Mid Day Outlook: March 29, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Thursday, March 29, 18
  
Equities posting solid gains (after a brief correction on the open), with the Dow Industrials rising over 175 points and reclaiming the 24K level, while the Nasdaq posting new highs as well, pushing above the 7,000 level (up 0.8%) to highs 7,007 (and off lows 6,935), while the S&P 500 is firmly higher. Most S&P sectors rising early, with Energy among the top gainers and as Technology rebounds after back-to-back days of losses. Bonds are higher, sending yields lower, while the dollar remains steady after a 2-day spike. Trade war fears and technology selling concerns, which have dominated the news and market action this week, took a back seat to economic data this morning, with several key data points released (some good, some not so good – see below). Despite the early gains, major averages are on track to end the quarter (and month) lower. The Dow Jones Industrial Average is down 3.5%. If it closes in negative territory for the period, it will snap a nine-quarter streak of gain (longest since Q3 of 1997). The S&P 500 also entered the year’s Q1 with nine straight quarterly gains, matching a streak that ended in the first quarter of 2015. Currently the S&P 500 is down 2.6% for the quarter. The Nasdaq Composite is currently up 0.7% thus far in the first quarter, but only represents its seventh straight quarterly gain. For the month of March, the Dow is down 4.7%, the S&P 500 is off 4%, and the NASDAQ has lost 4.5%. It would be the second straight monthly loss for all three after surging in January.
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar steady following busy round of economic data this morning; greenback had surged the last two days, bouncing off 5-week lows on Monday; the euro and yen both partially rebound after sharp declines yesterday; Bitcoin prices fall over 5% under $7,50 after China’s central bank will launch a crackdown on all types of virtual currencies this year, a vice governor of the central bank said on Thursday
·      Commodity prices; gold prices down only slightly after a big decline this week (posted largest one-session loss since February yesterday and closed at a one-week low on dollar spike), while oil futures look to rebound from declines yesterday as well
·      Treasury markets climb early, as yields inch lower following a busy morning of mixed economic data; the 10-yr yield at 2.75%, down about 2 bps from yesterday, while the 2-yr yield at 2.28% and 30-yr under 3% (2.99%)
 
Economic Data
·      Weekly Jobless Claims fell 12K to 215K (lowest level since 1973), below the estimate of 230K, while the 4-week moving average dipped by 500 to 224,500; prior week claims revised down to 227K from 229K; continuing claims rose 35k to 1.871M in the week ending March 17
·      Personal income for February rose 0.4%, in-line with estimates, while personal consumption (spending) rose 0.2%, also in-lie with economist expectations; real personal spending was unchanged compared to an est. of up 0.1%; Core inflation rose 0.2% (in-line) and was up 1.6% YoY (also in-line); compensation rose 0.4% in Feb. vs 0.5% the prior month and savings rate at 3.4%
·      Final Michigan Sentiment for March rose to 101.4 from 99.7 last month but below est. of 102; the expectations index fell to 88.8 vs. 90.0 last month, while the current economic conditions index rose to 121.2 vs. 114.9 last month
·      Chicago purchasing managers index (PMI) for March declined to 57.4 from 61.9 in prior month and was below the 62 estimate; prices paid and employment grew at faster pace while new orders and backlogs rose at a slower pace
   
Sector Movers Today
·      Internet; AMZN erased early gains after President Donald Trump tweeted that the e-commerce giant pays “little to no taxes to state and local governments.” Trump also said Amazon puts a strain on the U.S. Postal Service and is “putting many thousands of retailers out of business”; GDDY mentioned by several analysts after analyst day which focused on customer and ARPU growth drivers, supporting multi-year double digit revenue growth (vs. Street at 11%); SPOT was initiated at outperform and $220 tgt at RBC Capital;YNDX upgraded to buy at Citi
·      Software movers; ADBE said NBCUniversal will adopt Adobe Advertising Cloud TV, a platform for data-driven planning and buying of television advertising; PRGS reported an upside quarter with total revenue of $94M topping views amid a combo of favorable FX, a large DataDirect deal closing earlier than expected and good expense controls aiding results; ACXM shares fell after FB said it would phase out Partner Categories, the use of third-party data from firms like Acxiom as a targeting source for advertisers; VRNT Q4 results easily top views sending shares higher
·      Industrial & Machinery; Regarding class 8 truck data, Wells Fargo said estimates March Class 8 orders 35,000-38,000, positive checks are positive for CMI, NAV and PCARhowever the observed strength does not appear to be sustainable; TITN Q4 results top consensus and sees revenue growth while EPS view comes in above as well (2019 EPS 35c-55c vs. 21c est.)
·      Retailers; PVH posted strong Q4 beat and initial FY19 guidance which came in above consensus; shares of top wholesale customers including M, JSS, JCP active after PVH brands including Calvin Klein and Tommy Hilfiger reported strong Q4 comp sales; LB cautious mention at Jefferies saying they think the Victoria Secret core business will continue to erode while PINK appears to be close to the precipice; OXM Q4 results beat but Q1 guidance fell short of views
 
Stock GAINERS
·      ENR +17%; rises as deal with SPB clears antitrust review
·      FB +3%; rebounds after falling over 15% during the last 2-weeks on the data leak story
·      FMC +4%; after saying sees exceeding prior Q1 EPES view
·      MOV +20%; reported strong end to the year/issued FY19 net sales forecast that topped estimates
·      OSTK +1%; after cancelled its 4M share secondary offering
·      PRGS +1%; reported an upside quarter with total revenue of $94M topping views
·      PVH +5%; posted strong Q4 beat and initial FY19 guidance which came in above consensus
·      STZ +3%; EPS handily beat on higher than expected sales of $1.77B, while mid-point of EPS guidance fell short of estimates
·      TITN +14%; Q4 results top consensus and sees revenue growth while EPS view comes in above
·      VRNT +12%; Q4 results easily top views sending shares higher
 
Stock LAGGARDS
·      ACXM -32%; after FB announcement late yesterday that it would phase out Partner Categories, the use of third-party data from firms like Acxiom as a targeting source for advertisers
·      ADS -5%; as Bloomberg notes was mentioned cautiously by Off Wall Street firm
·      AMZN -1%; erased early gains after President Donald Trump tweeted that the e-commerce giant pays “little to no taxes to state and local governments.” Trump also said Amazon puts a strain on the U.S. Postal Service and is “putting many thousands of retailers out of business”
·      GME -11%; downgraded to underperform at Bank America and tgt cut by several analysts following Q4 results as they are more cautious on GME’s core gaming business
·      MNOV -11%; as its MN-166 fails mid-stage methamphetamine dependence study
·      SBUX -1%; downgraded to neutral at Wedbush and cut tgt to $56 from $70 on slower FY18 acceleration and increasing FY19 risks
 
Syndicate
·      Heron Therapeutics (HRTX) 6M share Spot Secondary priced at $26.00
·      iQIYI (IQ) 125M share IPO priced at $18.00
·      PTC Therapeutics (PTCT) 4M share Secondary priced at $27.04
·      Unum Therapeutics (UNUM) 5.77M share IPO priced at $12.00

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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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