Mid Day Outlook: December 15, 2017

Scott GreenDaily Market Report

Mid-Morning Look
Friday, December 15, 17
  
U.S. stocks surging to start the day as concerns appear to be easing over the passage of the Republican tax overhaul bill, with the full bill expected to be released sometime tonight. The S&P 500 and Dow Industrials are back near all-time highs, helped after Fox Business News tweeted this morning that Senator Rubio “will be a yes” for tax bill. Recall that stocks slumped mid-yesterday, snapping the Dow Industrial Average 5-day win streak, after Senators Rubio and Lee declined to back the bill without changes to child tax credits. Some stock movers today include COST to record highs after better earnings while ORCL shares slip on disappointing cloud revenue guidance. Regarding volatility, don’t forget today is quadruple witching day, which is the third Friday of the last month of every quarter, with the simultaneous expiration of stock-index futures, stock-index options, single-stock futures, and stock options, as well as index rebalancing. All 11 sectors were higher to start as major averages look to push higher on expectations of the tax bill passage.
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar advanced early, but remains on track to finish the week lower after back-to-back weekly gains. Emerging-market currencies renewed their climb, buoyed by the surging South African rand. The Argentine peso tumbled as the nation postponed a decision on overhauling its pension system. The Pound falls over -0.7% vs. the dollar while yen and euro little changed. Bitcoin prices jump over $18,00 overnight
·      Commodity prices; are little changed on the day as gold still bouncing off 6-month lows reached earlier in the week, while oil prices are also little changed
·      Treasury market’s slide and yields rise following a strong rebound in stocks; investors rotating back out of bonds and into riskier stocks on expected approval of the tax bill today; the 10-year benchmark Treasury yield up over 2 bps to 2.37% and 2-yr up about 3 bps to 1.84%
 
Economic Data
·      Empire Manufacturing Index slipped for a third straight month to a reading of 18 from 19.6 in November and just below the 18.7 estimate; new-orders index dipped -1.2 points to 19.5, while shipments index rose 4 points to 22.4; employment index fell -6.4 points to a reading of 5.1 and the average work week edged up; the six-month general business conditions fell to 46.6 vs 49.9
·      Industrial production for November rose 0.2% MoM after rising 1.2% in Oct. (was upwardly revised from 0.9% prior) and was slightly below the 0.3% estimate. Capacity utilization rose to 77.1% from 77% in Oct., which was unrevised from initial release and vs. 77.2% estimate
   
Sector Movers Today
·      Retailers; COST helping sentiment after posted solid membership trends, steady core gross margin and top/bottom line beats, pushing stock to record highs; in clothing, H&Mshares dropped overseas as reported record poor sales trends, as constant-currency 4Q17 sales declined 2%, well below consensus of +5%; in research, shares of UA and CROXwere both upgraded to buy at Stifel; SKX was upgraded to buy and $44 tgt at Argus; FL was upgraded to buy with $64 tgt at Canaccord citing gross margin recovery, buyback and tax rate
·      JP Morgan with various changes in the E&P sector following sustaining free cash flow and debt-adjusted production growth analysis (upgraded GPOR to overweight, and downgraded NFX to Neutral and EGN, LPI, JONE and SN to underweight); JP Morgan also upgraded MRO to Neutral and downgraded NBL to Neutral and HES to underweight;HCLP initiated equal-weight at Barclay’s; in Canadian E&P, Credit Suisse upgraded HSE to outperform and revised estimates and TPs largely to reflect the recent changes to the Credit Suisse commodity price outlook (Top Picks – SU, ECA, ERF, VII and NVA)
 
Stock GAINERS
·      ADBE +2%; Q4 results showed rev/EPS beats driven by strong Creative Cloud revenue (+30% y/y) and Marketing Cloud up 18% y/y and raised the FY18 revenue guidance
·      ALNY +5%; said the FDA has lifted a hold on clinical trials for hemophilia therapy fitusiran
·      COST +2%; trades to record all-time highs after strong quarterly beat
·      DDR +9%; announced plans to spin-off 50 assets into a separate REIT named Retail Value Trust
·      DISCA +6%: director John Malone bought over 333K shares at avg price $19.715 on Dec 13th
·      HES +3%; shareholder Elliott Management Corp. is calling for the company to sell assets in Southeast Asia and wants Hess to focus on share buybacks instead of dividends
·      JBL +4%; following Q1 results, as top and bottom line came in above consensus and issued Q2 revs guidance above consensus ($4.75B-$5.05B vs. $4.75B est.)
·      TEVA +7%; adds to yesterday gains as two analysts upgrade shares on cost cutting initiatives
·      UA +11%; upgraded to buy at Stifel as expects the company’s business to be in a much better position entering 2019
 
Stock LAGGARDS
·      CRTO -5%; extends yesterday’s -22% decline after lowered rev outlook on Apple’s iOS update
·      CSX -7%; after recently appointed CEO Hunter Harrison went on medical leave citing unexpected complications from a recent illness
·      FIT -7%; downgraded to sell at Stifel
·      ORCL -5%; as its forecast for cloud revenue growth was below analyst estimates/RBC Capital downgraded shares based off the guidance
·      WMGI -2%; agreed to acquire IMASCAP for about $88.8M, though analysts (Piper) said presents some near-term pressures
 
Syndicate
·      Casa Systems (CASA) 6M share IPO priced at $13.00
·      Chefs’ Warehouse (CHEF) 1.9M share Spot Secondary priced at $18.50
·      Global Blood Therapeutics (GBT) 2.632M share Spot Secondary priced at $38.00
·      Newmark (NMRK) 20M share IPO priced at $14.00
·      Univar (UNVR) 10M share Spot Secondary priced at $28.79
·      Verastem (VSTM) 8.4M share Block Trade priced at $3.07
 

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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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