Mid Day Outlook: April 18, 2018

Scott GreenDaily Market Report

Mid-Morning Look

Wednesday, April 18, 18

U.S. equities are little changed, taking a breather after a strong 2-day rally took major averages (S&P 500, Dow Industrials, and the Nasdaq Composite) above key technical trading levels (all top their respective 50-day moving averages the last 2-days), and best overall levels in over a month as strong earnings and easing geopolitical tensions lift buying sentiment. News overnight that CIA director Mike Pompeo met with Kim Jong Un in advance of a possible summit, and that meetings went well pushed global markets higher overnight. The CBOE Volatility index (VIX fear index) rises for the first time in 6-days as technology shares sputter on weaker margins at Dow component IBM and as semiconductor stocks slide on shipment comments at LRCX (despite record quarterly results). Financials decline after mixed earnings results (though group has failed to rally despite some better reports recently). The IMF sounded the alarm on excessive global borrowing, warning that with a total of $164tn owed, the world’s public and private sectors are deeper in debt than at the height of the financial crisis a decade ago, according to the Financial Times. Global debt is now more than twice the size of the value of goods and services produced every year and at 225% of global GDP, it is now 12% higher than at its previous peak in 2009. No major economic data today, though the Fed Beige Book to be released at 2:00 PM EST.

Treasuries, Currencies and Commodities

· In currency markets, the dollar reversed overnight gains, as the dollar index (DXY) down slightly below 89.50 (overnight highs 89.77); Canadian dollar falls after the Bank of Canada left rates unchanged; the euro trades back up near the 1.24 level vs. the greenback, though the dollar gains against the Japanese yen; Bitcoin prices rise on 2%

· Commodity prices; Precious metals are rising early, with gold back above $1,355 an ounce, rising 0.5%, while oil prices gain after bullish inventory data, as the EIA showed a surprise weekly drawdown in inventories of over 1M barrels, vs. an est. rise of 650K barrels

· Treasury markets are mixed, as shorter term yields continue to rise, with the 2-yr topping 2.41%, (up 2.5 bps) rising a 4th straight session and further narrows the gap between shorter-dated debt and longer-dated government paper, as the 10-yr up 1 bps at 2.84% and the 30-yr little changed at 3.01%. The spread between the two-year note yield and the 10-year note yield, narrowed to 42.7 basis points, it’s tightest since September 2007.

Sector Movers Today

· Bank earning; MS rises on results as posted a surprise jump in fixed-income trading, which combined with better-than-expected equities results helped push revenue above $11 billion for the first time ever; USB profit grew 13%, with loans surging and taxes falling as EPS and NIM beat, but revs miss; FULTposted better than expected margin results but expenses missed estimates; LTXB shares fall amid disappointing earnings report with significantly higher provision expense related to an energy credit resolution and healthcare finance reserve allocation – downgraded at Raymond James as results fell notably short of RJ/consensus stemming from credit-related issues; other bank earnings from HBHC and HOPE and tonight names expected to report include: AXP, BPFH, BXS, CATY, CVBF, EGBN, FBNK, GSBC, RLI, TBK, TCBI, TMK, TSC, UMPQ; MTB upgraded to neutral at Baird on weakness saying though bank earnings have started with some profit taking, we remain opportunistic with bank exposure

· Transports; in rails, CSX the first to report last night, with top and bottom line results beating consensus driven a little by cost, a little by better RPU growth, and a lot by a significant increase in fee revenue; in airlines, UAL reported quarterly results, helped by improved pricing power; in car rental (HTZ, CAR), Goldman Sachs said survey of airport rental car rates indicated that y/y pricing improved this week, registering a 22% y/y gain

· Internet; FB downgraded to mixed from positive by OTR Global saying Q1 ad spending is up 19% to 24% YoY versus up 25% to 30% among the same sources in Q4; Morgan Stanley with several changes as upgraded EBAY to overweight as expects the company to start pulling away from PayPal, downgraded GRUB on valuation, ZG downgraded after business model change

· Industrial & Machinery; TXT rises after posting a higher quarterly profit and announced deal to sell tools biz to EMR; WBT upgraded to buy at Longbow saying 1Q18 commercial food equipment survey suggests an acceleration in April business patterns that is likely to carry into 2H; Seaport Global upgradedTEX to buy and $46 tgt saying it has made a compelling case that there’s a multi-year earnings growth cycle ahead and that the 20% share pullback may be unjustified

· Biotech movers; RARE upgraded to buy at SunTrust following FDA approval of phosphorous genetic disease drug on better than expected pricing from $118k to $160k for kids & $200k for adults; INSY announced plans to advance clinical research of dronabinol inhalation using a novel and patented breath-actuated device; BLCM 8M share Secondary priced at $7.50


· CALA +2%; as announced FDA fast track designation for CB-839 in combination cabozantinib

· CSX +7%; shares trade to record high after quarterly results beat

· EBAY +2%; double upgraded to overweight at Morgan Stanley

· FSLR +7%; trades to 6 1/2 year highs after Bank America upgraded to buy

· HLF +1%; said it commenced a self-tender offer to buy back up to $600 million

· MS +1%; revenue topped estimates as posted a surprise jump in fixed-income trading

· NCLH +2%; upgraded to buy at Deutsche Bank and announced a $1B stock repurchase plan

· TSLA +3%; rebounds after two days of losses on positive analyst comments

· TXT +6%; after posting a higher quarterly profit and announced deal to sell tools biz to EMR

· VMW +3%; on CNBC report of Icahn buying medium-sized stake https://cnb.cx/2HztNNR


· ADTN -5%; posted a wider-than-expected Q1 EPS loss on weaker revenue and one analyst noted cautious commentary about 2H

· BMI -9% after lower quarterly profit

· IBM -6%; posted Q1 EPS and rev beat and backed guidance, but miss on margins hits shares

· JNPR -6%; cut to sell at Goldman Sachs saying suggests product and technology transitions in Juniper’s cloud business are only half complete and are likely to reset revenues lower

· LRCX -5%; shares dip despite record results as lack of an increase in full year WFE estimate and the forecast for its shipments to decline half-over-half in 2H18 likely disappointed

· LTXB -5%; amid disappointing earnings report with significantly higher provision expense related to an energy credit resolution and healthcare finance reserve allocation

· MO -1%; downgraded to neutral at Citigroup saying that JUUL is beginning to disrupt the U.S. cigarette industry

· RIOT -5%; said it received a subpoena from the SEC on April 9 requesting “certain information”

· ROKU -6%; as AMZN/BBY announced a collaboration to sell smart TVs equipped with Amazon’s Fire TV operating system, a Roku rival


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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