Mid Day Outlook: April 12, 2018

Scott GreenDaily Market Report

Mid-Morning Look

Thursday, April 12, 18

U.S. equities open higher and currently holding those gains with major averages around 1% across the board with investor worries over tensions in the Middle East subsiding as President Trump stepped back the immediacy of response to Syria situation in his tweet earlier today. Financial stocks are among the top gainers ahead of Friday’s big day for earnings from JPM, C, WFC and PNC, along with a bounce in bonds yields as investors flee from defensive assets early (gold falls more than 1% off 10-week highs and bonds rolls, while the dollar gains). Energy prices slip from best levels in over 3 ½ years but still on track for healthy gains this week. Earnings kick into gear tomorrow and the next month as attention may turn away from the macro picture that has dominated market movement the last few weeks (FOMC, Russia/Syria, China trade fears/tariffs, FB CEO Testimony to Congress).

Treasuries, Currencies and Commodities

·      In currency markets, the euro slumps vs. counterparts, falling against the US dollar and Pound after unexpectedly dovish ECB minutes; the dollar tracking to snap its 3-day losing streak as tensions ease for the moment globally as the U.S. immediacy to attack Syria in retaliation for the attack on civilians this weekend in Damascus seems to have subsided (for the moment). Bitcoin prices notable jump, rising 11% above $7,700 (traded as high as $8,055) 

·      Precious metals slip, with gold falling from 10-week highs of $1,360 an ounce yesterday, as President Trump stepped back the immediacy of response to Syria situation, though note that prices began to retreat late yesterday after mostly hawkish reading of Fed minutes (raising expectations the Fed may get more aggressive in their pace of hikes)

·      Energy futures retreated after closing at their highest level since December 2014 Wednesday, when President Trump tweeted that he would fire missiles at Syria in response to a suspected chemical weapons attack; oil prices small decline but on track for weekly gains

·      Treasury markets also sliding, as yields rise (10-yr tops 2.81%) as investors jump back into riskier assets such as stocks and out of defensive as gold and bonds decline

Economic Data

·      Weekly Jobless Claims fell 9K to 233K vs. the 230K est. while prior week claims unrevised at 242K; the 4-week moving average rose by 1,750 to 230,000; continuing claims rose 53kKto 1.871M in the week ending March 31. Labor Department says claims for Colorado and Maine were estimated last week

·      Import Prices for March unchanged MoM (due to lower cost of oil) vs. est. up 0.1% and after rising 0.3% in February; import prices rose 3.6% y/y in March; Excluding fuel, import prices rose 0.2% last month after rising 0.5% in February; auto prices fell 0.2% after rising 0.2% in Feb

Sector Movers Today

·      Large Cap Pharma; BMY shares underperformed other large cap Pharma names after Citigroup said in a note PFE’s CEO made it clear to them that PFE has no interest in BMY in the absence of transformational data or a de-rating. PFE has high conviction in its current pipeline and believes that the ROI is considerably higher than high risk transformational deals; MYL was upgraded to outperform at Leerink following investor day; INCY was upgraded to buy at UBS; MNK shares underperformed after SunTrust initiated hold

·      Retailers; sector active after a few retailers post March comp sales guidance; LB March sales rose 4% vs. est. 3.1% but said that the earlier Easter this year will hurt total company April comp. sales by ~2-3 points; COST rises as comparable sales of 6.7% for U.S. and 5.8% for the whole company top estimates; ZUMZ March comp sales rose 12.6% well above the 4.2% Retail Metric estimate; CATO March comp sales beat; BKE comp sales fell (-1.1%) slightly less than consensus estimates; AOBC upgraded to buy and $13 tgt at LakeStreet Capital

·      Asset managers/Alt managers; BLK Q1 EPS and revenue handily topped consensus estimates, though saw net flows for its global iShares exchange-traded funds decline 46% in Q1 to $34.6 billion from a year earlier; BEN said it would buy back up to 80M shares; WDR preliminary assets under management of $80.2B for the month ended March 31, 2018, compared to $81.4B MoM; VRTS March prelim total AUM $87.4B

·      Transports; airlines look to rebound after DAL earnings results came in slightly above consensus and issued favorable unit revenue guidance for Q2 despite concerns of deterioration in the U.S. domestic market (JBLU, AAL, UAL, LUV active)

·      Media & Telecom; Media giant Hearst said it bought the remaining 20% stake in credit rating services company Fitch Group it didn’t already own from Fimalac S.A. in a deal valued at $2.8B https://on.mktw.net/2qwKTlZ ; QNST shares rebound after issuing better guidance and defending itself against Kerrisdale Capital “short” call yesterday calling its basis inaccurate; SJR rises after earnings results and wireless growth; U.K. regulators said Thursday that DIS must make an offer for all of Sky PLC, if its proposed acquisition of assets from FOXA proceeds. Disney has agreed to pay some $52B for a big chunk of FOXA including the company’s current 39% stake in Sky https://on.mktw.net/2HgzKPq

·      Energy research: in E&P sector; PDCE was upgraded to buy from neutral at Goldman Sachs as sees an easing of DJ Basin midstream bottlenecks driving a growth inflection in 2019, while firm downgraded REN to neutral as its execution discount has narrowed; Goldman also cut CLR to neutral on valuation and added PXD to its conviction buy list; Goldman also upgraded FTI to buy in equipment space owing to expectations for higher inbound orders in 2019

·      Blockchain Services; Bitcoin prices jump over 10% after reports from one senior market analyst says Wall Street is set to inject “new liquidity” into bitcoin as part of a plan to “build bridges” between the markets. https://bit.ly/2GSFj3g . Shares of RIOT, OSTK, MARA, DPW, NETE, NXTD, names that have announced blockchain initiatives all surged on the report

Stock GAINERS

·      AOBC +4%; upgraded to buy and $13 tgt at LakeStreet Capital

·      BEN +3%; said it would buy back up to 80M shares

·      BLCM +17%; announced that the FDA has lifted the clinical hold on studies of BPX-501 in the U.S.

·      CBI +15%; jumps after guidance and as MDR reaffirming 2018 outlook, outlining CBI synergies

·      COST +2%; as comparable sales of 6.7% for U.S. and 5.8% for the whole company top estimates

·      NFLX +1%; rises for a 4th straight day as analysts continue to get bullish ahead of its earnings report this upcoming Monday

·      QNST +17%; shares rebound after issuing better guidance and defending itself against Kerrisdale Capital “short” call yesterday calling its basis inaccurate

·      RIOT +13%; amid surge in blockchain stocks as bitcoin prices spike

·      SJR +6% after earnings results and wireless growth

Stock LAGGARDS

·      APOG -10%; Q4 revenue missed estimates and guided year EPS below views

·      BBBY -18%; reported 4Q sales and EPS that came in slightly better than views but the 2018 outlook was worse than the Street forecast, sending shares lower

·      BMY -3%; after Citigroup said in a note PFE’s CEO made it clear to them that PFE has no interest in BMY in the absence of transformational data or a de-rating

·      CENX -6%; giving back recent gains after surging on US sanctions vs. Russia (Rusal)

·      ELLI -2%; after Wedbush downgraded to underperform based upon what is shaping up to be a disappointing year for mortgage originations in 2018

·      LB -3%; March sales rose 4% vs. est. 3.1% but said that the earlier Easter this year will hurt total company April comp. sales by ~2-3 points

·      RE -3%; after forecasting $100M in losses in Q1 for catastrophes

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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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