Mid Day Outlook: February 28, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Wednesday, February 28, 18
  
Equities broadly higher, shaking off in part yesterday’s more than 1% decline for major averages on Fed rate hike fears after Fed Chair Powell’s positive assessment of the US economy. Data today showed the economy expanded at a slightly slower-than-expected rate in Q4, as GDP rose 2.5% vs. the 2.6% prior outlook (though most components of data were in-line with prior view). Today markets the end of the month, with major U.S. averages on track for their worst performance in nearly two-years. Coming into today, the Dow and S&P on track for a 2.8% monthly slump and the NASDAQ set for a 1.1% drop. The dollar surging vs. nearly all rivals (expect the yen), while yields holding above the 2.88% on the 10-year. Commodity prices are down slightly, with crude on track for lower closing month. Energy stocks mixed after several earnings reports, retailers a boost on TJX results, housing related names fall on LOW EPS miss/lower guide, online travel up on BKNG beat and biotech names holding up well despite weaker commentary and/or earnings from CELG, TSRO, ACAD.
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar moving higher again, with the dollar index topping the 90.50 level, up over 0.25%; British pound falls below 1.38, its lowest level since 2/9, while the dollar rises vs. the CAD above 1.28 for first time since late December; dollar falls to Fresh February lows vs. the euro around 1.22 (well off monthly highs of 1.2555 on 2/15); though buck falls vs. the yen; Bitcoin prices down about 2% at $10,500  (well off overnight highs of $11,062)
·      Precious metals are little changed, with gold holding near yesterday closing levels around $1,319 an ounce, falling this week as the dollar pushes higher on rising rate hike expectations
·      Energy futures small roll after weekly inventory data: in-line for crude from EIA at build of just over 3M barrels, with gasoline bigger build (bearish) of 2.4M vs. est. 600K, and distillates also mostly in-line at a draw of -960K barrels. Crude exports fell by about 600,000 barrels a day. Crude set for the first down month since August 2017, as concerns about rising US production and inventories edges-out optimistic OPEC arguments of strong global demand.
·      Treasury markets edging higher as yields pullback after yesterday’s spike on perceived hawkish commentary from Fed Chair Powell to Congress; the yield on the benchmark 10-yr slips over 2 bps to 2.885%, while the 30-yr yield drops over 3 bps to 3.145%. Powell yesterday emphasized the strength of the U.S. economy, which boosted rate hike expectations
 
Economic Data
·      U.S. GDP for Q4 was trimmed to 2.5% from 2.6%, largely because of a slower buildup in inventories of unsold goods, but was in-line with consensus views. Nearly every other data point was virtually unchanged from the prior reading as personal consumption at 3.8% (though slightly better than the 3.6% est.) and Core PCE steady at 1.9%. For the full year, the U.S. expanded 2.3% vs. a 1.6% increase in 2016
·      Chicago PMI slipped in February to a reading of 61.9, a six-month low, from 65.7 in January and below the 64.1 estimate from economists; reported a slower pace of incoming orders and output
·      Pending home sales fell (-4.7%) MoM vs. est. up 0.5%; the Northeast fell 9%, Midwest fell 6.6%, South fell 3.9% and the West fell 1.2%; Dec. fell 0.2%
   
Sector Movers Today
·      Transports; sector underperforms, led by weakness in car rental and rails; car rental weak after HTZ posted larger-than-expected quarterly loss and said it incurred higher expenses as it upgraded technology, spent more on marketing; Cowen lowered estimates on rail companies citing lower volume growth and poor services impacted by difficult weather conditions thus far in 2018 and could drive operating expenses up (CSX, UNP, NSC)
·      Consumer Staples; BGS falls to 52-week lows as Q4 sales miss views and guides year EPS below views ($2.05-$2.25 vs. est. $2.26); HLFannounces a 2 for 1 stock split, name change, modified Dutch auction, refinance of some debt; ELF was downgraded to market perform from outperform at BMO Capital and lowered the price target to $19 from $24 after the company’s Q4 results and FY18 outlook; In tobacco, Citigroup said tobacco companies’ financials have become much harder to understand as they upgrade PM to buy and cut BAT to neutral
·      Retailers; TJX posted Q4 sales beat on higher comps of 4% with dividend boost and stock buyback; DKS said it is immediately ending sales of all assault-style rifles in its stores, NYT reports; BGFV said it expects a 1Q loss per share of (14c-6c) vs. est. loss (4c) and sees 1Q comp sales down high-single-digits y/y; CROX shares fall as falls short of Q4 forecasts after EPS miss; CHS shares surged as Q4 EPS beat by 5c on better sales and comp sales fell less than thought
·      Healthcare facilities and suppliers; EVHC reported solid 4Q results marked by decent volumes across segments, strong FCF and full year 2018 guidance ahead of expectations; THC was upgraded at Raymond James after better earnings results; ESRX 4Q results marked by solid core trends, strong expected ’18 retention and robust FCF; CYH a drag on hospitals after weaker earnings results
·      E&P movers on earnings: RSPP Q4 production miss though 2018 guidance better than feared with 2019-20 outlook implying better than expected capital efficiency, said CSFB; OAS reported strong 4Q earnings and maintained its long-term growth outlook; CPE 4Q earnings beat on cash unit expense and strong realizations and did not alter ’18 spending/production guidance; EOG 2018 capex and oil production guidance disappointed, sending shares down
 
Stock GAINERS
·      AAXN +22%; after reported an unexpected profit for Q4/was upgraded to buy at Ladenburg
·      BKNG +9%; analysts raise price targets after Q4 top and bottom line handily beat views
·      ETSY +21%; upgraded by at least two analysts as stocks trades to 52-week high after quarterly results and revenue guidance
·      MELI +6%; upgraded to overweight and street high $500 at JP Morgan
·      PHH +25%; agreed to be acquired by OCN for $360M in cash https://goo.gl/Vvu739
·      TIVO +14%; after earnings/ says starts to examine strategic alternatives
·      TJX +7%; Q4 sales beat on higher comps of 4% with dividend boost and stock buyback
 
Stock LAGGARDS
·      ACAD -16%; after 4Q revenue and Nuplazid sales came in below analyst expectations
·      BGS -5%; falls to 52-week lows as Q4 sales miss views and guides year EPS below views
·      CELG -6%; received a Refusal to File letter from the FDA regarding its New Drug Application (NDA) for Ozanimod for the treatment of patients with relapsing forms of multiple sclerosis
·      ELF -11%; downgraded at BMO Capital after the company’s Q4 results and FY18 outlook
·      FTR -26%; after announcing a dividend suspension with earnings/Jefferies downgrades the stock
·      LOW -6%; disappoints as quarterly earnings missed by 13c and guides year EPS below views
·      PPG -2%; after LOW said it would expand its partnership with SHW in paints
·      TSRO -12%; 4Q sales of its lead asset, Zejula, modestly missed analyst expectations and guidance for 2018 sales came in below Street estimates
·      VRX -10%; Q4 sales fell 10% YoY with lower revenue in all three of its major units and forecast for 2018 on both top and bottom line below estimates
 
Syndicate
·      Bright Scholar (BEDU) 10M share Secondary priced at $19.00
·      Cotiviti Holdings (COTV) 1.5M share Block Trade priced at $33.15
·      General Motors (GM) 40M share Spot Secondary priced at $39.80
·      NMI Holdings (NMIH) 3.7M share Secondary priced at $19.75
·      Norwegian Cruise Line (NCLH) 19.5M share Spot Secondary priced at $56.00

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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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