Mid Day Outlook: March 14, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Wednesday, March 14, 18
  
U.S. stock markets opened higher following tamer inflation data (PPI) and after retail sales declined for a 3rd straight month, raising thoughts the Fed won’t have to speed up the pace of interest rate hikes (though they are expected to raise rates when they convene next week). However, much like the last two sessions, markets are having trouble holding on to early gains, sliding to lows. Politics and trade war concerns also continue to play an important part in market trading after Trump’s ousting of Tillerson as Secretary of State yesterday while Democrat Lamb leads Republican Saccone by narrow margin in special election in Pennsylvania in seat that has been held by GOP for 14-years. In trade, rhetoric with China amped up after Trump was seeking tariffs of more than $30B on China imports (some reports said $60B), while his executive order blocking Broadcom from acquiring chipmaker Qualcomm, citing the tie-up’s threat to U.S. national security also a factor. Stocks in Europe advanced as positive economic data from China (better industrial production) lifted mining shares after a day of turmoil sparked by the latest shakeup in the Trump administration. U.S. Treasuries held gains while the dollar edged lower.
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar rebounding from yesterday’s losses despite weaker retail sales data and lowered expectations of an aggressive FOMC; the dollar index (DXY) rises about 0.2%, trading highs around 89.80; the euro slides, while the yen advances. Bitcoin prices dropped back below the $9,000 level as Google announced plans to review its advertising policy as it affects certain financial services, including Bitcoin and other cryptocurrencies, from June this year
·      Energy futures active after mixed weekly inventory data: the EIA reported a larger-than-expected weekly build of 5.0M barrels vs. est. 2.5M build (bearish), though gasoline inventories fell a greater -6.2M barrels vs. est. draw -1.1M (bullish) and distillates bigger draw as well at -4.3M vs. est. -1.7M (bullish); API overnight reported U.S. crude supplies rose nearly 1.2M barrels
·      Treasury market’s rise and yields fall following weaker retail sales data and tamer inflation (CPI yesterday and PPI today), raising expectations the Fed may be less aggressive in their outlook of rising rate hikes; the yield on the 10-year down around 2.82% (off highs above 2.95% 2-weeks ago), while the 30-yr yield slips to 3.07%
 
Economic Data
·      Producer Prices (PPI) for February rose 0.2% in February, down from the 0.4% rise last month, but was slightly above the 0.1% economist estimate; the 12-month rate of wholesale inflation edged up to 2.8% (in-line), but it’s still below a recent peak of 3.1%. Core PPI prices MoM rose 0.2%, in-line with estimates – inflation report follows in-line CPI data yesterday
·      U.S. retail sales fall for third month in a row, sliding (-0.1%) vs. estimates for a 0.3% rise, though the prior month was upwardly revised to a loss of (-0.1%) from (-0.3%); Sales rose 0.3% last month if autos and gas are stripped out, in-line with estimates; the decline in retail sales last month was largely concentrated in auto dealers, gas stations and traditional department stores.
·      Business Inventories for January rose 0.6% MoM, in-line with estimates while Business sales fell (-0.2%) in January after rising 0.5% the prior month
   
Sector Movers Today
·      Aerospace & Defense; SPR declined after its CEO forecast a challenging first quarter due to an increase in Boeing 737 production; in air leasing, Macquarie initiated outperform on AER, AL, AYR given positive view on the current economic backdrop and the expectation for continued strength in global demand for air travel
·      Brokers; online brokers (AMTD, ETFC, SCHW) weak as Morgan Stanley said the SEC may announce a new maker taker pilot which would pose a risk as it may cap the rebate revenue they get for directing retail order flow; ETFC said daily average rev trades (DARTs) for Feb were 330,121, up 51% YoY and added 51,988 gross new brokerage accounts, ending Feb. with about 3.7M brokerage accounts; SCHW said total client assets at a record $3.33T as of Feb. 28, up 15% Y/Y and down 4% M/M
·      Medical services, equipment and suppliers; DGX was upgraded at Morgan Stanley noting that the stock’s valuation has drifted back toward that of peer LH;PDCO rose after Credit Suisse said today they view as opportunistic buying opportunities with the recent correction following another disappointing quarterly performance (company also announced $500M share buyback); SIEN reported Q4 results modestly below their pre-release
 
Stock GAINERS
·      CAL +11%; Q4 sales of $702.5M beat the highest estimate and midpoint of guidance was in-line
·      CWH +13%; after company filed its 10-K which won’t include further impact to revenue, adjusted EBITDA or adjusted EPS according to Baird
·      EIX +2%; follow through strength after the California Governor’s office supported a revamp of rules dealing with natural disasters in the state
·      F +3%; upgraded to overweight from underweight at Morgan Stanley saying that negative sentiment on Ford has taken valuation to attractive levels
·      MDB +2%; Q4 results included all key financial metrics coming in ahead of consensus estimates
·      PETQ +12%; said it will open 20 veterinary services clinics in Walmart locations
·      VRX +4%; after filing showed Chairman and CEO Joseph Papa disclosed the purchase of 30,000 common shares of the company at a price of $16.05 per share
 
Stock LAGGARDS
·      CLNE -7%; on wider quarterly loss
·      SIG 18%; after earnings and comps decline of (-5.2%) and is starting a three-year improvement plan where it aims to focus on things like ecommerce and its real-estate footprint
·      SILC -13%; as major cloud customer is stopping deployment of SILC’s technology due to internal problems implementing — losing ~$75M in Revs in CY19
·      SPR -3%; CEO forecast a challenging first quarter due to an increase in Boeing 737 production
·      TSLA -1%; as corporate treasurer and vice president of finance has left the electric-car maker
·      TTWO -5%; mentioned cautiously by M Science, according to Bloomberg
 
Syndicate
·      Agree Realty (ADC) 3M share Spot Secondary priced at $48.00
·      Apollo Commercial (ARI) 13.5M share Spot Secondary priced at $18.00
·      Black Knight (BKI) 8M share Spot Secondary priced at $49.00
·      Bridgewater Bancshares (BWB) 6.7M share IPO priced at $11.75
·      CatchMark Timber (CTT) 5M share Spot Secondary priced at $12.60
·      Hoegh LNG (HMLP) 1.5M share Block Trade priced at $16.80
·      Rapid7 (RPD) 2M share Spot Secondary priced at $26.25

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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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