Morning Preview: October 31, 2017

Scott GreenDaily Market Report

Early Look
Tuesday, October 31, 17
  
Stock futures are pointing to a higher open, looking to rebound after yesterday’s small pullback from record highs as investors ready themselves for a week of potential market moving news and data. The two-day FOMC policy begins today with a policy decision tomorrow at 2:00 (no changes are expected at this time to rates), while news report indicate President Trump will make his announcement on the next Fed Chair this upcoming Thursday. Small caps underperformed yesterday with the Russell 2000 index falling over 1% as House tax writers are said to be discussing a gradual phase-in for the corporate tax-rate cut. Economic data picks up late week with the monthly jobs report expected Friday morning. Large cap tech extended Friday’s rally ahead of Apple and Facebook earnings this week. The S&P 500 fell -0.3% after hitting all-time high Friday while the Nasdaq holds around record highs. Health-care stocks fell for a sixth day, led by declines in Dow component Merck & Co. after concerns about its cancer drug Keytruda led three analysts to cut their ratings. In Asian markets, The Nikkei Index was unchanged at 22,011, the Shanghai Index gained 3points to finish at 3,393 and the Hang Seng Index fell -90 points to settle at28,245. In Europe, the German DAX was closed at 13,229 for Reformation Day, while the FTSE 100 is up around 25 points at 7,513.
Market Closing Prices Yesterday
·         The S&P 500 Index slipped -8.24 points, or 0.32%, to 2,572.83
·         The Dow Jones Industrial Average fell -85.45 points, or 0.36%, to 23,348.74
·         The Nasdaq Composite dropped -2.30 points, or 0.03%, to 6,698.96
·         The Russell 2000 Index declined -17.42 points, or 1.15% to 1,490.90
 
Events Calendar for Today
·      7:45 AM EST       ICSC Weekly Retail Sales
·      8:30 AM EST       Employment Cost Index (ECI) for Q3…est. 0.7%
·      8:55 AM EST       Johnson/Redbook Weekly Sales
·      9:00 AM EST       S&P CoreLogic’s 20-city index for August…est. 0.40%
·      9:45 AM EST       Chicago PMI for October…est. 60.0
·      10:00 AM EST     Consumer Confidence for October…est. 121.2
·      4:30 PM EST        API Weekly Inventory Data
 
Earnings Calendar
·      Earnings Before the Open: ADM, AET, AKS, AMT, BKU, BNP, BP, CDK, CG, CMI, DBD, ECL, ETN, FIS, GGP, GEO, GWR, HCA, HRS, IIVI, INCY, IPGP, K, KBR, MA, MSM, OSK, PFE, PJT, SERV, SHOO, SHOP, SNE, SSTK, TYPE, UAA, WPP, XYL
·      Earnings After the Close: APC, BBOX, CHKP, CHRW, CXO, DDD, DVN, EA, FISV, FORM, FTR, IPHI, MOBL, PLT, QLYS, RNR, VOYA, VRSK, WFT, X
   
World News
·      The Bank of Japan lowered some of its price forecasts and left policy unchanged. The BOJ voted 8-1 to keep its short- and long-term interest rates unchanged as it continues to inject huge amounts of cash into the financial sector in the hope of reaching its 2% inflation goal
·      China’s official nonmanufacturing purchasing managers’ index (PMI), a measure of activity outside of factory gates, fell to 54.3 in October from 55.4 in September, the National Bureau of Statistics said. The sub index for services dropped to 53.5 from 54.4 in September while the sub index for construction decreased to 58.5 from 61.1, the bureau said
·      The Bank of England is using the 75,000 number as a “reasonable scenario,” particularly if Britain crashes out of the EU without a trade deal, the BBC reported on Tuesday
·      The European Union’s statistics agency said the eurozone’s gross domestic product grew by 0.6% in the three months to September, a slowdown from the 0.7% growth rate recorded in the three months through June. Compared with the same period a year earlier, GDP was up by 2.5%
 
Sector News Breakdown
Consumer
·      Mondelez (MDLZ) Q3 EPS 57c/$6.53B vs. est. 54c/$6.45B; now expects organic net revenue growth to be approximately 1% given the larger than expected impact from the malware incident; still expects adjusted operating income margin in the mid-16% range and double-digit adjusted EPS growth on a constant-currency basis; Q3 organic revs 2.8% and margins 39.5%
·      Rent-A-Center (RCII) shares rise 6%; announced that its board has initiated a process to explore strategic and financial alternatives
·      Burlington Stores (BURL) raises Q3 adjusted EPS view to 64c-66c from 58c-61c (est. 62c) and raises Q3 revenue growth view to roughly 7.1% from 6.7%-7.7%; raises Q3 comp sales growth view to roughly 3.1% from 2%-3%
·      Chegg (CHGG) Q3 EPS loss (11c)/$62.64M vs. est. loss (1c)/$57.76M; sees 4Q revenue $70M-$71M vs. est. $66.3M
·      Nautilus (NLS) shares fell -9%; Q3 EPS 27c/$88.1M vs. est. 24c/$91.85M; sees FY17 revenue $405M-$410M below consensus $427.95M
·      Texas Roadhouse (TXRH) Q3 EPS 43c/$540.5M vs. est. 43c/$538.25M; Q3 comparable restaurant sales increase of 4.5% at company restaurants and 4.7% at domestic franchise restaurants; sees positive comparable restaurant sales growth for FY18
·      Trex Company (TREX) Q3 EPS 68c/$140M vs. est. 55c/$125.13M; sees Q4 revs about $118M (in-line); sees FY17 consolidated revenue growth of 17% vs. est. $546.38M
·      TrueBlue (TBI) Q3 EPS 60c/$661M vs. est. 58c/$651.9M; sees Q4 adjusted EPS 45c-50c on revs $660M-$675M vs. est. 48c/$679.83M
 
Energy
·      Advanced Energy (AEIS) Q3 EPS $1.19/$176.6M vs. est. $1.17/$165.8M; sees Q4 EPS $1.15-$1.25 on revs $172M-$182M vs. est. $1.17/$168.7M
·      BP PLC (BP) reported a healthy set of Q3 profits and plans to restart its share-buyback program
·      Arch Coal (ARCH) Q3 EPS $2.83 vs. est. $1.31; Q3 Ebitda $104.3M and reports $200M share buyback
·      CONSOL Energy (CNX) says board has given final approval of the separation into two publicly-traded companies, coal and natural gas exploration and production; increases share repurchase program to $450M
·      Edison International (EIX) Q3 EPS $1.44/$3.67B vs. est. $1.33/$3.57B; raises 2017 EPS outlook to $4.27-$4.37 from $4.13-$4.33 (est. $4.23) citing the continued strong performance at SCE and tax benefits we have received throughout the year
·      Noble Energy (NBL) Q3 EPS loss (2c)/$960M vs. est. loss (13c)/$945.5M; quarterly sales volumes averaged 355 MBoe/d, up 10 MBoe/d from the midpoint of the company’s original guidance range, on capital expenditures of $633 million
 
Financials
·      Alexandria Real Estate (ARE) Q3 FFO $1.51/$285.4M vs. est. $1.51/$285.3M; sees FY AFFO per share $6.01-$6.03 vs. estimate $6.03
·      AvalonBay (AVB) Q3 FFO $2.19/$550.5M vs. est. $2.17/$540.3M; narrows its core FFO/share forecast for the full year to $8.58-$8.64 from $8.50-$8.70 (est. $8.56) and sees Q4 FFO $2.21-$2.27 vs. est. $2.25
·      Brixmor Property Group (BRX) now sees 2017 same-property NOI growth of 2.0%–2.5% vs its prior forecast of 2.0%-3.0%, and now sees 2017 FFO/share of $2.05-$2.09 vs. prior forecast of $2.05-$2.12 (est. $2.10)
·      Corporate Office Properties (OFC) 8M share Spot Secondary priced at $31.00
·      Credit Acceptance (CACC) Q3 EPS $5.43/$283.9M vs. est. $5.01/$280.6M; 3Q consumer loan unit volume down -4.7%
·      CyrusOne (CONE) Q3 FFO 79c/$175.3M vs. est. 76c/$177.4M; raises FY17 normalized FFO view to $3.05-$3.10 from $3.00-$3.10 and raises FY17 revenue view to $670M-$677M from $666M-$681M, consensus $676.09M
·      Everest Re (RE) Q3 EPS loss ($15.73) vs. est. loss ($15.99) and said as previously announced, third quarter results included catastrophe losses, net of reinstatement premiums, of $1.2B for hurricanes Harvey, Irma, Maria and the Mexico City earthquake
·      Macerich (MAC) Q3 FFO 96c vs. est. 98c; sees FY FFO/share $3.90-$4.00 vs. est. $3.96
·      Stifel Financial (SF) Q3 EPS 89c/$721.2M vs. est. 83c/$701.1M
·      Sunstone forecast (SHO) Q3 FFO 31c/$303.9M vs. est. 30c/$299.9m; sees FY AFFO per share $1.18-$1.20, vs. est. $1.20
 
Healthcare
·      Aetna (AET) Q3 EPS $2.45/$14.95B vs. est. $2.09/$15.13B; Medical membership totaled 22.2M at September 30; raises FY17 adjusted EPS view to approximately $9.75 from prior $9.45-$9.55 (est. $9.50)
·      Pfizer (PFE) Q3 EPS 67c/$131.7B vs. est. 65c; raises mid-point of year EPS view by 3c
·      Exact Sciences (EXAS) shares rose 5%; reports 3Q EPS loss (23c)/$726M vs. est. (30c)/$65.1M; raised 2017 revenue view to $254M-257M from prior $230M-$240M (est. $244.6M) and now sees 568,000-572,000 completed Cologuard tests during 2017, had seen at least 550,000
·      Exactech (EXAC) Q3 EPS 20c/$61.4M vs. est. 23c/$61.78M; gross margins increased to 70.3% from 68.7% YoY
·      Teva Pharmaceutical Industries (TEVA) announced that Kundefinedre Schultz will join the company as President and CEO, effective November 1, 2017
·      Voyager Therapeutics (VYGR) shares fell -9% after the company announced that Sanofi Genzyme (SNY) decided not to exercise its rights to the VY-AADC program for advanced Parkinson’s disease
 
Industrials & Materials
·      Allison Transmission (ALSN) shares gained 3%; Q3 EPS 75c/$595M vs. est. 49c/$533.49M; sees FY17 revenue up 21%-22% over last year and see FY17 Adjusted EBITDA margin 37.75%-38.75%; adjusted Free Cash Flow $510M-$530M, capital expenditures $90M-$95M; does not expect Q4 net sales to increase
·      Eaton (ETN) Q3 EPS $1.25/$5.21B vs. est. $1.25/$5.12B; narrows FY17 operating EPS to $4.55-$4.65 from prior $4.50-$4.70 (est. $4.59)
·      Olin (OLN) Q3 EPS 31c/$1.55B vs. est. 37c/$1.58B
 
Technology, Media & Telecom
·      SoftBank Group Corp., concerned about giving up control of Sprint Corp. (S), is abandoning its efforts to merge the U.S. wireless carrier with T-Mobile US Inc. (TMUS),according to people familiar with the matter. SoftBank, which controls more than 80% of Sprint, has been in negotiations for months with T-Mobile’s parent Deutsche Telekom AG about combining the two U.S. cellular providers https://goo.gl/a6SYgV
·      Semiconductor equipment manufacturers such as Applied Materials (AMAT) and KLA-Tencor (KLAC) may rally after Samsung said it plans to almost double capital expenditures in 2017 with much of fourth-quarter spending directed to the semiconductor business. Samsung said it will make a substantial portion of 4Q investments in the semiconductor business to build infrastructure related to new sites and clean rooms
·      Qualcomm (QCOM) shares fall after the WSJ reported that Apple (AAPL) is designing iPhones, iPads that would drop Qualcomm components https://goo.gl/EFzVuG
·      Advertising stocks with another weak earnings report, as WPP Group (WPPGY) reported a 1.1% rise in turnover for Q3, and said it expects like-for-like revenue and net sales growth to be broadly flat for the year as a whole (watch IPG and OMC)
·      Sanmina (SANM) shares fell -8%; Q4 EPS 64c/$1.76B vs. est. 76c/$1.75B; sees Q1 adjusted EPS 68c-74c on revs $1.75B-$1.8B vs. est. 78c/$1.76B
·      Amkor Technology (AMKR) shares fell -5%; Q3 EPS 23c/$1.135B vs. est. 20c/$1.08B; sees Q4 EPS 14c-23c on revs $1.05B-$1.13B vs. est. 24c/$1.1B
·      Apptio (APTI) Q3 EPS loss (2c)/$47M vs. est. loss (10c)/$44.92M; Q3 non-GAAP gross margin improved to 72%, as compared to non-GAAP gross margin of 67% YoY; sees Q4 revenue $49.5M-$50M vs. est. $48.5M
·      Cognex (CGNX) Q3 EPS $1.14/$259.74M vs. est. $1.04/$256.38M; sees Q4 revenue $170M-$180M vs. est. $152.49M saying the range represents a decline from Q3-17 due to the timing of large orders from the consumer electronics industry, but represents expected growth exceeding 30% year-on-year; raises quarterly dividend 6% to 9c per share, approves 2-for-1 stock split
·      Harmonic (HLIT) Q3 EPS loss (19c)/$92M vs. est. loss (8c)/$85.63M; sees FY17 non-GAAP EPS (38c)-(29c) on revs $348.0M-$358.0M vs. est. loss (42c) and $347.65M
·      Integrated Device (IDTI) Q2 EPS 35c/$204.4M vs. est. 34c/$201.1M; sees exceeding FY18 revenue target of $830M vs. est. $827.91
·      SBA Communications (SBAC) Q3 FFO $1.75/$433.9M vs. est. $1.74/$431.6M; raises FY AFFO/share $6.82-$7.01 (vs. prior $6.75-$7.04) on revs $1.71B-$1.73B vs. est. $6.97/$1.72B
·      MDC Partners (MDCA) Q3 EPS 24c/$375.8M vs. est. 12c/$372.04M; sees FY17 organic revenue growth approximately 7%
·      Unisys (UIS) Q3 adjusted EPS 29c/$666M vs. est. 27c/$635.3M; reaffirms year guidance
 
 
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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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