Morning Preview: January 10, 2018

Scott GreenDaily Market Report

Early Look
Wednesday, January 10, 18
  
Stock futures are lower for a change, as stocks pause following a 6-day run higher to start the year, while bonds tumble taking the yield on the 10-year to 2.59%, topping the prior high of 2.58% in March. After the record runs recently, Wednesday’s pullback was seen as merely a pause in the rally and as traders took the chance to take some profits…or was it a change as yields rise and the dollar tumbles? Also weighing on sentiment, cautious comments from DoubleLine Capital CEO Jeffrey Gundlach last night saying the S&P 500 benchmark “may go up 15% in the first part of the year, but I believe when it falls, it will wipe out the entire gain of the first part of the year and end with a negative sign in front of it.” Though it is noteworthy that Gundlach has made bearish calls on U.S. stocks for more than a year.
 
As for Tuesday, it was another day gains, as all main stock benchmarks closed at records with the S&P 500 notching six consecutive records to kick off a new year. Healthcare and financials led the charge higher as Wall Street closed out Tuesday with a trio of record high amid confidence over the economy on top of optimism over tax cuts have continued to boost investors’ appetite for stocks. Expectations of another strong quarter of corporate earnings are also helping to support demand for equities, with big banks JP Morgan and Wells Fargo kicking off results this Friday. Despite the market gains, the CBOE Volatility Index (VIX) rose 5.6%, climbing above 10 for the 1st time this year.
 
In Asian markets, The Nikkei Index slipped -61 points to settle at 23,788, the Shanghai Index gained 7 to close at 3,421 and the Hang Seng Index rose 62 points to settle at 31,073. In Europe, the German DAX is down around -100 points at 13,280, while the FTSE 100 is flat around the 7,725 level
 
Market Closing Prices Yesterday
·      The S&P 500 Index climbed 3.58 points, or 0.13%, to 2,751.29
·      The Dow Jones Industrial Average rose 102.80 points, or 0.41%, to 25,385.80
·      The Nasdaq Composite gained 6.19 points, or 0.09%, to 7,163.58
·      The Russell 2000 Index declined -1.71 points, or 0.11% to 1,560.10
 
Events Calendar for Today
·      7:00 AM EST       MBA Mortgage Applications Data
·      8:30 AM EST       Import Prices MoM for December…est. 0.4%
·      9:00 AM EST       Fed’s Evans discusses Economy and Policy Outlook
·      10:00 AM EST     Wholesale Inventories MoM, Nov-F…est. 0.7%
·      10:30 AM EST     Weekly DOE Inventory Data
·      1:30 PM EST        Fed’s Bullard Speaks on U.S. Economic Outlook in St. Louis
 
Other Key Events
·      Consumer Electronic Show (CES) 1/8-1/12, in Las Vegas
·      ICR Retail Conference, 1/8-1/10, in Orlando, FL
·      JP Morgan Healthcare Conference, 1/8-1/11 in San Francisco, CA
·      Goldman Sachs Energy Conference, 1/9-1/10, in Miami, FL
·      Citigroup Global TMT West Conference, 1/9-1/10 in Las Vegas
   
World News
·      U.K. manufacturing grew again in November, posting its seventh monthly expansion in a row for the first time on record as factory output grew by 0.4% compared with October, slightly above the expectations of analysts polled for a 0.3% expansion. The monthly figure for October was revised up to 0.3% from 0.1%.
·      The inability of law enforcement authorities to access data from electronic devices due to powerful encryption is an “urgent public safety issue,” FBI Director Christopher Wray said on Tuesday as he sought to renew a contentious debate over privacy and security.
·      Prices for Bitcoin and Ripple coins dropped early Wednesday, while Ether coins continued their rally. Ripple’s ongoing selloff left that cryptocurrency’s market capitalization down by more than 50% from last week’s peak.
·      Investor Intelligence poll shows newsletter writers classified as bull’s rebounds to 64.4%, matching Nov. 8 high, vs 61.9% last week (64.4% is highest since 1987), while bearish sentiment drops to 3 1/2-year low of 13.5% vs 15.2% last week; those looking for a correction tumbles to 22.1% from 22.9%
·      Construction activity in the UK fell at its fastest pace in five years in the three months to November, according to official data
 
Sector News Breakdown
Consumer
·      Nordstrom (JWN) raises the lower end of year EPS to $2.90-$2.95 vs. prior outlook $2.85-$2.95 (est. $2.94); said net sales for nine weeks ended Dec. 30 rose 2.5% YoY; comparable sales for period rose 1.2%; revises FY sales outlook based on holiday results, sees net sales up ~4.2%, including 53rd week, and comparable sales up ~0.5%
·      Lennar (LEN) Q4 EPS $1.29/$3.79B vs. est. $1.48/$3.57B; Q4 deliveries of 8,633 homes, up 5%; Q4 new orders of 7,357 homes were up 12% and Q4 backlog of 8,935 homes was up 17%; says Tax Act to reduce 2018 effective tax rate to about 28% from 34%
·      Supervalu (SVU) Q3 adjusted EPS 61c/$3.94B vs. est. 46c/$3.99B; sees FY18 net ops earnings ($20M)-$2M which includes a non-cash charge of $35M-$45M anticipated to be made in Q4 to reduce the carrying value of Supervalu’s net deferred tax asset in accordance with the newly enacted tax reform legislation
·      D.R. Horton (DHI) said it sees a Q1 charge about $115M to cut deferred tax asset; sees the Tax Act having a favorable effect on its FY18 results; lowers FY18 effective tax rate estimate to about 26%, excluding one-time charge; no other changes to previous FY18 forecast
·      Toyota Motor Corp. (TM) and Mazda Motor Corp. will build a new $1.6B assembly plant in Huntsville, Ala., according to reports in a move that boosts their production capacity in the U.S.
·      WD-40 (WDFC) Q1 EPS 90c on sales $97.6M; forecast earnings per share for the full year of $3.91 to $3.98 and FY net sales $396M-$403M
·      Domino’s Pizza Inc. (DPZ) said President and Chief Executive J. Patrick Doyle will leave the company June 30, to be succeeded by Richard Allison, president of Domino’s International.
 
Energy
·      The American Petroleum Institute (API) reported that U.S. crude supplies dropped by 11.2 million barrels for the week ended Jan. 5; showed a rise of 4.3 million barrels in gasoline stockpiles, while inventories of distillates climbed by 4.7 million barrels
·      Pioneer Natural Resources (PXD) sees tax rate change to result in a noncash decrease to the company’s income tax provision of approximately $600 million for the quarter
·      Repsol (REPYY) is considering selling its 20% stake in local utility Gas Natural, and has been contacted by private equity group CVC about a possible deal, the company said
 
Financials
·      Trust Banks BNY Mellon (BK) and State Street (STT) upgraded to buy at Citi as digital transformation is likely to gain importance over the next several years, with winners and losers among U.S. banks determined by digital capabilities
·      Cohen & Steers (CNS) preliminary assets under management (AUM) decreases $466M from Nov. 30, 2017 to $62.1B citing distributions of $757M, partially offset by market appreciation of $269M, net inflows of $22M
 
Healthcare
·      Alkermes (ALKS) sees FY 2017 revenue $870M-$900M up from prior view $850M-$880M; sees FY 2017 adj. EPS 3c-22c
·      Tandem Diabetes Care (TNDM) sees Q4 sales $39M-$40M above est. $34.2M; sees 2018 non-GAAP sales up about 29%-39%; had about $24.2M in cash, cash equivalents, short-term investments and restricted cash
 
Industrial & Materials:
·      United Airlines (UAL) December traffic up 2.7%, and capacity up 3.7%; also says it expects 4Q consolidated passenger unit revenue to be about flat compared to 4Q 2016; sees Q4 consolidated capacity up 4% from prior view of up 3.5%
·      Deere (DE) upgraded to Outperform from Sector Perform at RBC Capital
·      MSC Industrial (MSM) Q1 EPS $1.05/$768.6M vs. est. $1.06/$770.57M; sees Q2 net sales $761M-$765M vs. est. $774.6M and sees Q2 EPS $1.00-$1.04 vs. est. $1.03
 
Technology, Media & Telecom
·      SYNNEX (SNX) Q4 EPS $2.79/$5.31B vs. est. $2.68/$4.86B; sees Q1 adjusted EPS $2.06-$2.15 on revenue $4.35B-$4.55B vs. est. $2.10/$4.28B; tax rate is expected to be in the range of 30%-31%; raises quarterly dividend 17% to 35c per share
·      Voxx International (VOXX) Q3 EPS 35c on revs $156.6M; Q3 Premium Audio revenue $57.4M and Q3 Consumer Accessories revenue $58.5M
·      VeriSign (VRSN) said U.S. Department of Justice had requested certain material related to the Company becoming the registry operator for the .web gTLD, and was told Jan. 9 investigation is closed
 

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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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