Mid Day Outlook: November 8, 2017

Scott GreenDaily Market Insights

Mid-Morning Look
Wednesday, November 8, 17
  
U.S. equities with modest declines early, pulling back from near record-closing levels as markets await new details out of Washington related to the tax reform proposals (Senate version expected tomorrow according to reports). Defensive/high-dividend stocks leading the way again while technology and financials underperform for a second session. No major economic data for a second today or Fed speakers expected, as focus remains on the earnings barrage and tax news. Today marks the 1-year anniversary of President Trump election, as the Dow Industrials 1-year gain since the win is its biggest post-Election Day rise since 1945. WTI crude extends losses following a surprise weekly inventory build while crude production jumps to record high (output 9.62M b/d) – though prices coming off 2-year highs reached on Monday. Note the Dow Industrials down for the first time in seven sessions.  Very busy morning/night of earnings with another busy schedule again tonight.
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar paring recent gains, falling against the yen, euro and Canadian dollar, but up slightly vs. the Pound; no major economic data to move currencies today; not Fed members speaking either
·      Precious metals getting a lift amid a slide in the U.S dollar early on; gold up around $10 as trades back above the $1,285 an ounce level
·      Energy futures slide following a surprise inventory build as reported by the DOE of 2.23M barrels vs. expected drawdown of -2.45M barrels, though gasoline and distillates post larger than expected draws of -3.3M barrels each; WTI crude back under $57 per barrel after touching its highest level in 2-years on Monday – crude production jumps to record high (output 9.62M b/d)
·      Treasury markets stay in tight range this week, with the 10-yr unchanged at 2.314% ahead of tax reform updates out of Washington, while lack of economic data this week also keeping lid on volatility for bonds
   
Sector Movers Today
·      Large Cap banks; sector traded lower for a second session, down ahead of Senate tax proposal reveal (tomorrow), while KBW said today that investors began to evaluate the impact of big Democratic election wins in Virginia and New Jersey. “If we are right and Virginia signals increased chances that control of the House flips, then investors need to start thinking about Rep. Maxine Waters (D-CA) as the next chairman of the House Financial Services Committee. While we doubt that Waters could implement an anti-bank, anti-financials agenda, the financial sector would no longer have a wind at its back from Congress and we think the headline risk for the industry would increase significantly,” said KBW (GS, BAC, WFC, JPM, C active)
·      Optical sector; very busy of week for this group, with AAOI results out overnight as 3Q results in-line with preannouncement while 4Q sales guide is below, but EPS guidance was above consensus due to tax benefit (OCLR, NPTN, LITE, FNSR active this week); MKM said they think the QSFP28 and China market issues should be fairly well understood for group after earnings reports
·      Auto’s; CVNA shares fall after the company posted 3Q revenue below analysts’ estimates and trimmed the top end of its full-year revenue and unit sales outlook (CARG, KMX, LAD, ABG, AN, GPI, PAG, SAH all active); Morgan Stanley cautious on auto parts retailer AAP saying they expect it to report a poor 3Q and lower guidance, but not as bad as market expectations; AXL 15M share Spot Secondary priced at $17.55
·      Consumer Staples; BETR downgraded to hold at SunTrust following the company’s 3Q results and lowered guidance; VSI shares fall after weak Q23 results, posting an unexpected Q3 loss; SBH downgraded to underweight at Morgan Stanley as the retail segment facing tougher competition which is leading to negative comps/margin erosion and amplifying EBIT pressure; in protein space, PPC rises as Q3 EPS, revs, Ebitda top views; ELF downgraded at Piper
·      Casino, Lodging & Leisure; in casinos, MGM meets quarterly profit; In lodging, MAR, RRR and ILG both reported quarterly results; in leisure, PLNT Q3 with quarterly beat on strong membership and margin gains, while management announced a 10% pricing increase on its higher-cost memberships; in boating, MBUU Q1 proved better than expected
 
Stock GAINERS
·      COHR +11%; 52-week highs after sales top highest estimates and EPS beat
·      DXC +3%; after top and bottom line quarterly beat
·      FRTA +32%; strong Q3 results as Ebitda totals and guidance well above consensus views
·      GDOT +11%; jumps to 52-week highs as earnings top consensus on accelerated debit card growth
·      INFN +6%; as NFLX deployed the Infinera Cloud Xpress 2 to expand their delivery capacity for streaming videos
·      MBI +30%; approved a new $250M buyback after prior buyback was exhausted
·      MGM +4%; after Q3 profits met forecasts
·      PLNT +13%; quarterly beat on strong membership and margin gains, while management announced a 10% pricing increase on its higher-cost memberships
·      SYNA +20%; as Q1 EPS/revs top consensus and in-line Q2 rev guidance
·      TTWO +10%; easily surpassed Street forecasts for 2QFY18 and posted higher guidance outlook for next quarter and year as upside reflects the continued success of the GTA franchise and NBA 2K
 
Stock LAGGARDS
·      AVAV -7%; mentioned cautiously by SprucePoint saying they see 30-50% downside risk
·      CARS -8%; reported 3Q results below estimates and forecast 2017 revenue to be down ~1%
·      CVNA -9%; posted 3Q revenue below analysts’ estimates and trimmed the top end of its full-year revenue and unit sales outlook
·      DVA -7%; among top decliners in S&P after earnings/guidance
·      FOSL -15%; plunges to new 52-week low on significantly lower earnings and outlook
·      LC -17%; reported earnings in line expectations, but announced a plan to restrict lending to all but the most creditworthy borrowers, hurt shares
·      SNAP -10%; as 3Q revenues and DAU missed estimates and it announced a redesign of its application, though got a boost after China’s Tencent said it took a 10% stake
·      TWX -3%; after AT&T CFO said that timing of the Time Warner deal closing is “now uncertain” because of ongoing talks with the DOJ
·      VSI -15%; falls after weak Q23 results, posting an unexpected Q3 loss
·      XOG -5%; slides on concerns amid higher spending, disappointing 4Q oil production guidance
 
Syndicate
·      Allegheny Technologies (ATI) 17M share Spot Secondary priced at $24.00
·      American Axle (AXL) 15M share Spot Secondary priced at $17.55
·      CBTX (CBTX) 2.4M share IPO priced at $26.00
·      Fireman B.V. (IFRX) 6.667M share IPO priced at $15.00
·      Four Seasons Education (FEDU) 10.1M share IPO priced at $10.00
·      Metropolitan Bank (MCB) 3.1M share IPO priced at $35.00
·      Orion Engineered (OEC) 10M share Spot Secondary priced at $23.25
·      Vical (VICL) 14.3M share Secondary priced at $1.75
·      Voyager Therapeutics (VYGR) 4.5M share Secondary priced at $12.00
 

 

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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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