Mid Day Outlook: January 18, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Thursday, January 18, 18
Stocks slipping early, reversing early gains as markets take a breather after hitting all-time record levels (again) yesterday for the Dow, S&P 500, and Nasdaq Comp. Despite the 5.4% YTD gain for the Dow, 4.6% for the S&P and 5.6% for the Nasdaq, stocks are only down slightly this morning after a round of mixed economic data (big drop in jobless claims, but housing data weak) and a handful of earnings results (highlighted by financials). Industrial metals a little lower after Alcoa Q4 results missed across the board, while tech mixed on guidance from a few networking and software stocks. Semiconductors continue record march higher, with the SOX at new best levels. The dollar slides with small declines in commodity prices, while bonds falling sending the 10-yr above 2.6%. Investors also remain focused on a potential for a partial government shutdown this weekend.
Treasuries, Currencies and Commodities
·      In currency markets, the dollar giving up overnight gains, with the dollar index just slipping into negative territory amid weakness vs. the euro and Pound; Bitcoin nearly a $3,000 bounce off yesterday lows of 9,185 – the dollar
·      Commodity prices; gold prices slip after strong gains the last few days back to multi-month highs, while oil prices dip from 3-year highs ahead of inventory data at 11:00 AM EST; Natural gas prices extended losses after the EIA said weekly inventories fell a smaller than expected -183 bcf (vs. est. -199 bcf); last night the API reported a large crude oil draw
·      Treasury markets slip as the yield on 10-year bond jumped above 2.6% for the first time since March, a day after the Federal Reserve’s Beige Book suggested a tighter labor market was finally translating into wage gains; the 2-yr up around 2.05% and 30-yr 2.88%
Economic Data
·      Weekly Jobless Claims fell 41K to 220K (marking the biggest one-week decline since 2009), well below the 249K estimate while the prior week was unrevised at 261K; the 4-week moving average declined by a smaller 6,250 to 244,500; continuing claims rose 76K to 1.952M
·      Housing starts fell 8.2% in December to a 1.19M annual rate, well below the 1.275M rate estimate as single-family starts dropped 11.8%, but construction on buildings with five or more units rose 2.6%. Building permits for future construction were basically flat at 1.30M. Completions rose to 1,177k in Dec., from 1,152k the prior month
·      Philadelphia Fed manufacturing index drops to five-month low in January, falling to 22.2 vs. an upwardly revised 27.9 last and below the 25.0 estimate; new orders plunged to 10.1 from 28.2 and the six-month outlook fell to 42.2 from 52.7
Sector Movers Today
·      IT Services; Citigroup said they remain cautious on sector as challenges include the transition to digital transformation from legacy outsourcing; immigration reform; tight IT labor market and clients’ significant productivity demands – the firm says DXC remains top idea followed by EPAM and also recommend GLOB, DOX, WNS andG as a Buy and upgrade CTSH to buy as valuation remains quite attractive even though the stock outperformed the market in 2017
·      Business info services; Bank America upgraded TRU to buy on healthy US consumer credit trends, new products, likely upward earnings revisions and potential market share gains from Equifax’s data breach and for other top pick CSGP, sees strong earnings growth in 2018 fueled by the bankruptcy of competitor Xceligent, corporate tax reform, LoopNet transition; BoFa downgraded CATM saying is likely to emerge smaller and less profitable as it shrinks its ATMs footprint
·      Solar movers; Guggenheim downgraded FSLR and VSLR to neutral from buy and now neutral on all integrated names, though RUN remains their sole buy and the top pick in the solar space. In the Yieldco space, they see continuing M&A activity and we think that BEP and PEGI will emerge as consolidators
·      Industrials & E&C; JCI downgraded to market perform at Cowen saying the company’s 2H weighting in 2018 and anemic actual free cash flow may render the stock “dead money”; FLR upgraded to outperform and $71 tgt at Credit Suisse viewed as a higher-quality bellwether with a diverse end market offering, and more importantly a more cyclical growth bias; HUBB upgraded to overweight from neutral at JP Morgan and raise tgt to $155
·      Blockchain movers; MARA announced that it has entered into a purchase agreement to acquire four patents related to the transmission and exchange of cryptocurrencies between buyers and sellers; LITB opened lab to explore and develop blockchain technology platforms and application on the cross-border e-commerce industry; RIOT submitted registration to participate in the U.S. Marshals Service sealed bid auction of bitcoins; DPW subsidiary, Super Crypto Mining, has escalated its current deployment in the first quarter of 2018 from 40 to 100 units per week
·      AES +9%; as ValueAct takes stake, pledges clean energy push
·      ESIO +15%; positive Q3 guidance along with above-consensus revenue guidance for Q4 and Q1
·      GNC +35%; said domestic company-owned comp. sales (including GNC.com sales) rose 5.7% vs. estimate +3.1%
·      HTZ +8%; upgraded to outperform at Macquarie and up tgt to $30 as sees U.S. tax reform potentially leading to a bounce back in corporate travel
·      LQ +3%; as WYN will buy its hotel operations for $1.95B https://goo.gl/6qCidA
·      PPG +3%; Q4 EPS and sales beat while sales volume increased 3%
·      PTC +8%; delivered a strong F1Q performance/outperformed on every major metric, with subscriptions driving the majority of the $12M bookings beat
·      TIVO +2%; after expanded patent licensing pact with Google
·      VZ +2%; top Dow after saying tax overhaul will drive a one-time reduction in net deferred income tax liabilities of about $16.8B and boost its Q4
·      WMT +2%; upgraded to buy and added to the Americas Conviction List at Goldman Sachs with $117 tgt as the firm’s strategic positioning remains compelling
·      AA -7%; as missed 4Q EPS, adj. Ebitda and revenue estimates and guided towards FY adj. Ebitda of $2.6B-$2.8B in 2018
·      ADTN -8%; more weakness in networking space after HIVE and ATEN lowered guidance yesterday
·      ALB -9%; weakness on supply concerns after SQM’s deal with Chile to expand production (shares of FMC also under pressure in lithium space)
·      APPN -6%; downgraded to sell at Goldman Sachs after rally in shares
·      BA -2%; pulling back after setting record highs over the last week
·      BK -4%; reported in-line 4QEPS and CEO Charles Scharf says the bank will likely almost entirely offset tax cuts with reinvestment
·      ENDP -6%; NY Times reported that a group of hospital systems plan to “create a non-profit generic drug company” to battle shortages and high prices (TEVA andMYL also lower)
·      PLXS -2%; guides Q2 EPS 68c-78c on revs $670M-$710M vs. 82c/$693.7M after weak Q1
·      Arrowhead (ARWR) 10M share Spot Secondary priced at $5.25
·      BeiGene (BGNE) 7.425M share Secondary priced at $101.00
·      Boot Barn (BOOT) 6M share Secondary priced at $17.25
·      Eagle Point Credit (ECC) 1.95M share Spot Secondary priced at $18.25
·      Innovative Industrial Properties (IIPR) 2.8M share Spot Secondary priced at $26.00
·      Inspired Entertainment (INSE) 4.5M share Secondary priced at $7.95
·      Keane Group (FRAC) 13.3M share Secondary priced at $18.25
·      Paratek Pharmaceuticals (PRTK) 3.11M share Spot Secondary priced
·      Playa Hotels & Resorts (PLYA) 6M share Block Trade priced at $10.80


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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