Mid Day Outlook: December 5, 2017

Scott GreenDaily Market Report

Mid-Morning Look
Tuesday, December 5, 17
  
U.S. equities are mixed, with the recently beaten technology sector getting a small bounce today, while the Dow Industrials and S&P 500 index are little changed as markets eagerly await the progress in the country’s tax reform. The Senate and House are hoping to finalize a combined bill and send to President Trump after the U.S. Senate on Saturday morning narrowly passed the Republican bill to overhaul the tax code. The move followed the House passage of its own version of tax reform legislation last month, which contained significant differences from the Senate version. Outside of Washington news, economic data came in weaker-than expected today (trade deficit and services index), though bonds and the dollar are little changed. A week-long rotation out of technology showed signs of abating as the NASDAQ outperforms, while telecom, retailers and utilities decline (paring recent gains).
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar maintaining its gains post tax-legislation passage in Senate as now markets await finalized bill between both chambers hopefully this week; the Pound fell to lows of 1.3371 overnight amid weak sentiment stemming from Brexit headlines. The Aussie dollar briefly touched a three-week high after retail sales beat and the central bank held rates unchanged. Bitcoin mania continues, rising to fresh record of $11,864 today and holding near highs up 2%
·      Precious metals are lower again in a broad move lower for metals (both precious and industrial) given the stronger US dollar; Copper futures slumped to a 2-month low on worries over China’s economic growth and speculation that recent gains have been excessive according to newswires
·      Energy futures are flattish after WTI crude prices fell for the first time in three sessions yesterday; WTI crude around $57.50 per barrel ahead of inventory data tonight and tomorrow
·      Treasury markets are little changed despite weaker-than-expected economic data, while stock averages are edging slightly higher; 10-yr yield above 2.37% and 2-yr up above 1.82%
 
Economic Data
·      ISM Non-Manufacturing for November falls to 57.4, below est. 59 and below prior months 60.1 reading; non-manufacturing index at 57.4 vs 60.1 prior month; Business activity fell to 61.4 vs 62.2 prior month; new orders fell to 58.7 from 62.8 prior while employment fell to 55.3 vs 57.5; prices paid fell to 60.7 vs 62.7 and backlog of orders fell to 51.5 vs 54
·      The U.S. trade deficit grew 8.6% in October to 9-month high of (-$48.7 billion), wider than economist expectations of (-$47.5B). Imports climbed 1.6% to a record $244.6 billion. Exports were unchanged at $195.9 billion
·      Nov. Composite PMI 54.5 vs. Flash Reading 54.6 as index falls to 54.5 from 55.2 in Oct (and compares to year ago 54.9); the US Markit Service PMI also 54.5 vs. 55.3 last month
   
Sector Movers Today
·      Retailers; JILL shares jumped as the women’s apparel retailer posted Q3 earnings that beat on a smaller comp sales loss (-0.6% vs. -3.7% est.); BKE announced a special dividend of $1.75 per share; ASNA shares fell after the owner of Justice and Dressbarn posted a larger comp sales decline (-5%) for Q1 on in-line earnings, but sees Q2 loss more than Street estimates; shares of LE and GII also actively higher early after earnings results, while FRAN slipped
·      Auto sector; auto parts retailers higher early after AZO Q1 comp sales of 2.3% topped the 0.9% estimate on better EPS/sales/margins noting storms and natural disasters during the quarter hurt EPS by about 7c (ORLY, MNRO, AAP also moved in sympathy); Morgan Stanley  raised targets on auto suppliers AXL to $16 from $11, keeps underweight; raises BWA PT to $38 from $32, retains underweight; raises MGA PT to $49 from $47, maintains equal-weight; Ford (F) said by 2025 plans to introduce more than 50 new vehicles in China, and boost China revenue by 50% above this year/new vehicles include eight all-new SUVs and at least 15 electrified vehicles
·      Housing & Building Products; homebuilders pressured after TOL Q4 EPS and revenue results fell short of Wall Street expectations, while 4Q was mixed, with robust order growth and generally in-line guidance offset by modestly lower-than-anticipated gross margins in FY18 guidance (shares of LEN, PHM, KBH, MTH were active)
·      Metals & Mining; VALE upgraded to outperform at Credit Suisse citing positive structural changes in the commodities space in China and well-qualified management;CLF reports offering of $400M senior notes due 2024; copper prices tumbled to 3-month lows on China fears, weighing on names like FCX, as well as industrial metals in general (aluminum, iron ore, steel)
·      Utilities; EIX shares dropped on concerns after reports of a fast-moving fire in Southern California’s Ventura County that began late Monday has led to at least one death and the evacuation of about 1,000 homes so far, according to authorities (PCG & SRE shares also slumped on the report of the fires); utility index (UTY) dropped below the 700 level for the first time in about a month
 
Stock GAINERS
·      AZO +2%; Q1 comp sales of 2.3% topped the 0.9% estimate on better EPS/sales/margins
·      BMS +5%; said to hire Goldman Sachs to explore options/possible sale https://goo.gl/UPbF4G
·      BNED +21%; after year-over-year earnings and sales spike
·      COLL +11%; enters pact with DEPO (more below)
·      DEPO +11%; COLL entered into a pact with DEPO on its top-selling drug Nucynta in the U.S. where COLL gets commercial rights to drug and DEPO royalties and $10M upfront
·      FOXA +2%; CNBC’s David Faber reported the media and entertainment company could be closing in on a deal to sell its film studio and TV production assets to DIShttps://goo.gl/nfahpQ
·      HDS +7%; as Q3 results topped estimated and Q4 guidance topped mid-point of estimates
·      RGC +9%; Cineworld Group PLC has agreed to buy RGC for $3.6B, creating the world’s second-largest cinema operator with more than 9,000 screens.https://goo.gl/nYi2kk
·      RVNC +33%; on positive results from two Phase 3 clinical trials, SAKURA 1 and SAKURA 2, both meeting their primary endpoints (shares of AGN dropped after RVNC reports Botox competitor)
·      SNAP +9%; upgraded to Overweight at Barclays and raised its tgt to $18 saying with pricing transition in the later stages, it may start hitting or exceeding consensus revenue estimates
 
Stock LAGGARDS
·      ASNA -18%; owner of Justice and Dressbarn posted a larger comp sales decline (-5%) for Q1 on in-line earnings, but sees Q2 loss more than Street estimates
·      EIX -8%; after reports of a fast-moving fire in Southern California’s Ventura County that began late Monday has led to at least one death and the evacuation of about 1,000 homes so far
·      FCX -2%; as copper falls to 3-month lows on China fears/industrial metals lower
·      GALT -31%; after negative phase 2b trial results saying GR-MD-02 therapy did not meet its primary endpoint in a mid-stage clinical NASH trial
·      HMNY -15%; after CNK announces a movie subscription service that competes with MoviePass, the subscription service HMNY is buying a majority stake in
·      KSS -4%; as retailers paring some of its recent gains following tax reform advance in Senate
·      SNSS -9%; announced the resignation of the company’s CEO ate yesterday
·      TOL -7%; after Q4 EPS and revenue results fell short of Wall Street expectations
 
Syndicate
·      BlackLine (BL) 4.5M share Spot Secondary priced at $34.40
·      GoDaddy (GDDY) 7.28M share Spot Secondary priced at $47.32
·      Heron Therapeutics (HRTX) 9.678M share Spot Secondary priced at $15.50
·      MGM Resorts (MGM) 10M share Block Trade priced at $34.00
·      Orion Engineered (OEC) 12.66M share Spot Secondary priced at $23.10
·      Performance Food Group (PFGC) 6.273M share Secondary priced at $30.00
 

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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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