WEEKEND NOTES

“STILL…HARDLY ANY COMPLAINTS!”
By Gary Kaltbaum- February 20, 2017
There continues to be very little to complain about. Major indices continue their upward trajectory with nary a pullback. In fact, since the election, we have not seen a correction of even 2%. This in itself is amazing. Normally, there is an ebb and flow in where markets give back a few before moving higher. Not right now. For sure, we are due but until then:
Biotech/healthcare now coming on.
Consumer staples now coming on off of proposed buyouts.
Financials another leg up.
New highs expand
Stocks gapping down on earnings immediately bought up.
Companies with blah numbers romping. For example:
CSCO  flat earnings…sales down…gaps up and breaks out
CAT 13% sales drop…ready to break out.
IBM no growth and used a ridiculously low tax rate…breaks out and ramps
Semis continue on their merry way.
As long as financials and semis work, not much to worry about.
The only thing to complain about remains sentiment which is now frothy and overly bullish (which is bearish) but this can last for a while as sentiment is not a pinpoint indicator. As always, if anything changes, we will let you know.

Thursday’s Closing Look

Stocks slid on Thursday after 5 strong days of hitting fresh record highs. Energy shares lagged as crude oil pulled back. President Trump tweeted about the stock market and said, “Stock market hits new high with longest winning streak in decades. Great level of confidence and optimism – even before tax plan rollout!” Economic data was strong with weekly jobless claims holding near their lowest levels in more than 40 years, while the Philadelphia Federal Reserve manufacturing index hit its highest level since January 1984.

Gary’s Thoughts: It is early in the Trump presidency. Markets making a big bet but have to say, economic numbers accelerating. Market due to relax.

Friday’s Morning Look

Market Update:

Stock futures are lower ahead of Friday’s open as the market finally takes a breather and pulls back from record highs.

Gary’s Thoughts: Futures down…no issue here f the market sits, pulls back and relaxes. It is due.

Economic Calendar:

  • E-Commerce Retail Sales 10:00 AM ET
  • Leading Indicators 10:00 AM ET
  • Baker-Hughes Rig Count 1:00 PM ET
  • Loretta Mester Speaks on Sunday 8:15 PM ET

Highlights:

  • Trump taps Acosta to be labor secretary
    Gary’s Thoughts: Next!
  • Snapchat Parent Sets Valuation of Up to $22.2 Billion
    Gary’s Thoughts: Money losing company…high valuations. But known name.

Wednesday’s Closing Look

Stocks rallied on Wednesday as Janet Yellen spent the day testifying on Capitol Hill. Economic news was mixed. The consumer price index (CPI) rose 0.6% in January, which was higher than the Street’s estimate for for 0.3%. Separately, Retail sales, rose 0.4% last month beating estimates for 0.1%. The Housing market index came in at 65, missing estimates for 68. Weekly mortgage applications fell -3.7%, which was sharply lower than last week’s reading of 2.3%. Meanwhile, the Empire State Manufacturing Index came in at 18.7, higher than the Street’s estimate for 7.5.

Gary’s thoughts: Ho hum…another up day off of the breakout of 9 tight weeks in the market. No complaints…and as we have said, biotechs re-emerging. Would love to see some rest in here.

Thursday’s Morning Look

Market Update:

Stock futures are lower ahead of Thursday’s open as stocks continue to hit fresh record highs.

Gary’s Thoughts: Futures flat…would love some rest here…NTES big gap to new highs of the day….

One important note: lots of yapping that Jack Dorsey bought $7 million of Twitter stock this week. Terrific but he also bought in previous years at much higher prices. We are not saying that the stock does not go higher but when looking at insider buying, it is important to look at the past.

Economic Calendar:

  • Housing Starts 8:30 AM ET
  • Jobless Claims 8:30 AM ET
  • Philadelphia Fed Business Outlook Survey 8:30 AM ET
  • Bloomberg Consumer Comfort Index 9:45 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • Fed Balance Sheet 4:30 PM ET
  • Money Supply 4:30 PM ET

Highlights:

  • Yellen Sees More Rate Hikes Ahead If Economy Stays on Course
    Gary’s Thoughts: New president…we guarantee 100% a hike in March bit who cares at this point/
  • IRS won’t reject tax returns if they do not include Obamacare disclosures
    Gary’s Thoughts: Trump ordered this and good…terrible Obamacare mandate/rule…whatever.

Tuesday’s Closing Look

Once again, stocks rallied on Tuesday as Janet Yellen spent the day testifiying on Capitol Hill. For the first time in years, Yellen was slightly hawkish which should be expected now that all the “data” is bullish. Stocks are at record highs, the economy is growing, inflation is edging higher and the official unemployment rate is under 5%. Shares of Apple (AAPL) hit fresh record highs which helped the major indices race higher. Biotech stocks also got a nice bid as money begins to flow into that industry group.

Gary’s Thoughts: Financials breaking out again. Financials have been leading market since the elction. Need we say more? Also, watch some oils. A few setting up well. Not the whole group but a potential start.

Wednesday’s Morning Look

Market Update:

Stock futures are quiet ahead of Wednesday’s open as stocks continue to hit fresh record highs.

Gary’s Thoughts: Futures down a wee bit as we write this.  Not much else to report…interest rates backing up a little more here. Recent attempted break to the upside in bonds has been stopped dead in its tracks.

Economic Calendar:

  • MBA Mortgage Applications 7:00 AM ET
  • Consumer Price Index 8:30 AM ET
  • Retail Sales 8:30 AM ET
  • Empire State Mfg Survey 8:30 AM ET
  • Industrial Production 9:15 AM ET
  • Atlanta Fed Business Inflation Expectations 10:00 AM ET
  • Business Inventories 10:00 AM ET
  • Housing Market Index 10:00 AM ET
  • Janet Yellen Speaks 10:00 AM ET
  • EIA Petroleum Status Report 10:30 AM ET
  • Eric Rosengren Speaks 12:00 PM ET
  • Harker Speaks 12:45 PM ET
  • Treasury International Capital 4:00 PM ET
  • William Dudley Speaks 7:15 PM ET

Highlights:

  • Yellen Sees More Rate Hikes Ahead If Economy Stays on Course
    Gary’s Thoughts:
  • Steel Resurgence Seen Fizzling as China’s Property Market Slows
    Gary’s Thoughts:

WEEKEND NOTES

We do not have to be long-winded this weekend.

Major indices moved out of a 9 week range. There has hardly been a down day of import since the election.

Financials held the 50 day. Still need to move out again. That has not happened yet.

Metals/mining look ready for another leg up as steel, copper and all that stuff set up.

The semis tease downside but reverse up every time there looks like trouble.

Not so great earnings are not sold. In fact, saw a few gaps to the downside that were bought intraday.

Chinese ADRs now coming on.

World markets remain strong.

In spite of protests, riots, missteps by the White House and a complete demonization by the media of the new President, markets continue to ignore.

The only real negative is sentiment but sentiment is a secondary indicator. Some of our readings are at multi-year bullish areas…as a contrary indicator, has to be kept in the file manager.

As always, if anything changes, we will let you know.

 

Friday’s Pre-Market Look: Stocks In The News Before The Open

Activision Blizzard (ATVI) jumped 10% in after-hours trading after it reported Q4 adjusted EPS of 92 cents, well above consensus of 73 cents, and its board authorized a $1 billion stock buyback over the next two years.

CyberArk Software Ltd (CYBR) dropped over 3% in after-hours trading after it said it sees full-year EPS of $1.20-$1.24, weaker than consensus of $1.34.

Ellie Mae (ELLI) climbed 5% in after-hours trading after it reported Q4 adjusted EPS of 57 cents, better than consensus of 49 cents.

VeriSign (VRSN) gained 1% in after-hours trading after it reported Q4 adjusted EPS of 92 cents, higher than consensus of 88 cents.

Seattle Genetics (SGEN) slid over 4% in after-hours trading after it said it sees 2017 revenue of $405 million-$445 million, below consensus of $490.5 million.

Columbia Sportswear (COLM) rose 4% in after-hours trading after it reported Q4 EPS of $1.20, above consensus of $1.10.

Monolithic Power Systems (MPWR) slid nearly 7% in after-hours trading after it said Q4 revenue for consumer end market fell to $38 million from $38.6 million y/y, the first year-on-year decline in consumer revenue in over a year.

Trivago (TRVG) jumped over 7% in after-hours trading after Expedia said Trivago’s Q4 revenue surged +65% y/y to $183 million.

Yelp (YELP) tumbled 9% in after-hours trading after it said it sees Q1 revenue of $195 million-$199 million, less than consensus of $204.4 million.

Cliffs Natural Resources (CLF) fell 4% in after-hours trading after it announced an offering of 50-million common shares.

Hortonworks (HDP) jumped 8% in after-hours trading after it said it sees 2017 GAAP revenue of $235 million-$240 million, above consensus of $234.8 million.

Regal Entertainment Group (RGC) gained over 2% in after-hours trading after it reported Q4 adjusted EPS of 33 cents, higher than consensus of 26 cents.

MagnaChip Semiconductor (MX) lost 3% in after-hours trading after it said it sees Q1 revenue of $157 million-$163 million, less than consensus of $166.5 million.

Control4 Corp. (CTRL) rallied nearly 7% in after-hours trading after it reported Q4 adjusted EPS of 31 cents, better than consensus of 24 cents, and then said it sees 2017 adjusted EPS of 90 cents-98 cents, higher than consensus of 85 cents.

Radisys (RSYS) sank nearly 15% in after-hours trading after it said it sees 2017 adjusted EPS of 7 cents-17 cents, below consensus of 25 cents.

Source: FoxBusiness, Barchart, Bloomberg, Reuters

Thursday’s Closing Look

Stocks rallied on Thursday after Trump promised a “big league” tax announcement. The market has been looking forward to hearing Trump’s tax plan because that is expected to be a big boost to the economy. Economic data was quiet. Weekly jobless claims slid by 12,000 to 234,000, which was lower than the Street’s estimate for 250,000. Separately, wholesale trade data for December showed a 1% increase on inventories.

Gary’s Thoughts: AND the financials lead off the news. Good action as Dow, S&P into new highs. As long as financials work, market works.