Mid Day Outlook: February 20, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Tuesday, February 20, 18
  
U.S. equities are mixed, with the tech heavy Nasdaq Composite outperforming early on, while the S&P slips and the Dow Industrials underperforms following weaker earnings results/guidance from WMT, as shares drop over 9%. Asia markets were mostly lower, while China markets remains closed for its week long holiday, though Europe rebounds off earlier lows. The combination of weaker WMT results, a busy week of bond issuance (and rising yields), and a rebound in the dollar has markets slipping to start the abbreviated trading week, as traders return from the 3-day holiday weekend. Dow component HD also posted results this morning, beating on top/bottom line as well as comp sales beat, but shares have pulled off earlier highs. Outside of earnings, and a few M&A stories (see below NXPI), macro generally quiet with no major economic data, or Fed commentary.
 
Treasuries, Currencies and Commodities
·      In currency markets, the U.S. dollar got a boost after limping back from a three-year low late Friday against a basket of currencies. The greenback marked its fifth weekly loss out of seven weeks this year on Friday, driving the euro up to its highest level since December 2014. The euro slides about -0.5% this morning to 1.2345, while the buck rises back above 107 against the yen vs. 106.59 late Friday. Bitcoin prices up around 3% at $11,430 (hit 3-week high $11,646)
·      Commodity prices: Precious metals are slumping, with gold prices down over 1% as the dollar rebounds off 3-year lows (gold prices advanced roughly 35 last week); after posting a weekly gain of over 4% last week, WTI crude oil prices are up, holding above $61.50 per barrel
·      Treasury markets little changed, with the 10-year yield up slightly around 2.89% ahead of a very busy week on bond issuance. The Treasury Department will auction $28 billion of 2-year notes, $35 billion of 5-year notes and $29 billion of 7-year notes this week, with the 2-year auction hitting Tuesday
   
Sector Movers Today
·      Restaurants; FOGO to be acquired by Rhone Capital for $15.75 per share/$560M deal https://goo.gl/WfdHkrDIN shares jump after earnings results top views; CBRLshares fall after Q2 results and Q3 EPS guidance of $1.85-$1.95 below the $2.23 estimate had shares lower; CMG was upgraded at Stifel; DPZ shares slide as Q4 EPS beat, but revs of $891.5M missed the $905M est and comp sales of 3.8% also light
·      Housing & Building Products; in home improvement retail, Dow component HD Q4 EPS beat by 6c on slightly better sales of $23.88B and comps 0f 7.5% topping the 6.5% estimate (LOW reports earnings next week); HD suppliers such as MAS, AMWD, SWK also active on report; in homebuilders, Barron’s called HOV shares too cheap to ignore; WLH posted Q4 rev beat and announced definitive agreement to acquire RSI Communities for about $460M
·      Auto movers; GM has offered to convert debt of around $2.2 billion owed by its ailing South Korean operation into equity in exchange for financial support and tax benefits from Seoul. https://goo.gl/yXFkPg ; GPC shares fell as Q4 results topped consensus but year guidance $5.60-$5.75 missed the $5.86 estimate; CTB shares fall as Q4 EPS missed lowest estimates
·      Media & Telecom; the better than expected opening weekend box office results from DIS’ “Black Panther” helps movie theater stocks today, as the film generated $235M in box office revenue over the four-day holiday weekend (RGC, AMC, CNK); IMAX announces record $35M global debut of Marvel Studios’ “Black Panther”
 
Stock GAINERS
·      FOGO +25%; to be acquired by Rhone Capital for $15.75 per share/$560M deal https://goo.gl/WfdHkr
·      HD +1%; Q4 EPS beat by 6c on slightly better sales of $23.88B and comps 0f 7.5% topping the 6.5% estimate
·      ICE +2%; upgraded to overweight at JP Morgan as see ICE as a relative value in exchange sector
·      MOS +6%; as Q4 EPS beat by 6c on higher sales and better volumes
·      NBL +8%; with its 3-year outlook viewed positively, despite reporting lower-than-expected 4Q17 production
·      NXPI +6%; after QCOM raised its bid for the chip maker to about $44B https://goo.gl/5uZgfS
·      VYGR +22%; in pact with ABBV; to receive $69M upfront payment and may get up to $155M in additional payments for preclinical and Phase 1 options
 
Stock LAGGARDS
·      GPC -3%; Q4 results topped consensus but year guidance $5.60-$5.75 missed the $5.86 est.
·      GPS -3%; on news Gap brand president Jeff Kirwan is leaving
·      KIRK -14%; guides Q3 EPS 32c-34c, below consensus of 59c
·      MDXG -33%; after the company postpones the release of financial FY17 and Q4 results
·      MRK -1%; federal judge in Delaware overturned a jury’s verdict requiring GILD to pay $2.54B as its hepatitis C drugs Sovaldi/Harvoni infringed patent held by MRK https://goo.gl/sCR5RD
·      RIOT -9%; extends Friday’s 33% decline after CNBC investigative report
·      SNAP -4%; downgraded to sell from neutral at Citigroup with $14 tgt
·      UBNT -25%; disclosed in a filing that the SEC had issued it subpoena relating to a range of topics
·      WMT -9%; missed Q1 EPS, forecast year adjusted EPS below estimates

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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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