Mid Day Outlook: December 21, 2017

Scott GreenDaily Market Report

Mid-Morning Look
Thursday, December 21, 17
  
After a brief pause in stocks yesterday, closing down modestly lower, major averages are once again on the rise following the tax reform bill passage early yesterday. Bond yields are heading lower as the 3Q GDP growth was revised lower to 3.2%, personal consumption is lowered to 2.2%, while jobless claims come in higher (note bonds have slumped the last 3-days, sending yields to multi-month highs). There were a handful of earnings results moving shares (last round of earnings until the new year, with a very quiet week coming up after Christmas), as retailer BBBY drops on margin concerns, while footwear retailer FINL jumps on boosted guidance (ahead of NKE results tonight). The dollar selling pressure subsides after falling the last few days (as the benefits of the proposed tax changes were likely already priced in). Financial stocks were leading markets higher on Thursday while utilities lagged for a 4th session – banks seen among biggest winners from the tax plan. Asian markets were mixed overnight while the FTSE 100 index rises over 1% to hit an intraday record high. Several companies have announced pay hikes for employees and one-time bonuses based off the implemented tax reform bill (CMCSA, AT&T, FITB and WFC all announced news last night)
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar index little changed, as the weakness post the FOMC rate hike and tax reform bill passage (dollar rallied into both announcement and has since sold off on the positive news) abates; the dollar little changed vs. the euro and yen
·      Commodity prices; are slightly lower as weakness in the dollar abates; gold prices slip after a strong week of returns, while oil prices also lower after recent rally
·      Treasury market selloff subsides, looking to snap its 3-day losing streak that saw yields surge across the board (10-yr highest levels since March, 2-yr back to 9-yr highs); bonds got a small reprieve after a GDP revision that was slightly below estimates; also selling pressure abates as the tax bill and FOMC rate hike are in the rear-view mirror; 10-yr down from 2.5% yield yesterday, 2-yr holding around 1.86% and 30-yr at 2.85%
 
Economic Data
·      GDP little lower; the U.S. economy’s pace of growth in Q3 was lowered slightly to a 3.2% annual rate from 3.3% under the government’s final revision to gross domestic product (GDP) after the economy expanded at a 3.1% rate in Q2; the downgrade in GDP reflected slightly less consumer spending in the July-September quarter than previously estimated. Consumer spending was revised down a tick to a still solid 2.2% rate
·      Weekly jobless claims rose by 20,000 to 245,000 in the latest week, topping the 233,000 estimate; the 4-week moving average increased by 1,250 to 236,000; continuing claims, or number of people already collecting unemployment benefits rose by 43,000 to 1.93 million
·      The Philadelphia Fed’s Manufacturing Business Outlook Survey jumped to a reading of 26.2 in December from 22.7, beating the consensus forecast of a slight downtick to 21.8. The new-orders gauge of the index surged to 29.8 from 21.4, a positive signal about future activity
·      FHFA Home Prices for October rises 0.5% vs. est. Up 0.4% and home prices rose 6.6% YoY
   
Sector Movers Today
·      Consumer Staples; in food, CAG quarterly sales, profit beat on hurricane-fueled demand, as EPS beat by 3c and said it now sees year sales and earnings near the high end of views; COTY was upgraded to Outperform at RBC Capital, stating after mgmt meetings/more constructive on the company and its opportunity to improve its top line and expand margins; NSRGY aims to sell its U.S. confectionery unit by the end of Marchhttps://goo.gl/9b5mt2 ; GNC said to exchange $98.9M in convertible senior notes due ’20 for 14.6M shares
·      Casino, Lodging & Leisure; Wolfe Research upgraded the lodging sector from Market Weight to Overweight and upgraded H from Peer Perform to Outperform $90 tgt and WYN from Underperform to Peer Perform w/ ~$106 fair value both entirely on valuation & tax reform – and firm also raised targets on other lodging names (MAR, HLT); in gaming, BYD added a 5th property to its December buying spree, announcing its intent to acquire Valley Forge Casino in PA
 
Stock GAINERS
·      ACN +3%; trades to record highs after earnings/guidance
·      CAG ; quarterly sales, profit beat on hurricane-fueled demand
·      CVX +2%; the Dow component trades to more than 3-year highs after Cowen ups target to $160
·      FINL +8%; Q3 earnings topping analysts’ estimates (on surprise positive comp sales of 0.8% vs. est. -4.5%) and also raised its FY18 adjusted EPS forecast
·      HOV +6%; reported Q4 EPS and revenue well above consensus views
·      LTEA +190%; as it announces rebrand name change to “Long Blockchain Corp.” (pares gains as stock had rallied more than 500% pre-market trading)
·      VERI +12%; after they announced a small acquisition of Atigeo last night
 
Stock LAGGARDS
·      APOG -17%; after the company reduced its earnings guidance for fiscal year 2018 citing “lower than expected volume and pricing, particularly in architectural glass” and higher-than-expected health-care costs
·      BBBY -11%; beat on top/bottom line and comps better but margin concerns highlighted by various analysts who lowered their price targets
·      BIIB -2%; said its Alzheimer’s disease drug trial will continue to 18 months, as planned as its Adaptive Phase II study of BAN2401 criteria at 12 month analysis did not meet primary endpoint
·      GNC -22%; said to exchange $98.9M in convertible senior notes due ’20 for 14.6M shares
·      PAYX -2%; after 2Q earnings and full year guidance were below estimates
·      PCG -16% as suspended its dividend, citing uncertainty over the cause of and resulting liabilities from the October northern California wildfires
 

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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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