Mid Day Outlook: October 24, 2017

Regal HelpdeskDaily Market Report

Mid-Morning Look
Tuesday, October 24, 17
U.S. stocks higher again, erasing yesterday’s brief one-day pullback, as the Dow Industrials surge to another record high, followed by small gains in the S&P and NASDAQ following earnings. The Dow touches a fresh life-time high (after having its 7-day win streak snapped yesterday) led by earnings from several components, with CAT surging on a beat and raise quarter and MMM also providing a boost to the index on better guidance. Financials getting a boost, led by strength in banks as bond yields rise/increasing expectations of higher rates/tax reform (JPM tops $100 per share). Technology stocks underperformed early, but the NASDAQ has since traded to its best levels of the day topping 6,600 ahead of a busy week of large cap earnings the next few days. The dollar is mixed, oil is higher and defensive/safe-haven assets such as gold and bonds slip on stock strength.
 
Treasuries, Currencies and Commodities
·      In currency markets, the U.S. dollar index (DXY) is down slightly, trading under the 94 level, though mostly steady against major rivals, with the euro not finding much action after economic data overnight and ahead of the ECB meeting later this week; bitcoin prices down over 4%
·      Commodity prices; precious metals down slightly, with gold back below the $1,280 an ounce level as investors sell defensive assets with stocks rising; oil prices steady, with WTI crude holding above the $52 per barrel level ahead of API inventory data tonight
·      Treasury market’s slide as the yield on the benchmark 10-year Treasury climbed to the highest level since mid-May (above 2.41%) as stocks surge and on growing expectations that corporate tax cuts may be on the horizon
 
Economic Data
·      Markit Flash Composite PMI for Oct 55.7 vs. 54.8 in Sept and vs. year ago 54.9 (marked the highest reading since Jan. 2017); new orders fall to 54.3 vs 55.6 in Sept.; flash manufacturing PMI rose to 54.5 this month and hit a nine-month high
·      Richmond Fed’s Oct. Manufacturing Survey reported at 12, below est. for reading of 17 and was below last month’s 19; shipments fell to 9 after 22 the prior month, while new order volume slowed to 17 after 20 the prior month and order backlogs fell to 7 after 8 the prior month
 
Sector Movers Today
·      Autos movers; GM reports strong Q3 results, ahead of consensus, on continued strength in North America (EPS 20c beat on $33.6B in revs); FCAU Q3 beat and confirmed its full-year revenue, adj. EBIT and adj. net profit guidance; in auto retail, ABGreports Q3 EPS and sales miss citing impact from hurricanes; MNRO Q2 EPS missed by 2c and lowered its FY17 EPS view
·      Banks; group broadly higher as bond yields rise/increasing expectations of higher rates/tax reform; JPM tops $%100 per share; several regional banks out with earnings; RF reported an in-line Q3 with operating earnings of $550M impacted by lower fees and boosted by lower expenses; ZION in-line EPS and NIM but higher operating expenses; FITB avg. portfolio loan and lease balances were flat q/q, and down $1.6B y/y; FRC 2.5M share secondary priced at $97.30
·      Housing, Home Furnishings, and Building Products; WHR reporting disappointing 3Q results and cutting its 2017 EPS forecast for a 3rd time and said is no longer providing SHLD with most appliances; homebuilder PHM Q3 profit edges past estimates as prices, sales rise; building products maker MAS Q3 EPS missed by 2c on slight revenue miss; SWK active on earnings beat and raised guidance by over 1% for the year; in furniture, HNI shares plunge after cutting its 2017 outlook after lowering its view in June and July, while KNL Q3 EPS and revs topped views saying Q3 was “an important inflection point” as sales stabilized (shares of MLHR also active on reports)
·      Brokers, Asset managers; AMTD with weaker Q4 operating income of $444M as EPS missed by 7c, driven by lower commissions $330M and higher expenses; WDR Q3 operating revs beat but cut its dividend to 25c from 46c
·      Machinery; Dow component CAT rises as Q3 EPS and revenue handily beat estimates and the company also boosted revenue and earnings forecast for the year (now sees year EPS about $6.25 vs. prior view of $5.00 and estimate $5.24); PCAR Q3 EPS/sales topped views
·      Industrials and Multi Industry; Dow component UTX boosted its 2017 forecast for the 2nd straight quarter while posted the strongest organic growth since 2011; Dow component MMM boosts its full-year earnings view and 3Q profit and sales top estimates; HUBB, PNR also reported earnings
 
Stock GAINERS
·      ALXN +2%; FDA approved its Soliris (eculizumab) for the treatment of adults with gMG
·      CAT +5%; Dow component rises as Q3 EPS and revenue handily beat estimates and the company also boosted revenue and earnings forecast for the year
·      CLB +5%; earnings related
·      CONN +10%; provided 3Q update showing improvements in its credit business gain traction
·      GLW +6%; Q3 core EPS and sales both top consensus views
·      GPK +5%; agreed to combine with IP’s North American consumer packaging unit
·      HMNY +9%; said its subscriber base has surpassed 600,000 members; two months ago the company lowered the price of its subscription to $10 a month from as much as $50
·      MMM +5%; boosts its full-year earnings view and 3Q profit and sales top estimates
·      PEB +4%; 3Q AFFO topped expectations and it raised the low end of its annual AFFO guidance
·      PII +14%; Q3 EPS/sales top views/raise guidance as off-road vehicle sales rise in the mid-teens
·      PTIE +65%; announces successful Phase I clinical study for PTI-125
 
Stock LAGGARDS
·      BIIB -6%; beat on both the top and bottom line but U.S. Spinraza sales were sequentially flat
·      CNC -5%; Q3 beat but midpoint of guidance below estimates
·      CVLT -9%; Q2 software revenue came up short—$72.0M vs consensus of $78.8M—and only grew 2% YoY while EPS missed
·      HNI -19%; after cutting its 2017 outlook after lowering its view in June and July
·      IONS -11%; 3Q U.S. inventory of Spinraza unchanged q/q vs 2Q’s $30M increase QoQ
·      IPG -4%; misses Q3 EPS and revs and said organic revs negatively impacted by broader trends
·      LMT -2%; Q3 EPS and sales both fell short of consensus though boosted its year EPS/sales
·      OI -4%; earnings related
·      WHR -10%; reporting disappointing 3Q results and cutting its 2017 EPS forecast for a 3rd time
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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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