>>> Asian Update

Asia Mid-Session Market Update: China first tier city prices stabilize; BOJ Gov Kuroda defends use of fixed rate operations in JGBs

***US Session Highlights***
- (US) OCT CPI M/M: 0.4% V 0.4%E; CPI EX FOOD AND ENERGY M/M: 0.1% V 0.2%E; CPI NSA INDEX: 241.729 V 241.785E; Y/Y CPI Ex Food and Energy Y/Y: 2.1% v 2.2%e
- (US) OCT HOUSING STARTS: 1.323M V 1.156ME; BUILDING PERMITS: 1.229M V 1.193ME (another jump in single family)
- (US) INITIAL JOBLESS CLAIMS: 235K (lowest since 1973) V 257KE; CONTINUING CLAIMS: 1.98M V 2.03ME (lowest since 2000)
- (US) NOV PHILADELPHIA FED BUSINESS OUTLOOK: 7.6 V 7.8E; new orders 18.6 v 16.3 prior
- (US) Fed Chair Yellen: Rate hike could be appropriate 'relatively soon'; no mention of US elections in remarks - prepared text
- (US) Atlanta Fed GDPNow: raises Q4 GDP forecast to 3.6% from 3.3% on Nov 15th

***US markets on close: Dow +0.2%, S&P500 +0.5%, Nasdaq +0.7%***
- Best Sector in S&P500: Technology/Services
- Worst Sector in S&P500: Basic Materials/Utilities
- Biggest gainers: BBY +13.7%, NTAP +6.3%, MU +5.2%, WYNN +4.5%, IPG +4.1%
- Biggest losers: MNK -7.3%, FSLR -5.1%, CSCO -4.8%, SWN -4.1%, SJM -3.9%
- At the close: VIX 13.4 (-0.3pts); Treasuries: 2-yr 1.06% (+4bp), 10-yr 2.28% (+6bps), 30-yr 2.99% (+6bps)

***US movers afterhours***
- MRVL: Reports Q3 $0.20 v $0.12e, R$654M v $612Me; +8.5% afterhours
- CRM: Reports Q3 $0.24 v $0.21e, R$2.14B v $2.12Be; +5.5% afterhours
- ROST: Reports Q3 $0.62 v $0.56e, R$3.09B v $2.96Be; +3.4% afterhours
- SCTY: SolarCity and Tesla shareholders approve planned merger; deal expected to close within days; SCTY +1.9% afterhours; TSLA +0.6% afterhours
- NUAN: Reports Q4 $0.41 v $0.39e, R$512M v $505Me; +1.9% afterhours
- AMAT: Reports Q4 $0.66 v $0.66e, R$3.30B v $3.31Be; -2.1% afterhours
- WSM: Reports Q3 $0.79 v $0.77e, R$1.25B v $1.26Be; guides Q4 $1.45-1.55 v $1.59e, R$1.57-1.65B v $1.63Be; -2.9% afterhours
- GPS: Reports Q3 $0.60 v $0.59e, R$3.80B v $3.77Be; -4.1% afterhours
- KTOS: Offers indeterminate amount of common stock through Canaccord and B. Riley -9.6% afterhours

***Asia Session Notable Observations, Speakers and Press***
- Strong US economic data and hawkish comments from Fed chair Yellen preserve the 2-week-long USD bull trend; USD/JPY hit a 5-month high above ¥110 and EUR/USD falls to 11-month low below $1.06; Treasury yields also continue to rise, particularly on the long-end, steepening the curve to multi-months highs. Gold prices fall to multi-month lows below $1,210.
- China property prices are stabilizing, with first tier appreciation slowing notably. In Beijing, New Home Prices were at a 10-month low m/m at 0.5% v 4.5% prior; Shanghai m/m also slowed to 0.5% from 2.7%, while Shenzhen m/m saw its first decline in years at -0.5% v +1.9% prior; All-70 city China prices hit 3-month low m/m at 1.1% v 2.1% prior, though y/y was still at multi-year highs of 12.3% v 11.2% prior. NBS said "property prices have stabilized in the second half of October." Separately in China, Financial Stability Bureau official remarked China is prepared for economic uncertainties.
- Japan PM Abe enthused after "long frank discussion with US President-elect Trump" at their NYC meeting; Renewed conviction toward a relationship of trust with Trump.
- BOJ Gov Kuroda says the recent rise in 2-yr and 5-yr JGB yields has been quite fast, pledging to continue to use fixed rate operations as needed with unlimited capacity for purchases; Prepared to conduct operations even at below market yields. Comments follow overnight BOJ's first use of fixed-rate facility to buy 2-yr and 5-yr JGBs to curb the recent yield rise.
- Despite OIS futures tipping a small chance of higher rates by RBA next year, one survey of economists forecast one more rate cut in Q3; Several houses expect as many as 2 more cuts by RBA, though there is also a camp expecting OCR to bottom at current level.

***Asia Key economic data:***
- (CN) CHINA OCT PROPERTY PRICES M/M: RISE IN 62 OUT OF 70 CITIES VS 63 PRIOR; Y/Y: RISE IN 65 OUT OF 70 CITIES V 64 PRIOR
- (NZ) NEW ZEALAND Q3 RETAIL SALES (EX-INFLATION): 0.9% V 0.9%E
- (NZ) NEW ZEALAND Q3 PPI INPUT Q/Q: 1.5% V 0.9% PRIOR; PPI OUTPUT Q/Q: 1.0% V 0.2% PRIOR
- (NZ) NEW ZEALAND NOV ANZ CONSUMER CONFIDENCE INDEX: 127.2 (19-month high) V 122.9 PRIOR; M/M: 3.5% V 1.6% PRIOR
- (KR) South Korea Oct PPI Y/Y: -0.2% v -1.1% prior
- (US) NPD: Oct Video Games Sales +6% y/y at $875.7M

***Asian Equity Markets (23:30ET)***
- Nikkei +0.7%, Hang Seng +0.3%, Shanghai Composite -0.3%, ASX200 +0.3%, Kospi -0.3%

***FX ranges/Commodities/Futures/Fixed Income (23:30ET):***
- EUR 1.0580-1.0630; JPY 109.95-110.75; AUD 0.7380-0.7420; NZD 0.7000-0.7035
- Dec Gold -0.8% at 1,207/oz; Dec Crude Oil -0.6% at $45.16/brl; Copper -1.1% at $2.46/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 5.7 tonnes to 920.6 tonnes; 6th straight decline; lowest since June 23rd
- Equity Futures: S&P e-mini -0.1%, Dax -0.2%, FTSE100 -0.2%
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.8796 V 6.8692 PRIOR; weakest Yuan setting since 2008; 11th straight day of weaker Fix
- (CN) China MoF sells 50-yr bonds at 3.48%; Bid to cover 3.77x
- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥420B in 3-5yr JGBs, ¥190B in 10-25yr JGBs, ¥110B in 25-yrs or higher JGBs, and ¥1.5T in T-bills
- (AU) Australia MoF (AOFM) sells A$900M in 2.75% 2019 Bonds; avg yield: 1.841%; bid-to-cover: 4.03x (1-year high)

Notables / movers:
- Coal names falls as China NDRC issues directive to increase production ahead of winter; WHC.AU -8.9%, 1088.HK -3.5%, 1898.HK -3.4%
- TPV Technology Ltd 903.HK: Reports Q3 Net profit $18.6M v loss $26.3M y/y, Rev $2.47B v $2.80B y/y; -1.3%
- Eagle Nice International 2368.HK: Reports H1 Net HK$121M; Rev HK$1.08B v HK$947M y/y; -1.3%
- ZTE 763.HK: update related to restrictions by US Commerce Dept; -1.7%
- Swire Pacific 19.HK: Confirms realignment of Coca-Cola Bottling in China; consideration payable by SBHL in relation to realignment CNY4.65B; -0.3%
- Singamas Container Holdings 716.HK: Guides FY16 net loss at least $53M v loss $2.7M y/y; -4.3%

- iCar ICQ.AU: Carsales said to be considering offer for iCar - press; +31.6%
- Myer MYR.AU: Reports Q1 Rev A$719.2M v A$728Me (1 est); SSS +1.6% (5th straight quarter of SSS increase); +14.4%
- Paladin PDN.AU: Guides FY17 uranium production 3.8-4.0M lb; uranium is unsustainable at <$20/lb; sees 10-15% of global supply cut as early as 2017; -4.0%
- AusNet AST.AU: Reports H1 Net A$178.6M v A$374.5M y/y; EBITDA A$595.3M v A$650.4M y/y; Rev A$1.02B v A$1.01Be; +1.0%
- Kathmandu Holdings KMD.NZ: Reports Q1 Rev +2.8% y/y; SSS +1.4%; -3.4%
- Brambles BXB.AU: Macquarie Resumed BXB.AU with Outperform, price target: A$13; +1.6%
- Sydney Airport SYD.AU: Credit Suisse Cuts SYD.AU to Underperform from Neutral; Oct traffic metrics; -1.5%
- FCG.NZ Fonterra: Raises FY16/17 forecast for Farmgate milk price by NZ$0.75 to NZ$6.00/kg; -0.2%

>>> US Close Dow +0.17% S&P+0.49% Nasdaq. +0.74% Russell +0.56%

Closing Market Summary: Bonds Slide and Stocks Gain on Upbeat Data

The stock market ended the Thursday affair on a modestly higher note as investors assessed the latest battery of economic data. The Nasdaq Composite (+0.7%) finished ahead of both the S&P 500 (+0.5%) and the Dow Jones Industrial Average (+0.2%).

Participants expanded their bets on an improving economy as increased inflation concerns had investors rotating out of the bond market in favor of more growth-oriented positions.

The Consumer Price Index (CPI) increased 0.4% (consensus +0.4%) in October while core CPI, which excludes food and energy, ticked up by 0.1% (Briefing. com consensus +0.2%). The data showed a firming inflation trend with the headline index rising to 1.6% year-over-year. Meanwhile, the core reading is up 2.1% year-over-year.

The latest housing data also helped pro-growth positioning as housing starts rose to an annualized rate of 1.323 million (consensus 1178k) in October. This will figure positively into fourth quarter GDP estimates and also marks the strongest reading since 2007. Building permits increased 0.3% to a seasonally adjusted rate of 1.229 million (consensus 1.200 million).

Federal Reserve Chair Janet Yellen highlighted recent economic growth when she stated that economic data since the November Fed meeting has been consistent with expectations. Chair Yellen also indicated that a policy rate increase may be appropriate relatively soon. According to the CME's FedWatch Tool, the implied probability of a December interest rate hike registers at 90.6%, unchanged from yesterday.

The tech-heavy Nasdaq (+0.7%; month-to-date: +2.8%) outperformed, narrowing this month's performance gap. The Dow Jones Industrial Average (+0.2%; month-to-date: +4.2%) and S&P 500 (+0.5%; month-to-date: +2.9%) ended closer to their flat lines. The modest advance in the benchmark index was underpinned by gains in six sectors.

The heavily-weighted financial (+1.3%), consumer discretionary (+1.2%), and technology (+0.7%) sectors led while real estate (-0.9%) and energy (-0.7%) underperformed.

The economically-sensitive financial sector (+1.3%) outperformed amid rising market rates and positive economic data. Banking names led the advance as steepening in the yield curve improved the industry's earnings potential. The SPDR S&P Bank ETF (KBE 40.17, +0.53) finished higher by 1.3%. Separately, Dow component JPMorgan Chase (JPM 78.02, +0.62, +0.8%) ended behind its peers after settling a hiring probe for approximately $265 million.

In the consumer discretionary space (+1.2%), homebuilders outperformed on the heels of the better-than-expected housing data. The iShares Dow Jones US Home Construction ETF (ITB 27.34, +0.57) rallied 2.1%. Meanwhile, electronics retailer Best Buy (BBY 45.99, +5.54) spiked 13.7% after topping consensus estimates for the quarter and issuing upbeat guidance for the fourth quarter.

The technology sector (+0.7%) continued playing catch up with the broader market. Dow component Microsoft (MSFT 60.64, +0.99) outperformed after an upgrade to "Buy" from "Neutral" at Goldman. Conversely, shares of Cisco Systems (CSCO 30.05, -1.52) fell 4.8% after the company issued some cautious guidance. The tech giant did, however, beat bottom-line estimates for the quarter.

The energy sector (-0.7%) ended on a lower note as crude oil surrendered an intraday gain, sliding into negative territory. WTI crude settled down 1.1% ($45.38/bbl; -$0.19).

The Treasury complex finished on a lower note with the long-end of the curve underperforming. The yield on the 2-yr note finished higher by two basis points (1.03%) while the yield on the benchmark 10-yr note rose six basis points to 2.29%.

Today's trading volume was below the average of 895 million as fewer than 831 million shares changed hands at the NYSE floor.

Today's economic data included CPI for October, October Housing Starts and Building Permits, weekly initial claims, and the Philadelphia Fed Survey for November: 

  • CPI increased 0.4%, as expected, in October while core CPI, which excludes food and energy, rose 0.1% (consensus +0.2%).
    • On a year-over-year basis, total CPI is up 1.6% -- its largest 12-month increase since October 2014 -- and core CPI is up 2.1%
  • October housing starts surged 25.5% to a seasonally adjusted annual rate of 1.323 million (consensus 1.178 million).
  • Building permits rose 0.3% to a seasonally adjusted annual rate of 1.229 million (consensus 1.200 million)
  • Initial claims for the week ending November 12 dropped by 19,000 to 235,000 (consensus 258,000).
    • Continuing claims decreased by 66,000 to 1.977 million, which is the lowest level since April 15, 2000.
  • The Philadelphia Fed Index dipped to 7.6 in November (consensus 8.5) from 9.7 in October, although the new orders index ticked up to 18.6 from 16.3.


There is no economic data of note scheduled to be released today

>>> After Hours Summary: MRVL +7%, CRM +5%, NUAN +2% following e


After Hours Summary: MRVL +7%, CRM +5%, NUAN +2% following earnings/guidance, SCTY +2% and TSLA +1% on shareholders' merger approval... GPS -4.9%, WSM -4%, AMAT -1% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: MRVL +7.1%, KOOL +6.2% (thinly traded), CRM +5.2%, ROST +3.3%, KEYS +2.2%, POST +1.7%, SPWH +1.6%, NUAN +1.6% (also extends Paul Ricci's contract as Chairman and CEO)

Companies trading higher in after hours in reaction to news: SYUT +23.2% (Synutra agrees to be taken private for $6.05/share in cash), HRG +11.5% (HRG Group confirms evaluating potential strategic alternatives to maximize shareholder value; Pres/CEO plans 2017 departure), DRYS +10.7% (modestly rebounding), GLBS +9.4% (will report Q3 results after the close on Monday, Nov 21), FCEL +6.7% (FuelCell Energy announces a contract with Alberta Innovates for an engineering study on a fuel cell carbon capture application at a Husky Energy-owned heavy oil thermal facility), PIP +5% (announces a $2.91 special cash dividend), SCTY +2% and TSLA +0.7% (Tesla Motors shareholders approve proposed merger with SolarCity), MNK +1% (modestly rebounding, presented study that addresses possible impact of H.P. Acthar Gel on use of corticosteroids among patients with rheumatoid arthritis, lupus, and dermatomyositis/polymyositis)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: GPS -4.9%, WSM -4%, AMAT -1.1%

Companies trading lower in after hours in reaction to news: KTOS -11.5% (intends to offer and sell shares of its common stock in an underwritten public offering pursuant to an effective shelf registration statement; size not disclosed), EMES -5.7% (commences an underwritten public offering of 2,750,000 common units), RGC -4.7% (to sell 13,000,000 shares of Class A common stock by Anschutz Corporation and certain of its affiliates), RLOG -3.3% (continued strength), VRX -1.1% (Aceto launches generic for Valeant's Benzamycin Gel to treat acne vulgaris)

WsJ : Fed Rate Rise Could Come ‘Relatively Soon’ as Data Point to Stronger Econo

Fed Rate Rise Could Come ‘Relatively Soon’ as Data Point to Stronger Economy
Fed Chairwoman Janet Yellen testified to Congress amid some of the best government data in decades on housing, jobless claims and inflation
President-elect Donald Trump is preparing to take office amid signs the U.S. economy is growing stronger as the year ends and the Federal Reserve is nearing its next increase in short-term interest rates.

Fed Chairwoman Janet Yellen on Thursday said a rate increase could come “relatively soon,” and her remarks were followed by some of the best government data in decades on housing, jobless claims and inflation. The news bolstered expectations the Fed will lift its benchmark short-term rate at its next policy meeting on Dec. 13-14.

“The economy has made further progress this year” toward the Fed’s employment and inflation goals, Ms. Yellen said in testimony before Congress’s Joint Economic Committee.

The Fed chief said the results of the U.S. presidential election hadn’t changed officials’ view following their last policy meeting that the case for a rate increase had strengthened.

“To my mind, the evidence we’ve seen since that time remains consistent with the judgment the [Fed’s policy] committee reached in November,” she said, noting that incoming data supports their expectations for strengthening economic growth, an improving labor market and rising inflation.
U.S. housing starts and permits for new construction both rose in October, a sign residential construction is ramping up to meet steady demand. Housing starts rose 25.5% last month, the best gain in more than three decades, while permits increased 0.3%, the Commerce Department said.

The number of Americans filing for unemployment claims fell last week to the lowest level since November 1973, the Labor Department said. A measure of the number of people on unemployment rolls fell below 2 million for the first time since 2000.

Meanwhile, U.S. consumer prices increased in October from a year earlier at the fastest rate in two years, the latest sign inflation pressures in the economy are firming. The consumer-price index advanced a seasonally adjusted 0.4% from a month earlier, the Labor Department said. Excluding the volatile costs of food and energy, so-called core prices rose 0.1%.

“U.S. economic growth appears to have picked up from its subdued pace earlier this year,” Ms. Yellen said shortly before the data were released.

Ms. Yellen quashed speculation that she may step down next year following the election of Mr. Trump, who called the chairwoman “highly political” earlier this year and accused her of keeping interest rates low to try to help Democrats. Ms. Yellen has refuted such accusations.

Asked about the possibility she may leave before her four-year term as chairwoman ends on Jan. 31, 2018, Ms. Yellen said: “It is fully my intention to serve out that term.”

Lawmakers also pressed Ms. Yellen to weigh in on what Mr. Trump’s proposed fiscal policies, including infrastructure spending and new tax cuts, mean for the economy and interest rates.

Ms. Yellen said that “when there is greater clarity” about what those policies will entail, the Fed policy committee will have to factor in the effect of those plans on unemployment, growth and inflation, and adjust their outlook accordingly.

She acknowledged there have been significant market moves following the election, which she said appear to be investors anticipating that a fiscal spending package could boost inflation and lead to the Fed raising rates faster. But she cautioned that there will be a great deal of uncertainty around those plans “for some considerable time.”

“Things could turn out very differently, we understand, and we will simply watch what decisions are made and factor them into our thinking going forward,” she said.

Asked whether the possibility of fiscal stimulus next year could warrant a delay in raising rates, possibly until January, Ms. Yellen said: “I would think that the judgment the committee reached in November remains the appropriate one.”

Fed officials decided to hold off on raising interest rates at their meeting earlier this month after judging that there was “somewhat more room” for the labor market to improve than they had expected at the beginning of the year, Ms. Yellen said. The central bank still sees “scope for some further improvement,” she said.

Since their last meeting, Fed officials have also seen several other pieces of reassuring data: wages grew 2.8% in October, the fastest annual pace since June 2009, and employers continued to add jobs at a steady clip. Americans boosted their spending at retail stores in October, and September sales were higher than previously estimated, marking the strongest two-month stretch of sales in at least two years.

“Absent significant negative economic news over the next month, the market’s assessment of the likelihood of [a rate increase] in December seems plausible,” Boston Fed President Eric Rosengren said in Portland, Maine, on Tuesday.

Fed officials have left their benchmark federal-funds rate unchanged this year after raising it in December 2015 to a range between 0.25% and 0.50%. Traders in futures markets put the odds of a rate rise next month at 90.6% on Thursday morning before Ms. Yellen’s testimony was released, according to CME Group.

Officials held off on a rate increase in November in part because of worries about market volatility that could stem from the U.S. presidential election.

While Mr. Trump’s victory stunned many investors, stocks have largely reacted positively to the news and risen on speculation that a Trump administration could usher in new infrastructure spending and tax cuts. Bond prices, however, have fallen on expectations of higher inflation.

“A single policy rate increase, possibly in December, may be sufficient to move monetary policy to a neutral setting,” St. Louis Fed President James Bullard, a voting member of the Fed’s policy committee, said in London Wednesday. Mr. Bullard added that his outlook for the economy hasn’t changed since the Nov. 8 election.

Ms. Yellen warned that the Fed can’t hold rates too low for too long for fear it could encourage “excessive risk-taking and ultimately undermine financial stability.” If that were to happen, the central bank might have to raise rates more abruptly to prevent the economy from overheating, she said.

The decision to hold rates steady this month did “not reflect a lack of confidence in the economy,” she said. Rather, the Fed sees many encouraging signs.

Unemployment was at a low 4.9% last month. Average monthly job growth so far this year is still well above estimates of the pace necessary to absorb new entrants into the labor force, Ms. Yellen said. The share of adults in the labor force—holding or seeking jobs—has held steady this year, reflecting that the economy has had “more room to run” than officials had anticipated, she said.

Additional employment gains could help push the labor-force participation rate up further and help boost wages, she said. Ms. Yellen said she was troubled by persistent disparities in jobless rates for whites and African-American and Hispanic workers, as well as racial gaps in the median household income.

Ms. Yellen said she continues to expect the evolution of the economy will warrant only gradual increases in short-term rates over time, in part because the so-called neutral rate of interest—the rate at which the economy is operating at its full potential without overheating—appears to be quite low.

With the current fed-funds rate only slightly below the estimates of the neutral rate, monetary policy is likely just moderately stimulative, Ms. Yellen said. That means “the risk of falling behind the curve in the near future appears limited, and gradual increases in the federal-funds rate will likely be sufficient to get to a neutral policy stance over the next few years,” she said.

Ms. Yellen largely reiterated what officials said following their Nov. 1-2 meeting that they needed “some” further evidence that the economy is improving before raising rates again.

Some officials have continued to call for caution as the Fed weighs when to proceed with rate increases, arguing that there may still be room for the jobless rate to fall further without sparking inflation.

“We obviously don’t want to be pushing on the brakes harder than we need to in order to continue the trend of moderate growth,” Fed governor Daniel Tarullo said at The Wall Street Journal’s CEO Council event Tuesday

>>> US After Hours Summary: ANW +13%, NTAP +11% following earnings/gui


After Hours Summary: ANW +13%, NTAP +11% following earnings/guidance, HAIN +10% on audit committee finding no evidence of intentional wrongdoing... FSLR -12%, CSCO -5% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: ANW +13.2%, NTAP +10.7%, GFF +2.9% (ticking higher - also increases quarterly dividend)

Companies trading higher in after hours in reaction to news: HAIN +9.8% (independent audit committee review was completed with no evidence of intentional wrongdoing; begun to implement a remediation plan to strengthen its internal controls and organization), PIP +3.4% (ticking higher; receives a final payment from SIGA Technologies of $83.9 million which fully satisfies the judgment owed to PharmAthene), TREE +2.1% (acquires CompareCards for up to $130 mln)

Shipping names extending recent gains in after hours: SINO +18.9%, DCIX +14.3%, GLBS +4%

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: FSLR -11.9% (raises 2016 EPS guidance; 2017 ERS, revenue, and shipment guidance below expectations), CSCO -4.7%

Companies trading lower in after hours in reaction to news: VUZI -32.3% (Vuzix receives letter from Intel stating that it no longer desires to pursue a strategic relationship), LEI -25.5% (files prospectus supplement increasing prior S-3 offering of common stock on behalf of selling shareholders), ACRS -10.1% (announces a $65 mln underwritten public offering of common stock), STL -3.9% (offering 3.8 mln shares of common stock in a registered public offering), PLNT -3.8% (commences 15 mln common stock offering by selling stockholders), PFGC -3.7% (files for common stock shelf offering and announces secondary offering of 10 mln shares of common stock by certain stockholders, including affiliates of The Blackstone Group), TERP -1.3% (announces extensions until March 2017 to regain Nasdaq compliance; D. E. Shaw affirms 6.7% active stake, says is evaluating various potential transactions with one or both of the Issuer and SunEdison)

Solar names are trading lower following First Solar (FSLR) guidance/update: CSIQ -4.3%, SPWR -3.6%, TSL -3.3%, TAN -1.7%, JKS -1.1%

>>> US Close Dow -0.33% S&P -0.25% Nasdaq -0.14% Russell -0.18%


Closing Market Summary: Stocks Finish Little Changed Amid Profit Taking

The major averages ended the midweek affair on a mixed note as investors continued to fine-tune their post-election positioning. The Nasdaq Composite (+0.4%) finished ahead of the S&P 500 (-0.2%) and the Dow Jones Industrial Average (-0.3%). The three indices are now up between 2.0% and 4.0% in November.

Equity indices diverged at the start of the session as profit-taking activity weighed on the post-election landscape. Investors continued to book profits on their reflationary trades, leading to pull backs in financials (-1.4%; month-to-date: +10.7%), industrials (-0.7%; month-to-date: +6.6%), and materials (-0.1%; month-to-date: +3.4%).

In addition, the top-weighted technology sector (+0.9%; month-to-date: -1.0%) rebounded after last week's underperformance, which occurred as investors left sector mainstays in favor of stocks better positioned for large-scale public works projects.

The S&P 500 (-0.2%) finished modestly lower with eight groups losing ground. The financial (-1.4%) sector rounded out the board while telecom services (+1.0%), technology (+0.9%), and consumer discretionary (+0.5%) outperformed.

Banking names continued to underperform in the financial sector (-1.4%) as Dow component JPMorgan Chase (JPM 77.40, -1.96) fell 2.5%. Banks rallied in the immediate aftermath of the election as a steepening yield curve boosted earnings prospects for the group. There has also been a fair amount of speculation regarding the Trump Administration reducing regulations for the industry. JPMorgan Chase remains up 11.8% so far this month.

The energy space (-0.9%) slid amid a downtick in crude oil futures. WTI crude fell 0.7% ($45.56/bbl; -$0.31) after the Department of Energy released a bearish inventory report. The EIA reported that crude oil inventories increased by 5.27 million barrels (consensus: +1.48 million) while gasoline stockpiles rose by 0.74 million barrels (consensus: -0.41 million). However, losses were held in check by some positive jawboning from Russian Energy Minister Alexander Novak.

The Dow Jones Transportation Average (-0.7%) also saw some profit taking as rail names narrowed their recent gains. Union Pacific (UNP 98.01, -1.10) finished lower by 1.1%, narrowing its month-to-date gain to 11.2%. In the broader industrial sector (-0.7%), Lockheed Martin (LMT 263.35, -2.58, -1.0%) trimmed its November gain to 6.8%.

In the consumer discretionary space (+0.5%), shares of discount retailer Target (TGT 76.03, +4.59) rallied 6.4% after the company reported a bottom-line quarterly beat and issued better-than-expected comparable sales guidance for the fourth quarter. Separately, Dow component Disney (DIS 99.12, +1.41) rose 1.4% after being upgraded to "Buy" from "Hold" at Deutsche Bank.

The Treasury complex finished on a modestly higher note while the 30-yr bond outperformed, recovering early losses after a lukewarm inflation reading. The October Producer Price Index (PPI) came in flat while the index for final demand, less food and energy, fell 0.2%. The headline index is up 0.8% year-over-year while the core reading checks in at 1.2% year-over-year. Despite today's four-basis point decline, the 30-yr yield (2.92%) is up 34 basis points so far in November. For its part, the 10-yr yield ended unchanged at 2.22%.

Today's trading volume was below the average of 924 million as fewer than 869 million shares changed hands at the NYSE floor.

Today's economic data included the weekly MBA Mortgage Index, October PPI, October Industrial Production/Capacity Utilization, and the November NAHB Housing Market Index: 

  • The MBA Mortgage Index indicated that mortgage applications fell 9.2% in the week ending November 12. This followed a 1.2% decline in the prior week.
  • The Producer Price Index for October was unchanged (consensus +0.3%) while the index for final demand, less food and energy, was down 0.2% ( consensus +0.2%).
  • Industrial production was unchanged in October (consensus +0.2%) after declining a downwardly revised 0.2% (from +0.1%) in September.
    • The capacity utilization rate slipped to 75.3% (consensus 75.5%) from an unrevised 75.4% in September.
  • The NAHB Housing Market Index for November came in at 63 from an unrevised 63 in October. The consensus expected the reading to come in at 64.0.

Tomorrow's economic data will include the 8:30 ET release of CPI for October (consensus +0.4%), October Housing Starts (consensus 1178k) and Building Permits (consensus 1200k), weekly initial claims (consensus 257k), and the Philadelphia Fed Survey for November (consensus 7.0). On a separate note, Fed Chair Janet Yellen is scheduled to testify before the Joint Economic Committee tomorrow at 10:00 ET. This will be Chair Yellen's first opportunity to address monetary policy since the election.

  • Russell 2000: +14.6% YTD
  • Dow Jones: +8.3% YTD
  • S&P 500: +6.5% YTD
  • Nasdaq Composite: +5.7% ytd