Mid-Day Outlook: March 23rd, 2017

eOptionDaily Market Report

Equities in a holding pattern, trading little changed after stabilizing on Wednesday ahead of a key vote on U.S. health care later today that could be a set the stage for future Trump administration policies (tax reform, regulation and infrastructure spending). U.S. legislators in the House are scheduled to vote on repealing and replacing the Affordable Care Act (Obamacare), news that has many investors on edge, but may decide to postpone the vote if not enough Republicans support the bill (Democrats all against bill, while Republicans are split). Seeing early gains in recently beaten up financials (banks have fallen since last Wednesday after FOMC comments/bond strength which has weakened yields), while defensive healthcare lower early. Auto industry gets profit warnings from Ford (F) which guides earnings below views. Commodity prices are a little lower as dollar pares recent losses.

Treasuries, Currencies and Commodities

  • In currency markets, the U.S. dollar was mixed on Thursday after several days of weakness, falling vs. the yen (below 111 level to 4-month lows) and the pound (which rose above the 1.25 level) amid heightened uncertainty about the future of the health-care legislation. The euro however was slightly lower after recently touching 7-week highs vs. the USD.
  • Commodity prices; precious metals little changed, coming into the day with a 5-day win streak on dollar weakness, holding around $1,250 an ounce; oil prices a little lower after bearish inventory data yesterday (rig data tomorrow), down around November lows
  • Treasury markets little changed, as yield on the 10-year remains around 2.4% (down from 2-yr highs of 2.61% just last week); economic data mixed today (jobless claims rise, housing better), but all eyes on healthcare bill vote later today by House

 

Economic Data

  • Weekly Jobless Claims rise 15k to 258k (a 7-week high) and above est. of 240k (prior week claims revised up to 243k from 241k); the four-week claims average rises 1,000 to 240,000; continuing claims fell 39k to 2.000m in the week ending March 11; no states were estimated last week
  • New Home Sales for Feb rose 6.1% to 592K, well above the 564K est., the previous three months’ new home sales data revised down 4K; median new home price fell 4.9% YoY to $296,200; said 18% of new homes sold in Feb. cost more than $500,000, up from 17% last month; months’ supply at 5.4 in Feb. compared to 5.6 in January

 

Sector Movers Today

  • Dollar stores active; FIVE reported Q4 EPS/sales above consensus views on in-line comps of up 1%, while 1Q guidance better than feared and the long-term growth view intact; in research, Credit Suisse downgraded DG to underperform from neutral calling the company’s long-term algorithm unachievable as increased competition and rising cost pressures should weigh on earnings for some time; CSFB upgraded DLTR to neutral with $73 tgt
  • Consumer Staples; in food, CAG reported mostly in-line Q3 results; WFM initiated with a sell at UBS; in consumer products at RBC, they raised price targets for PEP/CL/KMB/PG as we incorporate special situations into our valuation framework, while says believe KO still has the most upside given the combination of low expectations and early evidence that its many initiatives are working; in tobacco, MO was downgraded at RBC Capital and upped shares of SVU and KR in grocer space to outperform
  • Housing & Building Products; furniture makers SCS and MLHR were both upgraded at Raymond James (notes risk/reward more balanced following the Q3 MLHR report); in housing, KBH to report earnings after the close tonight; BBBY mentioned cautiously by Cleveland Research
  • E&P sector; several changes at UBS as the firm assumes/initiates coverage on many; says group of E&Ps are part of what OPEC has dubbed “green shoots” in the U.S. that are growing oil by 20-25% CAGR over the next 3 years, with growth driven by highly prolific, low-cost shale assets (predominantly the Permian) they upgraded EGN, RSPP, and ECA to Buy and downgrading WLL to Sell…said top picks are PE, WPX, and EGN

 

Stock GAINERS

  • CMC +6%; after quarterly earnings/revs topped consensus
  • FEYE +7%; upgraded to buy from sell at Goldman Sachs and boosts price target to $15 from $10
  • FLXN +22%; Fiercepharma said SNY on verge of $1B-plus deal for co https://goo.gl/82QEfX
  • HTGM +78%; said it obtained CE marking in the European Union for its in vitro diagnostic assay used to measure and analyze gene rearrangements in lung tumor specimens
  • PENN +7%; raises Q1 rev guidance to $770M-$771M vs. est. $759.8M
  • PVH +8%; better results last night as Q4 EPS and sales topped consensus
  • RACE +2%; upgraded to buy at Citigroup, while Morgan Stanley said bull case raised to $100-share

 

Stock LAGGARDS

  • ACN -3%; as Q2 revs of $8.32B misses estimate of $8.34B and lower Q3 rev mid-point guidance
  • CNC -3%; downgraded to neutral at Citigroup
  • CTRN -2%; CEO resigns to pursue another opportunity
  • Ford (F) -1%; guides Q1 EPS 30c-35c, below est. 47c
  • GOOGL -1%; Bank America says advertising controversy raise concerns about 1Q and 2Q results
  • PFPT -3%; cut sell at Goldman saying screens as one of the most expensive stocks in Software
  • RARE -6%; said Phase II study of UX007 in glucose transporter type-1 deficiency syndrome in patients with seizures did not meet primary endpoint
  • ZG -4%; Deutsche Bank said see risk to Zillow estimates if the CFPB cracks down on mortgage co-advertising, which has been a growing source of funds for real estate advertisers on Zillow

 

Syndicate

  • American Homes 4 Rent (AMH) 11M share Spot Secondary priced at $22.80
  • Frank’s International (FI) 5.6M share Block Trade priced at $9.35
  • Heat Biologics (HTBX) 5M share Spot Secondary priced at 80c
  • Keysight Technologies (KEYS) 11.43M share Secondary priced at $35.00
  • La Jolla (LJPC) 3.7M share Secondary priced at $33.50
  • LSC Communications (LKSD) 6.242M share Secondary priced at $20.25
  • Merit Medical (MMSI) 4.5M share Secondary priced at $28.25
  • Orion Engineered (OEC) 5M share Spot Secondary priced at $18.75
  • QuickLogic (QUIK) 11.3M share Secondary priced at $1.50
  • Tandem Diabetes (TNDM) 18M share Secondary priced at $1.25
  • Valeritas (VLRX) 5.25M share Secondary priced at $10.00

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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