Morning Preview: January 24, 2018

Scott GreenDaily Market Report

Early Look
Wednesday, January 24, 18
There appears no stopping U.S. markets, as futures point to another gain and major benchmarks for another round of records as investors cheer positive earnings thus far. The weaker U.S. dollar is giving the market an added boost, falling to fresh 3-year lows overnight after comments from the Treasury Secretary in Davos. U.S. Treasury Secretary Steven Mnuchin said that a weaker greenback is good for trade and wasn’t concerned about the currency’s recent decline. The euro rose to a high of $1.2356 from $1.2298 late Tuesday, the highest level in more than three years. The pound jumped above $1.41 from $1.4000 late Tuesday, trading at an intraday high of $1.4119 after U.K. labor market data showed the unemployment rate remained at a 4.3% in November, the lowest level since 1975. The greenback also declined against the yen trading under 110. The move in the dollar is lifting gold prices, rising about 1% to $1,355 an ounce. Lower tax rates, a boost to corporate earnings, and strong economic data has pushed the three main benchmarks up between 6% and 8.1% so far in 2018.
U.S. stocks mostly closed higher yesterday, with the tech-heavy Nasdaq Comp lifted on better-than-expected results at Netflix helped send the index to record closing highs, while interest rate sensitive/defensive sectors utilities and real estate led gains in the S&P, bolstered by lower Treasury yields. Bonds gained on Tuesday, as the 2-year note yield was down 3.3 bps to 2.04%, snapping a 14-day streak of yield gains, while the 10-yr yield fell 3.9 bps to 2.624% after the Bank of Japan tamped down on speculation that the central bank may follow the ECB and Fed by adopting a more hawkish monetary policy and also following a bullish 2-yr bond auction.
In Asian markets, The Nikkei Index fell -183 points to settle at 23,940, the Shanghai Index rose 12 points to close at 3,559 and the Hang Seng Index inched higher 27 points to end at 32,958. In Europe, the German DAX is flat trading around 13,550, while the FTSE 100 is down over -15 points at 7,714./span>
Market Closing Prices Yesterday
·      The S&P 500 Index gained 6.16 points, or 0.22%, to 2,839.13
·      The Dow Jones Industrial Average slipped -3.79 points, or 0.01%, to 26,210.81
·      The Nasdaq Composite spiked 52.26 points, or 0.71%, to 7,460.29
·      The Russell 2000 Index advanced 5.54 points, or 0.35% to 1,610.71
Events Calendar for Today
·      7:00 AM EST       MBA Mortgage Applications Data
·      9:00 AM EST       FHFA House Price Index MoM for November…est. 0.5%
·      9:45 AM EST       Markit US Manufacturing PMI, Jan-p…est. 55.0
·      9:45 AM EST       Markit US Services PMI, Jan-P…est. 54.3
·      10:00 AM EST     Existing Home Sales MoM for December…est. 5.7M
·      10:30 AM EST     Weekly DOE Inventory Data
Earnings Calendar
·      Earnings Before the Open: ABT, APH, BHGE, CMCSA, CVLT, GE, GWW, ITW, NSC, NTRS, ROK, SWK, TEL, UTX
·      Earnings After the Close: AMP, DFS, F, FFIV, LRCX, RJF, SLG, TCBI, VAR
World News
·      Special counsel Robert Mueller is seeking to question President Donald Trump about his decisions last year to fire national security adviser Michael Flynn and FBI Director James Comey, the Washington Post and CNN reported late Tuesday.
·      Investor Intelligence Poll shows that newsletter writers classified as bulls slips to 64.7% from last week’s 66.7%, which was the highest since April 1986, or nearly 32 years ago. Bears at 12.8% versus last week’s 12.7%, which was the lowest since April 1986. Those looking for a correction rises to 22.5% from a 10-month low of 20.6% last week
·      The U.K.’s employment level reached a new record high in the September to November period, with the unemployment rate remaining at the four-decade low of 4.3% (in-line w estimates)
·      Eurozone composite PMI rises to highest since 2006 at 58.6
Sector News Breakdown
·      United Continental (UAL) Q4 EPS $1.40/$9.44B vs. est. $1.34/$9.43B; Total operating expense was $8.7B in Q4, up 8.2% YoY; consolidated unit cost per available seat mile (CASM) increased 4.0%YoY due largely to higher fuel and labor expense
·      Stanley Black & Decker (SWK) Q4 EPS $2.18/$3.41B vs. est. $2.14/$3.27B; sees FY18 adj. EPS $8.30-$8.50 vs. consensus $8.36
·      German car makers BMW (BMW.XE) and Daimler (DAI.XE) are nearing a deal to merge their respective car-sharing subsidiaries, Drive Now and Car2Go, Frankfurter Allgemeine Zeitung reports, citing sources within the company.
·      The American Petroleum Institute (API) reported U.S. crude supplies rose by 4.8 million barrels for the week ended Jan. 19, a climb of 4.1 million barrels in gasoline stockpiles, while inventories of distillates fell by 1.3 million barrels
·      Baker Hughes (BHGE) Q4 EPS 15c/$5.76B vs. est. 14c/$5.60B
·      Valero (VLO) approves up to $32.5 billion stock buyback, hikes dividend to 80c from 70c
·      SandRidge Energy Inc. (SD) said its board of directors has turned down a plan from activist investor Carl Icahn that sought to make changes on its board and modify some of the bylaws.
·      Wells Fargo (WFC) raises share buyback by additional 350M shares
·      Capital One (COF) Q4 EPS $1.62/$7.01B, below est. $1.88/$7.11B; Q4 net interest margin 7.03%, down 5 bps; 4Q provision for credit losses $1.93B, net interest income $5.81 billion and 4Q non-interest income $1.2 billion
·      FCB Financial (FCB) Q4 EPS 76c/$88M vs. est. 74c/$87.23M; reports Q4 tangible book value per share of$24.66. 
·      Hanmi Financial (HAFC) Q4 EPS 36c vs. est. 48c; 4Q net interest margin 3.79%
·      Legacy Texas (LTXB) Q4 EPS 60c vs. est. 62c; 4Q net interest margin 3.78% vs. est. 3.73%; Q4 provision for credit losses $3.74 million
·      Navient (NAVI) Q4 core EPS 43c vs. est. 42c; Q4 FFELP loans segment core profit $65M; Q4 private education loans core profit $43M
·      Sterling Bancorp (STL) Q4 EPS 39c vs. est. 38c; Q4 net interest margin 3.57%
·      Total Systems (TSS) Q4 EPS 82c/$1.27B vs. est. 79c/$1.22B; sees FY adjusted EPS $4.10-$4.20 vs. est. $3.94 and sees FY revenue $3.85b-$3.95B
·      Umpqua Holdings (UMPQ) Q4 EPS 38c vs. est. 30c
·      Union Bankshares (UBSH) files to sell 7.93M shares for selling holders
·      Puma Biotechnology Inc. (PBYI) shares fell -20% after saying it will likely not get a positive result on its European marketing application for a breast cancer treatment; said the Committee for Medicinal Products for Human Use of the European Medicines Agency issued a “negative trend vote” for the drug neratinib to treat early stage HER2-positive breast cancer
·      Cerus (CERS) shares rise over 20%; said the primary efficacy and safety endpoints were successfully achieved in the company’s Phase 3 transfusion study of chronic anemia evaluating INTERCEPT-treated red blood cells in thalassemia patients; planning INTERCEPT RBC CE mark submission for the second half of 2018
·      Accuray (ARAY) Q2 EPS loss (6c)/$100.3M vs. est. loss (10c)/$90.31M; reaffirms FY18 revenue view $390.0M-$400.0M vs. consensus $396.2M; sees FY18 gross orders growth of approximately 5% year-over-year
·      Adamas Pharmaceuticals (ADMS) 3M share Secondary priced at $41.50
·      Ultragenyx (RARE) 4.4M share Secondary priced at $57.00
·      Aerie Pharmaceuticals (AERI) files to sell $75M in common stock
·      Audentes Therapeutics (BOLD) files to sell $150M in common stock
·      Five Prime (FPRX) files to sell $75M in common stock
·      Rocket Pharmaceuticals (RCKT) files to sell common stock
·      Strongbridge Biopharma (SBBP) files to sell 5M shares of common stock
Industrials & Materials
·      United Technologies (UTX) Q4 EPS $1.60/$15.7B vs. est. $1.56/$15.4B; sees FY18 adj. EPS $6.45-$7.10 vs. est. $7.38; sees FY18 revenue $62.5B-$64B vs. est. $63.08B and sees FY18 free cash flow in the range of $4.5B-$5B
·      General Electric (GE) reports Q4 EPS 27c/$31.4B vs. est. 29c/$34.06B; said Q4 industrial operating verticals EPS was ($1.23), at the low end of guidance excluding ($1.49) of charges for insurance related items (91c), the Tax Cuts and Jobs Act (40c) and industrial portfolio items (18c)
·      Canadian National (CNI) Q4 adjusted EPS C$1.20/$C$3.29B vs. est. C$1.23/$C$3.28B; sees FY adjusted EPS C$5.25-C$5.40 vs. estimate C$5.54; sees FY capital expenditure C$3.2 billion
·      Teekay Corp. (TK) files to sell 10M shares of common stock
·      Costamare (CMRE) Q4 EPS 17c vs. est. 15c; said accepted delivery of the 3,800 TEU containership Polar Argentina which was acquired pursuant to our joint venture with York
Technology, Media & Telecom
·      Texas Instruments (TXN) shares fell 6%; Q4 EPS 34c (hit by tax reform) on revs $3.75B vs. est. $1.09/$3.74B; sees 1Q EPS $1.01-$1.17 on revs $3.49B-$3.79B vs. est. $1.15/$3.63B
·      Qualcomm Inc. (QCOM) was slapped with a €997 million ($1.23 billion) antitrust fine by the European Union on Wednesday for illegal payments it made to Apple Inc. (AAPL) for exclusively using its chips in smartphones and other products.
·      Cree (CREE) Q2 adjusted EPS loss (1c)/$368M vs. est. 1c/$349.62M; sees Q3 adjusted EPS (3c)-3c on revenue $335M-$355M vs. est. 0c/$340.73M; Q2 gross margins weaker at 25.7%
·      Sirius XM (SIRI) adds $2B to stock buyback program
·      Rapid7 (RPD) files to sell 5.18M shares of common stock; raises Q4 rev outlook to $57.2M-$57.5M vs. prior view $53.9M-$55.3M
·      GoDaddy (GDDY) announced it has entered into a definitive agreement to acquire Main Street Hub for approximately $125M in cash plus up to $50M in potential future earnouts
·      Sigma Designs Inc. (SIGM) to sell one of its businesses to Silicon Labs Inc. (SLAB) and then liquidate, after failing to meet conditions of a full merger (SLAB had agreed to buy SIGM for $7.05 a share late last year, but said initial closing conditions for that deal could not be met). Instead, Sigma will sell its Z-Wave home-automation business to Silicon Labs for $240M
·      Universal Display (OLED) announced that the company and Sharp Corporation (SHCAY) entered into an extended and updated evaluation agreement


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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