Mid-Morning Look
Thursday, September 28, 17
U.S equities mixed as gains in energy shares were offset by lower technology and industrial shares. Financials and technology shares led yesterday’s gains, but renewed love with the “reflation trade” has the dollar, bond yields, and small-cap stocks have posted a strong month of returns thus far. Volatility remains non-existent as the CBOE Volatility index (VIX) is met with selling pressure every time it sees a little push higher, as traders/investors take any opportunity to pile back into stocks on any pullback (no matter how small). Dow Transports another record high, rising around 0.4% to 9,880, while the Russell 2000 Small caps slide after touching its best all-time level yesterday. Markets showing excitement over potential growth opportunities by new tax proposal plan, while showing no concern about the apparent increased rate hike cycle by the Fed after speakers this week/meeting last week point to one hike this year and three next. Updated GDP revisions come in slightly above consensus, rising 3.1% and topping last quarter’s 1.9% growth, while jobless claims jumped. Several stock movers on earnings, but heavy bulk of next quarter earnings don’t begin for another two-weeks.
Treasuries, Currencies and Commodities
· In currency markets, the dollar slides after several days of gains, falling from more than 1-month highs (traded as high as 93.66 before fading to the 93 level); the greenback has risen in anticipation of the tax reform proposal by the Trump administration, better economic data, and a perceived more hawkish view on interest rates from Fed members this week (Yellen)
· Precious metals little changed, down slightly after marking its lowest settlement since mid-August yesterday given the stronger dollar and rising interest rate hike expectations from the Fed; gold prices down around $1,285 an ounce
· Energy futures holding on to recent gains, with WTI crude holding above $52 per barrel, on track for a stellar month of returns; November natural gas trades at $3.076/mln Btu, up from $3.035 after the EIA reported a smaller weekly natural gas inventory build of 58 bcf vs. est. 67 mln bcf
· Treasury markets mark a third day of declines, with the yield on the 10-yr topping 2.34% earlier before paring gains to around 2.32%; GDP data this morning slightly above views (and better than prior month), raising expectations more for rate hike pace to intensify from the FOMC
Economic Data
· GDP slightly better; the U.S. economy’s pace of growth in Q2 was raised to 3.1% from 3% under the government’s latest revisions to GDP as the value of inventories rose by $5.5B; consumer spending was unchanged at 3.3% after rising 1.9% last quarter, while business investment in structures rose a stronger 7% instead of 6.2%; exports were revised to show a smaller 3.5% gain and imports advanced 1.5%; Core PCE q/q rose 0.9% in 2Q after rising 1.8% prior quarter
· Weekly Jobless Claims rose 12K to 272K (vs. est. 270K), while the 4-week moving average increased by 9,000 to 277,750, marking the highest level in a year and a half; continuing claims fell 45k to 1.934m in the latest week ending
· August advanced trade deficit of goods narrowed to (-$62.9B) from (-$63.9B) in prior month, the Commerce Department said; imports fell 0.3% in Aug. to $191.813B from $192.459B in July and exports rose 0.2% in Aug. to $128.870B from $128.601B in July
Sector Movers Today
· Consumer Staples; Kellogg (K) reaffirmed its 2017 financial guidance; FLO sees $27M-$30M 3Q charge on employee separations;HAIN shares active as reached an agreement with Activist Engaged Capital, and will explore strategic optionshttps://goo.gl/swx9Nh ; MKC Q3 EPS/sales top consensus and guidance comes in above estimates; CAG Q1 top and bottom line results top consensus and reaffirmed forecasts; in research, BF/B was upgraded to neutral at Goldman Sachs saying risk/reward more balanced, while firm added PM to its conviction buy list
· Casino, Lodging & Leisure; towables/RVs higher again after THO quarterly results beat handily as indicate heathy industry trends, a pick up after the hurricane, and tight supply at retail (shares of CWH and WGO also active) – group jumped yesterday behind CWH strength; MTN reports Q4 EPS loss (smaller than views) citing less favorable conditions in Colorado
· Healthcare services and facilities; EVH announced 3 new client relationships and 2 expanded client relationships (CountyCare & New Mexico Health) that SunTrust said will be incremental to 2018 revenue; pharmacy retailer RAD tumbles on weak Q2 sales and revenue and comp sales drop of (-3.4%); names like ABC active after Bernstein said in a note that he sees AMZN most likely to partner with a large pharmacy benefit manager or buy a small one
· Chemicals; SHW said the recent string of hurricanes has disrupted what were strong same-store sales in July and August, and issued a profit warning for Q3 (follows similar comments from PPG earlier in the week); Tudor Pickering said that Trump’s tax plan to provide a boost for chemical companies, but not as impactful as it could have been as it doesn’t include border tax (biggest winner would be WLK, LYB as it would boost NAV by 12% and 7% respectively); FUL EPS miss on hurricane impact, while guidance midpoint lowered; EMN upgraded to buy at Goldman Sachs
Stock GAINERS
· AAAP +11%; Bloomberg reported NVS has approached the company about a deal and held talks about a potential acquisitionhttps://goo.gl/MwYkb8
· ABBV +6%; and AMGN in settlement for commercialization of Amgevita
· BBRY +11%; after earnings and revenues top consensus after record software revenue
· EXA +42%; Dassault Systemes agreed to buy its U.S. peer in a deal valued at about $400M/paying $24.25 per sharehttps://goo.gl/bZKj8J
· HAIN +2%; reached an agreement with Activist Engaged Capital, and will explore strategic options
· MCD +2%; upgraded to buy at Longbow as believe comps trending above consensus
· MKC +5%; Q3 EPS/sales top consensus and guidance comes in above estimates
· SPPI +16%; Jefferies said data from an abstract of poziotinib in NSCLC were very encouraging
· THO +1%; quarterly results beat handily as indicate heathy industry trends
· ZYNE +64%; Fragile X study meets primary endpoint
Stock LAGGARDS
· ANGO -14%; reported a slight miss on revenues and much weaker than expected gross margins which caused a large miss on EPS
· DM -3%; cut to underweight at Morgan as fundamentals largely unchanged yet valuations high
· DXCM -36%; after the FDA announced the approval of ABT’s FreeStyle Libre with a better than expected label and arrived earlier than expected (three analyst downgrades)
· ENDP -9%; as Goldman Sachs initiates as new sell citing long turnaround story
· MTN -3%; reports Q4 EPS loss (smaller than views) citing less favorable conditions in Colorado
· PIR -13%; reported 2Q EPS/revs above consensus on better comps but Q3 guidance is below consensus on negative comps and cut year forecast
· RAD -10%; tumbles on weak Q2 sales and revenue and comp sales drop of (-3.4%)
Syndicate
· Cloudera (CLDR) 13.432M share Secondary priced at $16.45
· Deciphera (DCPH) 7.5M share IPO priced at $17.00
· Intra-Cellular (ITCI) 9.677M share Secondary priced at $15.50
· Nightstar Therapeutics (NITE) 5.36M share IPO priced at $14.00
· NuCana (NCNA) 6.667M share IPO price $15.00
· Roku (ROKU) 15.668M share IPO priced at $14.00
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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.