Mid Day Outlook: March 21, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Wednesday, March 21, 18
Equities were mixed/little change as the FOMC rate decision day and first press conference from newly appointed Fed chief Powell is finally here. An interest rate hike is highly anticipated, but investors will be looking for clues as a guide for future rate hike path trajectories. Anticipation of a more hawkish tone to the Fed statement has pushed treasury yields higher the last few days, with the 2-year at 2.35% and the 10-yr yield back above 2.9% (up about 6 bps the last 2-days alone). However, the prospect of a more dovish view not necessarily out of the picture following recent “softer” inflation data and weaker retail sales. The big question remains, will the dot plot signal three or four rate hikes this year. The dollar broadly lower after rallying yesterday, helping give a boost to commodity prices. Technology shares try to recover after being slammed the last few days on FB data leak, ORCL softer cloud growth outlook and that Europe is considering a 3% tax on revenue for large digital companies.
Treasuries, Currencies and Commodities
·      In currency markets, the dollar giving up gains after rising more than 0.6% yesterday, with the euro back around the 1.23 level (overnight low was 1.2241), while the greenback fell against the yen, pound and Canadian dollar. Bitcoin prices extend recent rebound, up about 1.5% and topping the $9,000 level (high $9,137 and low $8,846).  The Mexican peso and Canadian dollar rallied after the U.S. reportedly compromised on one of the most top issues in NAFTA.
·      Commodity prices are generally higher, with another leg higher for oil, up sharply and for the 5th time in the last six session, with WTI topping the $64 level. Precious metals also bouncing after the dollar came under heavy selling pressure this morning
·      Treasury market’s fall as yields push higher – after rising over 3 bps yesterday to 2.881%, the 10-yr yield up another 2 bps at 2.901% ahead of FOMC later today
Economic Data
·      Existing-Home Sales for February rise 3% to 5.54M rate, topping the 5.4M estimate, while January was unrevised at 5.38M; there were 3.4 month’s supply in Feb. vs. 3.4 in January as inventory rose 4.6% to 1.59M homes; Median home price rose 5.9% from last year to $241,700
·      U.S. current account deficit for Q4 rises to (-$128.2B) from (-$101.5B) in Q3 and compared to estimates of (-$125.0B); balance of goods and services deficit widened to (-$153.89B) compared to (-$135.27B) prior quarter
Sector Movers Today
·      Consumer Staples; GIS posted a Q3 EPS/sales beat but cuts FY18 constant-currency adjusted EPS view to flat to up 1% vs. prior view of up 3%-4% increase and sees FY18 total segment operating profit down 5%-6% citing higher freight and commodity expenses (food stocks CPB, K, CAG, SJM, HSY among top S&P decliners early on GIS outlook); In tobacco, PM said to shift entire capacity of Greek cigarette factory to smoke-free products; Piper said the tobacco industry will not see any impact from the FDA’s proposed tobacco flavor restrictions for at least 8-12 years or more
·      Ag & Machinery; Farm equipment makers (DE, AGOC, CNHI, LNN) were active as the U.S.-China tariff war intensifies, with the WSJ reporting that China is preparing to hit back with tit-for-tat tariffs aimed at Donald Trump’s support base, including levies targeting U.S. agricultural exports from farm belt states. WSJ also reported Tuesday that the White House will release a plan Thursday imposing tariffs of at least $30B
·      Medical equipment and devices; BSX agreed to buy  privately held NxThera for up to $406M, including $306M in upfront cash payment; MYGN was upgraded to equal-weight at Morgan Stanley saying risk/reward looks balanced after the stock’s recent weakness and survey showing improving market share in hereditary cancer testing;CTLT upgraded to outperform at Raymond James after pullback in shares following Q1 results
·      E&P sector; Johns Rice initiated 12 small and mid-cap onshore E&P stocks and transferring coverage of 3 additional stocks, with favorite stocks HPR, PVAC, QEP, WLL, and WPX noting all of these companies have compelling assets, improved (or improving) balance sheets and visibility to cash flow neutrality; not to mention they all trade at a discount to their respective E&P peers
·      DXPE +18%; after quarterly earnings results
·      MULE +5%; acquired by CRM for enterprise value of $6.5B, w/MULE holders receiving $36.00 in cash and 0.0711 shares of CRM stocks – valued at $44.89https://goo.gl/8rzLV1
·      PRTA +16%; signs R&D pact with CELG for neurodegenerative diseases as Prothena will receive $100M upfront payment and a $50M equity investment from Celgene
·      PTI +8%; as it withdraws its equity offering following share price decline
·      RRC +3%; as energy stocks rally with another 1% gain in oil (NFX, HES, HP all higher by 3%)
·      SCS +9%; posted Q4 top and bottom line beat, but Q1 guidance was mixed to lower
·      TWTR +3%; partially rebounds after falling over 10% yesterday
·      AAL -2%; on LUV RASM outlook and as over 3K flights cancelled amid Northeast storm
·      ALDR -9%; shares volatile after its CEO unexpectedly stepped down
·      DB -5%; warned the euro’s gain against the dollar and higher funding costs will weigh on revenue in the securities unit this quarter
·      GIS -9%; posted a Q3 EPS/sales beat but cuts FY18 constant-currency adjusted EPS view to flat to up 1% vs. prior view of up 3%-4% increase citing higher freight and commodity expenses
·      JWN -3%; board ends talks with the company’s founding family over a proposal to take the chain private, saying the two sides couldn’t agree on a pricehttps://goo.gl/JwMyL2
·      LUV -4%; cut its Q1 RASM outlook to in line with a year ago from up 1%-2%
·      Cision (CISN) 5.75M share Secondary priced at $10.75
·      DBV Technologies (DBVT) 3.528M share Spot Secondary priced at $21.26
·      ForeScout (FSCT) 4.41M share Secondary priced at $29.00
·      GlycoMimetics (GLYC) 7M share Secondary priced at $17.00
·      TPG Specialty Lending (TSLX) 3.75M share Spot Secondary priced at $17.45
·      Voyager Therapeutics (VYGR) 1M share Block Trade priced at $20.25
·      Xencor (XNCR) 7.3M share Secondary priced at $31.00


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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