Mid Day Outlook: February 15, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Thursday, February 15, 18
Stocks rising again (though have been paring gains over the last 30-minutes – falling from highs), on track for its fifth straight advance, as investors digested a wave of economic reports (PPI, jobless claims, IP, and manufacturing reports). The Dow Jones Industrial Average reclaims the 25K level for the 1st time in 2-weeks and is on track for its longest win streak in about 9 weeks, this after falling as much as 10% from record highs just 5 days ago. The S&P 500 index firmly above the 2,700 level and the Nasdaq Composite Index topped the 7,200 level (up over 570 points from Friday low). Strong earnings results from Dow component CSCO overnight helped lift tech stocks. The 10-year Treasury yield hit a morning high of 2.942%, but after mixed data reports, the yield has dipped back under 2.9% on the day.  The number of Fed rate increases this year expected by investors has risen to four in the wake of yesterday’s inflation data (CPI), while todays PPI inflation report also showed rising prices. The NASDAQ Composite Index rising a fifth straight session, putting the tech-heavy index on track for its biggest one-week percentage gain in more than three years. The NASDAQ is up 4.3% thus far this week, which represents its best week since October 2014. The Dow is up 3.5% thus far this week while the S&P is up 3.4%. Both are poised for their biggest weekly percentage gain since November 2016. The dollar falling again, bonds rebound and commodity prices are slipping.
Treasuries, Currencies and Commodities
·      In currency markets, the dollar falling again, down another -0.3% to around 88,75, and now well off yesterday morning highs of 90.12 after the CPI release; the weaker dollar falling despite rising rate hike expectations and increasing inflation as per data; dollar falls to 15-month lows against the Japanese yen; Bitcoin up over 5.8% at 9833 (highs 9,966 and lows 9,246)
·      Precious metals slipped from near 3-week highs after jumping yesterday above the $1,350 an ounce level on dollar weakness and rising inflation fears; Energy futuresposted a big rebound late yesterday on inventory data – pulling back slightly today, but holding above $60 per barrel; nat gas prices bounce off the lows after bullish inventory data (weekly draw of -193 bcf)
·      Treasury markets gain slightly, with yields dipping from earlier highs after several economic data reports painting mixed picture for the U.S. economy; 10-yr yield dips under 2.9% from earlier highs 2.94% while 2-yr remains up around 2.18% on rising rate hike expectations
Economic Data
·      Producer Price Index (PPI) shot up 0.4% in January, in-line with estimates, the latest sign that inflation is perking up; core PPI also rose 0.4%, hotter than the expected 0.2% rise, suggesting price pressures are more widespread. The 12-month rate of wholesale inflation rose a tick to 2.7% in January, and the yearly rate of core inflation edged up to a record 2.5%
·      The Philadelphia Fed manufacturing index rose to a reading of 25.8 in February from 22.2 in January and above the 21.8 estimate; the new-orders gauge jumped to 24.5 from 10.1, but the shipments gauge declined to 15.5 from 30.3; prices paid index increased 12 points to 45, its highest reading since May 2011.
·      The Empire State Manufacturing Index slumped to a reading of 13.1 in February from 17.7 in January and below the 18.0 estimate by economists; this marked the 4thstraight drop after the index hit 28.1 in October; the new-orders index rose 1.6 points to 13.5, and the shipments index slipped 1.9 points to 12.5;  prices paid index jumped 12 points to 48.6
·      Initial U.S. jobless claims increased by 7K to 230K in the latest week, slightly above the 228K estimate, while the prior week was revised to 223K from 221K; the 4-week moving average rose by 3,500 to 228,500, and continuing claims climbed by 15,000 to 1.94M (vs. 2.4M a year ago)
·      Industrial Production for January fell (-0.1%) vs. an expected rise of 0.2% and after rising 0.4% in December; IP was revised down to up 0.4% from up 0.9% in December. Capacity utilization fell to 77.5% from 77.7% in December and was revised down from 77.9%
·      Mortgage rates have climbed to the highest level in close to four years, averaged 4.38% in the week ending Feb. 15, up from 4.32%, mortgage buyer Freddie Mac said. A year ago, the benchmark mortgage averaged 4.15%
Sector Movers Today
·      Credit card monthly data: 1) COF January net charge-offs 5.33% vs. 5.37% last month and January 30-plus day delinquencies 4.11% vs. 4.01% last month; 2) JPMJanuary net charge offs 2.40% vs. 2.43% last month and January 30-plus day delinquency rate 1.21% vs. 1.20% last month; 3) SYF January charge-off rate 4.98% vs. 4.94% last month and January 30-plus day delinquency rate 3.11% vs. 302% last month; 4) ADS January net charge offs 6.8% vs. 5.9% last month and delinquency rate 5.5% vs. 5.1% last month; 5) DFS January charge-off rate 3.1% vs. 3.1% last month and delinquency rate 2.4% vs. 2.3% last month
·      Gold miners; several earnings results out of the gold mining sector overnight: 1) GG Q4 EPS beat by 17c on gold production of 646K oz.’s; 2) ABX Q4 adj. EPS in line with expectations, while cash flow and free cash flow were a bit lower than expected on higher capital spending; 3) KGC underperforms after Q4 results missed, with one analyst chalking it up to a timing issue; 4) AEM also moved lower on mixed Q4 results
·      Chemicals; SHLM +10%; to be acquired by LYB for $42 per share in a deal valued at $1.24B, doubling the size of its plastics business https://goo.gl/J7JmF7CF posted mixed Q4 results as EPS beat while Ebitda came in just below views, mainly driven by higher than expected feedstock costs in the U.K. and higher than expected non-gas costs in ammonia; CC Q4 EPS and sales topped consensus on higher Ebitda and reaffirmed guidance
·      Casino, Lodging & Leisure; busy week for lodging results, with HLT and WYN reporting yesterday and both MAR and Hyatt (H) moving on results today; WYN to sell European vacation rental business for $1.3 bln to Platinum Equity
·      AMAG +28%; and partner ATRS shares rise after the FDA approved its Makena subcutaneous auto-injector drug device combination
·      CRM +2%; upgraded to buy at Jefferies and increases the price target from $97 to $132
·      CSCO +3%; posted upbeat and clean results and guidance as Q2 sales beat
·      NBL +1%; to divest Gulf of Mexico assets for $710M, announces share $750M buyback program
·      SEDG +20%; after delivering a strong Q4 beat and an impressive Q1 guide of $200M-$210M, well above the $158M estimate
·      SHLM +11%; to be acquired by LYB for $42 per share in a deal valued at $1.24B, doubling the size of its plastics business https://goo.gl/J7JmF7
·      TEVA +8%; as Warren Buffet’s Berkshire revealed a new stake in TEVA in 13F filing
·      TRIP +7%; reported mixed quarterly results/guidance, but came in better than feared
·      CAI -15%; shares drop as quarterly sales miss consensus
·      CDK -3%; as Bloomberg reported, citing DealReporter, that Carlyle, Silver Lake are no longer actively working on CDK Global buyout
·      EQIX –7%; gave forecasts for 2018 revenue and adjusted Ebitda that missed analyst estimates
·      HAL -1%; said its Q1 negatively impacted by frack sand delays (frac sand companies SLCA, EMES, SND, HCLP, FMSA)
·      NTAP -12%; despite Q3 beats on top/bottom line, as midpoint of guidance for Q4 missed; analysts also noted lower margins
·      OMC -6%; reported lower-than-expected organic growth, and roughly in-line profitability expectations for 4Q17
·      SPWR -11%; as outlook disappointed, and the company said it’s already seeing negative impacts from the Section 201 solar tariffs
·      THS -11%; falls to 52-week lows after issuing disappointing full-year revenue guidance as sees sales of $5.9B-$6.1B vs. $6.24B consensus
·      XEC -5%; guided 2018 -3% below consensus, but still calls for 14% growth with 21-26% oil growth and raise cap-ex to $1.6B-$1.7B vs. Bloomberg est. $1.5B


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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