Mid Day Outlook: February 1, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Thursday, February 1, 18
  
Equities are mixed, trading in a narrower range then what we have been accustomed too, as investors appear overwhelmed by the amount of large cap earnings announcements today (and big ones still to come) with market monsters FB, MSFT, QCOM, MA, EBAY, BABA, PYPL among the names moving this morning on results, with AAPL, AMZN, XOM, CVX, AMGN expected tonight and tomorrow. Also a very busy morning of economic data, with ISM Manufacturing, Construction Spending, Jobless Claims and Productivity data released this morning (details below), all ahead of the Nonfarm Payroll report tomorrow (estimate 180K jobs added and unemployment rate to hold at 4.1%). It feels like markets are trying to get its bearings back after a week of information overload, with the State of the Union Tuesday, the FOMC yesterday (slightly more hawkish), and the onslaught of earnings results this week (over 125 S&P names reporting this week alone). Commodity prices are rebounding, with oil spiking, while the dollar slips and bond yields holding recent highs (10-year 2.735%). Stocks mixed early after a week of declines, though are coming off solid gains for January!
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar index (DXY) sinks to the lows, down over -0.3% back under the 89 level (touched 3-year lows earlier in the week), while bonds are slipping and yields inching higher again ahead of the jobs report tomorrow
·      Commodity prices are generally higher, led by strong gains in WTI crude as it trades higher by more than 1% to above $65.50 per barrel, while gold holds modest gains on a mixed dollar; natural gas prices resume yesterday’s decline on smaller weekly inventory draw, with prices down to $2.87 mln btu, down over 4%
 
Economic Data
·      Weekly Jobless Claims fell 1K to 230K, slightly below the 235K estimate, while prior week was revised to 231K from 233K; the 4-week moving average fell by 5,000 to 234,500; continuing claims rose 13K to 1.953M in the week ending Jan. 20; claims data for Puerto Rico and the Virgin Islands affected by fall hurricanes
·      Non-farm productivity for Q4 fell an unexpected (-0.1%), below the expected 0.7% gain; Nonfarm output per hour rose 2.7% prior quarter (prior reading revised to 2.7% from 3.0%); Unit labor costs rose 2% in 4Q vs. down 0.1% prior quarter and above the 0.9% estimate; Output rose 3.2% in 4Q vs. up 4% prior quarter; Employee hours rose 3.3% in 4Q vs. up 1.2% prior quarter; Compensation per hour rose 1.8% in 4Q vs. up 2.7% prior quarter
·      The ISM Manufacturing index in January slipped to 59.1 from 59.3 in December, but slightly above the 58.6 estimate; segment breakdown: New orders fell to 65.4 from 67.4 prior, employment fell to 54.2 from 58.1; prices paid rose to 72.7 vs 68.3 and backlog of orders rose to 56.2 from 54.9 in prior month
·      IHS Markit said its manufacturing PMI remained steady at a final reading of 55.5 in January from the flash estimate; was up from 55.1 in December.
·      Construction Spending for December rose 0.7%, topping the 0.4% estimate while Nov. revised to 0.6% from 0.8%; Private construction rose 0.8% in Dec., Private residential construction rose 0.5%, Private nonresidential construction rose 1.1% and Public construction rose 0.3%
   
Sector Movers Today
·      Autos; monthly auto sales data out for January: 1) GM Jan. U.S. auto sales up 1.3% versus an estimate of 3.4%/total sales in January totaled 198,548; 2) Ford (F) Jan. U.S. light-vehicle sales down (-6.3%) vs. est. down (-1.5%); Ford overall U.S. sales for Jan. total 161,143, down (-6.6%), Total SUVs down 5.9%, Total trucks up 2.2%; 3)FCAU Jan. U.S. sales were down (-13%) vs. est. loss (-10%) – Fiat brand sales down 43%, Chrysler brand sales down 21%, Jeep brand sales up 2%, Dodge brand sales down 31%; 4) TM Jan U.S. auto sales rose 16.8% vs. est. up 9%/January 2018 sales of 167,056 vehicles; 5) NSANY Jan U.S. auto sales up 10% vs. est. 2.1%
·      Casino, Lodging & Leisure; in gaming, Macau gross gaming revenue increased 36.4% in January, according to the Gaming Inspection and Coordination Bureau, topping the most optimistic estimates from analysts and was almost ten full points over the consensus mark of +27%. JPMorgan estimates that VIP revenue shot up 50% during the month and the mass market segment saw a 22% to 24% increase (gaming stocks LVS, MGM, WYNN, MLCO)
·      Internet; FB shares at a fresh life-time high today after Q4 results came in above consensus forecasts, though ad revenue came in below the most bullish expectations; EBAY 52-week highs after earnings/upgraded at RBC Capital citing GMV growth/said it will shift its payments business to Adyen BV, a global payments company (away from PYPL); BABA pulls back from record highs after earnings results/beats forecasts again, takes stake in affiliate Ant Financial; PCLN tgt raised to $2,100 at Raymond James as favor its global positioning in hotel, quicker path to room night recovery, and buyback potential; still earnings to come tonight for AMZNand GOOGL
·      Transports; sector weak initially, dragged down by UPS after its outlook misses estimates and announced investment climb (said cap-ex to rise as much as $7B from $5.2B in 2017); ALGT higher in airlines after earning and analyst upgrade; truckers help pare index losses with LSTR the latest to report better results/strong guidance (CHRW and KNX better yesterday)
 
Stock GAINERS
·      BA +2%; new record highs helping boost the Dow Industrial Average
·      EBAY +13%; 52-week highs after earnings/upgraded at RBC Capital citing GMV growth
·      FB +3%; Q4 results came in above consensus forecasts, though ad revenue came in below the most bullish expectations
·      ICPT +9%; jumps after avoiding a more restrictive label on its Ocaliva
·      NOK +13%; on licensing boost ahead of 5G rollout/earnings
·      QRVO +15%; its custom mid- and high-band PAD socket had been approved at Apple (more than offsetting the worse than expected forecast)
·      +4%; after earnings results and sub numbers top expectations
 
Stock LAGGARDS
·      CMG -4%; downgraded to sell at UBS and tgt down to $290 saying brand perceptions remain depressed while competition is unlikely to ease in 2018
·      DWDP -2%; 2018 EPS guidance fell below estimates
·      EGOV -18%; one analyst noted Texas shunning NIC’s contract re-bid is a “major loss” and means the company may stand to lose an estimated ~$58M-$62M of the $68M the contract generated
·      HSY –5%; as Q4 EPS and sales miss estimates and midpoint year guidance also short of views
·      OMI -15%; preliminary 2017 adj. EPS trailed the prior forecast and gave no update on 201
·      PYPL -6%; on guidance and as EBAY shifts its payments business to Adyen BV, a global payments company (away from PYPL)
·      UPS -6%; outlook misses estimates and announced investment climb
 
Syndicate
·      Corporacion America Airport (CAAP) 28.6M share IPO priced at $17.00
·      Fusion Telecommunications (FSNN) 11.25M share Secondary priced at $3.20
·      Hudson (HUD) 39.418M share IPO priced at $19.00
·      Hyatt (H) 645K share Block Trade priced at $81.00
·      Nuvectra (NVTR) 28.25M share Spot Secondary priced at $8.00
·      One Stop Systems (OSS) 3.8M share IPO priced at $5.00
·      OncoSec (ONCS) 20M share Spot Secondary priced at $1.50
·      Seattle Genetics (SGEN) 11.538M share Secondary priced at $52.00
·      Sol-Gel Technologies (SLGL)6.5M share IPO priced at $12.00
·      VICI Properties (VICI) 60.5M share IPO priced at $20.00

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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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