Morning Preview: December 7, 2017

Scott GreenDaily Market Report

Early Look
Thursday, December 7, 17
  
Stock futures are mixed as markets look to break out of its recent small downturn (markets haven’t hit new highs in over a week), on optimism over continued progress on tax reforms out of Washington, and as the market started to look ahead to the monthly jobs report due tomorrow morning. Another reason for eyes to turn to Washington was the potential for a U.S. government shutdown. Trump is scheduled to meet congressional leaders on Thursday to discuss a bill to keep the government open. Markets bounced in Asia after dropping sharply the day prior, while Europe is currently trading higher. Stock prices ended mixed on Wednesday, with the Nasdaq Composite snapping its 3-day losing streak (which was longest since August), though the S&P 500 extended its losing streak (just barely) to 4-days, the longest streak of daily declines since March. Energy shares were the weakest link, with the S&P 500 energy sector down 1.3% as oil prices retreated. Technology stocks outperformed after leading market declines over the last week on profit taking. Treasuries advanced while the yield curve flattened further, while the dollar was broadly higher. Bitcoin rose more than 12% on Wednesday, passing both the $13,000 and $14,000 milestones and has now topped the $15,000 level, up over 13%. Bitcoin’s total market capitalization has topped $240 billion, according to pricing website CoinMarketCap.
 
Regrading the tax bill, both the House and Senate passed their own versions of the tax bill last week, and now the two need to bridge their differences and agree on a final bill for President Donald Trump to sign. The Republican-led Senate late Wednesday agreed to begin formal negotiations with the House, spurring hopes the final tax overhaul will be completed by a self-imposed deadline of Dec. 22.
 
In Asian markets, The Nikkei Index advanced 320 points to settle at 22,498, the Shanghai Index declined -21 points to finish at 3,272 and the Hang Seng Index gained only a fraction of what it lost the prior day, rising 78 points to settle at 28,303 (had declined over 600 points the day prior). In Europe, the German DAX is up over 40 points at 13,040, while the FTSE 100 is up a few points around 7,350.
 
Market Closing Prices Yesterday
·      The S&P 500 Index slipped -0.30 points, or 0.01%, to 2,629.27
·      The Dow Jones Industrial Average fell -39.73 points, or 0.16%, to 24,140.91
·      The Nasdaq Composite climbed 14.16 points, or 0.21%, to 6,776.38
·      The Russell 2000 Index declined -7.88 points, or 0.52% to 1,508.88
 
Events Calendar for Today
·      7:30 AM EST       Challenger Job Cuts YoY for November…prior (-3%)
·      8:30 AM EST       Weekly Jobless Claims…est. 240K
·      8:30 AM EST       Continuing Claims…est. 1.919M
·      9:45 AM EST       Bloomberg Consumer Comfort Index… prior 51.6
·      10:30 AM EST     Weekly EIA Natural Gas Inventory Data
·      12:00 PM EST     Household Change in Net Worth for Q3
·      3:00 PM EST        Consumer Credit for October…est. $17.0B
 
Earnings Calendar
·      Earnings Before the Open: CIEN, DLTH, DVMT, EYE, FGP, GMS, MCC, MEI, MTN, VNCE
·      Earnings After the Close: AOBC, CLDR, COO, FNSR, FSCT, HOFT, SAIC, SKIS, UNFI
 
Other Key Events
·      Barclays Global Tech, Media and Technology Conference, 12/6-12/7 in San Francisco
   
World News
·      Chinese banks may have insufficient capital to weather potential losses from the nation’s rapidly mounting credit risks, the International Monetary Fund said, in a broad review of China’s financial system
·      Prince Bader bin Abdullah bin Mohammed bin Farhan al-Saud was revealed late Wednesday as the possible mystery buyer of da Vinci’s 500-year-old “Salvator Mundi” portrait of Christ, according to the New York Times, in which he paid a record breaking $450M
·      Eurozone final Q3 GDP up by 0.6%, meeting expectations
·      German industrial output in October was lower than anticipated, as in monthly, adjusted-terms factory output declined by 1.4%, disappointing expectations of a 0.7% increase
 
Sector News Breakdown
Consumer
·      Lululemon (LULU) shares rise 7%; Q3 EPS 56c/$619M vs. est. 52c/$610.6M; Q3 gross margin 52% vs. est. 51.2%; Q3 stores comp sales in constant currency +2% vs. estimate +2.4%; 3Q total comparable sales including direct-to-consumer in constant currency +8%, estimate +5.2%; sees Q4 EPS $1.19-$1.22 on revs $870M-$885M vs. est. $1.17/$866.2M; authorizes $200M stock buyback; raises year EPS to 2.45-$2.48 from $2.35-$2.42 and revs to $2.59B-$2.605B (est. $2.58B)
·      Conn’s (CONN) Q3 EPS 18c/$373.2M vs. est. 4c/$368.7M; 3Q comparable sales (-7.0%) vs. estimate (-8.6%) and sees 4Q Comp Sales down mid-single digits
·      Ollie’s Bargain Outlet (OLLI) Q3 EPS 29c/$238.1M vs. est. 21c/$233.7M; Q3 comp sales up 2.1%; Q3 adjusted EBITDA increased 23.8% to $29.2M; opened 15 new stores during the quarter, ending the quarter with a total of 265 stores; raises FY17 EPS view to $1.21-$1.22 from $1.16-$1.19 and raises FY17 revenue to $1.062B-$1.065B from $1.045B-$1.052B (est. 1.07B)
·      Tailored Brands (TLRD) shares rise 13%; Q3 EPS 71c/$810.8M vs. est. 54c/$807.5M; sees FY17 adjusted EPS $2.03-$2.08 vs. est. $1.84; continues to expect comparable sales for Men’s Wearhouse and Moore’s to be down low-single digits and coms for Jos. A. Bank to increase mid-single digits
·      Korn/Ferry (KFY) Q2 EPS 67c/$443M vs. est. 64c/$421.38M; sees Q3 adjusted EPS 54c-62c, on revs $406M-$426M vs. est. 58c/$399.42M
·      NCI Building (NCS) Q4 EPS 32c/$488.7M vs. est. 28c/$478.88M; sees Q1 revenue $390M-$410M, vs. consensus $400.24M and sees Q1 Adjusted EBITDA $24M-$34M
·      Blue Bird (BLBD) Q4 EPS 51c/$312.7M vs. est. 50c/$310.7M; Q4 unit sales of 3,608 buses; sees FY18 net revenue $1B-$1.03B vs. est. $1.04B
·      At Home Group (ATHM) 5M share Secondary priced at $24.50
·      William Hill PLC (WMH.LN) said it has agreed to support Scientific Games Corporation’s (SGMS) proposed acquisition of NYX (NYX.V), adding that the parties have therefore withdrawn from all litigation in the U.S. and in the U.K. https://goo.gl/eeJaVg
·      British bookmaker Ladbrokes Coral PLC is in “detailed” talks with GVC Holdings PLC over a takeover offer worth about 3.9 billion pounds ($5.2 billion), the two companies said https://goo.gl/B1N7En
 
Energy
·      In Los Angeles, a fire sparked early Wednesday morning is threatening some of the country’s most expensive real estate. Videos on social media showed motorists on the busy 405 freeway driving toward hillsides that were completely engulfed in flames. Part of the freeway remained closed. Meanwhile, fires across Southern California this week have already consumed more than 80,000 acres, fueled by Santa Ana winds
 
Financials
·      Citigroup Inc. (C) finance chief John Gerspach said late Wednesday the bank is likely to take a hit of about $20 billion to profits under the tax plans recently passed by Congress. The charge will result from the bank writing down the value of what are known as deferred tax assets
·      CURO (CURO) 6.666M share IPO priced at $14.00
·      The toll from October’s wildfires that ravaged Northern California’s Wine Country cost has topped $9 billion in insured losses, California’s insurance commissioner said Wednesday.
·      Goldman Sachs (GS) was added to Bank America’s US1 list given more favorable outlook, with rising GDP growth, low expectations, catalysts for potential upside
 
Healthcare
·      Spark Therapeutics Inc. (ONCE) announced positive results from a study of a gene-therapy approach to hemophilia. The drug, developed and tested in a collaboration with Pfizer Inc. (PFE) involves a single injection meant to help those suffering from hemophilia B. The study followed 10 adult males for 492 weeks and found that the number of episodes of bleeding decreased from an average of 11.1 a year before administration to 0.4 per year after, while infusions were reduced by 99%.
·      Sage Therapeutics (SAGE) shares up 49%; reports positive top-line results from phase 2 placebo-controlled trial of SAGE-217 in major depressive disorder
·      Odonate Therapeutics (ODT) 6.25M share IPO priced at $24.00
·      ArQule (ARQL) files to sell 17.06M shares of common stock for holders
 
Industrials & Materials
·      Southwest Airlines (LUV) raises 4Q Operating RASM forecast to up 1%-2% vs prior estimate up slightly to up 1.5%; said Nov. traffic rose 3.4% and capacity rose 2.5%
·      Greif (GEF) Q4 EPS 98c/$968.1M vs. est. 89c/$933.6M; 4Q adjusted Ebitda $117.9M vs. estimate $128.2M
·      General Electric (GE) Power reports global headcount reduction of 12,000 jobs
·      Celanese Corporation (CE) said it will increase list and off-list selling prices for acetyl intermediates products by $50 per ton
 
Technology, Media & Telecom
·      Broadcom (AVGO) shares rise 5%; Q4 EPS $4.59/$4.84B vs. est. $4.52/$4.83B; sees Q1 revenue $5.3B, plus/minus -$75M vs. est. $4.82B; said Q1 cap-ex expected to be approximately $210M
·      Comcast Corp. (CMCSA) is interested in seeking full control of Sky Plc, part of the reason it’s vigorously pursuing a deal to acquire film and TV assets from 21st Century Fox Inc. (FOXA) despite tough competition from rival bidder Walt Disney Co., according to Bloomberg report
·      Keysight Technologies (KEYS) Q4 EPS 71c/$878M vs. est. 65c/$885.47M; sees Q1 adjusted EPS roughly 29c-43c on revs $762M-$820M vs. est. 61c/$864.09M
·      Comtech (CMTL) Q1 EPS loss (7c)/$121.6M vs. est. loss (29c)/$106.94M; raises FY18 EPS view to 44c-46c from 41c-44c and backs FY18 revenue view $550M-$575M vs. est. $555.78M
·      Okta (OKTA) Q3 adjusted EPS loss(19c)/$68.2M vs. est. loss (24c)/$62.84M; sees Q4 adjusted EPS loss (18c)-(17c) on revs $70M-$71M vs. est. loss (20c)/$67.88M; raises FY18 EPS view to (87c)-(86c) from (98c)-(95c)and raises FY18 revenue view to $252M-$253M from $243M-$245M
·      SeaChange (SEAC) Q3 EPS 9c/$23.4M vs. est. 1c/$19.5M; sees Q4 EPS 2c-10c on revs $20M-$24M vs. est. 8c/$22.9M; raises FY18 EPS view to 4c-12c from (10c)-2c on revs $77M-$81M, vs. est. 1c/$76.3M
·      Verint (VRNT) Q3 EPS 66c/$283.8M vs. est. 58c/$282.34M; reaffirms year EPS forecast
·      Cornerstone OnDemand, Inc. (CSOD) approved a restructuring plan to reduce the headcount of its global service delivery and certain sales teams; to cut 6% of jobs
·      Digital Power Corporation (DPW) stated today that it has entered into no agreement and has received no order from Amazon. DPW further avers it is not negotiating anything with Amazon. The Company was informed of a rumored deal between DPW and Amazon in the amount of $450M for hardware related to cryptocurrency.
·      Orange (ORA.FR) said Thursday that it aims to achieve additional gross savings of 1 billion euros ($1.18 billion) by the end of 2020, which will be partially reinvested to enhance its networks and increase the services it offers.

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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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