Mid Day Outlook: April 2, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Monday, April 2, 18
  
U.S. stocks decline to start the week, falling across the board amid renewed trade worries, after China announced tariffs on several U.S. goods in retaliation for President Trump’s tariffs and increased rhetoric against China. The dollar remains steady while Treasury yields jumped, though oil prices decline and gold futures bounce. European markets remain closed for holiday, while Asia was open. Technology shares hit again, led by last week’s culprits as AMAZN falls on more tough talk from Trump, while TSLA extends its slide. One potential M&A deal in healthcare space has HUM shares higher, but most sectors are lagging early (led by housing stock weakness and protein stocks on China tariffs/TSN). Focus this week will turn to U.S. labor market data Friday, which is expected to show unemployment fall to its lowest level since 2000, while traders will also have one eye on trade developments.
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar was mixed following economic data; USD slipping vs. yen, paring earlier gains to trade near flat level on day around 106.32 (off highs 106.45); dollar index dips back under the 90 level; euro little changed on day, with Mexican peso active on NAFTA headlines
·      Commodity prices: Precious metals catching a bid early, with gold prices rising nearly 1% back around the $1,340 an ounce level following a sharp decline for U.S. stocks early amid renewed trade war fears; Energy futures lose grip on early gains, sliding along with weakness in stocks and dragging down energy stocks as WTI crude drops below $64 per barrel
·      Treasury markets down initially, as yields bounce back after faltering last week…but as stocks extend morning losses, bonds paring early losses; 10-year yield down off highs around 2.77%; the 2-year yield at 2.274% and the 30-yr remains under 3%
 
Economic Data
·      March U.S. ISM Manufacturing falls to 59.3 from 60.8 last month and was slightly below the 59.7 estimate; new orders fell to 61.9 from 64.2 prior while employment fell to 57.3 vs 59.7 and inventories fell to 55.5 vs 56.7; prices paid rose to 78.1 vs 74.2
·      Construction Spending for February rose 0.1%, below the 0.4% estimate; private construction rose 0.7% in Feb., private residential construction rose 0.1%
·      March Manufacturing PMI 55.6 vs Flash Reading 55.7; the Index rises to 55.6 from 55.3 in February and compares to a year ago 53.3 (was highest reading since March 2015); output falls to 55.2 vs 55.5 in February
   
Sector Movers Today
·      Retailers; DKS cautious mention at Morgan Stanley saying UA sales declines at Dick’s Sporting Goods could cause a 90-basis-point drag on the retailer’s 2018 sales (as firm estimates UAA sales fell 11%-15% at DKS in 2017); FIT was downgraded to underweight at Morgan Stanley and cuts tgt to a street-low $4 saying shares have more downside as revenues struggle to stabilize and cash burn resumes; Retailer Hudson’s Bay disclosed that it was the victim of a security breach that compromised data on payment cards used at Saks and Lord & Taylor stores in North America
·      Casinos (WYNN, MLCO, LVS) active after Macau’s gaming bureau reported March gross revenue from games of fortune in the region rose 22.2% YoY to 25.95B patacas – ~520 bps above our Deutsche Bank pre-month forecast of 17.0% and nicely ahead of recent consultant checks (+17-20%) helped by VIP segment led the growth in the month of March, with 1Q18 VIP growth in excess of 20% YoY; WYNN separately upgraded to buy at Roth
·      Transports; initially moved higher after Deutsche Bank upgraded Rail Company UNP to buy and raised target to $158 from $137, while the firm upgraded truckers JBHT and WERN as remain positive on the backdrop for U.S. Transportation stocks; airlines dragged the index lower initially (DAL, UAL, AAL) along with low cost carriers
·      Utilities; UBS upgraded shares of AEE to buy as expect EPS growth rate to increase due to a better environment for investment in Missouri which translates to a better valuation; also upgraded ES to buy as they see the current valuation as a reasonable entry point for investors seeking to own a high quality, pure play T&D utility; Guggenheim said the MPSC ordered an authorized ROE of 10% in CMS’ Electric rate case, which sends a strong signal to the market that MI remains a constructive regulatory environment. Overall, they view the order as supportive for CMS, a positive read-through for DTE
 
Stock GAINERS
·      ALNA +19%; initiated buy at Roth with $61 target (settle at $11.02 Thursday)
·      CVLT +12%; after Elliott Management discloses 10% stake
·      DISCA +2%; upgraded to outperform at Wells Fargo
·      HUM +5%; on reports WMT is in early-stage talks with HUM about developing closer ties, with the acquisition of Humana being discussed as one possibilityhttps://goo.gl/XY9q8R
·      LHO +1%; as holder HG Vora reports 7.1% stake and sees added talks
·      MNOV +22%; will terminate the Phase 2 clinical trial of MN-001 (tipelukast) in NASH and NAFLD with hypertriglyceridemia early based on the significant positive results from an interim analysis
·      SENS +4%; after its pre-market approval application for Eversense gained unanimous support from an advisory panel on March 29.
·      STZ +3%; added to focus list at JP Morgan
 
Stock LAGGARDS
·      ALKS -18%; after the company received a “refusal to file” letter from the FDA regarding its new drug application for ALKS 5461, a treatment for major depressive disorder (MDD)
·      AMZN -3%; after a fresh round of critical comments from President Donald Trump
·      FIT -9%; downgraded to underweight at Morgan Stanley and cuts tgt to a street-low $4 saying shares have more downside as revenues struggle to stabilize and cash burn resumes
·      LEN -4%; amid broad weakness in the homebuilding sector early (DHI, PHM)
·      SNX -14%; Q1 EPS/revs topped consensus, but Q2 guidance fell short of expectations
·      TSLA -6%; extends losses on fears after recent fatal accident involving the company’s driver-assistance system and a growing consensus that Q1 deliveries may fall below expectations
·      TSN -4% China announced Sunday night that it will enact retaliatory tariffs on a number of imported US goods, including an incremental 25% tariff on imported US pork

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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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