Mid Day Outlook: November 9, 2017

Scott GreenDaily Market Insights

Mid-Morning Look
Thursday, November 9, 17
  
Equities sink on the open, with major averages posting their biggest declines in months as traders await tax-cut legislation out of Washington. Senate Republicans are expected to unveil their tax bill…but this version may differ from that of House Republicans in part by not fully repealing the estate tax and other factors. A tax bill put forth by House Republicans comes ahead of Friday’s Veterans Day holiday, with lawmakers reportedly aiming for a floor vote next week. Stock averages have already started paring losses (as has been the case on any incremental intraday pullback for months), led by a bounce in financials, energy and retailers. Technology underperforms, led by a 2% drop in the semiconductor index. Note the S&P 500 index is currently lower by more than -0.5% which is noteworthy as the index hasn’t closed with a loss of 0.5% or more since Sept. 5 (or 46 trading days), the longest streak since 1968, according to LPL Financial. Small Caps continue to underperform broader averages on the corporate tax concerns. European markets also posting biggest declines since August.
 
Treasuries, Currencies and Commodities
·      In currency markets, the dollar slips against most rivals, with the index on track for its biggest decline since late October after the dollar index (DXY) earlier this week it hit a high of 95.149, the highest since the middle of July (down as low as 94.52 today)
·      Gold prices holding near three-week highs as the U.S. dollar index continued to trade below the multi-month from earlier this week, as uncertainty about tax-bill progress hangs over financial markets. On a negative note, gold saw its weakest third-quarter global demand since 2009 as inflows of the metal into the gold-backed exchange-traded funds slowed, and tax and regulatory changes hurt demand from India, according to a report released by the World Gold Council
·      Energy futures back on the rise after suffering two-straight sessions of losses, with investors eyeing geopolitical tensions in major oil producing countries which have sent prices soaring in recent weeks; WTI crude back above $57 per barrel after touching 2-year highs this week
·      Treasury markets again little changed as markets await details of the tax bill part 2; bonds have stayed in tight range all week with the 10-yr around 2.33% (same as late yesterday), though the 2-yr has been quietly inching up to 1.645% (multi-year high)
 
Economic Data
·      Weekly Jobless Claims rose 10K to 239K, slightly above the 232K estimate while the prior week claims were unrevised from 229K; the 4-week moving avg. decreased by 1,250 to 231,250 to the lowest level since March 1973; continuing claims rose 17K to 1.901M in the week ending Oct. 28
·      Wholesale Inventories rose 0.3% in September, in-line with estimates as wholesale inventories increased to $609.5B from $607.5B in prior month; Wholesale sales rose 1.3% in Sept. after rising 1.9% the prior month
·      The 30-year fixed mortgage rate for week ended today fell to 3.90% from 3.94%, Freddie Mac said; the 15-year rate avg 3.24%, down from 3.27% a week earlier
   
Sector Movers Today
·      Retailers active on earnings; Macy’s (M) with mixed Q3 results as EPS beat by 7c, but sales of $5.28B just miss forecasts with comp sales down (-4%); KSS after new FY18 EPS forecast misses the Street estimate as forecast may reflect the promotional environment; GOOS 2Q earnings beat and boost to FY18 outlook; AEO was upgraded to peer perform at Wolfe Research
·      Uranium related stocks (UEC, WWR, URG, DNN) moving higher after CCJ said yesterday it would suspend production at its McArthur River mining and Key Lake milling operations by the end of January, which could increase the uranium supply/demand balance and induce a sustainable and significant raise in uranium prices; BMO Capital noted that McArthur River is the world’s largest uranium mine and suspension should remove ~17M lb U3O8 from the market next year (12M lb attributable to CCJ), representing 12% of primary mine supply and 9% of estimated demand
·      Sporting goods stores under pressure after VSTO Q2 revenue missed forecasts and sharply lowered its year EPS and rev outlook to 50c-60c on revs $2.24B-$2.26B, below prior view $1.10-$1.30 and $2.36B-$2.42B (shares of BGFV, DKS active as well as gun makers AOBC, RGR)
·      Media & Telecom movers; FOXA posted another quarter of double-digit growth in fees from cable and satellite providers; TIME 52-week lows as revenue estimates as print ads decline; NLSN reaffirms 2017 outlook and sees’18 rev growth on constant currency basis around 3%; NLSN announced an agreement to use CMCSA’s set-top box data in its local television measurement service; DIS to report earnings after the close
·      Beauty products/consumer; COTY shares jump after profit beats and revenue rises in line with expectations; ELF shares fall on mixed results as Q3 EPS and sales both topped views and guided year profit above views, but sales view of $270M below estimate of $287M
·      Semiconductors slide, leading declines in the NASDAQ, with all 30 names in the Philly semi index (SOX) lower to start, led by AMD, KLAC, NVDA (ahead of earnings), MKSI, ENTG
 
Stock GAINERS
·      COTY +15%; after profit beats and revenue rises in line with expectations
·      DISH +6%; mixed quarterly EPS/revs, but adds subscribers for the quarter
·      +2%; relief rally after EPS beat/sales miss, on comp decline of (-4%); helps retail rebound
·      OTIC +95%; announced positive top-line results from the AVERTS-2 Phase III trial of Otividex in patients with Meniere’s disease
·      PRGO +11%; as Q3 EPS topped the highest estimates, pushing shares near 52-week highs
·      ROKU +47%; on earnings; active account and ARPU growth accelerated YoY from 2Q, fueled by
 
Stock LAGGARDS
·      AMBC -11%; as Puerto Rico exposure stings Q3 results
·      CTL -8%; reiterated commitment to dividend but said it would fall short of full-year guidance
·      INFN -20%; cut to neutral at MKM after the company’s second consecutive disappointing quarterly outlook (guided Q4 revs to $185M-$195M vs. $204M on lower margins)
·      KSS -4%; after new FY18 EPS forecast misses the Street estimate
·      MEET -20%; downgraded by several analysts after 3Q17 results and 4Q guidance missed
·      SQ -1%; posted a strong 3Q beat and payment volume (GPV) growth decelerated less than expected, benefiting from large sellers and new products – (shares up 169% YTD)
·      SRCL -5%; now sees EPS of $4.46 to $4.52, down from prior view of $4.55 to $4.69
·      TDG -5%; after the company forecast full-year EPS and sales below expectations
·      VSTO -29%; as Q2 revenue missed forecasts and sharply lowered its year EPS and rev outlook to 50c-60c on revs $2.24B-$2.26B, below prior view $1.10-$1.30 and $2.36B-$2.42B
 
Syndicate
·      ADMA Biologics (ADMA) 17M share Secondary priced at $2.15
·      Apellis (APLS) 10.714M share IPO priced at $14.00
·      Bright Horizons (BFAM) 4M share Spot Secondary priced at $87.50
·      Cadence Bancorporations (CADE) 9.5M share Secondary priced at $22.00
·      Hyatt (H) 1.2M share Block Trade priced at $69.00
·      James River Group (JRVR) 3M share Spot Secondary priced at $39.00
·      Restaurant Brands (QSR) 4.1M share Block Trade priced at $65.00
·      Schneider National (SNDR) 2.4M share Block Trade priced at $24.85
·      Sogou (SOGO) 45M share IPO priced at $13.00
·      SRC Energy (SRCI) 35M share Spot Secondary priced at $8.0
·      Taylor Morrison (TMHC) 10M share Spot Secondary priced at $23.10
 

 

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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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