Mid Day Outlook: March 1, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Thursday, March 1, 18
  
Equities again volatile, bouncing between gains and losses as markets weigh commentary from Fed Chairman Powell in his second day of testimony on the economy and rates, this time to the Senate. Markets had extended gains after Fed Chairman Jerome Powell said there is no strong evidence of a decisive move up on wages, and the economy is not overheating. The U.S. dollar pared some of its gains, falling back from its highest level since mid-January, as Federal Reserve Chairman Jerome Powell told Congress there was some slack left in the labor market. However, stocks have since edged lower, trading little changed on the day. Commodity prices are mostly lower, led by a 1% decline in gold and nearly 2% decline for oil prices. U.S. steel stocks jumped early on tariff expectations, though have slipped since after CNBC reported there will be no Trump announcement on tariffs today. Stocks are trying to recover after closing out February with its worst monthly return in about 2-years.
 
Treasuries, Currencies and Commodities
·      In currency markets, the U.S. dollar rising early, extending recent gains against the euro, yen and pound after finishing February with a more than 1.5% gain, snapping a 4-month losing streak; the price of bitcoin sank late Wednesday after a report by the WSJ that the SEC is ramping up pressure on the initial-coin-offerings industry, issuing scores of subpoenas and information requests to companies. https://goo.gl/8FGnj8  – Bitcoin has since rebounded up 1%. The dollar has since pared gains following comments from Powell on Capitol Hill
·      Commodity prices extending recent weakness, as gold prices down around 1%,falling to $1,305 an ounce level (down sharply from the Feb 16th high of $1,364.40 an ounce) as rising rate expectations, inflation as well have lifted the dollar, sending gold lower
·      Energy futures also extending losses, with the energy complex among the top declining names in the CRB commodity index, down around 2%, but holding above the $60 per barrel level. Oil prices fell 4% in February, posting its first monthly loss since August
·      Treasury markets are higher, with yield inching lower again this morning, but bonds remain active as Powell speaks in front of the Senate today on rates; 10-year yield around 2.86%
 
Economic Data
·      ISM manufacturing in February was highest since May 2004, rising to 60.8 from 59.1 in prior month and above the 58.7 estimate; new orders fell to 64.2 vs 65.4 prior month, while employment rose to 59.7 vs 54.2; customer inventories fell to 43.7 vs 45.6 and prices paid rose to 74.2 vs 72.7; backlog of orders rose to 59.8 vs 56.2
·      Construction spending unchanged in January, below the estimate for a rise of 0.1%, though the prior month revised up to 0.8% from 0.7%; Private construction fell 0.5% in January, Private residential construction rose 0.3% and Private nonresidential construction fell 1.5%
·      Consumer spending in January rose 0.2%, in-line with expectations, while spending fell for the first time in a year if adjusted for inflation, the government said.Personal incomes rose 0.4%, topping the 0.3% estimate and after-tax incomes posted the biggest gain since 2012 in the wake of the Trump tax cuts. The combination of higher incomes and slower spending boosted the U.S. savings rate to 3.2% from 2.5%.
·      Inflation data points in-line with consensus: January PCE Core MoM was 0.3%, and core year 1.5%, while the PCE Deflator MoM 0.4% and year 1.7% – all in-line with economic estimates
·      Initial U.S. jobless claims fell by 10K to 210K, well below the 225K estimate, while prior week was revised lower to 220K from 222K; continuing claims, increased by 57,000 to 1.93 million; the 4-week moving average declined by 5,000 to 220,500 and also hit the lowest level since 1969
   
Sector Movers Today
·      Monthly auto sales released: February: 1) GM February sales fall (-6.9%) vs. est. for a (-4.5%) drop as GMC and Chevy leading declines with Chevy Brand sales down 8.8%, GMC brand sales down 8%, Buick brand sales up 1.2% and Cadillac brand sales up 14%; 2) Ford (F) monthly auto sales fell (-6.8%) to 194,132 vehicles vs. est. (6%); 3) FCAU said U.S. sales fell (-1.4%) vs. est. (-11%) with Fiat brand sales down 42%, with Chrysler brand sales down 3%, Jeep brand sales up/down 12% and Dodge brand sales up/down 8%; 4) Mazda North American Operations total Feb. U.S. sales of 25,731 vehicles, up 12.7%; 5) NSANY Feb US auto sales fell (-4.3%) vs. est. (-3.1%); 6) TM Feb auto sales rose 4.5% vs. est. 3.7%; 7) HMC said Feb auto sales fell (-5%) vs. est. (-2.3%)
·      Retailers; BBY reported Q4 results that topped estimates across the board (Q1 comps up 9% vs. est. 3%) and Q1 rev guidance of $8.65B-$8.75B better than the $8.66B estimate; saw suppliers to BBY move early (NTGR, GRMN, VOXX, GPRO); KSS Q4 EPS beat by 22c on better sales of $6.78B and mostly in-line comps of up 6.3%/CEO says too early to give update on AMZN partnership pilot; LB shares fall after guiding Q1 and full-year profit below consensus forecasts; KR and WMT the latest retailers to raise the age of buying a gun to 21
·      Metals (steel/aluminum) gained initially on reports President Donald Trump is said to likely announce steep tariffs on steel and aluminum imports; shares of AKS, NUE, X, STLD, AA, CENX, and CLF were all edging higher. Earlier, Trump said U.S. steel, aluminum ‘decimated’ by unfair trade – However, CNBC reported there would be no announcement today, as stocks pare gains
·      Wearables market up 7.7% in 4Q 2017 & 10.3% in 2017 according to IDC which showed AAPL moved past competitors FIT and Xiaomi to claim overall leadership for both the quarter and the year in the wearables market; Apple’s 4q wearables shipment volume 8.0m vs 5.1m in prior yr; market share 21% vs 14.4% while Fitbit’s 4q wearables shipment volume 5.4m vs 6.5m in prior yr; market share 14.2% vs 18.5%
 
Stock GAINERS
·      AFSI +8%; said it would be acquired for $13.50 per share in cash in a deal valued at $2.7B to be taken private https://goo.gl/J1YbuJ
·      BC +6%; board agreed to spin off its fitness business into a standalone company called FitnessCo
·      HIIQ +10%; provided very strong FY’18 guidance, well ahead of Street consensus estimates
·      MYL +5%; Q4 results top views and reaffirmed guidance
·      NVAX +15%; as its Nanoflu vaccine demonstrated higher immune responses over the market leading flu vaccine for older adults against three tested H3N2 strains
·      QEP +9%; after reporting Q4 results, production guidance/expects to deliver year-over-year total oil-equivalent production growth of approximately 15% in 2018
 
Stock LAGGARDS
·      AGN -4%; as MYL announced collaboration with RVNC for developing a Biosimilar version of AGN’s Botox
·      BLDP -9% as forecasts FY 2018 revenues coming in flat Y/Y at $121M vs. $132M est.
·      BOX -16%; reported in-line Q4 revenue and billings ahead of views (28% vs. 22% year ago), though guides year revs $616M vs. est. $626M
·      CCRN -11%; after reporting a large Q4 shortfall and Q1 guide that was well below as well
·      CLNS -29%; after cutting its annual dividend target to 44 cents a share for 2018, down from $1.05 last year and posted big Q4 FFO miss of 16c vs. est. 35c
·      LB -10%; after guiding Q1 and full-year profit below consensus forecasts
·      MNST -7%; reported 4Q results and both top and bottom line both missed with one analyst noting the +6.5% organic sales in the Q came in well below their +11% estimate
·      OSTK -5%; after the company received a request from U.S. securities regulators asking for documents related to its plan to issue digital tokens as per regulatory filing
·      PDCO -23%; guided year EPS $1.65-$1.70, well below the $2.16 estimate as Q3 EPS also miss by 9c and was downgraded to neutral at Baird
·      PTLA -25%; after disclosing that the FDA may require a randomized study for AndexXa and was downgraded at Morgan Stanley on the news
·      WPP -9%; reported a disappointing 4Q17 and an outlook that was more negative than previously anticipated

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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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