Mid Day Outlook: April 11, 2018

Scott GreenDaily Market Report

Mid-Morning Look
Wednesday, April 11, 18

U.S. equities slip for the first time in three days amid geopolitical tensions, trade war concerns and drama out of Washington weighing on sentiment early. Futures dropped overnight with global tensions increasing after President Donald Trump warned Russia of imminent military action in Syria over a suspected poison gas attack, declaring that missiles “will be coming” and attacking Moscow for standing by Syrian President Bashar al-Assad. Trump reacted to an earlier warning from Russia that any U.S. missiles fired at Syria over the deadly assault on a rebel enclave would be shot down and the launch sites targeted. However, U.S. equities have steadily rebounded all morning, with the Nasdaq Composite erasing earlier losses and the Dow Industrials cutting losses by more than half. Stocks trying to extend its 2-day rally, led by a surge in stocks yesterday after President Donald Trump praised China’s Xi Jinping’s “kind words” following the Chinese leader’s reaffirmed pledge to continue to open the country’s banking and manufacturing sectors in a speech yesterday.

Treasuries, Currencies and Commodities

·      In currency markets, the U.S. dollar declines for a 3rd straight session, with the dollar index (DXY) down under the 89.50 level, falling vs. the euro and Canadian dollar (7-week highs), as global tensions and trade war fears continue to dominate action in currencies

·      Commodity prices rise, led by strong gains in gold as investors rotate into defensive assets amid the increased rhetoric between the U.S. and Russia regarding the recent Syria gas attack; oil prices extend recent gains as well, though pull back from highs after bearish inventory data (EIA said weekly crude stockpiles rose 3.3M barrels vs. the expected -1.25M barrel draw)

·      Treasury market’s advance as yields slip, with the 10-yr yield dropping to 1-week lows, with the 10yr down over 2 bps points to around 2.77% (dropped lower earlier)

Economic Data

·      Consumer price index (CPI) for March fell (-0.1%) vs. estimate unchanged, while the core reading ex: food and energy rose 0.2%, in-line with economist estimates. Yet the rate of inflation over the past 12 months rose again to 2.4% from 2.2% and hit a one-year high (though in-line with views). The CPI reading ex: food, energy rose 2.1% YoY after rising 1.8% last month. The drop in energy prices alone is what turned the CPI negative for the first time since last May.

Sector Movers Today

·      Energy stocks continue recent outperformance as oil prices move to a two-week high after President Donald Trump told Russia in a tweet to “get ready” for U.S. missiles to be fired at Syria, in addition to reports that Iran and Venezuela facing risk of significant output losses this year. Inventory data also impacting energy prices early

·      Internet; FB active as CEO Mark Zuckerberg testifies for second day in Washington on privacy, data breach; EBAY upgraded to overweight at KeyBanc with $50 tgt saying has successfully transitioned to a destination for compelling prices, and initiatives to enhance customer experience and attract brands should lead to continued GMV acceleration in 2018; GOOGL is in talks to buy NOK’s airplane broadband business, Bloomberg reported https://reut.rs/2qp2iff ; SPOT and Hulu join forces with $12.99 subscription plan; Goldman Sachs raises tgt to $350 on NFLX, third positive analyst comment in two days

·      Metals & Mining; industrial related metals (aluminum and copper) have had a nice stretch of gains (AA, CENX, FCX, AKS) benefitting from the Trump/Syria/Russia tensions within commodity markets as aluminum has advanced about 10% in last 3 days, after the U.S. slapped new sanctions on Russia; in gold space, Deutsche Bank downgraded HMY to sell from hold and retain buys on GFI and AU as continue to forecast a dip in the gold price to end 2018 at US$1,260/oz (average of US$1,292/oz for 2018E) but thereafter we raise our gold price forecasts by +3% over 2019E-2022E (forecasting US$1,300/oz for 2019

·      Asset managers: IVZ preliminary month-end assets under management (AUM) of $934.2B, a decrease of 1.2% MoM driven by unfavorable market returns, lower money market AUM, net long-term outflows; AB prelim AUM decreased to $549B during March 2018 from $555B at the end of February due to firm wide net outflows and market depreciation; APAM AUM totaled $114.8B and LM prelim AUM about $754.1B vs. $767.2B end of 2017; AMG downgraded at KBW


·      AAOI +9%; Rosenblatt positive on the shares today saying take back share

·      AVAV +17%; upgraded to buy at Stifel and raise tgt to $65 as sees the company benefiting from tailwinds including an improving defense budget environment

·      CBAY +21%; on positive mid-stage seladelpar data

·      CCL +1%; hikes dividend by 11% and adds $1B to stock buyback

·      HLT +4%; 60M share Secondary priced at $73.00 after HNA Group sells shares (analysts said sale removed overhang in shares)

·      MAT +5%; upgraded to hold at Jefferies as believe the near-term risks are more well-known now

·      NFLX +2%; Goldman Sachs raises tgt to $350, third positive analyst comment in two days

·      VHC +15%; rallies as AAPL ordered to pay $5026M to the company over infringed patents as jury ruled that Apple’s FaceTime, VPN on Demand and iMessage features infringed four patents


·      ALOG -13%; after agreeing to be acquired by an affiliate of Altaris Capital Partners for $84.00 per share in cash, or approximately $1.1B, a 13% discount to yesterday close https://on.mktw.net/2HcSvn6

·      AMG -1%; downgraded to market perform at KBW Inc.

·      BW –35%; after cutting its 2018 Ebitda guidance outlook

·      CBS -2%; as drama with VIAB continues

·      FAST -5%; posted weaker gross margins after in-line quarterly earnings and revenues

·      QNST -19%; after Kerrisdale Capital says they are shorting, calling it an outdated online marketing company with a bad business model benefiting from fake web traffic

·      RSG -2%; downgraded at Raymond James and lower estimates for RM as well incorporating current recycling prices into estimates


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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