Mid Day Outlook: November 6, 2017

Scott GreenDaily Market Insights

Mid-Morning Look
Monday, November 6, 17
  
Equities trading slightly higher, to flat on the day as technology shares extend gains among U.S. averages amid better-than-expected earnings and as renewed M&A in the semi chip space boosts the index. There were several M&A stories today driving stocks, with QCOM confirming that AVGO made a $70 per share offer, while Sprint/TMUS terminated its merger talks. Also other news in chip space and telco (more below). The S&P 500 hits intraday all-time high at 2,591.09, while the NASDAQ and Dow Industrials also reached record best intraday levels. There were no major economic data points today, but earnings busy again today (and next couple of days before it slows a bit) in what has been a good quarter for corporate results. In Saudi Arabia, the government announced the arrest of several senior officials, including prominent billionaire investor Prince Alwaleed bin Talal, as part of an anti-corruption and power-consolidation move by Crown Prince Mohammed bin Salman, but has no impact on US markets. Federal Reserve Bank of New York President William Dudley will retire next year, around six months earlier than scheduled, the Fed’s regional New York bank confirmed Monday in a statement. A search for Dudley’s successor will start with an eye toward the finding one in mid-2018.
 
Treasuries, Currencies and Commodities
·      In currency markets, the U.S. dollar held gains against many of its rivals, but retreated from an 8-month high that it had reached against the Japanese yen earlier in the session. It hit that high after Bank of Japan Gov. Haruhiko Kuroda reiterated a commitment to loose monetary policy
·      Commodity prices; are generally higher across the board, led by strength in energy (natural gas up over 3%), along with industrial metals (copper up over 1%) and gains in precious metals as well; WTI crude tops $56 per barrel
·      Treasury markets are little changed on a day of no economic data and as U.S. stocks continue to hold record levels; the 10-yr yield 2.329% and 2-yr 1.6175%
   
Sector Movers Today
·      Lodging & Leisure; hotels/lodging active after Wells Fargo upgraded Hyatt (H) and HST to outperform on potential asset dispositions and tax reform, while Host Hotel’s rating was raised because its new management will likely drive value creation, and downgraded HLT on valuation; Hyatt was downgraded by B. Riley/FBR to neutral from buy given the stock’s 22% rise this year; CHH Q3 revs top views on mixed guidance for Q4
·      Telecom; Wells Fargo said tower stocks should benefit (AMT, CCI, SBAC were active today) from Sprint and T-Mobile U.S. calling off their merger plans, and VZis likely to be hurt by a more competitive wireless environment. DISH was upgraded to buy at Pivotal post the S/TMUS deal fail combined with the underperformance and speculates there is a reasonable chance that TMUS could make a play for DISH or DISH spectrum
·      In non M&A news in the semi sector; AMD jumped initially after the WSJ reported it was teaming up with rival INTC to thwart a common competitor, NVDA, planning to announce a laptop-computer chip that combines an Intel processor and AMD graphics unit https://goo.gl/LSuSyZ ; CREE was upgraded to buy at Deutsche Bank saying the company’s Wolfspeed business opportunity remains underappreciated; ON reported better much better Sept quarter results with December quarter revenue guidance also above estimates at the midpoint; Barron’s said INTC shares could return 25% or more over the next year as the stock is still cheap
·      Healthcare services and providers; ANTM announced new CEO Gail Boudreaux; CAH EPS beat by about 9c but only reaffirmed year guidance and named current CFO as next CEO; HSIC shares fell as beat on the topline but reported a miss on bottom line because of cost of goods/guidance of 7-10% EPS growth weaker than expected and below the street; XRAY upgraded to outperform at Barrington with $73 tgt; CVS Q3 EPS and revs mostly in-line as well as guidance
 
Stock GAINERS
·      CAVM +10%; MRVL is in advanced talks to combine with CAVM, citing people familiar with the matter, a deal that would create a $14B chip playerhttps://goo.gl/gaJDMc
·      CHK +8%; as energy related stocks rebounding early
·      CHTR +6%; after CNBC’s David Faber said SoftBank willing to re-engage in Charter talks
·      DISH +6%; was upgraded to buy at Pivotal post the S/TMUS deal fail
·      KORS +13%; posted a strong Q2 report that beat estimates across the board and raises outlook
·      QCOM +2%; confirmed it received an unsolicited buyout bid from AVGO valued at $70 per share in cash and stock valued at about $130B (includes $25B in net debt) https://goo.gl/Gvvy4y
·      SBAC +7%; along with gains in other towers (AMT/CCI) after TMUS/S merger plans called off
·      TXMD +43%; following resubmission of TX-004HR NDA without new pre-approval study
·      VBLT +12%; out-licenses lead candidate VB-111 in Japan; $15M upfront/up to $100 milestones
 
Stock LAGGARDS
·      CVS -2%; after earnings and guidance
·      HOG -3%; among top decliners in the S&P 500 index
·      HSIC -9%; as beat on the topline but reported a miss on bottom line because of cost of goods and also missed 2018 guidance
·      RBC -4%; after missed Q3 profit forecast
·      -11%; and TMUS shares slide after they formally ended merger talks over the weekend after months of negotiations
·      SYY -3%; after in-line earnings results, but margins disappoint
·      VZ -4%; as Sprint/TMUS deal called off, back to more competition between four major carriers fighting for subscribers
 

 

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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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