Mid Day Outlook: April 23, 2018

Scott GreenDaily Market Report

Mid-Morning Look

Monday, April 23, 18

U.S. equities are mixed, with commodities and materials moving lower given the recent strength in the dollar, while interest rate sensitive sectors are active given the extended surge in Treasury yields, as investors with growing expectations of more aggressive rate hikes this year from the Fed. The yield on the 10-year touched a 4-year high of 2.99% earlier, while the 2-year yield topped 2.47%. Aluminum prices (along with broader commodities) declined as Bloomberg reported the U.S. says it may relieve Rusal sanctions if Oleg Deripaska divests control in the Russian producer. Also weighing on broader commodity prices, a stronger dollar, sending gold and oil lower. Consumer Staples try and recover after last week’s drubbing following weaker earnings and guidance in the sector (PG, PM). Financials surprisingly edging lower despite the jump in Treasury yields. Consumer discretionary stocks rising after several analyst upgrades in the sector today (UAA, HBI, KORS). Markets looking to another very busy week of earnings, with GOOGL the highlight tonight in tech.

Treasuries, Currencies and Commodities

· In currency markets, the dollar extends last week’s gains, as the dollar index (DXY) rises more than 0.5% to highs of 90.849, rising broadly vs. other currencies along with the pop in Treasury yields as markets undergoing rising rate hike expectations by the Fed; the dollar rises to the best levels since mid-February against the yen, topping 108.40. Bitcoin prices rise another 4% after last week’s strong gains; Bitcoin back above the $8,900 level (earlier briefly topped $9,000)

· Commodity prices slump given the recent aggressive rate hike expectations, lifting the dollar; gold prices decline round 1% to $1,325 an ounce, while oil prices slip after trading at 3 ½ year highs late last week

· Treasury market’s fall as yields rise on increasing U.S. interest rate hike expectations from the Fed to four times in 2018, rather than the three signaled by policy makers. Easing geopolitical risks also reducing bond exposure after North Korean leader Kim Jong Un said Saturday that his country would shut down its nuclear test site and suspend testing of long-range missiles

Economic Data

· Existing-Home Sales for March rise 1.1% to 5.6M, topping the 5.55M est by economists; February remained at 5.54M, unrevised; 3.6 month’s supply in March vs. 3.4 in February; inventory rose 5.7% to 1.67M homes; said 1st-time buyers 30% of total sales; all cash 20%; investors 15%

· Markit said its flash composite purchasing managers’ index for U.S. in April rises to 54.8 from 54.2 in March (vs. a year ago 53.2), as new orders rise to 58.3 vs 56.9 in March (highest reading since March 2015);

· The Chicago Fed’s index of national economic activity was a positive 0.10 last month, down from the upwardly revised positive 0.98 in February. February’s result was the highest marker for this volatile index since positive 1.19 in October 1999

Sector Movers Today

· Retailers; several research ratings changes today in group; Deutsche Bank said they prefer global apparel, handbag, and footwear brands within coverage as they upgraded KORS to buy, and said PVH top pick, while the upgrade UAA to neutral from sell; HBI upgraded to buy at Stifel with a $23 target; SHLD shares jumped after ESL Investments, the investment firm controlled by Sears CEO Edward Lampert, proposed to the board it consider a deal for the firm to buy certain real estate, the total or partial sale of the rights to the Kenmore brand and assets, and all of the Home Improvement Business of Sears Home Services Division

· Healthcare services; HSIC shares active after the company said it will spin-off its animal health unit and merge it with Vets First Choice to create a new company; HUM, TPG Capital and Welsh, Carson, Anderson & Stowe have agreed to acquire privately held hospice operator Curo Health Services for ~$1.4B/HUM will have a 40% interest in company; CERN upgraded to buy at Citigroup with $71 tgt saying the DoD and VA are embarking on electronic health records upgrade projects worth greater than $14B

· Oil Equipment, E&P and Services; FTK shares plunge after warning that it expects to report negative EBITDA for Q1 and forecasts revenues of $59M-$62M, below the $73M analyst consensus; OAS downgraded to sell from hold on valuation and forward questions over pace of Delaware activity and core Bakken locations; service space saw Q1 EPS beat by HAL after mixed results from SLB and BHGE on Friday as HAL sees strong sales and margin growth for completion and production in 2Q

· Industrial & Machinery; CBI shares fell after MDR confirmed that it had rejected an unsolicited buyout bid by Subsea for $7 per share, but said remains “fully committed” to completing the deal to buy CBI as planned; CAT upgraded to buy at Citigroup saying shares can outperform over the next 6-12 months on positive estimate revisions, increased capital returns and improving China macro data points; JBT downgraded to neutral at Baird on valuation; ARNCdowngraded to neutral at Longbow Research on reduced near-term earnings visibility

Stock GAINERS

· ALK +4%; after earnings results and expects available seat miles to increase 8.5% during Q2 and be 6.5% higher for the full year, down from a prior view of +9.5% for Q2 and +7.5% for 2018

· HSIC +4%; after company said it will spin-off its animal health unit and merge it with Vets First Choice to create a new company

· KORS +4%; upgraded to buy at Deutsche Bank amid lower markdowns

· MDR +15%; after Subsea 7 S.A. confirmed that it made a proposal to acquire the entire issued share capital of McDermott for $7 per share, which has been rejected

· NWL +1%; in agreement with Starboard Value to end current proxy contest

· SHLD +8%; as ESL Investments proposed to the board it consider a deal for the firm to buy certain real estate, the total or partial sale of the rights to the Kenmore brand and assets, and all of the Home Improvement Business of Sears Home Services Division

· STT +3%; rallies after Friday and was upgraded to buy at Deutsche Bank

· TNC +8%; after quarterly results

· VVC +5%; CNP agrees to acquire VVC for $72 per share in cash, a premium of nearly 10% over Friday’s closing price https://prn.to/2K7MvL5


Stock LAGGARDS

· AA -7%, along with other aluminum stocks after the U.S. says it may relieve Rusal sanctions if Oleg Deripaska divests control in the Russian producer

· AKRX -32%; as Fresenius SE (FMS) said it had decided to pull out of its planned acquisition for the company after it found data integrity breaches at the company https://reut.rs/2qQVY0c

· CBI -8%; after MDR confirmed that it had rejected an unsolicited buyout bid by Subsea for $7 per share, but said remains “fully committed” to completing the deal to buy CBI as planned

· CRSP -9%; after Merck KGaA receives patent for CRISPR technology

· FTK -35%; after warning; says it expects to report negative EBITDA for Q1 and forecasts revenues of $59M-$62M, below the $73M analyst consensus.

· HAS -4%; after quarterly earnings missed estimates

· IRBT -5%; stock falls after report that Amazon is working on home robots

· PRTA -68%; said it has terminated development of NEOD001 for the treatment of AL amyloidosis as Phase IIb PRONTO study did not meet its primary or secondary endpoints and the Phase 3 VITAL Amyloidosis study is being discontinued based on futility analysis

· SPWR -6%; downgraded to underperform at Bank America and tgt to $7 from $8.50, citing concern over the impact of import tariffs to SPWR’s premium businesses

________________________________________________________________________________________

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.
 

Live Trading

Open an Account

Paper Trading

Register