TradeTheNews.com Weekly
Market Update: Volatility Returns Before the House Passes Tax Reform
Fri, 17 Nov 2017 16:03 PM EST
US stocks rolled over early this week nudged by pressure coming from overseas.
The first three sessions of the week saw futures trade lower in the premarket
along with European bourses, only to see buyers step in after the opening bell
in New York. An aggressive increase in corporate debt offerings may have caused
some indigestion. Monday saw ~$2.5B in junk-rated bond deals brought to market
compared to ~$1.5B the previous week. By Wednesday risk barometers jumped, with
the VIX rising above 14 for the first time since this summer, while the high
yield bond ETF (HYG) neared the March 2017 lows. The backdrop also featured a
continued flatting of Treasury yield curve. Spreads between the short and long
ends of the US curve continued to probe the narrowest levels since early 2007, causing
further consternation for some investors. Brexit and US tax reform were most
often sited along with carryover from a technical reversal in the DAX last week
as contributing factors holding back sentiment and raising volatility.
Thursday saw a significant snapback in stock prices though, as the US House of
Representatives finally passed a long awaited tax reform bill. The Russel 2000
led a bounce that recouped much of the first three sessions’ losses for US
indices. By week’s end, equity prices were drifting lower once again despite a
swath of strong retail earnings reports and management commentary that observed
business activity accelerating late in the quarter and into Q4. Supply was
likely a factor yet again with six US IPOs opening for trading on Friday alone,
to what can be best described as a lukewarm reception by investors. The dollar
remained relatively soft probing five-week lows against the Yen and gold broke
out to a one-month high on Friday. US rates continued to move lower outside of
the 2-year note. For the week, the DJIA lost 0.3%, the S&P500 dropped 0.1%,
while the Nasdaq added 0.5%.
In corporate news this week, some large M&A deals are brewing on the
horizon. Both Comcast and Verizon are said to have been in talks to acquire
assets from 21st Century Fox, following reports last week that Disney also
harbored interest in some part of the media giant. Toymaker Mattel is said to
have turned down a takeover approach from Hasbro, but terms of the offer are
still not publically known. Earnings season slowed down considerably this week,
but on the retail front, apparel stores showed some signs of life. Both Gap and
Ross Stores posted same store sales above analyst expectations, and sports
footwear names bounced in response to better than expected earnings from Shoe
Carnival and Foot Locker. On Thursday, Walmart impressed Wall Street with
better than expected numbers supported by its surging ecommerce metrics,
sending shares up about 10% and adding nearly $30B in market cap. GE ran in the
opposite direction during its investor meeting on Monday, where CEO Flannery
announced a 50% dividend cut and a restructuring plan which spooked investors,
sending GE shares below the $20/share support level, in the stock’s worst day
since 2009. Tesla unveiled its long-awaited electric semi truck (and threw in a
Roadster announcement for good measure), despite nagging questions that remain
about Model 3 production capacity.
MONDAY 11/13
*(CN) CHINA OCT NEW YUAN LOANS (CNY): 663.2B V 783BE
(IN) INDIA OCT CPI Y/Y: 3.6% V 3.4%E
(CN) CHINA OCT AGGREGATE FINANCING (CNY): 1.040T V 1.100TE
GE Guides FY18 framework adj EPS $1.00-1.07 v $1.15e, Organic Rev 0-3% y/y, FCF
$6-7B - investor slides
BWLD Reportedly receives >$150/shr takeover offer from Roark Capital - press
REN Announces withdrawal of proposed offering of $550M in 2025 senior notes
;cites 'broader market conditions'
(UK) PM May has granted parliament full vote on Brexit deal - FT
(HK) According to Credit Suisse analysts Macau Nov 1-12th gaming Rev +20-22%
y/y v 15%e
(CN) China Oct Home Sales Value Y/Y: -3.4% (biggest decline in approx 3-years)
(HK) Macau Gaming Regulator's Chan: To continue existing regulations on
junkets, have banned over 200 people entering casino this year
TUESDAY 11/14
(DE) GERMANY Q3 PRELIMINARY GDP Q/Q: 0.8% V 0.6%E; Y/Y: 2.8% V 2.3%E; GDP NSA
Y/Y: 2.3% V 2.0%E
VOD.UK Reports H1 Adj EBIT €2.46B v €2.05B y/y, adj EBITDA €7.39B v €7.09B y/y,
Rev €23.1B v €24.1B y/y
(IT) ITALY Q3 PRELIMINARY GDP Q/Q: 0.5% V 0.5%E; Y/Y: 1.8% V 1.7%E
(UK) OCT CPI M/M: 0.1% V 0.2%E; Y/Y: 3.0% V 3.1 %E; CPI CORE Y/Y: 2.7% V 2.8%E
(EU) EURO ZONE Q3 PRELIMINARY GDP Q/Q: 0.6% V 0.6%E; YY: 2.5% V 2.5%E
HD Reports Q3 $1.84 v $1.81e, Rev $25B v $24.5Be
(US) OCT PPI FINAL DEMAND M/M: 0.4% V 0.1%E; Y/Y: 2.8% V 2.4%E
Noting a number of cross currents in newsflow thru the EU session to current
time
(US) Fed's Bostic (non-voter, dove): Reiterates gradual Fed hikes are
appropriate over next couple of years; US is nearing full employment
(CA) Canada govt files legal challenge of US softwood lumber duties under NAFTA
provisions - press
(CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 2.50%;
AS EXPECTED
9064.JP Offers to increase pay for workers by 33% y/y to ¥2,000/hour in
December in order to help meet rise in demand – Japanese Press
WEDNESDAY 11/15
700.HK Reports Q3 (CNY) Net 18.0B v 15.7Be, Rev 65.2B v 61Be
(UK) SEPT AVERAGE WEEKLY EARNINGS 3M/Y/Y: 2.2% V 2.1%E; WEEKLY EARNINGS EX
BONUS 3M/Y: 2.2% V 2.2%E
(UK) SEPT ILO UNEMPLOYMENT RATE: 4.3% V 4.3%E (matches lowest level since 1975)
(UK) OCT JOBLESS CLAIMS CHANGE: +1.1K V +2.6K PRIOR; CLAIMANT COUNT RATE: 2.3%
V 2.3% PRIOR
(DE) GERMANY SELLS €2.475B VS. €3.0B INDICATED IN 0.50%B AUG 2027 BUNDS; AVG
YIELD: 0.36% V 0.48% PRIOR; BID-TO-COVER: 1.2X (technically uncovered) V 1.7X
PRIOR
(US) OCT ADVANCE RETAIL SALES M/M: 0.2% V 0.0%E; RETAIL SALES EX AUTO M/M: 0.1%
V 0.2%E
(US) NOV EMPIRE MANUFACTURING: 19.4 V 25.1E
(US) OCT CPI M/M: 0.1% V 0.1%E; CPI EX FOOD AND ENERGY M/M: 0.2% V 0.2%E; CPI
INDEX NSA: 246.663 V 246.646E
(US) Association of American Railroads weekly rail traffic report for week
ending Nov 11th: 547.5K carloads and intermodal units, +1.2% y/y
(US) Senator Ron Johnson (R-WI) says he will vote Against the Senate tax bill -
press
(US) SEPT TOTAL NET TIC FLOWS:-$51.3B V $125.0B PRIOR; NET LONG-TERM TIC FLOWS:
$80.9B V $67.2B PRIOR
CSCO Reports Q1 $0.61 v $0.60e, Rev $12.1B v $12.1Be
MAT Reportedly rejects latest Hasbro acquisition bid - press
(CN) China Banks are conducting stress tests related to loans to property
developers - Chinese Press
(AU) AUSTRALIA OCT EMPLOYMENT CHANGE: +3.7K V +18.8KE; UNEMPLOYMENT RATE: 5.4%
V 5.5%E
(US) Christie's auction sells last privately held Leonardo da Vinci painting
entitled 'Salvator Mundi' sold for record $450.3M (expected $100M+)
THURSDAY 11/16
(UK) Renewed speculation that UK PM May to increase her Brexit financial
settlement (divorce bill) in Dec to help kick-start trade talks - financial
press
(UK) OCT RETAIL SALES (EX AUTO FUEL) M/M: 0.1% V 0.0%E; Y/Y: -0.3% V -0.4%E
BBY Reports Q3 $0.78 v $0.79e, Rev $9.32B v $9.35Be
WMT Reports Q3 $1.00 v $0.97e, Rev $123.2B v $121.1Be
APC Guides initial FY18 oil production 385-405 MBOPD (implies +14% y/y); capex
$4.2-4.6B ('17 plan 4.5-4.7B)
(NO) Norway Sovereign Wealth Fund proposes to divest oil and gas stocks (valued
around $35B)
(US) OCT IMPORT PRICE INDEX M/M: 0.2% V 0.4%E; Y/Y: 2.5% V 2.5%E
(US) NOV PHILADELPHIA FED BUSINESS OUTLOOK: 22.7 V 24.6E
(US) OCT INDUSTRIAL PRODUCTION M/M: 0.9% V 0.5%E; CAPACITY UTILIZATION: 77.0% V
76.3%E
(US) NOV NAHB HOUSING MARKET INDEX: 70 V 67E
(US) Judge in Sen Menendez (D-NJ) corruption trial grants mistrial - press
(US) House of Representatives passes GOP tax reform bill (as expected)
AMAT Reports Q4 $0.93 v $0.91e, Rev $3.97B v $3.93Be
GPS Reports Q3 $0.58 v $0.55e, Rev $3.84B v $3.77Be
FOXA Comcast reportedly approached Fox over possible bid; not clear if Comcast
sought all of Fox or only some assets - press
FOXA Verizon reportedly also considering acquiring assets from Fox - press
TSLA Unveils prototype electric 'big rig' truck (as expected); production to
begin in 2019
(IN) MOODY'S RAISES INDIA SOVEREIGN RATING TO BAA2 FROM BAA3 (1st hike in 14
years); Outlook revised to Stable from Positive
FRIDAY
(CA) CANADA OCT CPI M/M: 0.1% V 0.1%E; Y/Y: 1.4% V 1.4%E
(US) OCT HOUSING STARTS: 1.29M V 1.19ME; BUILDING PERMITS: 1.30M V 1.25ME
