Mid Day Outlook: March 15, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Thursday, March 15, 18
  
Equities mixed in the early going, with the Dow Industrials attempting to rebound after falling the last 3-sessions (including a 1% decline yesterday), though the Nasdaq Composite failing to rally. Markets got another round of stronger than expected economic data, but as has been the case the last three trading sessions, markets are having difficulty holding on to early gains. This morning, the U.S. announced new sanctions on Russians over election interference, adding to global pressures, with trade war fears between China among the factors driving markets lower this week, along with shakeups in Trump’s Cabinet (Economic Advisor and Secretary of State changes the last few days). The S&P 500 Index managing to hold its technical 50-day moving average support (held yesterday as well) of 2,748. Volumes are light as investors sort out the political, FOMC, and global impacts we have seen this week.
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar index (DXY) pushes to morning highs as nears the 90 level again as the greenback buoyed by better economic data and bullish news of Larry Kudlow as economic advisor to White House (spoke positively on CNBC late yesterday about importance of strong dollar). Bitcoin pops into positive territory, up less than 1% to $8,380 (overnight lows $7,666)
·      Commodity prices: Precious metals slip as gold prices slipped $6 to under $1,320, on track for its lowest close in about a week if these levels hold in what has been a back and forth week for prices. Energy futures are flat, erasing earlier gains, with WTI crude trading around the $61 per barrel level. Natural gas prices edge lower after smaller-than-expected weekly inventory draw
·      Treasury markets extend recent gains, as the yield on the benchmark 10-year falls to lows around 2.80%, while the 30-year slides to under 3.05% as stocks are mixed
 
Economic Data
·      The Philadelphia Fed manufacturing index slipped to a reading of 22.3 in March from 25.8 in February (vs. est. 23.0); the new orders gauge rose to 35.7 from 24.5, shipments gauge also jumped to 32.4 from 15.5; prices paid index fell 2 points to 42.6 but remained near last month’s reading which was the highest since 2011
·      The Empire State Manufacturing Index jumped to a reading of 22.5 in March from 13.1 in February and well above the 15.0 economist estimate; the shipment gauge jumped 14.5 points to 27 while new orders had a smaller 3.3 point gain to 16.8; the prices paid rose again to 50.3 from 45, its highest level in six years
·      Weekly jobless claims dropped 4K to 226K, mostly in-line with the 228K estimate (prior week was revised to 230K from 231K); the four-week moving average slips 750 to 221,500; continuing claims inches higher to 1.879M from 1.875M, but was below the 1.903M estimate
·      Import prices for February rose 0.4% MoM, topping the 0.2% estimate after rising 0.8% in January; Import prices ex-fuels rose 0.5% after rising 0.5% in January; consumer goods prices rose 0.5% after rising 0.1% in January
·      The 30-year fixed mortgage rate for week ended today fell to 4.44% from 4.46%, Freddie Mac said; the 15-year rate avg 3.90%, down from 3.94% a week earlier; the two-basis-point drop from last week in 30-year rate first decline this year
·      The U.S. Home Builders’ Confidence index (NAHB) in March falls to 70 vs 71 last month and was below the estimate of 72; the present single family sales unchanged at 77 vs 77 last month and future single family sales falls to 78 vs 80 last month
   
Sector Movers Today
·      Media movers; VIAB upgraded to buy at Needham and $40 tgt saying forward PE valuation at 8.2-times is 15%-30% below peers mainly due to Paramount’s losses; LBTYA upgraded to outperform at Bernstein saying the project Lightning in the U.K. will lighten up standalone growth prospects and FX tailwinds are being ignored; MTCH was downgraded to neutral on valuation; IAC tgt raised to $200 at UBS as believe that IAC’s SOTP valuation provides one of the most compelling risk/rewards in coverage universe
·      Consumer Staples; in tobacco, PM, MO, BTI active after Bloomberg reported FDA to explore lowering nicotine standards in cigarettes; ELF was downgraded to underweight at Morgan Stanley saying the market remains far too bullish on a growth recovery following the company’s weaker than expected 2018 guidance; SFS shares declined after issuing 2018 forecast that signals a comp slowdown and constrained margins on increased investments, said Morgan Stanley
·      Credit card monthly data statistics; COF February net charge-offs (NCO’s) 5.16% vs. 5.33% last month and 30-plus day performing delinquencies 3.92% vs. 4.11% last month; SYF February net charge off rate 4.90% vs. 4.98% last month and 30-plus day delinquencies 3.12% vs. 3.11% last month; JPM February net credit losses 2.28% vs. 2.40% last month and 30-plus day delinquencies 1.24% vs. 1.21% last month; ADS Feb net charge offs 6.9% vs. 6.8% last month and delinquency rate 5.6% vs. 5.1% last year
·      Healthcare services and facilities; LPNT upgraded to outperform at Raymond James as think shares are undervalued at 6.5x 2018 EBITDA; TDOC downgraded to hold at Deutsche Bank saying product expansion and renewed marketing efforts have excited investors, but cuts on valuation as shares are up 23.2% YTD; MGLNupgraded to outperform from market perform and raise tgt to $120 from $95 at Leerink
·      Internet; BABA active after WSJ reported company said to explore plan to list shares in China https://goo.gl/69agsTAKAM upgraded at KeyBanc (third analyst upgrade of late) as believe cost reductions are likely to lead to upward revisions to consensus margin expectations; In travel, CTRP reported quarterly eps beat, but forecast revenue well below expectations, blaming the shortfall on new rules that constrained its business; Z tgt raised to $65 at KeyBanc as believe multiple expansion can continue as investors better appreciate the new Zillow narrative; EXPE was downgraded to neutral at Macquarie on expected “ugly” Q1 results
 
Stock GAINERS
·      AKCA +25%; upgraded at Wells Fargo after IONS licenses Inotersen rights to Akcea
·      ALXN +9%; after its experimental drug (ALXN1210) to treat patients with a rare blood disorder was shown to be not inferior to its flagship drug, Soliris
·      AMOT +17%; reported its second consecutive sizeable quarterly beat yesterday with virtually every metric ahead of expectations, according to Craig Hallum
·      BABA +2%; after WSJ reported company said to explore plan to list shares in China https://goo.gl/69agsT
·      DDD +6%; Q4 revenue and gross margins $48.2% vs. 47.9%) topped consensus
·      DG +5%; after same-store sales beat, upbeat outlook
·      SMTC +14%; produced a Q4 beat and raise despite recent investor concerns around optical headwinds and smartphone product transitions
·      SRPT +2%; as Solid Biosciences’ trial for lead gene therapy candidate in Duchenne muscular dystrophy (DMD) was paused by the FDA due to safety
·      WSM +3%; Q4 came in above expectations as the company generated its strongest sales growth (+6.2%) since 1Q16
 
Stock LAGGARDS
·      CTRP -2%; reported quarterly eps beat, but forecast revenue well below expectations, blaming the shortfall on new rules that constrained its business
·      EQT -1%; CEO Steven Schlotterbeck has stepped down from the board, and changes are effective immediately and also resigned from his positions at EQM, RMP and EQGP
·      EXPE -2%; downgraded to neutral at Macquarie on expected “ugly” Q1 results
·      JILL -27%; after results, with Q4 EPS/sales/comps all topping views, but Q1 EPS missed estimates and said its CEO will retire
·      MO -2%; after Bloomberg reported FDA to explore lowering nicotine standards in cigarettes
·      OSTK -4%; down for a 5th straight day ahead of expected earnings tonight (shares down from 52-week highs of $89.80 on January 8th – nearly cut in half since then)
·      QRVO -8%; downgraded to neutral at Bank America as believes Qorvo faces headwinds of a sluggish high-end smartphone market
·      SFS -17%; after issuing 2018 forecast that signals a comp slowdown and constrained margins on increased investments, said Morgan Stanley
·      SLDB -63%; shares plunge after the FDA placed its DMD study of lead candidate SGT-001 on clinical hold due to adverse event in first patient
·      TACO -12%; after reported lower profits and lower sales than estimated
 
Syndicate
·      ABM Industries (ABM) 9.05M share Spot Secondary priced at $35.60
·      Arcus Biosciences (RCUS) 8M share IPO priced at $15.00
·      Evoqua Water (AQUA) 17.5M share Secondary priced at $22.00
·      Hilton Grand Vacations (HGV) 22.25M share Secondary priced at $46.25
·      Invuity (IVTY) 4.429M share Spot Secondary priced at $3.50
·      La Jolla (LJPC) 3.4M share Spot Secondary priced at $29.50
·      National Vision (EYE) 12M share Secondary priced at $33.00
·      RGC Resources (RGCO) 609K share Spot Secondary priced at $23.00

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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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