>>> After Hours Summary: RH +16%, SGH +18%, NTAP +9%, CSCO +5% foll


After Hours Summary: RH +16%, SGH +18%, NTAP +9%, CSCO +5% following earnings/guidance, PG +2.5% on vote recount news

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: RH +15.8%, SGH +17.8%, NTAP +9.2%, CSCO +5.2%, NTES +2.2%

Companies trading higher in after hours in reaction to news: LEDS +30% (continued strength following earnings), SBPH +11.6% (announces positive top-line results from the second cohort of Part A of the Phase 2 ACHIEVE Trial -- Low dose of Inarigivir Soproxil (50mg) Monotherapy demonstrates a favorable safety profile and significant dose-dependent antiviral activity, meeting both primary endpoints), PG +2.5% (Trian confirms preliminary voting tabulation by independent Inspector of Elections - P&G shareholders have elected Nelson Peltz to P&G's Board), WSM +1.8% (following RH guidance), DG +1.2% (slightly higher in after hours following upgrade to Buy at Deutsche Bank)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: LB -3.8%

Companies trading lower in after hours in reaction to news: AXGN -11.4% (proposes common stock offering includign portion by holders), MRTX -7.5 (commences common stock offering), NCLH -1.5% (Norwegian Cruise Line launches 20 mln ordinary share secondary public offering by certain funds affiliated with Apollo Global), MAT -1.2% (reports that Hasbro's latest proposal has been rebuffed by 

>>> Asian Update

Asia Mid-Session Update: Aussie employment change lower than expected, KRW 13-month higher

***Headlines/Economic Data***
Japan
- As of the time of writing, the Nikkei 225 is higher by over 0.7%, after opening down by 0.2%. Nikkei heavy component Fast Retailing has gained over 0.8%.
-In the technology space, Canon has moved higher following press speculation that it may raise its annual dividend by ~7%. Meanwhile, shares of Softbank have risen by more than 0.9%.
-Casualty insurers are lower amid press speculation that their FY profits may miss forecasts on exposure to hurricanes in the US. USD/JPY has traded steady ahead of the US House vote on its tax bill, expected later on Thursday.
- (JP) Japan GDP seen at 1.6% for FY17 v 1.3% in FY16; lifted by strong exports and businesses investing in labor-saving measures – Nikkei
- (JP) JAPAN Q3 HOUSING LOANS Y/Y: 2.9% V 3.3% PRIOR
- (JP) Japan MoF sells ¥800B v ¥1.0T offered in 0.6% 20-yr JGBS; avg yield 0.573%; bid-to-cover 4.13x
- (JP) Japan PM Abe top economic advisory panel in a draft will suggest they see economy closer to deflation exodus - financial press

Korea
-The Kospi has gained over 0.3%, amid more than 0.5% gains in shares of Samsung Electronics.
-More action has, however, been seen in the currency markets, as the Korean Won has hit the highest level against the US dollar since Oct 2016. On Wednesday, the Bank of Korea and Bank of Canada announced a bilateral currency swap agreement.
-The agreement is expected to have limited direct impact on FX rates, says a Bank of Korea Deputy Gov. Even still, South Korea’s Finance Ministry reiterated that it would closely monitor markets in cases of ‘severe volatility.’
- USD/KRW Onshore opens at KRW1,106 (13-month high) v KRW1,112 prior close

China/Hong Kong
- The Shanghai Composite opened the session -0.3%, while the Hang Seng opened +0.4%. The Information Technology index in Hong Kong has risen by over 1%. Component, Tencent, has gained over 1.7% after reporting better than expected Q3 results.
-The Hang Seng Energy index is trading lower by over -0.1%. Gasoline and diesel prices may be raised in China by as soon as Friday, according to a press report.
- The Hang Seng Property Index is little changed. Banks in China are said to be conducting stress tests related to loans made to the property sector, according to a local press report.
-China Legislature Official Huang said China should levy a property tax as it curbs speculation. China should also reform its FX reserves system and have the MOF play a larger management role, says the official.
-Separately, the PBoC’s Research Head said there could be the risk of a ‘big crisis’ if economic reforms are too slow.
- (CN) China port names moving higher on chatter that China could cut shipping fees
- (CN) China may raise gasoline prices by CNY265/ton and diesel prices by CNY250/ton as of Friday
- USD/CNY (CN) PBOC sets yuan reference rate at 6.6286 v 6.6263 prior
- (CN) China PBoC Open Market Operations (OMO): CNY330B v CNY330B injected in 7, 14 and 63-day reverse repos prior; Net injection CNY310B v CNY220B prior
- (CN) China Oct YTD Outbound Investments $86.3B, -40.9% y/y in USD terms

Australia/New Zealand
- (AU) AUSTRALIA OCT EMPLOYMENT CHANGE: +3.7K V +18.8KE; UNEMPLOYMENT RATE: 5.4% V 5.5%E
- Full-Time Employment Change: 24.3K v +6.1K prior
- Part-Time Employment Change: -20.7K v +13.7K prior
- Participation Rate: 65.1% v 65.2%e
- AUD was little changed after an initial spike higher, little reaction in the bond market
- (AU) Australia Nov Consumer Inflation Expectation y/y: 3.7% v 4.3% prior
- (NZ) New Zealand Nov ANZ Consumer Confidence Index: 123.7 v 126.3 prior; M/M: -2.1% v -2.8% prior (7-month low)
- (NZ) New Zealand sells NZ$200M in Apr 2025 bonds; avg yield 2.6711%

Other Asia
-In the Philippines, the Peso currency and equity markets are moving higher following Q3 GDP data. The y/y figure rose by a better than expected 6.9%.
-The economy is still not overheating, according to the Philippines Central Bank Chief Espenilla.

North America
- (CA) Bank of Canada (BOC) Wilkins: Reason for caution is desire to avoid policy reversal, motivated by lower than expected inflation
- (US) Christie's auction sells last privately held Leonardo da Vinci painting entitled 'Salvator Mundi' for record $450M (expected $100M+)
-Ahead of the expected vote, US President Trump said tax cuts are getting ‘close.’
-Various US companies have priced secondary offerings following the NY close and ahead of the expected tax vote (including JELD, STKS, NCLH, ACHN and GDI). Floor & Décor Holdings also priced a 6.5M share secondary, which was below the originally planned 9M shares.

***Levels as of 23:00ET***
- Nikkei +0.7%, Hang Seng +0.5%; Shanghai Composite -0.1%; ASX200 +0.1%, Kospi +0.5%
- Equity Futures: S&P500 +0.2%; Nasdaq100 +0.3%, Dax +0.2%; FTSE100 +0.1%
- EUR 1.1792-1.1769; JPY 113.05-112.76; AUD 0.7609-0.7569;NZD 0.6878-0.6850
- Dec Gold +0.1% at $1,278/oz; Dec Crude Oil +0.0% at $55.34/brl; Dec Copper +0.2% at $3.06/lb

***Equities notable movers***
Australia/New Zealand
- STO.AU Not currently engaged in talks, received earlier takeover approach from Harbour Energy at A$4.55/shr; +11%
- RKN.AU Sells Accountants Practice Management business to MYOB (as expected) for A$180M cash; to pay special dividend; +33%

Hong Kong/China
- 700.HK Reports Q3 (CNY) Net 18.0B v 15.7Be, Rev 65.2B v 61Be; +1.5%
- 410.HK Approves special interim dividend of CNY0.576; +8.7%
- 4.HK Announces share price adjustment after spinoff of Wharf Estates; -63%

US
- TIME Said to be in talks regarding selling itself to Meredith - US press

>>> US Close Dow -0.59% S&P -0.55% Nasdaq -0.47% Russell -0.49%

Closing Market Summary: Weakness Continues

Stocks slid for the fourth time in five sessions on Wednesday as investors continued to weigh the prospect of tax reform.

The Dow and the S&P 500 lost 0.6% apiece, while the Nasdaq finished lower by 0.5%. Losses were more substantial at the opening bell, but a relatively positive performance from the heavily-weighted financial sector (+0.2%) proved useful in defusing the bearish sentiment. A late bout of selling pulled the major averages from their best marks of the day.

Senate Republicans announced on Tuesday evening that they've added a provision to their tax reform bill that would repeal the Affordable Care Act's individual mandate, which requires all Americans to have health insurance. The individual mandate is a hotly debated topic among lawmakers and an attempt to repeal it may face resistance--potentially delaying the GOP's tax overhaul effort.

Uncertainty surrounding tax reform has been a stumbling block for the market as of late, although it's tough to gauge the true level of concern among investors, who may just see the pause as an opportunity to cash in on recently minted record highs.

Energy shares extended weekly losses on Wednesday as the price of crude oil continued retreating from the two-year high it touched last week; West Texas Intermediate crude futures slid 0.7% to $55.29 per barrel, while the S&P 500's energy sector lost 1.2%. The energy group now trades lower by 3.2% for the week.

On a related note, the Energy Information Administration reported that U.S. crude stockpiles unexpectedly rose by 1.9 million barrels last week.

The top-weighted technology sector (-0.9%) also underperformed on Wednesday, as did the consumer staples (-1.1%), utilities (-1.0%), and real estate (-0.8%) groups. Within the tech space, Apple (AAPL 169.08, -2.26) showed particular weakness, finishing lower by 1.3%. The tech giant has now settled in the red for five sessions in a row.

In earnings news, Target (TGT 54.16, -5.93) tumbled 9.9% after issuing a disappointing earnings forecast for the holiday season.

U.S. Treasuries rallied in a curve-flattening trade, reducing the 2yr-10yr spread to 65 basis points--its lowest level since 2007. The yield on the benchmark 10-yr Treasury note dropped five basis points to 2.33%, while the 2-yr yield finished flat at 1.68%. 

Elsewhere, stock indices in both Europe and the Asia-Pacific region settled the midweek session broadly lower, with Japan's Nikkei (-1.6%) showing notable weakness.

Reviewing Wednesday's economic data, which included the Consumer Price Index for October, Retail Sales for October, September Business Inventories, November Empire Manufacturing, and the weekly MBA Mortgage Applications Index:

  • Total CPI increased 0.1% (consensus +0.1%) in October while core CPI, which excludes food and energy, rose 0.2% (consensus +0.2%). On a year-over-year basis, total CPI and core CPI are up 2.0% and 1.8%, respectively.
    • The key takeaway from the report is that inflation pressures are still not acute, yet they are likely not weak enough to persuade the Federal Reserve from raising the fed funds rate again at its December meeting.
  • October retail sales increased 0.2% (consensus +0.1%). The prior month's increase was revised to 1.9% from 1.6%. Excluding autos, retail sales increased 0.1% in October while the consensus expected an increase of 0.2%. The prior month's increase was revised to 1.2% from 1.0%.
    • The key takeaway from the report is that it isn't as soft as it appears at first blush, as there was an unwinding of some of the hurricane-related sales strength that led to the remarkably strong sales activity in September.
  • Business Inventories were unchanged (0.0%) in September, as expected. The August reading was revised to 0.6% from 0.7%.
    • The key takeaway from the report is that sales growth is outpacing inventory growth, which is a step toward regaining some pricing power.
  • The Empire Manufacturing Survey for November declined to 19.4 from the prior month's reading of 30.2. The consensus estimate was pegged at 26.0.
  • The weekly MBA Mortgage Applications Index increased 3.1%.

On Thursday, investors will receive the weekly Initial Claims Report (consensus 234K), the November Philadelphia Index (consensus 24.6), and October Import/Export Prices at 8:30 ET, followed by October Industrial Production (consensus +0.5%) and Capacity Utilization (consensus 76.3%) at 10:00 ET.

Also of note, Wal-Mart (WMT 89.83, -1.26) will report earnings on Thursday morning.

  • Nasdaq Composite +24.6% YTD
  • Dow Jones Industrial Average +17.8% YTD
  • S&P 500 +14.6% YTD
  • Russell 2000 +7.9% YTD

>>> NetApp beats by $0.12, beats on revs; guides Q3 EPS above consensus, revs ab

NetApp beats by $0.12, beats on revs; guides Q3 EPS above consensus, revs above consensus (45.82 +0.20)
  • Reports Q2 (Oct) earnings of $0.81 per share, excluding non-recurring items, $0.12 better than the Capital IQ Consensus of $0.69; revenues rose 6.1% year/year to $1.42 bln vs the $1.38 bln Capital IQ Consensus.
    • All-flash array annualized net revenue run rate of $1.7 billion increased 58% year-over-year
  • Co issues upside guidance for Q3, sees EPS of $0.86-0.94, excluding non-recurring items, vs. $0.85 Capital IQ Consensus Estimate; sees Q3 revs of $1.425-1.575 vs. $1.44 bln Capital IQ Consensus Estimate.
  • "In the second quarter, NetApp again delivered strong operating results on the top and bottom lines. We also introduced a number of industry-leading innovations that position us for continued growth and expand our leadership position in the growth segments of the market," said George Kurian, chief executive officer. "Our strong performance was driven by excellent execution and reflects our customers' clear and growing preference for the value of our Data Fabric strategy. We are winning because we enable our customers' success through data."

>>> Cisco Systems beats by $0.01, reports revs in-line; guides Q2 EPS and rev to

Cisco Systems beats by $0.01, reports revs in-line; guides Q2 EPS and rev towards the high end of expectations (34.11 +0.07)
  • Reports Q1 (Oct) earnings of $0.61 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus of $0.60; revenues fell 1.7% year/year to $12.14 bln vs the $12.11 bln Capital IQ Consensus, with product revenue down 3% and service revenue up 1%. 32% of total revenue was from recurring offers, up over 3 percentage points from the first quarter of fiscal 2017. Revenue by geographic segment was: Americas down 1%, EMEA down 3%, and APJC down 1%. Product revenue performance was led by Security and Applications, which increased by 8% and 6%, respectively. Infrastructure Platforms revenue decreased by 4%.
    • Non-GAAP total gross margin and product gross margin were 63.7% vs. 63-64% guidance and 63.0%, respectively. The decrease in non-GAAP product gross margin compared with 64.8% in the first quarter of fiscal 2017 was primarily due to pricing and lower productivity benefits. While productivity was positive, the benefit was lower than in the prior year as productivity improvements continued to be adversely impacted by an increase in the cost of certain memory components, consistent with our expectations.
  • Co issues upside guidance for Q2, sees EPS of $0.58-0.60, excluding non-recurring items, vs. $0.58 Capital IQ Consensus Estimate; sees Q2 revs of +1-3% to ~$11.70-11.93 bln vs. $11.69 bln Capital IQ Consensus; adj. GM 62.5-63.5%.