CLOSED AT ABSOLUTE HIGHS & DOW AT RECORD. Trump announced next Fed chair Powell as expected. Tax headlines initially pressed but we rallied as people felt comfortable with the details (only Homebuilders were hit on Tax headlines). EPS led us, as Paper, Lifers, Apparel, App Softwares and AeroSpace all benefited on company earrings. Laggards were Hospitals as COMMUNITY HEALTH SYSTEMS was crushed on #s, and Housing on Mortagage deduction headlines. Internets also lower as FACEBOOK fell 2.05% due to higher CAPEX, and ALIBABA -0.68% and CTRIP.COM INTERNATIONAL- 2.3% put small pressure on SocMedia and China nets. Lastly telcos lower on AT&T & TIME WARNER headlines (possibly no merger?). Focus on APPLE #s after close and Nonfarm. Volumes solid as came 22% above 20day ave. Note that SPX once again held day's VWAP as longs bought. US After Hours MELI +8%, MOH +7%, AAPL / CRUS +3% higher and P / CBL -12%, DATA -11%, SBUX -3%, AIG -2% lower following earnings/guidance. ASIAN MARKETS – ARE MIXED. Regional activity is subdued with volumes affected by the closure of JAPANESE markets. MAINLAND MARKETS are in negative territory. Liquidity has been a focus all week following a spike in bond yields and a large amount of funds coming due. The PBoC injected CNY404bn via its one-year medium-term lending facility, resulting in a net injection of CNY107bn. A total of CNY396bn in MLF funds are due to mature this month. Macro wasn’t much of a directional driver. The Caixin services PMI ticked higher last month, though the composite PMI slipped. Trade, inflation and lending data headline next week’s China economic releases.
Nikkei closed Hang Seng +0.26% CSI -0.12% Shanghai -0.36% Shenzen -0.73%
Eur$ 1.1658 CNH 6.6214 CNY 6.6216 JPY 114.07 GBP 1.3054 CHF 0.9987 RUB 58.33 WTI$ 54.74 +0.37%
S&P +0.07% EuroStoxx +0.11% Dax +0.22% FTSE +0.16% SMI +0.16%
Macro :
- Bitcoin Hyper Bull Tom Lee Turns Cautious in the Short Term
- Venezuela Will Seek to Restructure Debt, Blaming Sanctions
Keep an eye on :
- AAPL US : Apple Tackles IPhone X Production Woes to Buoy Holiday Sales
- ARL GY : Aareal to Cut Over 90 Jobs in First Stage: Immobilien Zeitung
- AC FP : Accor Says China Tourists to Australia Fastest Growing in Asia
- AF FP : Air France-KLM 3Q Op. Income EU1.02B; Co. Sees FY Improvement
- AMS SM : Amadeus Nine Month Ebitda EU1.47 Bln
- ANDR AV : Andritz Third Quarter Net Income EU59.0 Mln
- CS FP : Axa Reports Stable Nine-Month Revenue and Solvency II Ratio
- BMW GY : BMW Group U.S. Oct. Sales Decline 3.9%
- CSGN VX : Credit Suisse Seeks to Expand Wealth Management in Philippines
- DAI GY : Daimler, VW, BMW, Ford Start Fast-Charging Rollout in Europe
- DIC GY : DIC Asset Third Quarter FFO EU48.1 Mln
- EBS AV : Erste Group on Track on ROTE of 10% for 2017, Sees Similar 2018
- EIT IM : EI Towers Nine Month Net Income EU43.5 Mln
- EVK GY : Evonik Ups 2017 Adj. Ebitda Guidance, Plans Cost Cuts
- EOAN GY : Eon’s Kley Criticizes Uniper Mgmt on Fortum Offer: Handelsblatt
- GBLB BB : GBL Buys More GEA Group Shares; 9-Month Cash Earnings Drop 8.7%
- G1A GY : GEA Group Third Quarter Revenue Meets Estimates
- GSK LN : Glaxo’s Vallance Is Said to Exit Co. for U.K. Govt Role: FT
- LSG NO : Norway Seafood Exports Decline 3% to NOK9.1b in October
- OR FP : L’Oreal 3Q Sales EU6.1B; Like-for-Like Growth Beats Estimates
- OR FP : L’Oreal Sales Beat Pushes Bernstein to Up Sales Estimate: Wood
- RNO FP : France Selling 14M Renault Shares, Or 4.73% Stake in Carmaker
- RNO FP : France ‘Much-Awaited’ Renault Stake Cut Is Good News: Natixis
- REP SM : Repsol 3Q Adj. Net EU576M; Est. EU558.3M
- SAN SM : Santander Is Said to Plan 1,500-1,600 Job Cuts: Independiente
- GLE FP : SocGen’s Cabannes: ‘Early to Say’ When Volatility Will Return
- SCHA NO : Schibsted Third Quarter Ebitda Beats Highest Estimate
- SN/ LN : Smith & Nephew Third Quarter Revenue Meets Estimates
- TEVA IT : Teva Weighs on Pharma, Community Health Tumbles: Health Wrap
- FP FP : Total’s Next Growth Phase to Tap Oil Bought at $1-$1.5/bbl: CEO
- VOW3 GY : Volkswagen Explores Obtaining UK Banking License, FT Says
>>> Up
* Just Eat Raised to Equal-weight at Morgan Stanley
* Weatherford Upgraded to Buy at SocGen
>>> Down
* Berner Kantonalbank Cut to Underperform at Credit Suisse
* Swedbank Cut at Berenberg; Long-Term Winner But Valuation Full
>>> Initiation
* DSM Reinstated at Goldman With Neutral
* Grainger Initiated at Citi With Buy; PT 3.35 Pounds
* Pandora New Buy at Berenberg; Brand Success Here to Stay
>>> Call
After Hours Summary: MELI +8%, MOH +7%, AAPL / CRUS +3% higher and P / CBL -12%, DATA -11%, SBUX -3%, AIG -2% lower following earnings/guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: ABUS +19.3% (light volume), BOOT +17.3%, CATM +16.4%, FND +12%, EVC +11.6%, MELI +8.1%, TNET +8%, UQM +7.9%, ANET +7.6%, MOH +6.8%, WIFI +6.3%, EVH +6% (also signs expanded relationship agreement with Premier Health), ACLS +5.2%, ROG +5%, EBS +4.9%, SPPI +4.4%, CTRL +4.2%, LNTH +4% (light volume), UNIT +3.7%, AUTO +3.6%, GNW +3.6%, AAPL +3.1%, NYMT +3%, CRUS +2.9%, KTOS +2.7%, WING +2.5%, OLED +2.5%, MDRX +1.9%, MTZ +1.9%, AGO +1.8%, ATVI +1.6%, FLR +1.2%
Companies trading higher in after hours in reaction to news: DCIX +34% (after 20% move higher today), HCC +9.5% (after declaring special cash dividend of $11.21 per share of Warrior's common stock), IMGN +7.7% (ahead of earnings tomorrow before the open), S +5.3% and TMUS +1.7% (WSJ reporting that T Mobile and Sprint are attempting to save merger), VRX +3.5% (VRX unit announces FDA approval Of VYZULTA), VZ +0.5% (S / TMUS sympathy)
Apple (AAPL) / Cirrus Logic (CRUS) earnings are boosting suppliers in after hours trade: SWKS +2%, AVGO +1.3%, TXN +0.7%, NXPI +0.4% (also WSJ reporting that Elliott Management has hired bankers to find other bidders for NXPI, or force Qualcomm to make a higher bid), QRVO +0.3%After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: KEYW -22.6% (ticking lower), AXDX -16.1%, RUBI -13%, P -12.4%, CLNE -12.1%, PACB -11.9%, CBL -11.8%, BVX -11.8% (light volume), DATA -11.2%, STMP -9.2%, LOCO -7.1%, XPER -6.5%, HLF -6%, RDUS -5.4%, COHU -5.2%, ACIA -4.9%, AOSL -4.8%, PMT -3.9%, CC -3.3%, DRNA -3.2%, CARA -3.1%, SBUX -3.1%, HCI -2.7%, AIG -2.4%, NE -2.4% (light volume), AXON -2.3%, LNT -1.2%, CBS -1.1%, HDP -1%, ADMS -1%
Companies trading lower in after hours in reaction to news: APRI -2.4% (thinly traded; files for $100 mln mixed securities shelf offering)
Asia Mid-Session Update: Next week’s RBA meeting in focus amid weaker Australia retail sales; PBOC confirms MLF operation; Upcoming US Oct payrolls, ISM Non-Manufacturing data in focus
**Asia Summary***
-With the Nikkei 225 closed in observance of a holiday, Asian equity markets opened the session generally higher. Australia’s S&P ASX 200 index has hit a fresh high for 2017, amid gains in the mining and energy sectors. BHP has gained over 1%, while shares of gold miner Newcrest are up over 2%.
-As of the time of writing, Nasdaq Futures have gained over 0.1%, as shares of Apple traded higher in the afterhours, following its financial results and guidance.
-Amid the results, Samsung Electronics, which has gained over 4% this week, is trading lower by over 1%. Shares of Taiwan Semi are also down by about 1%. In Hong Kong, Tencent has gained over 1% and moved to a fresh all-time high.
-With the Reserve Bank of Australia (RBA) due to hold its policy meeting next week (Tuesday, Nov 7th), the Aussie has declined by over 0.15%. In Sept, retail sales missed market expectations for the 3rd straight month. Amid the data, Australia’s 3-year bond yield has dropped over 5bps on the session.
-China’s 10-year bond yield is generally stable. Earlier today, the PBoC skipped its regular open market operation (OMO) and instead confirmed a medium-term lending facility (MLF) operation, which was speculated earlier in the week. Recall, it was reported earlier in the week that liquidity conditions in China may tighten in the near term with around CNY1T in funds expected to mature this week, said the China Securities Journal.
-In terms of emerging market debt, Venezuela’s President Maduro said state oil company PDVSA would on Friday make a $1.1B payment of bonds due in 2017 to JPMorgan. He also said, however, that the country will restructure all of its foreign debt, following the payment by PDVSA.
-Looking ahead, the later today release of the US Oct nonfarm employment report will be in focus, along with ISM Non-Manufacturing PMI.
***Key economic data***
- (AU) Australia Sept Retail Sales M/M: 0.0% v 0.4%e; Q3 Ex Inflation Q/Q: 0.1% v 0.0%e
- (CN) CHINA OCT CAIXIN PMI SERVICES: 51.2 V 50.6 PRIOR; COMPOSITE: 51.0 V 51.4 PRIOR
-(KR) South Korea Sept BoP Current Account Balance: $12.2B (record) v $6.1B prior; Goods Balance: $15.0B v $9.3B prior
-(KR) South Korea Oct Foreign Reserves: $384.5B v $384.7B prior
***Speakers and Press***
China
- (CN) NDRC issues draft guidelines on overseas investment by China companies
Other
-(VE) Venezuela President Maduro: Will pay bonds tomorrow morning; payment on PDVSA bond to start on Friday; To restructure all foreign debt after tomorrow
***Asian Equity Indices/Futures (00:30ET)***
- Nikkei closed, Hang Seng +0.3%, Shanghai Composite -0.7%, ASX200 %, Kospi -0.2%
- Equity Futures: S&P500 flat ; Nasdaq +0.3% , Dax flat , FTSE100 +0.1%
***FX ranges/Commodities/Fixed Income (00:30ET)***
- EUR; 1.1654-1.1666; JPY 113.90-114.09; AUD 0.7682-0.7716; NZD 0.6908-0.6929
- Aug Gold flat at 1,277/oz; Aug Crude Oil +0.5% at $54.81/brl; Sept Copper +0.4% at $3.149/lb
- GLD SPDR Gold Trust ETF daily holdings -0.4% at 846.0 metric tons
- (CN) PBOC SETS YUAN REFERENCE RATE AT 6.6072 V 6.6196 PRIOR
- (CN) PBOC CONFIRMS CNY404B MEDIUM-TERM LENDING FACILITY (MLF) OPERATION; Offers 1-year loans at 3.20% v 3.20% prior
-(CN) PBoC OMO: Skips OMO v skipped prior; Weekly net drain CNY110B v CNY390B injection w/w
-(AU) AUSTRALIA SELLS A$500M IN DEC 2021 BONDS, AVG YIELD 2.0919%, BID TO COVER 7.25X
***US markets on close: Dow +0.4%, S&P500 0.0%, Nasdaq 0.0%, Russell +0.3% ***
- Best Sector in S&P500: Financials +0.9%
- Worst Sector in S&P500: Consumer Discretionary -0.8%; Materials -0.7%
- At the close: VIX 9.93 (-0.27pts); Treasuries: 2-yr 1.616% (+1.5bps), 10-yr 2.372% (flat), 30-yr % (-2bps)
***US Market Summary***
- US indices opened largely flat after the Bank of England raised rates for the first time in roughly a decade, but moved lower after the opening bell as the long-awaited details of the Republican tax plan were finally leaked. To this point much has been in line with the run-up speculation, but it remains clear that there remain likely key sticking points that will be heatedly debated, such as the caps on mortgage interest and state/local taxes deductability. Treasury prices firmed and yields slipped; homebuilder stocks ticked lower on the release. In the afternoon, Pres Trump officially named Jerome Powell to the Fed, which had been expected for several days, but markets got a bit of a lift from the announcement. Financials, REITs, and utilities outperformed on the day, while telecom, energy, materials and consumer discretionary lagged.
***US Afterhours Movers***
-AAPL Reports Q4 $2.07 v $1.87e, Rev $52.6B v $51.2Be; Guides Q1 Rev $84-87B v $83.3Be, gross margin 38-38.5%; guides op-ex $7.65-7.75B; +3.4% afterhours
-SBUX Reports Q4 $0.55 v $0.55e, Rev $5.70B v $5.73Be; Raises dividend 20%; Estab $15B 3-yr buyback plan (~19% market cap); -6.7% afterhours
Notable post-earnings movers
- Post-earnings gainers: BOOT +18.5%, EVC +14.6%, CATM +12.3%, FND +11.2%, VRNS +10.7%, MOH +9.3%, UQM +7.9%, MELI +7.1%, MATX +7.1%, ANET +6.5%, EVH +6%, MTZ +5.5%, ABUS +5.5%, TNET +5.2%, ACLS +4.1%, ACLS +4.1%, ROG +4%, WIFI +4%, CRUS +3.6%, CYRX +3.6%, WING +3.4%, CTRL +3.4%, UNIT +3.3%, SPPI +3.2%, OLED +3.2%, AAPL +3%, CECO +3%, HTGC +2.8%, TEP +2.7%, BRKR +2.6%, EYES +2.6%, AGO +2.3%, NYMT +2.2%, LADR +2.2%, ATVI +2.1%
- Post-earnings losers: AXDX -14%, CBL -13.6%, RUBI -13.6%, DATA -12.4%, CLNE -12.1%, STMP -11.4%, COHU -10.3%, P -8.2%, SBUX -7.3%, LOCO -7.1%, HLF -6%, ACIA -5.4%, RMAX -5.2%, PMT -3.9%, ADMS -3.8%, RDUS -3.8%, CC -3.3%, AIG -3.2%, YRCW -3.1%, CARA -2.2%
Closing Market Summary: Wall Street Ends Busy Session Little ChangedEquities ended Thursday little changed after a late-afternoon rally trimmed modest losses from earlier in the session. The S&P 500 ended a tick above its flat line, while the Nasdaq finished slightly lower and the Dow (+0.4%) outperformed, settling at a new record high. Small caps had a good showing, pushing the Russell 2000 higher by 0.3%.
Highlights of the House's tax reform bill include an immediate--and permanent--reduction in the corporate tax rate from 35.0% to 20.0%, a repeal of state and local tax deductions--with the exception of a $10,000 limit for property taxes, a limit for mortgage interest deductions on new home loans of less than $500,000 (adjusted from $1,000,000), and no major changes to 401(k) tax laws.
The bill also calls for reducing the number of tax brackets from seven to four--12%, 25%, 35%, and 39.6%--with the rate for top earners remaining unchanged.
Stocks initially sold off after the media leaked details of the bill in the morning, but the market bounced back soon thereafter. Financials helped fuel the turnaround and remained strong for the remainder of the session; the S&P 500's financial sector finished with a gain of 0.9%. The industrials (+0.5%), utilities (+0.4%), and real estate (+0.9%) groups also outperformed.
Meanwhile, the technology sector (+0.1%) manged to eke out a slim victory, but was weighed down by Facebook (FB 178.92, -3.74), which dropped 2.1% despite reporting better-than-expected earnings and revenues. Conversely, chipmaker Qualcomm (QCOM 54.84, +1.38) jumped 2.6% after beating both top and bottom line estimates.
In other earnings news, Tesla (TSLA 299.26, -21.82) plunged 6.8% after reporting worse-than-expected earnings and delaying its Model 3 production target of 5,000 per week by another quarter. Newell Brands (NWL 30.01, -10.99)--which owns names like Sharpie, Crock-Pot, and Yankee Candle--also tumbled, losing 26.8%, after missing earnings estimates and cutting its outlook.
Dow component DowDuPont (DWDP 72.04, -1.28) also declined, losing 1.8%, despite reporting above-consensus earnings. The materials sector (-0.8%), which houses DowDuPont, finished near the bottom of the sector standings, alongside the telecom services (-1.0%) and consumer discretionary (-0.8%) groups.
Elsewhere, the Bank of England announced its first rate hike in a decade, increasing the Bank Rate by 25 basis points to 0.50% in a 7-2 vote. However, the British pound dropped 1.4% against the U.S. dollar to 1.3064, hitting a fresh one-month low.
In the bond market, U.S. Treasuries climbed in a curve-flattening trade; the yield on the benchmark 10-yr Treasury note dropped three basis points to 2.35%, while the 2-yr yield slipped one basis point to 1.62%. Yields move inversely to prices.
Also of note, President Trump nominated Fed Governor Jerome Powell to replace Fed Chair Janet Yellen when her term ends in February--as expected.
Reviewing Thursday's economic data, which included third quarter Productivity, third quarter Unit Labor Costs, and the weekly Initial Claims Report:
- The preliminary unit labor costs ticked up 0.5% during the third quarter, while the consensus expected no change (0.0%). The preliminary productivity reading showed an increase of 3.0%, while the consensus expected an increase of 2.8%.
- The key takeaway from the productivity report is that it was the highest quarterly increase since the third quarter of 2014, offering a hopeful sign that U.S. economic activity and workers' standard of living will be improving.
- The latest weekly initial jobless claims count totaled 229,000, while the consensus expected a reading of 235,000. Today's tally was below the revised prior week count of 234,000 (from 233,000). As for continuing claims, they declined to 1.884 million from the revised count of 1.899 million (from 1.893 million).
- The key takeaway is the initial claims are holding at historically low levels, underscoring the tightness in the labor market.
On Friday, investors will receive the Employment Situation Report for October (consensus 300K) at 8:30 ET, the September Trade Balance (consensus -$43.5 billion) also at 8:30 ET, and both the October ISM Services Index (consensus 58.5) and September Factory Orders at 10:00 ET.
- Nasdaq Composite +24.7% YTD
- Dow Jones Industrial Average +19.0% YTD
- S&P 500 +15.2% YTD
- Russell 2000 +10.3% YTD