of Washington pertaining to the tax reform vote. U.S. stocks edged lower overnight as Senate Republicans suspended a vote on a tax bill as lawmakers continued to debate a number issues related to cutting rates for individuals and corporations. Futures bounced back on reports Sen. Ron Johnson, one of the few holdouts, will vote for the Senate Republican tax package and as Senator Corker said they probably have enough votes to pass the tax bill – time will tell. Outside of the Washington drama, energy stocks leading the S&P early after OPEC extended production cuts through 2018, while generic pharma names rise (VRX, MYL, and ENDP) on reports AMZN has had early talks with generic drug makers about a potential entry into the pharmacy business. Transports maintain strong gains this week after touching fresh record-highs yesterday, while tech stocks slip again (semiconductors). Banks moving higher on the tax reform hopes while retail active after earnings from FIVE, BIG, GCO, and ULTA. Can’t leave out the news on Bitcoin, soaring over 9% earlier today after the CFTC said it would allow bitcoin futures trading on three exchanges starting December 18th.
Treasuries, Currencies and Commodities
·      In currency markets, the dollar gains with the dollar index up about 0.2% after posting declines in November of over 1%; the Canadian dollar ripped higher on Friday after new data on third quarter economic growth and jobs gains in November topped analyst forecast; dollar highs against the yen to 112.80 up 0.25%, while the euro slides
·      Bitcoin rises as much as 9% after the US Commodity Futures Trading Commission on Friday said it would allow bitcoin futures trading on three exchanges starting December 18th (the CME and CBOE self-certified new contracts for bitcoin futures products and Cantor Exchange self-certified a new contract for bitcoin binary options). The contracts will make it possible to bet on bitcoin prices without buying the cryptocurrency
·      Commodity prices; strong rebound for WTI crude, rising more than 2% after OPEC’s decision to maintain oil output cuts until the end of 2018  was announced yesterday; meanwhile gold prices are little changed around the $1,276 an ounce level
·      Treasury markets initially climbed, pulling yields lower after the Senate tax bill hit snags, delaying a floor vote that had been expected a day earlier. However, as reports indicate they have the 50-votes needed for the bill this morning, bonds have since moved lower (10-yr 2.415%)
Economic Data
·      ISM Manufacturing Index reported in-line at 58.2 and down slightly from 58.7 last month; component breakdown showed: new orders rose to 64 vs 63.4 prior, employment fell to 59.7 vs 59.8, inventories fell to 47.0 vs 48.0, prices paid fell to 65.5 vs 68.5
·      Construction Spending for October rose 1.4%, topping the 0.5% estimate; Private construction rose 0.6% in Oct. while private residential construction rose 0.4%; private nonresidential construction rose 0.9%; public construction rose 3.9% in Oct.; largest gain since Oct. 2014
·      Manufacturing PMI for Nov as reported by Markit was 53.9, mostly in-line with flash reading 53.8 and falls from 54.6 in Oct. (and year ago 54.1); employment falls to 54.7 vs 55.4 in Oct.
Sector Movers Today
·      Auto movers; monthly November auto sales data out today: 1) GM Nov. U.S. auto sales down (-2.9%) vs. est. down (-1.5%) and GM sees U.S. economic growth momentum carrying over into 2018; 2) Ford (F) Nov U.S. light vehicle sales up 6.7% vs. est. 3.7% and vs. year ago on sales of 210,771 vehicles (total car sales +2.0%, total SUVs +13.3%, total trucks +4.1%); 3) FCAU Nov. U.S. auto sales down (-3.7%) vs. est. down (-5.5%) as reported sales of 154,919 units vs 160,827 YoY with Jeep brand sales -2%, Chrysler brand +14%, Dodge brand -15%, Ram brand -5% and Fiat brand -28%
·      Casino, Lodging & Leisure; shares of WYNN, LVS, MLCO, MGM higher early as Macau reports November casino revenue up 22.6% to 23.03B patacas (vs. est. 19%); JP Morgan said November GGR beat is very impressive given the high expectations and very tough comps and average daily revenue (ADR) came in at MOP768m, well above MOP728m in 3Q despite being a seasonally slow month; SEAS positive mention at Stifel saying believe the turnaround story remains grossly underappreciated and misunderstood and still see significant upside from current prices
·      Semiconductors; AVGO does not intend to increase its $105B bid for QCOM ahead of a proposal next week to replace directors on its board, Bloomberg reports, and Broadcom doesn’t expect to boost its $70-per-share offer until around QCOM board meeting in March https://goo.gl/n2V1KC ; CY downgraded to hold at SunTrust saying it faces risks of potentially slowing sales growth and relatively high financial leverage; MLNX upgraded to buy at Longbow as believe activist encouragement could lead to 2 value creation options; MU shares slipped after 128Gb TLC NAND contract pricing decreased 2% MoM in November while 16GB and 32GB DDR4 contract pricing increased slightly MoM in November, following a 7% increase MoM in October
·      Energy stocks among the top gainers in the S&P 500 index following OPEC’s decision to maintain oil output cuts until the end of 2018 may now give energy stocks room to bridge the gap (shares of APA, RRC, HES, COP, NBL, NFX, CXO leading)
·      AMBA +18%; reported and guided for inline revenue and beat on non-GAAP EPS while outlook for FY19 remained about the same as management’s previous outlook
·      AMWD +27%; despite Q2 EPS/sales miss though announces acquisition
·      APRN +10%; said its CFO will take over as new CEO/reaffirmed second-half guidance
·      FMI +17%; after the FDA and CMS jointly announced the approval and proposed coverage for the company’s FoundationOne CDx test
·      GCAP +5%; announces the launch of Bitcoin trading on City Index platform for U.K. users
·      MLCO +4%; on the Macau gaming rev numbers rising 23% vs. est. 19%
·      MYL +4%; on reports AMZN has had early talks with generic drug makers about a potential entry into the pharmacy business
·      NTNX +9%; after posting 1Q results and 2Q forecasts that topped estimates
·      RRC +4%; as energy stocks play catch-up following OPEC news to extend cuts yesterday
·      TIF +3%; upgraded to overweight at KeyBanc with $115 tgt
·      GCO -18%; as missed Q3 earnings estimates by 10c citing decreased interest in NFL gear
·      MU -3%; after 128Gb TLC NAND contract pricing decreased 2% MoM in November
·      PDCO -3%; after Cleveland Research made cautious comments regarding Amazon’s headway into the dental industry
·      ULTA -6%; reported Q3 EPS that topped expectations but same-store sales growth slowed and the Q4 outlook was mixed (sees EPS $2.73-$2.78 vs. $2.84 est.)
·      ZUMZ -13%; Q3 EPS in-line though gross margins of 33.9% below views and prior year at 34.4%
·      Blackstone Mortgage (BXMT) 10.8M share Spot Secondary priced at $31.90
·      Limelight Networks (LLNW) 15M share Spot Secondary priced at $4.60
·      Medpace (MEDP) 4M share Secondary priced at $31.50


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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