Mid Day Outlook: January 22, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Monday, January 22, 18
  
Equities mostly higher as the S&P 500 index and Nasdaq Composite extend Friday’s gains to trade at fresh all-time levels ahead of a busy week of earnings (and central bank news), as markets shake off the overnight decline as the U.S. government shutdown stretches to 3rd day ( vote is expected in about 90 minutes in the Senate). Defensive sectors and Energy early market leaders while industrials and materials decline. Biotech stocks getting a lift following two big M&A deals this morning (CELG buys JUNO for around $9B and SNY buys BIVV for around $11.8B). In Central Bank news, The Bank of Japan is holding its two-day policy meeting this week, while the European Central Bank is set to begin their get-together on Thursday. Overall, today all about M&A, earnings and the gov’t shutdown.
 
The International Monetary Fund revised up its outlook for global growth in part because of upside surprises in Europe and Asia. In its revised world economic outlook, the IMF said the global economy would expand at a 3.9% rate this year and next, revised upward by 0.2% from its prior forecast and also said the Republican tax bill will add 1.2% to U.S. growth through 2020 but will then lower growth for a few years from 2022 onwards.
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar index failing to push higher after ending last Friday lower for a 5th straight week, led mostly by weakness against the euro and pound; dollar mixed again today; bitcoin prices slide over 6% early; no major economic data to lead the greenback
·      Commodity prices; Precious metals not doing much; wit gold prices down slightly but holding above the $1,300 level; in oil, prices are little changed after slipping last week; WTI crude steady around $63.40 per barrel. Over the weekend, OPEC and Russia reaffirmed that they’ll persevere with production cuts until the end of the year.
·      Treasury markets also steady after sliding the last few weeks on rising rate expectations, along with improving economic data; the yield on the 10-yr holds above 2.64%, highest in more than a year, while shorter-term 2-yr up at 2.06%
   
Sector Movers Today
·      Pharma movers; OMER confirms that the European Medicines Agency’s Committee for Orphan Medicinal Products issued a positive opinion on Omeros’ application for orphan drug designation of OMS721 in the treatment of primary Immunoglobulin A nephropathy; LLY was downgraded to underperform at Credit Suisse; BMY gets EC approval for expanded use for its Yervoy; TEVA active after Q4 letter reveals Jana Partners took new stake, Bloomberg reported first
·      Metals & Mining; steel sector active after Citigroup upgraded US Steel (X) to neutral and raised targets for all steel equities raised (top picks STLD, NUE, CMC) as the group will see another rally, even after recent share price rise – firm notes steel equities have rallied 35% since November as higher steel prices closed out the import arb, but they anticipate another leg higher with significant potential for a multi-year cycle of above-average utilization and profitability
·      Housing & Building Products; homebuilder LEN and MTH upgraded to outperform at Credit Suisse as firm maintains positive outlook for housing space as forecast continued expansion this year, with single family starts rising ~11%; LOW upgraded to outperform at Bernstein as outlook has changed and raised tgt to Street high $125
·      Casino, Lodging & Leisure; in casinos, WYNN reported Q4 EPS and revs above consensus views ($1.40/$1/69B vs. est. $1.38/$1.56B); prior to earnings, Jefferies positive on space saying channel checks indicated that over the past week, GGR in Macau has accelerated from the prior week, is currently on run rate to support 28% y/y growth (LVS, MLCO, MGM active); in leisure, HOG was upgraded to outperform at Wells Fargo
 
Stock GAINERS
·      ANF +8%; boosts guidance for Q4 comp and overall sales
·      ARRY +12%; as CRC triplet therapy continues to show positive effect in late-stage study
·      BIVV +62%; will be acquired by SNY for $11.6B, $105 per share in cash https://goo.gl/3sEdVx
·      FE +15%; advanced after Elliott Management Corp. is part of a group of investors that agreed to a $2.5 billion equity investment for the companyhttps://goo.gl/fZWPzK
·      HAL +3%; after quarterly earnings results
·      JUNO +27%; to be acquired by CELG for $87 per share/$9B deal https://goo.gl/Q7Ndgx
·      NUAN +7%; guides Q1 EPS 26c-27c on revs $500M-$503M, above est. 22c/$492.72M
·      VR +44%; to be acquired by AIG for $5.56B/$68 per share https://goo.gl/eLgnZA
·      WYNN +3%; Q4 EPS and revs above consensus views ($1.40/$1/69B vs. est. $1.38/$1.56B)
·      XRX +2%; as billionaires Carl Icahn and Darwin Deason, have formed an alliance and plan to encourage the printer and copier giant to explore a potential salehttps://goo.gl/H4emw6 
 
Stock LAGGARDS
·      JBL -3% and BHE down on SANM lower guidance
·      PANW -1%; cut to neutral at Goldman Sachs as believe risk/reward is balanced at current levels
·      PETS -5%; despite earnings and revenue beat
·      QRVO -3%; more weakness in AAPL suppliers on further cautious analyst comments
·      SANM -21%; guides prelim Q1 EPS to 48c on revs $1.74B, below est. 71c/$1.77B, driven by slower than expected new program ramps and an unfavorable program mix
·      TWTR -1%; after WSJ reported that COO Anthony Noto is said to be in talks to become the next CEO of SoFi

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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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