Mid Day Outlook: January 9, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Tuesday, January 9, 18
U.S. equities open and trade higher for a sixth consecutive session (S&P and NASDAQ) with all major indexes extending their record intraday highs, led by health-care and financials (which had lagged the market Monday). Investors continue to put money to work to start the New Year, extending strong market returns from 2017. Lots of news/guidance in the retail/consumer sector as well as Healthcare given the ongoing ICR Conference and JP Morgan Healthcare conference taking place this week. Next market catalyst, quarterly earnings, with large cap banks JPM and WFC kicking off results this Friday. There have also been a few Fed member speaker moving markets the last few days, while bond markets sink, sending the yield on the benchmark 10-year to 10-month highs of 2.52%. The dollar rebounds for a second session while gold prices dip after snapping its 11-day win streak yesterday.
Treasuries, Currencies and Commodities
·      In currency markets, the dollar makes it two days of gains, trying to extend its rebound after ending 2017 with a 10% decline and starting off the year weak; the euro stretches its losing streak to 3-days around 1.1925 after topping at 1.2089 on January 4th; the dollar fell against the Japanese yen on news that the BoJ has cut back its bond purchases in the long
·      Precious metals drift lower after snapping its 11-day win streak yesterday, weighed down by a firmer dollar on the back of concerns about instability in Europe, while investors also continue to rotate into riskier assets as stocks post fresh intraday highs
·      Energy futures rise, extending gains from a strong start to the week and on track for fresh three-year highs, as investors awaited an update on U.S. supply (API data tonight and EIA tomorrow); Prices for both contracts soared to the highest levels since December 2014 on Thursday; WTI crude trading back near the $62 per barrel level
·      Treasury market’s fall as yields continue their push higher; 10-year yield rises to 2.51%, its best levels since March while the 2-yr is up at 1.95% and the 30-yr rises to 2.84% (10-yr yield hit its 2017 peak on March 10 at 2.58%) – yields got a boost in the wake of the Bank of Japan’s decision to trim its purchases of longer-dated debt overnight.
Sector Movers Today
·      Airlines; few data points in airlines as LUV reaffirms forecast for 4Q operating RASM and reports Dec. traffic rose 2.6%; HA ups Q4 operating revenue per ASM to 2.5%-3.5% from 1.5%-3.5%; raises FY17 operating revenue per ASM view to 6.1%-6.6% from 5.5%-6.5%; in research, Bank America upgraded AAL to buy from underperform saying that tax reform is a significant positive for corporate spending, and can drive a pickup in corporate pricing across the airline sector (also maintains buy on DAL and UAL, and upgraded SAVE and ALGT to buy and downgrades LUV and ALK to neutral from buy and JBLU to underperform
·      Medical devices and equipment movers; BSX sees Q4 prelim sales about $2.41B vs. est. $2.35B; DXCM Q4 revs about $218M vs. est. $212.9M but sees 2018 revs $830M-$850M vs. est. $853.5M; GMED sees prelim Q4 sales $175.5M vs. est. $165.5M; CFMS sees 2018 revs $79.6M-$83.6M vs. est. $84.2M; said prelim Q4 revs $20.8M vs. est. $19.9M; DHR said it sees both 4Q eps and 4Q core revs growth above the high-end of previously announced guidance ranges; ILMN announced today the launch of the iSeq™ 100 Sequencing System
·      Payment systems; PYPL upgraded to outperform at Cowen ($88 tgt) as believe most of the bear theses have not and will not play out (margin compression, outsized eBay renewal concerns, take-rate collapse); GPN was upgraded to overweight at Stephens; PAYX downgraded to neutral at Bank America saying the stock may take a rest after its 24% rise during the past five months, and tax-reform benefits seem priced in
·      Alternative investments; Goldman Sachs said they sees more share price divergence and remains constructive on alternatives and trust banks (the firm adds KKR to conviction list; top picks and upgraded VRTS to neutral and downgraded AMG to neutral) – bullish on alternative managers (top ideas KKR, APO, BX), as fee-related earnings grow at 25% CAGR through 2019
·      ATUS +14%;: Altice to spin off U.S. company ATUS and reorganize Europe activities
·      BSX +5%; sees Q4 prelim sales about $2.41B vs. est. $2.35B
·      CCL +2%; upgraded to outperform at Credit Suisse as no longer cautious on the stock
·      HMNY +3%; says MoviePass added another 500,000 new paying subscribers since Dec 12th and MoviePass surpasses 1.5M subscribers
·      ILMN +5%; sees ~$3.12B in 2018 revenue, representing a 13%-14% y/y growth, exceeding analyst estimates of $3.09B
·      LBCC +28%; says will not proceed with stock offering
·      TGT +3%; raises Q4 EPS view to $1.30-$1.40 from prior $1.05-$1.25 and said holiday com sales up 3%-4% – said saw increased guest traffic in November and December
·      AMD -3%; after MSFT halts some AMD chip Meltdown patches after PCs freeze/customer reports some AMD devices getting into an unbootable state after installing recent OS security updates
·      ARDM -36%; ahead of Ad Com review of inhaled ciprofloxacin for chronic non-CF lung infection
·      AYI -14%; misses both top and bottom line quarterly results/EPS miss by 14c
·      BGFV -17%; guided Q4 EPS to an unexpected loss on revs $243.2M, below est. $263.47M and comp sales fell (-9.4%)
·      ELF -10%; as cut compound annual net sales and adjusted Ebitda growth of 10%-15% from fiscal 2016 to 2019, down from 20% for each
·      EXPR -13%; sees Q4 EPS 31c-33c, below estimates 43c and comp sales down (1%-2%)
·      ROKU -1%; preannounced that active accounts “exceeded 19 million at December 31, 2017” (OpCo said was 2% below their 4Q:17 estimate)
·      UAA -4%; downgraded to negative at Susquehanna
·      URBN -4%; posted a 2% comp for Holiday (Anthro +2%, UO +1%, Free People +5%), below 4Q17 consensus for +3% and a deceleration from the early December trend of ~4%
·      VNET –4%; as the company CFO resigns


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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