Market Review: Another Week, Another New All Time High

eOptionDaily Market Report

Equity Market Recap
  • Another record setting day on Wall Street, as the Dow Industrials, S&P 500 Index, Nasdaq Composite and Russell 2000 Index all post new record closing highs, adding to their gains last week and are on pace for their best monthly returns since March of last year. Stocks got an early lift following better than expected earnings results from Dow components HD and WMT, as well as a busy morning of M&A activity, boosting market sentiment (despite a massive deal terminated over the weekend as KHC pulled $143B offer for Unilever). Oil prices advanced more than 1% (lifting energy stocks), while the dollar gained vs. most currencies (big jump in peso late day pared the greenback daily gains). Utilities and REITs outperformed today.
  • Today marked the 50th straight session S&P hasn’t moved more than 1% in both direction and it has been well over 80 days since the S&P saw a decline of over 1%. Also Note the NASDAQ has not had back-to-back losing days yet in 2017 and is up over 0.4% today. The Dow Industrials top the 20,700, level, now up over 700 points in the last 12-days and up from the 20K level it first crossed back on January 25th. The Dow is on track for its eighth straight daily advance, while both the S&P and the Nasdaq Composite have gained in nine of the past 10 sessions, all at record highs today. Germany’s DAX finishes at highest since April 2015

 

Commodities
  • Precious metals pared losses, ending lower by only 20c, or 0.1% to settle at $1,238.90 an ounce despite strength in the dollar and a rallying stock market. Concerns related to the ongoing European elections and the apparent rise of anti-establishment candidates could partially be a reason for the strength in gold (bounced off earlier lows of $1,226.80 an ounce)
  • WTI oil prices advanced, rising 66c, or 1.24% to settle at $54.06 per barrel after comments from Barkindo, OPECs top official, said the implementation of an agreement between OPEC and other major producers to reduce output has been “very encouraging” and the agreement is on track to reduce the global oil surplus. Natural gas prices slide 27c or 9.5% to settle at $2.564 mln btu, down 35% from its winter peak amid warmer temps in the Northeast expected this week

 

Currencies
  • The U.S. dollar gained broadly, rising against many counterparts following bullish comments about the economy/rates by several Fed members. Philadelphia Fed President Patrick Harker said he “would not take March off the table at this point” in an interview. The euro fails to rally despite stronger PMI data overnight The dollar index (DXY) pared gains, closing off earlier highs of 101.60 (more than one-week high), but finished higher. Bitcoin rose over 4% to highs of $1120 before ahead of the SEC ruling on a proposed bitcoin exchange-traded fund. The Mexican Peso jumped 2% late day against the greenback (paring its gains) after Mexico Central Bank says will offer up to $20B in peso FX hedges (says first auction of u-p to $1B will be on March 6th)

 

Bond Market
  • Bonds reversed earlier losses, with yields only posting small gains; bonds initially dropped on further rotation out of safe haven investments and into stocks (again), but pared those losses late day, as the 10-yr yield held around 2/42%. The U.S. Treasury sold $26B in 2-year notes at a yield of 1.23% vs. 1.235% when issued prior with demand strong at 2.82 (highest since August) vs. 2.68 prior auction but indirect bidders only awarded 49.8% of the auction

 

Economic Data
  • Markit flash U.S. services gauge fell to 53.9 in February from 55.6 in January
  • Markit U.S. flash manufacturing PMI falls to 54.3 in February vs 55 in January
  • IHS Markit said its composite Purchasing Managers Index for the Eurozone’s manufacturers and service providers, which is based on a survey of 5,000 companies, rose to 56.0 in February from 54.3 in January, reaching its highest level since April 2011
Sector News Breakdown
Consumer
  • Retailers; Dow component and retail giant WMT with 4Q earnings and U.S. comp sales beating estimates (said sees Q1 sales a little slower); Macy’s (M) Q4 EPS beat by 6c though sales missed on in-line Q4 comps down (-2.1%); DDS Q4 EPS/sales well below consensus on comp sales decline of (-6%); sporting goods retailer DKS downgraded at Oppenheimer following strong of recent profit warnings from other such stores
  • Consumer Staples; UN shares declined after KHC withdrew its $143B proposal to acquire the company over the weekend https://goo.gl/wrzpoK; other food related names that had been volatile on the deal last week active again today (K, GIS, MDLZ, as well as consumer products names PG, EL, CL); FDP a mover on Q4 earnings results; GNC jumps after signs deal w/Epsilon to help launch new loyalty program…platform will allow customers to earn points and collect rewards for purchases in stores, online and on mobile devices.
  • Restaurants; PLKI rises after agreeing to be bought by QSR for $79 per share in $1.8B deal https://goo.gl/xWKNac ; CBRL Q4 EPS beat by 5c but missed on revenue; BLMN downgraded at JP Morgan to neutral
  • Housing & Building Products; home improvement retailer and Dow component HD Q4 EPS, revs, and comp sales all topped consensus along with $15B share buyback and dividend boost (year eps view slightly below estimates $7.13 vs. $7.16); flooring company LL Q4 sales top views as comps comp in up 2.8% vs. est. 2.1%; WHR little bump after the AHAM reported U.S. shipments of major home appliances rose 6.4% y/y to 5.36M units in January
  • Lodging news; in lodging REITs, FCH shares rise as AHT offers to buy the company for $9.27 per share/$1.27B deal https://goo.gl/YmcJWl
  • Auto news; few earnings in auto retail, as AAP mixed Q4 results as EPS misses by 8c, but sales beat and comps in up 3.1% vs. expected decline of (-0.2%); SAH Q4 revs beat, while year profit forecast shy of views ($2.00-$2.10 vs. $2.17 est.); and GPC with Q4 EPS 1c beat on in-line revs, though year EPS below estimates; in suppliers, ADNT was upgraded to overweight at Morgan Stanley as they like the growth and margin opportunities in global auto seating and downgrade LEA to equal-weight; BMW and MBLY agree to generate new kind of sensor data; GM mentioned positively in Barron’s saying shares could rise as much as 35% in a year

 

Energy
  • Energy outperformed other sectors, helped in part by a jump in oil prices though names leverage to natural gas (RRC) declined amid warmer weather; in research TOT upgraded to conviction buy at Goldman Sachs, but downgraded RDSA; MRC upgraded to buy at Seaport Global; LPI was upgraded at Piper as believe the balance sheet is in a better position; VNOM was raised to strong buy at Raymond James on confidence in Viper’s ability to outperform the market; HES mentioned cautiously in Barron’s saying shares could drop more than 10% amid the U.S. shale boom that may put pressure on rising oil prices; in news, DGAS to be acquired by People’s Natural Gas for $30.50 per share https://goo.gl/OJSxem; CVX outperforms XOM in the Dow; CXO, EIX, FE, NFX, SPN notables to report tonight in the space; in solar, FSLR rises ahead of earnings

 

Financials
  • Large Cap banks rise despite bond yields pulling back; US banks get a lift as major banks remain near 52-week highs; Euro banks mostly higher outside of HSBC after earnings; WFC said it terminated “for cause” four current or former senior managers in its community banking business following an ongoing investigation into the banking giant’s sales practice scandal.
  • Insurance; VOYA was added to Citigroup focus list (replaces AMP) and reiterate sell on MET (though also added to focus list)
  • Brokers/Advisors; RILY to buy FBR Capital (FBRC) for $20.28 per share/deal valued at $160.1M (21% premium)/FBR holders will receive 0.671 RILY shares/$8.50 in cash https://goo.gl/98CdXD
  • Lending & Finance; ONDK shares volatile after EJF Capital LLC reports 7.0% stake and says it believes shares of on deck capital’s common stock are undervalued and are attractive investment; FNMA shares fell after a federal appeals court upheld a decision that barred hedge funds from suing the U.S. government for seizing profits made by mortgage companies

 

Healthcare
  • Large Cap Pharma; TEVA rises as won’t face a generic rival for lead drug Copaxone in February, due to a delay in Momenta-Sandoz’s application, even though other generic applicants are awaiting approval; shares of MNTA declined on that ANDA delayed news; in large cap, BMY jumped late day after Dow Jones reported Carl Icahn took a stake in the drugmaker/separately, BMY named three new independent directors to board after talks with Jana Partners/announces stock buyback of up to $2B; EYEG rises as licenses EGP-437 and EyeGate II Delivery System in ocular surgery to VRX; AMRI falls on weaker guidance for year ($710M-$740M vs. $763M); SCMP to replace NILE in the S&P SmallCap 600 index
  • Medical devices & equipment; EW shares rise after revealing in its 10-K Friday that it would resume clinical activity with its EW-CardiAQ TMVR platform following the recent completion of validation testing; Supreme Court rejects BSX appeal, won’t consider overturning $366m award for breaching licensing contract with Mirowski Family Ventures; MDT Q3 EPS/revenue tops consensus and year mid-point forecast tops views; EXAS revs/guidance better
  • Biotech movers; SRPT sells GILD rare disease review voucher for $125M; TRVN shares drop after positive late-stage results for opioid substitute oliceridine but the safety/side effect data underwhelm market; CDTX shares plunge as its CD101 fails mid-stage study in acute yeast infections;
  • Hospitals/services; CYH shares jump after Q4 EPS/revs handily top views (46c/$4.47B vs. 13c/$4.39B) – also upgraded at Mizuho; other hospital names moved in reaction with THC, LPNT, UHS moving; HSIC shares rally behind Q4 sales beat and backs year view

 

Industrials & Materials
  • Industrial & Machinery; MTOR upgraded to overweight at KeyBanc saying latest CapEx analysis suggests that market expectations are set too low; new 52-week highs for CMI
  • Transports; WAB falls after Q4 results miss and says sees Q1 similar to prior quarter; CSX announced a shakeup in management; UPS announced it tested a drone that can deliver a package from a package car as the driver makes other deliveries; AAL begins selling basic economy fares in 9 U.S. cities
  • Metals & Mining; FCX shares fell, downgraded to sell at Deutsche Bank on failed Indonesia talks/FCX said 1Q production at PT Freeport Indonesia (PT-FI) adversely impacted by suspension of concentrate exports, temporary outage since Jan. 19 at PT Smelting; workers at world’s biggest copper mine (BHP) will consider ending a strike by extending their expired contract in about 30 days, according to a union spokesman, Bloomberg reported; gold miner NEM reports tonight
  • Chemicals; TROX said it expected a lighter expected Q4 loss and an agreement to acquire the TiO2 business of privately held chemical and mining Cristal for $1.673B in cash and stock https://goo.gl/uhxK1Q; Separately TROX said Q4 TiO2 sales volumes strongest since 2007 (KOR, CC, HUN active on commentary); WLK shares benefit after quarterly results

 

Technology, Media, & Telecom
  • Internet; VZ and YHOO amended definitive purchase agreement valuing Yahoo at $4.48B, or $350M lower than the previous agreement with deal expected to close in 2Q17 (VZ/YHOO to share certain legal, regulatory liabilities arising from YHOO’s data breaches); AMZN trades to new 52-week highs again today
  • Software & Hardware; AAPL tgt raised to $154 at Morgan Stanley saying analysis of upgraders and switchers suggests China could contribute outsized growth in FY18 (raise FY18 iPhone estimates by 3%)
  • Telecom & Media; LMOS to be bought by private equity fund EQT Infrastructure for $18 per share in cash https://goo.gl/7fs4Yu; ENT CEO and CFO resigned and sees misses SEC filing deadline/sees 2016 revs at low end of range; EIGI falls on Morgan Stanley downgrade; SNI rises in media on earnings results

 

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