Equity Market Recap
- U.S. stocks ended higher, trading in a fairly narrow range on light volume as stocks quietly go into year-end on a positive note. A rise in financial and energy stocks helped major averages as the S&P 500 and Dow Industrials are at or near their all-time bests reached last week. The S&P remains on track for a 20% yearly gain, while the Dow and NASDAQ were looking at gains between 25% and 30% on tax reform optimism, strong earnings and economic data. The global stock market rally has continued all year as the Stoxx Europe 600 and the Euro Stoxx 50 were each set for their largest gains since 2013, with potential advances of 7.5% and 8%, respectively. The MSCI Europe Index, which tracks 15 developed market countries, has surged roughly 20% since the end of 2016… but still underperforming the U.S. World stocks, as measured by the MSCI All-Country World Index, have risen every month this year so far. In fact, they haven’t had a down month since October 2016. If they were to close out December in the green it would represent the first year ever without a single monthly decline, according to a Schwab strategist. In other markets, the dollar slumped to 1-month lows, while oil and gold prices jumped. Treasury prices slipped slightly, while Bitcoin rolls and is now 25% off its record highs.
- Chicago PMI rises to 67.6 in December from 63.9 and easily topping the 62 estimate; it was the highest level since March 2011; New orders touched a three-and-a-half year high, noted MNI Indicators
- U.S. weekly jobless claims flat at 245K in week before Christmas, but slightly above the 240K estimate; the Four-week jobless claims average rises 1,750 to 237,750; Continuing claims rose 7K to 1.943M in the week ending Dec. 16 (vs. est. 1.9M)
- U.S. deficit in goods widens 2.3% in November to $69.7B (vs. est. $67.9B) from $68.1B in prior month; Imports rose 2.7% in November to $203.409B from $197.984B in Oct., while exports rose 3% in Nov. to $133.728B from $129.882B in Oct.
- Copper prices climbed for the 16th straight session, extending its longest winning streak ever, as copper for March delivery added 1% to $3.3160 a pound, its highest level in almost four years. Strong demand from China and supply disruptions have buoyed prices throughout the year.
- Gold futures advanced, rising $5.80, or 0.5% to finish at $1,297.20 an ounce, registering a 6th straight day of gains (longest win streak since July) and closed at the best level in 10-weeks as a weaker dollar offered support. The dollar has lost ground over the last 2-weeks, even as the FOMC increased interest rates mid-month, which should help support the dollar. Gold futures are headed for a nearly 12% gain this year.
- Oil prices edged higher after mixed inventory data earlier, with WTI crude rising 20c or 0.34% to settle at $59.84 per barrel (narrow range of $59.89 high and $59.44 low). Data earlier showed larger than expected weekly drawdowns for oil inventories, but bigger builds for gasoline. Natural gas prices surged 6.6% to end at $2.914 mln btu
- The U.S. dollar dropped to a four-week low against a basket of currencies, with the dollar index (DXY) touching 92.57 lows, while bitcoin selling pressure extended to a third day in the last four and now down over 30% in less than two weeks. The euro touched a 1-month high against the dollar at $1.1959, while commodity-linked currencies such as the Australian and New Zealand dollars posted two-month highs amid a jump in copper prices. It appears to be profit taking the dollar after the FOMC followed through with its 3rd rate hike of 2017 2-weeks ago and as the Trump administration pushed through its tax reform bill. Note the dollar index has dropped nearly 10% this year, putting it on track for its biggest annual slide since 2003. The Turkish Lira advanced after the U.S. resumes full visa services in Turkey; the euro trades as high as 1.195. The Canadian dollar added to 2-month highs late day against the dollar.
- Bonds slipped early as Treasury yields ticked up and remained steady for the duration of the day. The yield on the 10-yr inched higher to 2.43% after yields posted their biggest one-day drop in about three months yesterday. Overall, it was a quiet session for bonds with the 2-yr steady at 1.90% and the 30-yr at 2.75%. Note the bond market will close early on Friday, at 2:00 PM EST and will be closed on Monday for New Year’s. The U.S. Treasury sold $28B in 7-year notes at a yield of 2.37% (highest since Dec ’13), above the 2.361% when issued prior; the bid-to-cover ratio was 2.55, above the 2.36 in prior auction with indirect bidders awarded 60.5% of the auction.
Other Interesting tidbits
- In a year that saw volatility plunge, investors bet on the direction of the VIX like never before. Almost 730,000 options on the Cboe Volatility Index and 260,000 futures changed hands each day on average in 2017, more than in any previous year. The VIX has averaged 11, the lowest annual mean since its inception in 1990. Per Bloomberg L.P.
- The latest AAII investor sentiment survey indicates that 50.5% of polled investors are bullish on the market, meaning they expect prices will be higher in six months. That’s the highest level in nearly two years, and significantly above the 38.5% historical average. The number of bullish investors has gone up by 5.5 percentage points in the last week alone, while the percentage of bearish investors has dropped to 25.6%, down 2.5 percentage points over the last week.
Sector News Breakdown
- Auto movers; Kelley Blue Book said it sees Dec new car sales down 7% at 1.57 mln units and still expects December to be biggest car sales month of 2017; FCAU is recalling more than 19,500 of its imported vehicles in China, due to potentially faulty airbags provided by Takata Corp China’s quality watchdog said.
- Other movers; in leisure, Nevada reports November Las Vegas Strip gaming win down 6.04% to $485.75M and November statewide gaming win down 2.3% to $909.01M; week highs today for: WYN, HLT, MAR in lodging
- Oil prices slipped a second session as an inventory report showed a larger decline in weekly crude stockpiles but bigger gains in gasoline. WTI oil prices hit a 2 1/2-year high on Tuesday following an explosion at a pipeline that connects crude-oil fields to Es Sider oil terminal in Libya. While the halt at the pipeline that carries crude to Libya’s biggest export terminal will keep output below the cap it agreed to last month, it is said to need about a week for repairs.
- Inventory data mixed; last night, the American Petroleum Institute (API) showed that U.S. crude supplies declined by -6M barrels for the latest week, but API also showed a gain of 3.1M barrels in gasoline stockpiles, while inventories of distillates rose by 2.8M barrels. This morning, the EIA reported a weekly draw of -4.6M barrels of crude (vs. est. -3.75M), with a smaller build of 591K gasoline (vs. est. +1.35M) while distillates rose 1.09M barrels
- Stock news; CSIQ signs an agreement with Axium Infinity Solar LP for eight solar PV plants totaling 105.5 MWp; CLMT lowers FY17 CapEx view to $85M-$95M from $110M-$130M
- Banking/insurance news; NYCB said sees about $25M after-tax benefit during 4Q; AFL said it will lift its 401(k) match from 50% to 100% on the first 4% of employee contribution, while making a one-time $500 contribution to every worker’s plan; GCAP shares rallied after a positive Mox Reports out with positive commentary
- Bitcoin/Blockchain leveraged names that have surged in recent weeks such as OSTK, DPW, LTEA, SSC, RIOT, LFIN, SRAX, NETE, NXTD, TEUM were all down for a second straight big down day as Bitcoin extends its slide overnight below $14,000 (touched lows $13,827). South Korea’s government announced tougher measures to crack down on cryptocurrency trading in the country and said it is considering shutting down the nation’s bitcoin exchanges. The cryptocurrency is now down over 25% from last week’s record high
- Consumer Finance/Payments; Susquehanna raised tgts on several names saying in total the financial technology sector should see $4.8B in lower taxes thanks to tax reform saying high domestic tax payers with few at-risk shelters should benefit most, pointing to ADS, AXP, DFS, SYF and TSS (though said WU should see a higher tax rate and sees no benefit for PYPL, LC and SQ). The form raised tgts on several stocks (ADS, AXP, DFS, MA, SPGI, SYF, TSS and V)
- Medical devices and Equipment; DRAD sells its Medical Device Sales and Service business unit service contracts to Philips North America for $8M; GKOS tgt was lowered to $48 from $60 at Cantor but reiterate overweight following submission of the PMA by Glaukos for the iStent Inject device; GWPH said the FDA has accepted for filing with priority review its New Drug Application (NDA) for Epidiolex in the treatment for seizures associated with Lennox-Gastaut syndrome and Dravet syndrome
Industrials & Materials
- Transports; another sector that’s pretty quiet, but truckers active after JBHT guided Q4 EPS 77c-82c on revs $1.9B-$2.0B (est. $1.02/$1.91B); airlines were one of the few bright spots in the transport index which was highlighted by weakness in rails and truckers
- Metals & Mining; copper surges to 4-year highs on Chinese demand after China ordered its top producer, Jiangxi Copper Co, to halt output to combat winter pollution, fueling a rally (shares of FCX have been active); RGLD announced that given a lack of sufficient water resources, its mill processing operations at the Mount Milligan mine has been temporarily suspended; gold miners active (ABX, GG, AEM, NEM) as gold prices remain strong on the dollar weakness
Technology, Media & Telecom
- Software & Hardware; NTDOY told outside game developers it is delaying delivery of 64-gigabyte game cards for its Switch console until 2019, meaning gamers may have to wait longer for some data-rich software titles https://goo.gl/1bqpge ; LG Display (LPL) denied reports that it supplied OLED panels this year for AAPL’s iPhone X/company also says the future panel supply for the iPhone X remains undecided; WATT adds to yesterday’s 168% spike (recall received FCC certification for its wireless charging transmitter, WattUp Mid Field)
- Media & Telecom movers; HMNY shares active after MoviePass said this month that it had signed up more than one million subscribers in just four months, a level that took NFLX more than three years to reach – NYT reported; EROS said that Eros Now, its cutting edge digital over-the-top (OTT) entertainment platform, is now available to Amazon Prime members on Amazon Channels across the US and UK with subscription fee of 7.99 USD and 5.99 GBP per month
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.