Morning Preview: December 26, 2017

Terrie AmengualDaily Market Report

Early Look
Tuesday, December 26, 2017

U.S. stocks futures are trending slightly lower in a light volume session overnight as investors return from the Christmas holiday weekend, with major averages remaining but a “stones throw” away from record all-time highs as we enter the final week of trading for the year. Coming into this final week of 2017 the Dow Jones Industrial Average is up 25.26% YTD, with the S&P 500 index up 19.85% and the tech heavy Nasdaq Comp outperforming up 29.29% YTD. The Dow Jones Transports, which is about 15 points from its recent intraday record high of 10,691 on 12/21, is up 18% YTD, while the Small Cap Russell 2000 Index is up 13.69% YTD. U.S. Treasury yields edged while currencies are mixed. Stock averages remained shut across the large European markets, as well as in parts of Asia including Hong Kong and Australia. Japanese benchmarks slipped from the highest levels since the early 1990s, helping to pull the MSCI Asia Pacific Index down. Bitcoin rallied past $15,000 following a five-day slump as the crypto-currency rose 10%, its biggest gain on a closing basis in two weeks and the first in six days. Rival currencies litecoin and Ethereum are also rebounding. In Asian markets, The Nikkei Index fell -46 points to settle at 22,892, the Shanghai Index gained 25 points to settle at 3,306 while the Hang Seng Index was closed. In Europe, all major markets were closed.

Market Closing Prices Yesterday

  • The S&P 500 Index slipped -1.23 points, or 0.05%, to 2,683.34
  • The Dow Jones Industrial Average fell -28.23 points, or 0.11%, to 24,754.06
  • The Nasdaq Composite dipped -5.40 points, or 0.08%, to 6,959.96
  • The Russell 2000 Index declined -4.18 points, or 0.27% to 1,542.93

Events Calendar for Today

  • 7:45 AM EST       ICSC Weekly Retail Sales
  • 8:55 AM EST       Johnson/Redbook Weekly Sales
  • 9:00 AM EST       S&P CoreLogic’s CS 20-city index for October
  • 10:00 AM EST     Richmond Fed Manufacturing for December…est. 21
  • 10:30 AM EST     Dallas Fed Manufacturing for December…est. 20.0

World News

  • A senior White House official said Sunday that the Trump administration’s push for an infrastructure rebuilding plan will begin in earnest early next month, and that the president has invited GOP congressional leaders to Camp David to nail down their agenda for 2018 – WSJ
  • China’s central bank on Tuesday lifted its official yuan midpoint CNY=PBOC to the highest level in 3-1/2 months at 6.5416 per dollar, reflecting a strong spot yuan performance a day earlier.
  • Japan’s core consumer prices rose for the 11th straight month and household spending jumped in November; core consumer price index (CPI), which includes oil goods but excludes volatile fresh food prices, rose 0.9%, topping the 0.8% estimate
  • U.S. stock-market traders pulled an estimated $17.47 billion from U.S.-based stock funds over this past week, the highest weekly outflow since September 2015. That’s according to BofA Merrill Lynch Global Research, which looked at both mutual funds and exchange-traded funds.
  • China exported no oil products to North Korea in November, Chinese customs data showed, apparently going above and beyond sanctions imposed earlier this year by the United Nations

Sector News Breakdown

Consumer

  • U.S. retail sales in the holiday period rose at their best pace since 2011, according to Mastercard SpendingPulse, which tracks both online and in-store spending. Sales, excluding automobiles, rose 4.9% from Nov. 1 through Christmas Eve, compared with a 3.7% gain in the same period last year, according to the Mastercard Inc. unit, which tracks all forms of payment. E-commerce continued to drive the gains, rising 18.1%.
  • Six Flags (SIX) announced that its board intends to increase the regular quarterly cash dividend from 70c to 78c
  • Aston Martin is recalling around 5,500 vehicles in the United States due to problems with powertrains and battery cables, according to documents posted on the National Highway Traffic Safety Administration’s (NHTSA) website.

Energy & Industrials

  • Barron’s said a sharp drop last week in shares of PG&E (PCG) could present a buying opportunity; the article noted shares of California utilities Sempra Energy (SRE) and Edison International (EIX) also fell this past week amid concerns about their liability for this month’s wildfire outbreak in Southern California
  • Hyundai Heavy Industries Co., the world’s second-biggest shipbuilder, plans to raise about 1.29 trillion won ($1.2B) selling new shares for working capital; company intends to sell 12.5 million new shares before the end of March at an estimated price of 103,000 won each – Bloomberg

Financials

  • Barron’s said derivatives exchanges Chicago Board Options Exchange (CBOE) and CME Group (CME) recently launched futures trading on the digital cryptocurrency bitcoin, but these securities do not trade actual bitcoin and are instead based on indexes of bitcoin prices that are calculated differently
  • REITs mentioned favorably in Barron’s noting among REITs with nice payouts are Macerich (MAC), Simon Property Group (SPG), Agree Realty (ADC), National Retail Props (NNN) and Realty Income (O)
  • Credit Suisse (CS) is at risk of posting a third consecutive annual loss after predicting it will take a $2.33B hit from a U.S. tax overhaul signed into law by President Donald Trump, according to Bloomberg
  • Bank of Hawaii (BOH) has announced that it is increasing its minimum wage level to $15 per hour (from $12 an hour) effective January 1, 2018

Healthcare

  • Mallinckrodt (MNK) to acquire Sucampo Pharmaceuticals (SCMP) for about $1.2B, paying $18 per share; sees deal immediately accretive https://goo.gl/zLRE5Z
  • Theranos Inc. told its investors this week that it has secured a $100 million loan from Fortress Investment Group LLC, averting for now a possible bankruptcy filing as its remaining cash dwindled https://goo.gl/jVy2hy
  • Alexion Pharmaceuticals (ALXN) said the Ministry of Health, Labour and Welfare in Japan has approved Soliris (eculizumab) as a treatment for patients with generalized myasthenia gravis who are anti-acetylcholine receptor antibody-positive and whose symptoms are difficult to control with high-dose intravenous immunoglobulin therapy or plasmapheresis

Technology, Media & Telecom

  • Apple Inc.’s (AAPL) suppliers fell on Monday after the Economic Daily News cited unidentified people in the supply chain as saying Apple has cut its sales forecast for the iPhone X; Apple sees 30m iPhone X sales in 1Q compared with previous forecast of 50m, EDN reported (watch shares of US AAPL suppliers such as QRVO, SWKS, AVGO)
  • Western Digital (WDC) positive mention in Barron’s saying shares could be worth $120 saying shares look undervalued, as the stock could be worth $120 at $10 a share in free cash flow; notes its key product is flash memory, or NAND – which is used in mobile phones, Fitbits and other wearables, laptop computers and a raft of industrial products.
  • Aside from Apple there are still a few bargains in tech, says Barron’s; they include chip producer Qorvo (QRVO) and fiber-optic supplier Finisar (FNSR), which both make components for the iPhone, and Cisco Systems (CSCO), which may increase its dividend and buybacks with the passage of the new U.S. tax law.
  • Barring an unexpected stumble, Apple (AAPL) should cross the line first in the race to $1T, ahead of Alphabet (GOOGL), Microsoft (MSFT), Amazon (AMZN) and Facebook (FB) – Barron’s
  • Disney (DIS) said “Star Wars: The Last Jedi” global box office total is estimated at $745.4 million as of Dec. 24 and sees “The Last Jedi” U.S. daily gross box office at $100.7 million Dec. 22 to Dec. 25, $143.6 million globally

 

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