Mid Day Outlook: January 30, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Tuesday, January 30, 18
  
U.S. stocks falling sharply, heading for their worst 2-day slide since August amid mounting worries over higher borrowing costs as the yield on the 10-year Treasury yield rises to highest level in four years (back above 2.72%). Apprehension and profit taking early ahead of tonight’s State of the Union for Trump and as the 2-day FOMC meeting kicking off today (results tomorrow – no changes expected at this point), in Yellen’s final as head of Fed. Healthcare sector dragging major averages lower after a trio of Amazon, Berkshire Hathaway and JPMorgan said they’ll collaborate on ways to offer health-care services to their employees (hitting managed care, services, and drug makers). Tech remains cautious ahead of Apple earnings this week (falls to lowest levels since December) as concerns mount over its iPhone X models ahead of its next earnings report (reports Thursday). Energy stocks also falling, down with a drop in oil prices and some weaker operational updates overnight (PE, GPOR). Economic data again comes in strong with consumer confidence rising to around 17-year highs. Major U.S. averages have already pared losses, with the Dow rebounding after falling over -325 earlier.
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar resumes its slide after brief bounce yesterday; the dollar index (DXY) down about -0.2% to around the 89 level after bouncing from 3-year lows yesterday; stronger consumer confidence data fails to lift the greenback, Bitcoin prices down over7% as it nears the $10,000 level to the downside
·      Precious metals edging higher as investors rotate out of riskier assets (stocks and oil) and into defensive type names; gold up a few dollars around $1,350 an ounce
·      Energy futures slide as markets undergoing “risk-off” attitude ahead of several market catalysts tonight and rest of week (State of the Union, FOMC meeting, jobs data); oil prices drop over 2%, while natural gas prices rise over 2%
·      Treasury market’s slide after better confidence data and on upward momentum for bond yields; 10-year yield back near 4-year highs of 2.72%, while the 2-yr steady at 2.115%
 
Economic Data
·      U.S. consumer confidence rises to 125.4 in January from an upwardly revised 123.1 in December (from 122.1) and above estimates of 123.0. An index of future expectations rose to 105.5 from 100.8 and returned close to a 14-year high. The present situation index slipped to 155.3 from 156.5. It’s just a few ticks below a 17-year high, however.
   
Sector Movers Today
·      Managed Care sector under pressure today; pressured (UNH, AET, CI, HUM) today after Amazon, Berkshire Hathaway, JPMorgan to create independent company focused on technology solutions “that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.” Company is free from profit-making incentives and constraints. IN earnings, AET Q4 operating EPS topped consensus, while revs fell short of views; the news by the trio on healthcare, having a big impact on services (CVS, ESRX, ABC) and drug makers (ENDP, MNK, VRX, TEVA) as well as managed care space
·      Auto sector; ALV Q4 sales topped consensus views and issues strong guidance for 2018 (though Q1 guidance is disappointing); LEA upgraded to neutral from sell at Goldman Sachs and ADNT tgt cut to $62 from $72 after evaluating earnings from the two auto parts suppliers, and the backlog update from Detroit Auto show; TSLAslipped early after CNBC reported yesterday that a key TSLA engineer, who helped design batteries, has left the company.; CARS and media company TRNC said they’ve agreed to a deal to convert Tronc’s eight affiliate markets; MNRO falls after 3Q results, year EPS view fell below expectations
·      Leisure movers; HOG shares dropped after forecasting 2018 motorcycle shipments of 231k-236k, trailing Stifel’s estimate of ~242k after mixed Q4 results, while PII shares dropped after lower guidance (Q4 EPS/revs beat), as saw 2018 adj. EPS of $6.00-$6.20, reflecting tax adjustments included in recently passed Tax Cuts and Jobs Act vs. est. $6.99; recreational vehicle manufacturers and suppliers move in sympathy (shares of THO, LCII, FOXF, WGO, JOUT and PATK active on reports); BC rises as Owl Creek Asset Management is pushing the company to spin out its fitness business after building an activist stake in the company
·      Media movers; Morgan Stanley with several rating changes today as they upgraded WWE and FWONK to overweight saying they may benefit from disruption caused by a consumer shift to over the top distribution, while remains bullish on DIS, and sees CBS and VIAB “trading at deep discounts to the market.” The firm remains “incrementally cautious” on ad agency holding companies IPG, OMC; while saying ROKU is “well positioned but expensive” and stand-alone cable networks like MSGN are exposed to slimming bundles. Firm also lowers media industry view to in-line, and downgraded LGF to equal-weight
·      E&P sector movers; GPOR guided in 2018 for a lower capex and growth rate than analysts expected (new 2018 guidance of 17% mid-point and growth rate on $800M capex); SD 1.9M share Block Trade priced at $19.00; PE shares fall as came in with Q4 oil production -5% miss vs. Street), Q4 capex came in way high (+21% vs Street), and 2018 guidance was revised lower (follows recently lower update from fellow Permian player LPI); AR said it is working with advisers to address its relative “discount in trading value;” NBL to sell 7.5% of field to Tamar for about $800M (below the $900M Mizuho expected, but came in ahead of 2H18 timetable)
 
Stock GAINERS
·      BC +5%; Owl Creek Asset Management is pushing the company to spin out its fitness business after building an activist stake in the company – Bloomberg
·      CRBP +8%; awarded $25M from CF Foundation to support development of lenabasum
·      EXTR +9%; to replace TIME in the S&P MidCap 400 index
·      HCA +7%; helps lift hospitals after Q4 revenue and Ebitda topped consensus ($11.56B and $2.36B) and initiates dividend of 35c
·      MNTA +7%; rises (TEVA/MYL slip) as company sees possible near-term approval
·      QRVO +7%; strong outperformance in the semiconductor sector
·      TRI +8%; BX is in advanced talks to buy an approximate 55% stake in the Financial and Risk business of Thomson Reuters Corp (TRI), Reuters https://goo.gl/Jb8nGw
 
Stock LAGGARDS
·      AAPL -2%; falls to lowest level seen during regular session hours since Nov. 2/ weakness continues ahead of earnings this Thursday as Street cautious on iPhone X demand
·      GGG -12%; shares tumbled as profit, outlook disappoint amid high expectations
·      GPOR -7%; guided in 2018 for a lower capex and growth rate than analysts expected
·      HOG -6%; provided 2018 shipment guidance that missed some estimates
·      MET -9%; said material weakness found in annuity reserves review; expects to report 4Q prelim EPS 61c-66c vs. est. $1.08
·      MXIM -9%; after Japan-based Renesas Electronics Corp. denied that is in discussions to buy them
·      PCAR -5%; as margins disappointed despite 4Q profit/sales that were above analysts’ estimates
·      PE -8%; came in with Q4 oil production -5% miss vs. Street), Q4 capex came in way high (+21% vs Street), and 2018 guidance was revised lower
·      RMBS -7%; Q4 adjusted EPS 19c/$101.9M vs. est. 19c/$101.13M; sees Q1 adjusted EPS 12c-19c on revs $94M-$100M, below est. 20c/$100.73M
·      SMG -16%; posted wider Q1 EPS loss on weaker sales of $221.5M while cutting its sales forecast for the business that serves cannabis growers, citing disappointing growth in California
·      UNH -6%; managed care falls as AMZN, JPM and BRK/A are teaming up to collaborate on a way to offer health-care services to their U.S. employees more transparently and at a lower cost
 
Syndicate
·      Amarin (AMRN) 19.2M share Spot Secondary priced at $3.65
·      Clementia Pharmaceuticals (CMTA) 780K share Block Trade priced at $17.25
·      CymaBay (CBAY) 11.6M share Spot Secondary priced at $10.80
·      SandRidge Energy (SD) 1.9M share Block Trade priced at $19.00

________________________________________________________________________________________

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.
 

Live Trading

Open an Account

Paper Trading

Register