Mid Day Outlook: November 7, 2017

Scott GreenDaily Market Insights

Mid-Morning Look
Tuesday, November 7, 17
  
U.S. equities are lower after earlier touching fresh record highs, as a pullback in oil prices from 2-year best levels (surging oil helped boost energy stocks yesterday) and anticipation of the Senate version of the tax reform bill coming Thursday has investors anxious. With 3Q earnings slowing down, investors are shifting focus to tax reform and favorable seasonal patterns for the market during the holiday season. Today was another extremely busy day of earnings (highlights of top movers below), but between President Trump’s trip to Asia, rising expectations of a Fed rate hike in December, political uncertainty in Europe and the latest news out of Saudi Arabia where 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, it’s a little surprising that the market continues to trade in a tight range holding record levels. Note all three benchmarks closed at records on Monday, marking the 26th time this year that they’ve notched records simultaneously, which is itself a record.
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar with a solid rebound after sliding vs. most rival currencies late yesterday; the dollar index (DXY) trades up over 0.4% to highs around 95.15 (best levels in over a week); the euro slips to lowest levels since July, while the dollar rebounds back above 1.28 against the Canadian loonie as oil pulls back from highs
·      Commodity prices; lumber futures trade limit up for a second day, rising to 23-year highs; after surging yesterday on dollar weakness, gold futures down about -$5 to $1,275 an ounce; oil prices take a break, falling from 2-year highs late yesterday following lots of commentary out of OPEC member regarding the possibility of extending production cuts. Also earlier, OPEC said in its 2017 World Oil Outlook that rapid adoption of electric vehicles could cause oil demand to plateau in the second half of the 2030s, denting OPEC’s longer-term prospects.
·      Treasury markets have slowly and quietly bounced the last two weeks, sending yields lower, despite strong economic data and surging U.S. stock prices; the yield on the 10-year bond down about 15 bps to 2.32% over the last 3-weeks from 2017 highs of 2.47%. Bonds have failed to sell-off despite rising expectations of another Fed rate hike in December
   
Sector Movers Today
·      Online travel stocks weak; PCLN solid Q3 results, but guided Q4 below consensus shifting more budget to brand advertising (sees Q4 EPS $13.40-$14.00 vs. est. $15.57); TRIP3Q revenue missed Street ests. due to declines in rev. per hotel shopper, which was driven by advertisers reducing spending on TRIP (also lowered 2017 forecast for click-based transactions revs); TRVG upgraded at Citigroup to buy saying the 66% selloff since July has created a favorable risk/reward profile
·      Healthcare services; DPLO mixed 3Q results as revenues slightly trailed estimates but Adj. EPS exceeded estimates driven largely by good cost controls; in hospitals, THCshares reversed earlier losses on EPS outlook cut, with one analyst noting Ebitda guidance cut comes from non-recurring items; GKOS falls as Stifel said the company’s iStent may lose market share to NVS CyPass
·      E&P sector; FANG (after touching all-time highs yesterday) announced a 3Q EPS beat and FY production raise by ~2 Mboe/d while tightening up its capex range; SLCA Q3 EPS and Ebitda topped consensus while proppant sales came in above views as well; CPE reported 3Q 2017 adjusted EPS/CFPS/EBITDA all in line or slightly ahead of consensus estimates; RSPP reported 3Q EPS/CFPS/EBITDA in line or very slightly behind consensus projections; MTDR 3Q beat and increasing 2017 production guidance again; COG falls after a federal appeals court ordered a temporary halt in construction of the Atlantic Sunrise natural gas pipeline in Pennsylvania
·      Transports; CAR lowered the top ends of its full-year adjusted EPS and revenue views noting operational disruptions faced during the quarter due to hurricanes Harvey, Irma and Maria (HTZ also moved in reaction); EXPD among top gainers in S&P early as Q3 EPS tops highest view; AAWW said adjusted income from continuing operations for this year would rise less than expected, weighing on shares
·      Media movers; movie theatres active after earnings as AMC cut 2017 EPS and revenue guidance as weaker box office outlook for 4Q combined with a difficult 1Q outlook suggests challenges ahead; NCMI also slipped early despite Q3 expectations beat; rebound in media related stocks (CBS, VIAB, DISCA) after reports by CNBC yesterday DISlooking at FOXA assets
·      Optical sector; Goldman Sachs downgraded FNSR to Neutral and overall Telecom Equipment coverage view to Neutral from Attractive citing a more cautious stance on the optical component cycle as sees softening end markets, rising inventories and industry capacity; NPTN Q3 EPS and revs topped consensus as midpoint of Q4 results seen above views
 
Stock GAINERS
·      DF +10%; Q3 EPS/sales missed estimates though EPS guidance of 80c-90c topped the 79c view
·      DISCA +3%; rebound in media after reports by CNBC yesterday DIS looking at FOXA assets
·      EXPD +7%; among top gainers in S&P early as Q3 EPS tops highest view
·      HAIN +7%; after reporting better-than-expected sales for the fiscal first quarter
·      KND +26%; shares rise on better Q3 results
·      RCL +5%; Q3 EPS beat by 17c on better revs and 2018 bookings seen at higher rates/volume
·      VRX +18%; maintained its profit forecast and posted modest sales growth
·      SLCA +10%; Q3 EPS and Ebitda topped consensus while proppant sales came in above views
·      WTW +13%; Q3 results topped estimates and raised its year EPS view for the third time
·      XOMA +24%; after Q3 revs topped consensus
 
Stock LAGGARDS
·      CAR -13%; lowered the top ends of its full-year adjusted EPS and revenue views noting operational disruptions faced during the quarter due to hurricanes
·      COG -4%; after a federal appeals court ordered a temporary halt in construction of the Atlantic Sunrise natural gas pipeline in Pennsylvania
·      FN -5%; downgraded at JP Morgan after earnings results missed views
·      FPRX -44%; plunges after Cabiralizumab Combo data abstracts fall short of expectations
·      GKOS -13%; as Stifel said the company’s iStent may lose market share to NVS CyPass
·      KERX -17%; posts wider Q3 loss and withdraws guidance though FDA approves Auryxia
·      MNK -33%; after 3Q net sales miss ($793.9M vs. est. $808.8M) down 10.5% YoY
·      RRGB -30%; after Q3 EPS/sales miss while cutting its year EPS profit view and weak comp sales
·      PCLN -10%; solid Q3 results, but guided Q4 below (sees Q4 EPS $13.40-$14.00 vs. est. $15.57)
·      TRUE -31%; weak results/lowered FY guidance after poor performance from their USAA partner
 

 

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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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