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Stocks

Riding a Seesaw


Selling into strength?  Yeah, that didn't happen yesterday.  The stock market started strong and stayed strong.  Reportedly, participants were enthused by the House GOP passing its tax bill, which just about everyone knew was going to happen on Wednesday when the stock market had a bad day.

The seesaw action made at least one thing clear to us:  the market reaction will not be good if the House and Senate fail to reconcile their bills and don't get a tax deal done.

Call Wednesday a warning shot, then, and Thursday a hot-shot move for the bulls who are not ready to release their hold over the stock market.

The default belief continues to be that a tax deal of some kind will get done soon.  On a related note, the Senate Finance Committee approved its tax plan approach in a partly-line vote, setting it up for consideration on the Senate floor the week after Thanksgiving.

That can be considered progress in the tax reform effort, yet the futures market, in its inimitable way, looks unimpressed this morning by that development.

The S&P futures are down two points, the Nasdaq 100 futures are up four points, and the Dow Jones Industrial Average futures are down 45 points.

It's a surprisingly lackluster indication considering a number of retailers, including Gap (GPS), Foot Locker (FL), Abercrombie & Fitch (ANF), Ross Stores (ROST), and Hibbett Sports (HIBB), reported positive earnings and/or sales surprises, Applied Materials (AMAT) exceeded sales and earnings expectations, Comcast (CMCSA) and Verizon (VZ) are reportedly interested in acquiring assets from Twenty-First Century Fox (FOXA), and the Housing Starts and Building Permits report for October blew past economists' average estimates.

In other words, many of the same factors driving yesterday's broad-based rally are in play again today, yet the response has been exceptionally neutral from a broad market standpoint.

Perhaps the trading attitude changes before the close, but one can reasonably assume not to expect much when the market opens.

In terms of the economic data, housing starts surged 13.7% month-over-month to a seasonally adjusted annual rate of 1.29 million (Briefing.com consensus 1.198 million) while building permits increased 5.9% to a seasonally adjusted annual rate of 1.297 million.

Those were the strongest readings for starts and permits since the beginning of the year and they were fueled by large increases for multi-unit dwellings.  Still, there was some strength in single-family units as well, with single-family starts up 5.3% and single-family permits up 1.9%.

The key takeaway from the report is that it will be a positive input for fourth quarter GDP forecasts as the number of units under construction --1.096 million -- was slightly ahead of the third quarter average of 1.077 million.

Strikingly, the Treasury market has not distanced itself from the curve flattening trade.  In the wake of the report, the 2-yr note yield is up three basis points to 1.73% while the 10-yr note yield is unchanged at 2.36%. 

The flattening is somewhat thematic this morning in the sense that the stock market should start today's session on a flattish note.

--Patrick J. O'Hare, Briefing.com


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Stocks

The Hammerstone Report - Mid-Morning Look


U.S. stocks open lower, putting weekly gains for the S&P 500 and Dow at risk, though the Nasdaq is still on track to post a weekly gain. The market focus this week has swirled around the developments surrounding the Republican tax cut plan in Washington (now on the Senate, after the House of Representatives passed bill to overhaul the tax code yesterday) along with earnings. Retailer resurgence is also a hot topic after Dow component WMT handily topped results yesterday, lifting the sector while results overnight and this morning from ANF, GPS, FL, HIBB, SCVL, ROST extend those gains. Technology was boosted by better earnings out of AMAT and SPLK, which followed a beat/raise by CSCO yesterday, pushing the Nasdaq Composite to record highs late yesterday. Volumes will likely dry up next week given the abbreviated holiday week and with earnings now in the “rear-view” mirror. Stocks have extended losses, now trading near the lows of the session.

Treasuries, Currencies and Commodities

  • Bonds mixed as long-dated Treasury yields dropped; short-dated yields rose as the December FOMC meeting still expects to yield a 25-bps hike; the 10-year Treasury note yield fell to 2.344%, from 2.361% late Thursday, while the 2-year note yield rose to 1.721%, from 1.71%
  • The U.S. dollar dropped following a report overnight that U.S. special counsel Robert Mueller’s probe into Russian election interference has made its first official order for information connected to President Donald Trump’s campaign; the buck reversed some of the gains yesterday after the House voted in favor of the Republican-led U.S. tax overhaul (next to Senate). The dollar index is down slightly, on track for 2nd weekly decline
  • Commodity prices; sector is broadly higher, led by more than 2% gains in crude and a jump in precious metals, helped greatly by a decline in the U.S. dollar

Stock GAINERS

  • ANF +27%; quarterly results beat, helped by surprise sales growth at Hollister unit
  • FL +25%; as Q3 results handily topped consensus estimates
  • GPS+8%; reported better earnings as comps surprised to the upside at +1% for core Gap
  • FOXA +3%; was reported that CMCSA has approached FOXA to express interest in buying a substantial piece of the company’s business. CMCSA is interested in assets like those DIS pursued when it recently held talks with FOX https://goo.gl/awvU53
  • JASO +6%; agreed to be taken private by an investor consortium in an all-cash deal with an equity value of about $362.1M, or $7.55 per ADS share https://goo.gl/bn8jh5
  • SPLK +17%; strong quarter, with revenue and billings both coming in well ahead of consensus estimates and with a FY revenue guidance raise/also license revenue growth continues
  • TSLA +2%; launched its Semi tractor-trailer and said JBHT has already ordered multiple tractors

 

Stock LAGGARDS

  • CHRW -2%; another name seen hurt by the TSLA news
  • CMI -3%; tumbled after TSLA’s unveiling of its new electric-powered Semi truck
  • EA -3%; suspended micropayments on its highly anticipated new video game "Star Wars: Battlefront II” given pushback from fans
  • HOG -3%; mentioned cautiously at UBS saying they may post lower shipments in 4Q
  • WSM -11%; downgraded at JP Morgan to underweight following mixed results, lower margins

Syndicate:

  • Bluegreen Vacations (BXG) 6.5M share IPO priced at $14.00
  • SailPoint Technologies (SAIL) 20M share IPO priced at $12.00
  • scPharmaceuticals (SCPH) 6.4M share IPO priced at $14.00
  • Sterling Bancorp (SBT) 15M share IPO priced at $12.00
  • Stitch Fix (SFIX) 8M share IPO priced at $15 per share, lower than the $18 to $20 range that the company originally expected

 

The content of this post was created by the Hammerstone Group. The Hammerstone Institutional Forum, a chat-based platform for traders, provides subscribers with up-to-the-minute breaking news headlines and instant analysis that drive the market. For more information please visit www.thehammerstone.com. For more information on the stocks mentioned in the Hammerstone Recap, please contact Brian Ducey at brian@thehammerstone.com.

This article is from the Hammerstone Group and is being posted with the Hammerstone Group's permission. The views expressed in this article are solely those of the author and/or the Hammerstone Group and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


15397




Stocks

Technical Take: XRT Driven Higher by Stronger Retail Earnings


The S&P Retail ETF (ticker XRT) is today’s top performing industry with a gain of +2.4% after a host of retailers issued better than expected earnings reports.  The opening spike carried the XRT well past its 200-day sma, but it ran into a wall of supply at a six-month resistance zone in the $41.70 - $42 range.  This resistance zone could be the neckline of an inverse head & shoulders bottoming pattern.  The size of the pattern projects a measured move to $45.75, +10% from last sale.  Retail has been one of the worst performing industries in 2017, and today’s gains leaves the XRT with a YTD decline of (5.7%).  Yet the hallmark of this bull market has been sector rotation, and retail could be one of the next leaders if the XRT can breakout through $41.70 - $42. 

Nasdaq's Market Intelligence Desk (MID) Team includes: 

Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.

Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading.

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Brian Joyce, CMT has 16 years of trading desk experience. Prior to joining Nasdaq Brian executed equity orders and provided trading ideas to institutional clients. He also contributed technical analysis to a fundamental research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Airline companies among others understand the trading in their stock. Brian is a Chartered Market Technician.

This article is from Nasdaq and is being posted with Nasdaq’s permission. The views expressed in this article are solely those of the author and/or Nasdaq and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Stocks

Nasdaq Market Intelligence Desk - Equity Market Insight November 17, 2017


As of 11:09 AM ET:

NASDAQ Composite -0.09% Dow -0.35% S&P 500 -0.18% Russell 2000 -0.13%

NASDAQ Advancers: 1079 Decliners: 1319

Today’s Volume (100 day avg) +22.20%

 

Yesterday’s Tax bill announcement and strong quarterly results in the Retail space do not appear to be enough to pull the bulls in the market this morning. The Dow and S&P 500 are ticking towards the 2nd consecutive weekly decline, a streak the large-cap indices haven’t seen since August. Conversely, the Russell 2000 will likely post its best weekly performance since 10/6. The calendar today is dominated by housing related indicators with some Fed Speak mixed in.

  • Housing starts rose to the highest level in a year, increasing 13.7% in October to a seasonally adjusted annualized rate of 1.290 million units in October (consensus: 1.198 million), up from a revised 1.135 million units in September. Building permits increased 5.9% to 1.297 million in October. It appears that the impact on the data series caused by the hurricanes in the southeast should be behind us but given the wide portion of the region that is still struggling to get essential services restored it could still be a while until that data is free of noise. This must be taken into account at the Fed as they try to prepare for the December meeting on rates.  We will get a window into some of their thinking on the matter when the November meeting minutes are released next Wednesday. 
  • The Republican’s passage of the $1.5 trillion tax overhaul through the House yesterday was a positive event. Investors will continue to track developments as we wait on the Senate to bring their version to a vote, which is expected to happen just after the Thanksgiving holiday. 

Nasdaq welcomes three IPOs today: Stitch Fix (Ticker: SFIX), an online subscription and personal shopping platform, which priced 8 million shares at $15, scPharmaceuticals Inc. (Ticker: SCPH), a pharmaceutical company, which raised 6.4 million shares at $14 , and Sterling Bancorp, Inc., a bank out of Michigan, which raised 12 million shares at $15. Congratulations and welcome to the family!

 

Nasdaq's Market Intelligence Desk (MID) Team includes: 

Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.

Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading.

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Brian Joyce, CMT has 16 years of trading desk experience. Prior to joining Nasdaq Brian executed equity orders and provided trading ideas to institutional clients. He also contributed technical analysis to a fundamental research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Airline companies among others understand the trading in their stock. Brian is a Chartered Market Technician.

This article is from Nasdaq and is being posted with Nasdaq’s permission. The views expressed in this article are solely those of the author and/or Nasdaq and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


15398




Options

Wal-Mart Ready to Rumble With Amazon


Oh, ye of little Wal-Mart Stores faith, who fear Amazon.com’s fire and brimstone.

On Thursday morning, Wal-Mart Stores (ticker: WMT) reported extraordinary fiscal third-quarter earnings, and raised financial guidance.

These results should be viewed as a resounding confirmation that the king of traditional retail has what it takes to fiercely compete with the king of online retail (AMZN).

Wal-Mart’s stock is up 8.4% in midday trading Thursday, creating conditions that require taking profits on our earnings trade, and repositioning for the stock to trade even higher.

With shares around $95, investors can sell Wal-Mart’s March $92.50 put and buy the March $95 call for a net cost of $1.05. The risk reversal – that is selling a put and buying a call with a higher strike price but similar expiration – obligates investors to buy the stock if it declines below the $92.50 strike, while enabling them to participate in any rallies above $95.

The March expiration was chosen to cover the Feb. 20 release of fourth-quarter earnings. The trade also benefits if holiday sales are good, which should enable the stock to consolidate its recent gains. So far this year, Wal-Mart is up 39%. Over the past 52 weeks, the stock has traded from $65.28 to $96.02.

When the stock was at $78, we recommended investors sell the November $77.50 for $2.03, and buy the November $80 call for $1.81. The puts are now worthless, and the call is trading around $15.75.

 

Steven M. Sears is a Senior Editor and Columnist with Barron's. He is the author of "The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails." Mr. Sears previously reported for Dow Jones Newswires and The Wall Street Journal. He has reported upon most major modern financial events, including the Asian Contagion, the bursting of the Internet Bubble, the Credit Crisis, and Europe's sovereign debt crisis. He also was part of exchange executive teams that modernized the U.S. options market, and introduced electronic trading. Interact with him on Twitter @sm_sears.

Get investing analysis that moves stocks and markets—Subscribe to Barron’s for just $1 a week.

This article is from Barron's and is being posted with Barron’s permission. The views expressed in this article are solely those of the author and/or Barron's and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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