Mid Day Outlook: February 12, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Monday, February 12, 18
US equities opened firmly higher, trying to extend its gains for a second session after posting its worst weekly loss in over 2-years Friday on rising inflation, borrowing cost fears and amid mass volatility. The Dow closed up 330 points Friday after falling more than 500 at one point and traded up over 350 points earlier today before paring its gains across the board. The S&P 500’s Friday bounce off its 200-DMA spurred optimism that the two-week selloff may be close to an end with some market strategists today suggesting buying the recent dip (Morgan, Goldman, and JP Morgan among them). All major industries gained early Monday (before paring gains) except for utilities and real estate as commodity and financials rose at least 1.3%. A few key items this week for markets include: 1) Trump infrastructure plan (released today), 2) inflation data points (CPI on Wednesday) and 3) more earnings.  President Donald Trump’s administration releases plan it says would stimulate at least $1.5t in new investment, shorten project permitting time to two years, improve training to get more qualified workers and boost investment in rural projects. Trump campaigned on promise of $1t plan to fix roads, bridges and airports; this proposal calls for allocating $200B in federal funds over a decade.
Treasuries, Currencies and Commodities
·      In currency markets, currency action mostly muted early after volatility last week; no major economic data today to move markets; The U.S. dollar was slightly weaker (DXY down -0.15%) after recording its biggest weekly gain since December 2016 last week; the euro little changed around 1.2257 and dollar slips slightly vs. yen at 108.50; South African rand active after commentary about president Zuma
·      Commodity prices; crude oil prices moving higher, looking to rebound from its work weekly decline in nearly 2-years (fell shy of 10% last week) – still around $60 per barrel; in its monthly report, OPEC said supply from producers outside the cartel should increase by 1.4 million barrels a day this year, raising its view amid surging US shale production; gold prices rebound
·      Treasury markets reverses losses, as the yield on the 10-year Treasury moves back to 2.83% after trading as high as 2.893% this morning ahead of key inflation data later this week (CPI on Wednesday); bonds also growing budget deficits and the Federal Reserve’s unwinding of its balance sheet along with the inflation fears; 30-yr yield little changed at 3.14% initially, but now down around the 3.12% level; 2-yr down at 2.07%
Sector Movers Today
·      REITs; sector among the weakest in the S&P 500, with shares of HCP, HCN, BXP, REG, SPG, MAC, FRT, VTR leading lower early; BTIG noted today that half of their coverage universe has reported 4Q17 results and issued 2018 FFO guidance with only 4 of the 24 companies issuing FY 2018 FFO guidance have provided for mid-points at or above the consensus estimate – note guidance is lower for two primary reasons: Lower than expected and/or back-end weighted SSNOI growth and higher than modeled interest expense
·      Retailers; VFC was upgraded to buy at Stifel and up tgt to $91 saying helped by fundamental strength, environmental factors, and FX they are confident in above consensus estimates; ULTA shares fall on Women’s Wear Daily article alleging reselling cosmetics https://goo.gl/hxCS95; ; ICON announced a debt exchange, unveiled a cost savings plan, provided guidance for 2018 and announced a new deal with TGT
·      Metals & Mining; in the steel sector, KeyBanc adjusted 2018 estimates on CMC, NUE, and STLD to reflect tougher 1Q18 comps and higher tax, but maintain positive strategic bias on STLD via industry leading ROIC, strong FCFE, and balance sheet optionality to explore M&A and upgrade TMST to overweight with a $17 price target from SW via improving risk/reward
·      Media & Telecom; DIS raised the cost of some single-day theme park tickets by about 9%,with peak one-day tickets for a single theme park at the Disneyland Resort in Anaheim, California, will see the biggest increase, rising to $135 from $124; FOXA said it would commit to maintain Sky News in Britain for at least five years and would establish an independent board for the channel to try to secure its takeover of pay-TV operator Sky https://goo.gl/Qfbyuw; in media,WWE was upgraded to outperform at KeyBanc
·      COLL +12%; after main competitor, closely-held Purdue Pharma, said it would stop promoting its opioids, including the popular OxyContin, to doctors
·      CSRA +31%; +31%; to be acquired by GD for $40.75 per share in cash, a 32% premium to Friday closing price, in deal valued at $6.8B https://goo.gl/iVW8Es
·      FDC +4%; after in-line Q4 EPS results and in-line guidance
·      GM +1%; reiterated buy at Citi and upped tgt to $70 from $60 with greater confidence on its $134 long-term potential
·      PFG +2%; upgraded at both JP Morgan (to neutral) and Barclay’s (to overweight) after pullback
·      PXD +3%; energy stocks broadly rising after last week’s sell-off/oil prices rebound
·      QSR +4%; Q4 EPS topped consensus on Burger King boost while Tim Hortons posts weak same-store sales for the fifth quarter in a row
·      DY -4%; guided prelim January qtr revs to $655M compared to prior view of $645M-$675M and est. $663.2M with EPS 9c-12c, down from 24c-36c
·      LL -7%; downgraded to neutral at Wedbush as now project slower improvement in fundamentals
·      LJPC -7%; downgraded to underperform at Jefferies on concerns hospital P&T committees will be lukewarm to Giapreza adoption
·      RPD -4%; after reporting quarterly results for Q4
·      STMP -9%; Craig Hallum comments on disappointing PC Postage volumes for December, which were up only 4% from the previous year
·      ULTA -5%; after Women’s Wear Daily details more accusations against the retailer on selling used and returned items as new https://goo.gl/hxCS95


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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