Америка сегодня. Доходы физических лиц.

E.ON AG downgraded to Underperform at RBC Capital Mkts  (7.83)RBC Capital Mkts downgrades EONGY to Underperform from Sector Perform. E.ON is nearing the end-game on nuclear uncertainty and the Uniper spin-off has created a clearer focus. However, balance sheet repair is still needed, dividends are restricted and valuation metrics are unattractive. Firm sees better value elsewhere in the sector and E.ON is their least preferred German utility. They downgrade despite an increase in tgt to €7.0/sh from €6.5/sh.

 Columbia Sportswear downgraded to Hold from Buy at Stifel  (55.06)

 Overnight Summary — World markets uneasy following Trump travel ban

• The global stock markets are generally lower to begin the week with S&P Futures down ~0.2%. Sentiment seemed to be soured by the executive
  order by President Trump that put a ban on travel from 7 countries over the weekend. The Dollar saw pressure due to the news early on, but has recovered and currently unchanged.
• With China and Hong Kong closed for Golden Week, Japan stood out as the most significant market open in the region. The Nikkei closed out the session down 0.5%. The weakness seen in the USD early on prompted a bid in the yen. As such, traders carried a cautious tone throughout the day. A soft Dec Retail Sales figure coupled with a BOJ update due out tomorrow also seemed to give traders trepidation in Monday's action.
• European bourses have fared no better, with the major averages down ~0.7-0.9%, thus far. The tone of trading has echoed into the regional indices with updates from key central banks on the horizon for this week (BOJ, FOMC, and BOE). Miners and Financials are leading the way lower, albeit in lighter than average volume. Energy stocks are also seeing pressure, led by Royal Dutch Shell (-1.2%), unable to take advantage of a modest rise in Crude prices this morning.

Market updates:

• S&P Futures vs Fair Value: -6.00 
• 10 yr Note: 2.4826% 
• USD/JPY: 114.69 -0.38 
• EUR/USD: 1.0676 -0.0015
• Europe: FTSE -0.7% DAX -0.8% CAC -0.9% 
• Asia: Hang Seng CLOSED Shanghai CLOSED Nikkei -0.5% 
• Commodities: Gold (1192.40 +1.30) Silver (17.12 -0.02) crude (53.41 +0.24) 

US Econ Data

• December Personal Income & Spending, PCE Prices (8:30am)
• December Pending Home Sales (10am)

Select Medical downgraded to Market Perform from Outperform at Wells Fargo  (13.80)

 

 Regulus Therapeutics downgraded to Market Perform from Outperform at Wells Fargo  (2.25)

 

 

 

 

 Rowan Cos downgraded to Hold from Buy at Jefferies  (19.27)

 WebMD Health upgraded to Buy from Neutral at Citigroup  (48.23)

 DDR upgraded to Buy from Neutral at Citigroup  (14.93)

 

 

 Air Products downgrade details — to Neutral at Robert W. Baird; tgt lowered to $140  (142.01)Robert W. Baird downgrades APD to Neutral from Outperform and lowers their tgt to $140 from $146. As they noted last quarter, with identifiable margin improvement catalysts having now substantially played out, APD is simply more exposed to the same sluggish global economic trends that have underpinned firm's more cautious thinking on PX. Further, as investors adjust to this new normal, they move to the sidelines to let market sentiment and valuation recalibrate. That said, firm expects excellent execution and capital allocation to persist and continue to view the company in high regard overall.

 Himax Tech downgrade details — to Neutral at Robert W. Baird; tgt lowered to $4 — China smartphone market appears to be correcting  (5.41)Robert W. Baird downgrades HIMX to Neutral from Outperform and lowers their tgt to $4 from $10. China panel makers are expected to start adopting gate-in-panel technology this year, which would reduce driver IC content. Himax's in-cell touch design has been delayed, while OLED ramp at China-based panel makers is not expected until 2019. AR/VR longer-term secular growth trends remain intact despite well-advertised program postponement impacting 2017.

 Ocera Therapeutics shares halted for news pending

 Tempur Sealy Int'l downgraded to Underperform from Outperform at Raymond James  (63.19)

 CBL & Assoc upgraded to Neutral from Sell at Citigroup  (9.86)

 Meritage downgraded to Hold from Buy at Evercore ISI  (36.90)

 MDC Holdings downgraded to Sell from Hold at Evercore ISI  (27.33)

 

 

 Paycom Software downgraded to Sector Weight from Overweight at Pacific Crest  (49.21)

 Array Biopharma downgraded to Mkt Perform from Outperform at Leerink Partners  (11.19)

 CymaBay Therapeutics upgraded to Buy at H.C. Wainwright; tgt raised to $6  (1.67)H.C. Wainwright upgrades CBAY to Buy from Neutral and raises their tgt to $6 from $2.50. Firm's positive outlook on the shares is driven by two major factors: 1) potential aggregate milestone payments totaling up to $200M from Kowa (Japan), CymaBay's new U.S. partner for arhalofenate (gout), which they initially did not incorporate into their model when the agreement was announced earlier this month, and 2) a more positive view of the potential of MBX-8025 to treat PBC in the ongoing open-label, dose ranging Phase 2 study.

 Asian Markets Close: Nikkei -0.5%, Hang Seng CLOSED, Shanghai CLOSED

Equity indices in the Asia-Pacific region began the week on a quiet note amid Lunar New Year closures in China, Hong Kong, South Korea, and Singapore. The few markets that were open saw cautious action amid uncertainty related to a travel ban that temporarily restricted arrivals to the U.S. from seven Middle Eastern countries. In Japan, the country's cabinet maintained a 61.0% approval rating, according to Yomiuri.

• In economic data:
  • Japan's December Retail Sales +0.6% year-over-year (consensus 1.3%; last 1.7%)
  • New Zealand's December trade deficit narrowed to NZD41 million from NZD746 million (expected deficit of NZD95 million). December Imports NZD4.42 billion (expected NZD4.34 billion; last NZD4.60 billion) and December Exports NZD4.38 billion (consensus NZD4.23 billion; last NZD3.85 billion)

---Equity Markets---

• Japan's Nikkei shed 0.5%, but remained just below this year's high. Toshiba lost 3.7% while consumer names like J Front Retailing and Fast Retailing posted respective losses of 1.6% and 2.6%. Industrial names like Komatsu, Fuji Heavy Industries, Hitachi Construction, and Mitsubishi Heavy Industry lost between 1.2% and 1.9%. On the upside, SUMCO, Hino Motors, Alps Electric, and Bridgestone gained between 0.7% and 2.2%.
• Hong Kong's Hang Seng was closed.
• China's Shanghai Composite was closed.
• India's Sensex slipped 0.1% ahead of this week's announcement of a budget for 2017. Tata Motors and Tata Steel posted respective losses of 2.2% and 1.6% while Bharti Airtel surged 7.5% in reaction to strong results.

---FX---

• USDJPY -0.4% to 114.66
• USDCNY UNCH at 6.8819
• USDINR -0.3% to 67.936

 

 

 

 

 

 Valvoline target raised to $28 at Monness Crespi & Hardt — Strong out of the gate, good ’17 start on VIOC growth   (23.66)Monness Crespi & Hardt raises their VVV tgt to $28 from $26. VVV's year got off to a strong start with surprisingly good 1Q earnings and an increase in annual guidance. The 1Q result illustrates the key opportunity for VVV in that the VIOC performed exceptionally well with 9% same store sales growth and a continuation of meaningful store acquisition growth. With the Core N. Am. business continuing with its steady state cash flow generation and with the Int'l segment growing around double-digits firm continues to see shares as an excellent opportunity for future appreciation. They believe VVV has shown that it deserves a premium multiple; Buy.

 

 

 

 Overseas Research Calls

Upgrades: 

• Software AG (STWRY) upgraded to Buy from Hold at HSBC
• Software AG (STWRY) upgraded to Buy from Neutral at UBS
• NovaTek (NOVKY) upgraded to Neutral from Underweight at JP Morgan
• GOL Linhas Areas Inteligentes S.A. (GOL) upgraded to Buy from Neutral at BofA/Merrill
• National Grid (NGG) upgraded to Outperform from Sector Perform at RBC Capital Mkts

Downgrades: 

• easyJet (ESYJY) downgraded to Hold from Buy at Cantor Fitzgerald
• Aggreko (ARGKF) downgraded to Hold from Buy at Deutsche Bank
• Iberdrola SA (IBDRY) downgraded to Sector Perform from Outperform at RBC Capital Mkts
• ENGIE (ENGIY) downgraded to Sector Perform from Outperform at RBC Capital Mkts
• Diageo plc (DEO) downgraded to Sell from Hold at Liberum
• Nestle (NSRGY) downgraded to Sell from Hold at Liberum
• Beiersdorf AG (BDRFF) downgraded to Hold from Buy at Liberum
• Henkel AG (HENKY) downgraded to Sell from Hold at Liberum

Miscellaneous: 

• ASML (ASML) initiated with a Buy at ABN Amro

 

 Regulus Therapeutics downgraded to Hold at Needham — HCV program concerns persist  (2.25)Needham downgrades RGLS to Hold from Buy after co announced late Friday that FDA has extended RG-101 clinical hold and requested additional long-term clinical data from ongoing trials. These data are not expected until 4Q17. Firm has removed the program from our model considering extensive development risk. Regardless, opportunity for RGLS to capture value in HCV is fading in our view given growing number of effective oncedaily oral options. Though they believe microRNA platform has substantial potential, firm downgrades to HOLD due to absence of near-term material clinical milestones. A key value-creating milestone in their view is top-line results from Phase 2 proof-ofconcept trial of RG-012 in Alport Syndrome. This trial is expected to begin mid-2017, with results available in 2018. Data from RG-125 Phase 2 trial in NAFLD (collaborator AstraZeneca) are expected 3Q17.

 

 NeoPhotonics initiated with a Outperform at Cowen  (10.84)

 

 Media Sector upgraded to Attractive from Cautious at Morgan Stanley  (27.71)

 Heritage Commerce Corp. downgraded to Mkt Perform from Outperform at Keefe Bruyette  (14.42)

 

 DuPont downgraded to Hold from Buy at Argus  (77.70)

 

 

 Analog Devices target raised to $85 at RBC Capital Mkts ahead of Q1 results  (76.93)RBC Capital Mkts raises their ADI tgt to $85 from $80. In light of competitor reports (LLTC, MXIM, TXN), they think upside to ADI estimates are likely when they report on 2/15.

 

 

 Cracker Barrel initiated with a Neutral at Buckingham Research; tgt $161  (158.65)

 

 

 S&P futures vs fair value: -8.30. Nasdaq futures vs fair value: -19.90.

Equity futures are lower this morning as global markets digest the implications of President Trump's executive order issued late Friday, which temporarily suspends the U.S. refugee program. The S&P 500 futures trade eight points (0.3%) below fair value.

U.S. Treasuries are flat, with the 10-yr yield unchanged. Similarly, crude oil is also relatively flat this morning, holding a slim 0.1% gain. The commodity currently trades at $53.24/bbl.

Today's economic data will include December Personal Income (Briefing.com consensus 0.4%) and December Pending Home Sales (Briefing.com consensus 1.3%). The two reports will be released at 8:30 am ET and 10:00 am ET, respectively.

In U.S. corporate news:

• Tempur Sealy (TPX 45.99, -17.20): -27.2% after terminating contracts with Mattress Firm, the company's largest customer.
• DHT Holdings (DHT 4.75, +0.48): +11.2% following news that the company was approached to be acquired by Frontline (FRO 6.99, -0.03).
• Walt Disney (DIS 109.80, +0.50): +0.5% after the company's stock was upgraded to 'Overweight' from 'Equal-Weight' at Morgan Stanley. 

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region began the week on a quiet note amid Lunar New Year closures in China, Hong Kong, South Korea, and Singapore. Japan's Nikkei -0.5%, India's Sensex -0.1%.
  • In economic data:
    • Japan's December Retail Sales +0.6% year-over-year (consensus 1.3%; last 1.7%)
    • New Zealand's December trade deficit narrowed to NZD41 million from NZD746 million (expected deficit of NZD95 million). December Imports NZD4.42 billion (expected NZD4.34 billion; last NZD4.60 billion) and December Exports NZD4.38 billion (consensus NZD4.23 billion; last NZD3.85 billion)
  • In news:
    • In Japan, the country's cabinet maintained a 61.0% approval rating, according to Yomiuri.

• Major European indices trade in negative territory with Italy's MIB showing relative weakness. UK's FTSE -0.6%, Germany's DAX -0.7%, France's CAC -0.9%, Italy's MIB -2.0%.
  • In economic data:
    • Eurozone January Business and Consumer Survey 108.2 (expected 107.7; last 107.8)
    • Spain's Q4 GDP +0.7% quarter-over-quarter, as expected; +3.0% year-over-year, as expected
    • Swiss January KOF Leading Indicators 101.7 (consensus 103.3; last 102.1)
  • In news:
    • The underperformance in Italy comes amid a spike in yields and speculation that the country is headed for early elections. Italy's benchmark 10-yr yield has jumped ten basis points to 2.31% while Germany's 10-yr yield is flat at 0.47%.

 Symantec target raised to $30 at RBC Capital Mkts ahead of Q4 on Wednesday afternoon  (27.35)RBC Capital Mkts raises their SYMC tgt to $30 from $28. Their long-thesis is predicated on cost savings, both internal and Blue Coat related, to total $550M+, which could go higher once LifeLock is acquired. They are not including revenue synergies from what looks like conservative expectations, but their checks are starting to show that some revenue synergies may be happening. They think EPS is biased upward.

 

 

 

 Build-A-Bear Workshop: Cannell Capital disclosed 5% active stake  (12.20)

 Colgate-Palmolive target lowered to $70 at Stifel — Reducing estimates as sales miss results in increased investment levels  (64.68)Stifel lowers their CL tgt to $70 from $75. Colgate-Palmolive reported 4Q16 sales growth meaningfully below consensus (1.5% vs consensus of 4.7%) and guided to 2017 sales growth at the low-end of long-term 4-7% targets and EPS growth approximately 5% below expectations. The magnitude of the sales miss is most notable and according to the company attributable to slowing category growth rates in the majority of markets and temporary items that should normalize in time (i.e., demonetization in India and since resolved issues with a large retail customer in France and liquidity issues with distributors in Africa). To combat slowing category growth, Colgate plans to increase advertising spend, which, along with recent U.S. dollar strength, results in anticipated low-single-digit EPS growth in 2017 (compared to a double-digit long-term target).

 

 Automatic Data target raised to $105 at Stifel  (101.71)Stifel raises their ADP tgt to $105 from $95. While fundamentally they like the stock, their neutral rating reflects the 53% premium to the S&P versus its historic range of ~40%. They expect F2Q to look very similar to F1Q (their estimates in line) and make the following observations in front of the report.

 

 DHT target raised to $5 at Stifel — Fredriksen’s new target: Could it be the start of something more...  (4.27)Stifel raises their DHT tgt to $5 from $4.50. DHT Holdings announced a non-binding proposal from shipping billionaire John Fredriksen's Frontline Ltd (FRO; NC; $7.02) in an all stock transaction placing an implied value of $5.09 per share per DHT shares, or a 19.2% increase over Friday's closing price. Importantly, Frontline announced that it had already acquired 15 million shares or approximately 16% of outstanding DHT shares. In response, the DHT board installed a one-year rights plan or effectively a poison pill intended to give the board and shareholders time to review the offer. THe only other logical copeting bidder would be Euronav (EURN) but they don't expect that to happen. INSW and GNRT are other potential takeout candidates although M&A is very rare int his segement. They would not expect a significant increase in the offer price for DHT.

DHT +14% premarket… FRO -0.6% premarket.

 European Summary

Yields Jump in Eurozone Periphery

• Eurozone sovereign yields moved sharply higher in the eurozone periphery today as the IMF said that Greece's debt pile is on an unsustainable path. Italy and Portugal are being treated as much greater credit risks this morning as their yields jump to 12-month highs while the German 10-year Bund yield is unchanged. German inflation data for January came up a little bit short of expectations (1.9% y/y) and an economic sentiment index for the eurozone rose to a nine-year high for the same month
• Greece's debt burden will «become explosive» after 2022, according to an IMF report seen by the Financial Times. The report says that «Greece cannot grow out of its debt problems» and that debt restructuring is necessary. Some eurozone countries will not support aid to Greece without IMF support and so Greece's 10-year yield is up 30 basis points to 7.39% this morning
• Italian bank Unicredit said today that its capital ratios for the end of 2016 will not meet ECB requirements. The bank is trying to raise EUR13 bln in February, almost as much as its market cap of EUR17 bln
• New Issuance:
  
  • Italy sold EUR2.75 bln of 5-year BTPs at a gross yield of 0.92% with a bid-to-cover ratio of 1.32
  • Italy sold EUR4.00 bln of 10-year BTPs at a gross yield of 2.37% with a bid-to-cover ratio of 1.29
• European Economic Data:
  
  • Germany's consumer price index fell 0.6% m/m in January, in line with estimates. January's drop reversed December's 0.7% m/m jump but easier year-on-year comparisons allowed the y/y pace to rise to 1.9% from 1.7%. The ECB's target is just under 2%
  • The eurozone's Business and Consumer Survey index unexpectedly increased to a nine-year high of 108.2 for January from 107.8 in December
    
    • The Business Climate index fell to 0.0 from 0.8
    • Consumer Confidence ticked up to -5.0 from -5.1
    • Services Sentiment climbed to 14.0 from 13.0
    • Industrial Sentiment increased to 1.0 from 0.1
  • Spain's GDP grew 0.7% q/q in the fourth quarter (3.0% y/y), according to preliminary data. That was in line with both forecasts and Q3's rate
  • In Switzerland, KOF Leading Indicators unexpectedly fell to 101.7 for January from 102.1 for December
• Yield Check:
  
  • France, 10-yr OAT: +4 bps to 1.08% (touched a 15-month high)
  • Germany, 10-yr Bund: unch at 0.46%
  • Greece, 10-yr note: +35 bps to 7.44%
  • Italy, 10-yr BTP: +11 bps to 2.32% (touched a 17-month high)
  • Portugal, 10-yr PGB: +7 bps to 4.17% (touched an 11-month high)
  • Spain, 10-yr ODE: +4 bps to 1.63%
  • U.K., 10-yr Gilt: -1 bp to 1.47%

 

 Meredith raises quarterly dividend to $0.52/share from $0.495/share  (61.60)

 S&P futures vs fair value: -10.00. Nasdaq futures vs fair value: -23.40.

The S&P 500 futures trade ten points (0.4%) below fair value.

Just in, December personal income rose 0.3% while the Briefing.com consensus expected an increase of 0.4%. Meanwhile, December personal spending increased 0.5% while the Briefing.com consensus expected a reading of 0.4%. The November Personal Spending reading was left unrevised at 0.2% while November Personal Income was revised to 0.1% from 0.0%.

Separately, Core PCE prices for December rose 0.1% (Briefing.com consensus 0.2%). The November reading was left unrevised at 0.0%.

 Rent-A-Center: Engaged Capital discloses 9.9% active stake, says has engaged, and intends to continue to engage, in communications with the Board and management team regarding means to create stockholder value  (8.01)

 Gapping up

Gapping up
In reaction to strong earnings/guidance:

• IPGP +4.2%, BANC +3.7%, ARLP +2.7%, TRNC +1.7%

M&A news:

• DHT +14.3% (receives non-binding proposal to be acquired by Frontline (FRO) for $5.09 per share)
• XXIA +5.8% (confirms it will be acquired by Keysight Technologies (KEYS) for $19.65/share in cash)
• VOD +2.2% (confirms discussions with the Aditya Birla Group about an all share merger of Vodafone India)

Other news:

• CALA +28.3% (Calithera Biosciences & Incyte (INCY) announce global collaboration to develop & commercialize CB-1158)
• QURE +12.5% (announces FDA breakthrough therapy designation for AMT-060 in hemophilia B )
• FGEN +7.3% (announces Roxadustat meets primary endpoints in two phase 3 anemia studies of roxadustat in China)
• HMY +4.5% (provides H2 2016 guidance update)

Analyst comments:

• CLD +3.1% (upgraded to Overweight from Neutral at JP Morgan)
• CBL +1.9% (upgraded to Neutral from Sell at Citigroup)
• DKS +1.7% (upgraded to Buy from Neutral at Goldman)
• NTAP +1.3% (upgraded to Buy from Neutral at Goldman)

 

 Gapping down

Gapping down
In reaction to disappointing earnings/guidance:

• SNE -3.3% (announces its Pictures unit to record impairment charge against the goodwill of JPY112.1 bln)

M&A news:

• NRZ -1.4% (to acquire approximately $97 bln unpaid principal balance of mortgage servicing rights, increases dividend, offers prelim Q4 results)

Select financial related names showing weakness: SAN -2%, RBS -1.4%, DB -2.9%, .

Select metals/mining stocks trading lower: MT -2.1%, AKS -2.1%, RIO -2%, BBL -1.8%, BHP -1.6%, VALE -1.6%, X -1.4%, .

Select oil/gas related names showing early weakness: SSL -1.9%, RDS.A -1.8%, SDRL -1.7%, BP -1.7%, CHK -1%, .

Other news:

• OCRX -53.7% (announces top-line results for Phase 2b study in Hepatic Encephalopathy; primary and secondary endpoints showed trend and dose-related clinical benefit although not statistically significant )
• RGLS -28.9% (receives written communication from the FDA that the clinical development program for RG-101 remains on clinical hold )
• TPX -23.8% (after terminating contracts with largest customer Mattress Firm)
• PULM -23.4% (announces $5 mln registered direct offering at $2.50/share)
• FIT -9.8% (report that company plans to 5-10% of workforce amid weaker than expected Q4 earnings)
• IHG -2% (travel name weak in response to Trump exec orders over weekend)
• DAL -1.9% (after IT system failure on Sunday; reports all systems return to normal)

Analyst comments:

• ARRY -3% (downgraded to Mkt Perform from Outperform at Leerink Partners)
• HIMX -2.8% (downgraded to Neutral from Outperform at Robert W. Baird)
• BCS -2.6% (downgraded to Sell from Hold at Berenberg)
• DEO -2.1% (downgraded to Sell from Hold at Liberum)

 Rite Aid -16%, Fred's (FRED) +4% following amended RAD/Walgreens (WBA) merger  (6.93)

 

 

 

IPO Radar: No IPOs Opening Today; Two Substantial IPOs Expected on WednesdayIPOs Opening Today:

• No IPOs Opening Today.
  

Upcoming IPOs:

• February 1: Invitation Homes (INVH) -- The REIT owning & operating single-family homes for lease focused on Western US and Florida is expected to price its 77.0 million share IPO within a range of $18-$21.

• February 1: Laureate Education (LAUR) -- The operator of the largest global network of degree-granting higher education institutions is expected to price its 29.0 million share IPO within a range of $17-$20.

• February 2: Braeburn Pharmaceuticals (BBRX) -- The commercial stage pharmaceutical company developing long-acting medications for disorders of central nervous system is expected to price its 7.7 million share IPO within a range of $18-$21.

• February 3: IC Power (ICP) -- The owner, developer and operator of power facilities located in key power generation markets in Latin America, the Caribbean and Israel is expected to price its 25.9 million share IPO within a range 12-$15.

• February 3: Kimbell Royalty Partners (KRP) -- The limited partnership formed to own & acquire mineral royalty interests in oil & natural gas properties in US is expected to price its 5.0 million unit IPO within a range of $19-$21.

• February 3: Ramaco Resources (METC) --The miner of metallurgical coal in West Virginia, Virginia, and southwestern Pennsylvania is expected to price its 6.0 million share IPO within a range of $12-$15.

 S&P futures vs fair value: -9.00. Nasdaq futures vs fair value: -19.40.

The stock market is poised for a lower open as investors contemplate the implications of President Trump's executive order, which temporarily suspends the U.S. refugee program. The S&P 500 futures trade nine points (0.4%) below fair value.

On the earnings front, Enterprise Products (EPD 28.85, -0.24) is down 0.8% in pre-market trade after the company reported worse than expected earnings per share this morning. 

U.S. Treasuries are currently near their overnight highs, hovering just above their flat lines. The 10-yr yield is down one basis point at 2.47%. 

Conversely, crude oil has slipped in recent action, descending from positive territory into the red. The commodity is currently at its overnight low, down 0.4% at $52.95/bbl.

On the data front, December personal income rose 0.3% while the Briefing.com consensus expected an increase of 0.4%. Meanwhile, December personal spending increased 0.5% while the Briefing.com consensus expected a reading of 0.4%. The November Personal Spending reading was left unrevised at 0.2% while November Personal Income was revised to 0.1% from 0.0%.

Separately, Core PCE prices for December rose 0.1% (Briefing.com consensus 0.2%). The November reading was left unrevised at 0.0%.

Today's last economic report, December Pending Home Sales (Briefing.com consensus 1.3%), will cross the wires at 10:00 am ET.

 Fitbit lowers Q4 guidance; sees FY17 well below consensus; announces restructuring, cutting 6% of workforce  (7.21)

• Lowers Q4 EPS to ($0.51-0.56) from $0.14-0.18 vs $0.17 Capital IQ Consensus Estimate; revs to $572-580 mln from $725-750 mln vs $734.57 mln Capital IQ Consensus Estimate. The company expects non-GAAP fourth quarter gross margin to be materially below its previously issued 46% guidance due to excess inventory and other related charges as follows: One-time write downs of tooling equipment and component inventory of ~$68 million. Increased rebates and channel pricing promotions of ~$37 million which is recorded as a reduction in revenue and others.
• «Fourth quarter results are expected to be below our prior guidance range; however, we are confident this performance is not reflective of the value of our brand, market-leading platform, and company's long-term potential. While we have experienced softer-than-expected holiday demand for trackers in our most mature markets, especially during Black Friday, we have continued to grow rapidly in select markets like EMEA, where revenue grew 58% during the fourth quarter. To address this reduction in growth and what we believe is a temporary slowdown and transition period, we are taking clear steps to reduce operating costs. Looking forward, we believe Fitbit is in a unique position to stimulate new areas of demand by leveraging the data we collect to deliver a more personalized experience while developing upgraded versions of existing products and launching additional products to expand into new categories.»
• Sees FY17 ($0.22-0.44) vs $0.64 Capital IQ Consensus Estimate; sees revs $1.5-1.7 bln vs $2.39 bln Capital IQ Consensus. Preliminary non-GAAP free cash flow guidance of ~negative $50 to $100 million.
• Long-term non-GAAP gross margin of ~45% versus previous 50% target.
• Fitbit is taking direct action to reduce the expense basis of the co while maintaining necessary investments to drive future growth and maintain its global leadership position in the wearables market.
  • Targeting a reduction in the 2016 exit operating expense run rate of ~$200 million, to ~$850 million for 2017, which includes realigning sales and marketing spend and improved optimization of research and development investments.
  • Conducting a reorganization of its business, including a reduction in force, that will impact ~110 employees, constituting ~6% of the co's global workforce, creating a more focused and efficient operating model. The cost of these reorganization efforts is expected to be ~$4 million to be recorded in the first quarter of 2017.
  • Fitbit intends to seek stockholder approval for a program under which certain employees may relinquish out-of-the-money options at the time of the exchange in return for a fewer number of restricted stock units. Fitbit expects minimal dilution from this program.

 Lancaster Colony initiated with a Buy at CL King  (129.38)

 

 

 pus Bank downgraded to Market Perform at Hovde Group as credit drives another loss; tgt $31  (27.25)Hovde Group downgrades OPB to Market Perform from Outperform and sets target price at $31 following earnings. Firm anticipates the stock will be down sharply today on the further credit deterioration and capital raise. It is possible the company's new Chief Credit Officer and the third-party loan review firm have identified and reserved for the loss content in the portfolio, but they feel at this point there is too much uncertainty.

 On The Wires

• Daxor Corporation, (DXR) announces a new randomized controlled trial analysis presented in at the Society of Critical Care meeting this month confirming a markedly lower ICU mortality rate with fluid and red blood cell management individualized according to direct blood volume analysis compared with conventional care using pulmonary artery catheter alone.
• Immunomedics (IMMU) filed an investor presentation with the SEC titled «Setting the Record Straight: Immunomedics is Acting in the Best Interests of All Stockholders to Maximize Near-Term Value.»
• Malvern Bancorp, Inc. (MLVF), appointed Alexander Opiela III, COO replacing Karen Walter. Prior to joining Malvern, Alex served as the Senior Vice President, Chief Risk and Compliance Officer, for Royal Bank America.
• PharmaCyte (PMCB) has retained Facet Life Sciences to guide PharmaCyte through its pancreatic cancer therapy development lifecycle with the FDA. Facet has been working with PharmaCyte and Translational Drug Development (TD2) since September 2016 and was instrumental in expediting its pre-IND meeting with the FDA.

 

 Hearing Tempur Sealy Int'l was downgraded to Hold from Buy at Stifel  (47.00 -16.19)

 Rite Aid gaps down -18% to open around the $5.75 vicinity after amended merger talk with WBA...  (5.74 -1.19)

 Tempur Sealy Int'l sinks nearly -30% to test its 2014 lows along the $45-level  (45.60 -17.59)

 

 

 December Pending Home Sales M/M +1.6% vs +1.3% Briefing.com consensus

 Economic Summary: Personal income & Spending rise; Chicago PMI out tomorrow at 9:45 ET

Economic Data Summary:

• December Personal Income 0.3% vs Briefing.com consensus of 0.4%; November was 0.0%
• December Personal Spending 0.5% vs Briefing.com consensus of 0.4%; November was 0.2%
  • The item of note was the PCE Price Index, which was up 1.6% year-over-year versus a 1.4% increase seen in November. That is tracking toward the Fed's longer-run target of 2.0%, which is what Fed officials will want to see to justify further rate hikes. The core PCE Price Index, which increased 0.1% in December (Briefing.com consensus +0.2%), was up 1.7% year-over-year, unchanged from November.
• December PCE Prices — Core 0.% vs Briefing.com consensus of 0.2%; November was 0.0%
• December Pending Home Sales +1.6% MoM (November was -2.5%).

Upcoming Economic Data:

• Fourth Quarter Employment Cost Index due out Tuesday at 8:30 (Briefing.com consensus of 0.6%; Third Quarter was 0.6%)
• November S&P Case Schiller Home Price Index due out Tuesday at 9:00 (Briefing.com consensus of 5.0%; October was 5.1%)
• January Chicago PMI due out Tuesday at 9:45 (Briefing.com consensus of 55.0; December was 54.6)
• January Consumer Confidence due out Tuesday at 10:00 (Briefing.com consensus of 112.5; December was 113.7)

Other International Events of Interest

• Japan's December Retail Sales +0.6% year-over-year (consensus 1.3%; last 1.7%)
• New Zealand's December trade deficit narrowed to NZD41 million from NZD746 million (expected deficit of NZD95 million). December Imports NZD4.42 billion (expected NZD4.34 billion; last NZD4.60 billion) and December Exports NZD4.38 billion (consensus NZD4.23 billion; last NZD3.85 billion)

 UPS Fourth Quarter Earnings Preview  (116.64 -1.45)

• UPS is expected to report fourth quarter earnings tomorrow before the open. There is a conference call scheduled for tomorrow at 8:30 ET.
• Capital IQ consensus calls for EPS of $1.69 (versus $1.57 last year) on revenue of $16.994 bln (+5% YoY).
• Guidance: The company is expected to guide for FY17 where consensus calls for EPS of $6.16 & revenues of $61.014 bln.
• Co's peer FedEx (FDX) reported earnings last month. The company missed on EPS and reported revenues in line. The company also reaffirmed FY17 guidance.
• In late December, Holiday shoppers are projected to return 1.3 mln packages with UPS on National Returns Day and more than 5.8 mln packages during the first full week of January 2017. In 2016, shoppers returned more than 1 mln packages on National Returns Day and 5 mln packages during the peak returns week.

Key Points from Last Quarter

• U.S. Domestic revenue increased 4.8% y/y, to $9.3 bln.
• Average daily package volume increased 5.7%; Revenue per package increased 0.9%; Fuel surcharge rates reduced revenue per package growth by about 40 basis points; Operating profit was $1.3 bln and operating margin was 13.5%.
• International operating profit jumped 14% to $576 mln, a record for any third quarter in company history. Volume growth in all products contributed to the improved profitability.
• Revenue was $3.0 bln, up 2.2%; lower fuel surcharges reduced revenue growth by approximately 70 basis points.
• Daily Export volume increased 7.1%, on double-digit gains out of Asia and high-single digit cross-border shipments within Europe.
• Revenue per package decreased 2.8%; lower fuel surcharge rates reduced revenue-per-package growth.
• Changes in trade lanes and product mix offset base rate improvements; Revenue growth was primarily due to the Coyote Logistics acquisition midway through the third quarter last year.
• Weak market conditions in the Air Freight Forwarding and LTL (less than truckload) markets weighed on top-line growth.
• Market conditions in International Air Freight and the U.S. truckload brokerage industries remain soft. Despite these conditions, saw increased loads in Coyote Logistics.

Options Activity

• Based on UPS options, the current implied volatility stands at ~ 16%, which is 33% higher than historical volatility (over the past 30 days). Based on the UPS Weekly Feb03 $117 straddle, the options market is currently pricing in a move of ~3% in either direction by weekly expiration (Friday)

Technical Perspective

• UPS shares have outperformed the Nasdaq YTD with UPS increasing by 3% vs 2.5% gain in the index. UPS tends to have 2-4% reactions to earnings. On a positive report, look for resistance near the $120.00-121.00 area, while support sits near the $114.00-115.00.

 Sector Summary: Technology (XLK -1.02%) trading lower today, behind the broader market

The tech sector — XLK — trades behind the broader market. Semiconductors, meanwhile, display relative weakness as the SOX index trades -1.46%. Within the SOX index, NXPI (-0.13%) outperforms the rest of the sector yet still trades in the red, while MSCC (-3.11%) lags. Among other major indices, the SPY is trading 0.86% lower, while the QQQ -1.18% and the NASDAQ -0.99% trade modestly lower on the session. Among tech bellwethers, AMX (+0.20%) is showing relative strength, while NVDA (-3.30%) lags.

Notable laggards following earnings:

• SILC (-9.8%), BAH (-8.9%) reported mixed Q3 results and guided FY17 in-line

Gainers on news:

• DGLY (+14.7%) co announced 'its largest commercial order ever received for the sale and installation of DVM-250 event recorder video systems' to American Medical Response; representing 2017 revs approx. $2 mln.
• XXIA (+6.7%) co confirmed it will be acquired by Keysight Technologies (KEYS) for $19.65/share in cash, or ~$1.6 bln.
• VOD (+1.4%) co confirmed discussions with the Aditya Birla Group about an all share merger of Vodafone India.

Laggards on news:

• FIT (-13.8%) co lowered Q4 guidance; sees FY17 well below consensus; announced restructuring, cutting 6% of workforce.
• ACLS (-3.7%) co received orders for the Purion H high current implanter from two manufacturers of memory devices in the Asia Pacific region.
• INTC (-1.2%) the EU cleared INTC's acquisition of Intel Security by TPG Capital.
• ODP (-0.5%) co appointed Gerry Smith to replace Roland Smith as CEO effective Feb 27, 2017.

Among notable analyst upgrades:

• HDP (+5.4%) upgraded to Buy from Neutral at Mizuho
• MELI (-1.0%) to Buy from Neutral at BofA/Merrill
• NTAP (+2.0%) to Buy from Neutral at Goldman
• WBMD (+0.5%) to Buy from Neutral at Citigroup

Among notable analyst downgrades:

• PAYC (-5.9%) downgraded to Sector Weight from Overweight at Pacific Crest
• HIMX (-6.1%) to Neutral from Outperform at Robert W. Baird
• TRMB (-3.3%) to Neutral from Buy at Dougherty

Scheduled to report earnings after the bell:

• AEIS, IDTI, ISIL, RMBS, SANM

Scheduled to report earnings tomorrow morning:

• AXE, AUDC, MMYT, MA, NTCT, S, XRX

 

 Hearing Nevro was upgraded to Outperform from Market Perform at Northland Capital  (83.34 -0.36)

 

 Early Options Activity

Taking an early look at the options market, we found the following names that may be worth watching throughout the day for further indication of investor expectations given their options volume and implied volatility movement.

Stocks seeing volatility buying (bullish call buying/bearish put buying):

Calls:

• CRM Mar 85 calls are seeing interest with 10.2K contracts trading vs. open int of 11.4K, pushing implied vol up around 3 points to ~33% — over 5.9K traded in a single transaction. Co is expected to report earnings early march.

Puts:

• HIG Feb 46 puts are seeing interest ahead of earnings Thursday, February 2 after the close with 1530 contracts trading vs. open int of 11.1K, pushing implied vol up around 4 points to ~35% — we noted activity in the same strike last week (see 1/26 13:44 OPTNX). M&A speculation circulated last month.

Stocks seeing volatility selling:

• AMG, BAH, OPB implied vol is lower following earnings/guidance

Sentiment: The CBOE Put/Call ratio is currently: 1.33… VIX: (12.02, +1.44, +13.6%).
February 17 is options expiration — the last day to trade February equity options.
*Please use the Talk to Us link at the top of the page to provide feedback on this comment as well as the OPTNX comments.

 Hearing CSX was upgraded to Buy from Hold at TD Securities  (47.25 -0.81)

 Morning Commodities: Crude remains on track to double Friday's losses ahead of tomorrow's API on the heels of Friday's rig count data which showed active oil rigs at a 14-month high

• Crude oil was on track to double Friday's losses ahead of tomorrow's API reading, last week's data showed the oil rig count is at its highest level since Nov 2015
  • Mar 2017 crude oil futures were down about $0.44 (-0.8%) around the $52.73/barrel level
  • Its worth noting that the energy sector (XLE, -2%) hit a 2-month low earlier
  • Rig count data recap:
    • On Friday, Baker Hughes reported the total US rig count increased by 18 to 712 rigs, following last week's increase of 35 rigs
    • The number of active U.S. rigs drilling for oil rose by 15 to 566 rigs this week
      
    • Last week, the U.S. oil rig count increased by 29 to 551 rigs.
    • In the week prior to Friday, the rig count declined, but that followed 10 consecutive weekly prior increases
    • The oil rig count is at its highest level in ~14 months
      
    • It is worth noting that this pick-up in US activity could potentially cap oil price gains in the future
  • Upcoming data reminders:
    • Weekly API data will be released tomorrow at around 4:30 pm ET.
    • Weekly EIA petroleum data will released this Wednesday at 10:30 am ET
    • Weekly Baker Hughes rig count data will be released this Friday at 1 pm ET.
• Natural gas extended Friday's losses on updated forecasts showing cold weather receding across much of the US in the coming weeks
  • Mar 2017 natural gas futures were down about $0.11 (-3.2%) around the $3.25/MMBtu level
  • Weekly EIA natural gas inventory data will be released this Thursday at 10:30 am ET
• In precious metals, gold snapped its 4-day losing streak after data showed PCE rose the most in ~2 years, ahead of the 2-day Fed meeting
  • Feb 2017 gold futures were up about $7.80 (+0.7%) around the $1196.20/oz level
  • Dec Personal Income 0.3% vs Briefing.com consensus of 0.4%; Nov was 0.0%
  • Dec Personal Spending 0.5% vs Briefing.com consensus of 0.4%; Nov was 0.2%
    • The item of note was the PCE Price Index, which was up 1.6% year-over-year versus a 1.4% increase seen in November. That is tracking toward the Fed's longer-run target of 2.0%, which is what Fed officials will want to see to justify further rate hikes. The core PCE Price Index, which increased 0.1% in December (Briefing.com consensus +0.2%), was up 1.7% year-over-year, unchanged from Nov.
  • Mar 2017 silver futures were up about $0.10 +0.6%) around the $17.24/oz level
• The dollar index was +0.2% around the 100.75 level
  • Commodities, as measured by the Bloomberg Commodity Index, were -0.9% around the 87.15 level

 

 

 Notable movers of interest

The following are some of today's most notable movers of interest, categorized by market capitalization (large cap over $10 billion and mid cap between $2-10 billion) and ranked by % change (all stocks over 100K average daily volume).

Large Cap Gainers

• NTAP (38.22 +1.22%): upgraded to Buy from Neutral at Goldman
• VOD (24.97 +1.59%): confirms discussions with the Aditya Birla Group about an all share merger of Vodafone India — VOD trading
• WHR (172.87 +1.18%): announces a 4-year exclusive contract renewal with Meritage Homes (MTH); financial terms not disclosed

Large Cap Losers

• DAL (47.78 -3.86%): IT system failure on Sunday
• INCY (119.48 -1.84%): and Calithera Biosciences Announce Global Collaboration to Develop and Commercialize CB-1158, a First-in-class, Small Molecule Arginase Inhibitor

Mid Cap Gainers

• IPGP (112.01 +7.22%): raises Q4 guidance, driven by the continued strong performance of materials processing
• THS (74.71 +3.13%): upgraded to Outperform from Market Perform at BMO Capital

Mid Cap Losers

• TPX (45.56 -27.91%): anticipates it will cease doing business with Mattress Firm, a unit of Steinhoff (SNHFY), during 1Q17
• RAD (5.82 -16.02%): & Walgreens (WBA) amend and extend definitive merger agreement; parties have agreed to reduce the price for each share of Rite Aid common stock to be paid by Walgreens Boots Alliance to a maximum of $7.00/share and a minimum of $6.50/share

 

 IPG Photonics target raised to $116 at The Benchmark Company after preannouncing upside record results for 4Q16  (111.31 +6.84)The Benchmark Company raises their IPGP tgt to $116 from $100. For Q4, IPG expects to report rev of ~$280 mln compared with the previously guided range of $255 mln to $270 mln, and earnings per diluted share in the range of $1.39 to $1.42, including a benefit of $0.02 from foreign exchange, compared with previous guidance of between $1.17 and $1.32 per diluted share. The consensus expectation was for earnings of $1.25 per diluted share on sales of $263.5 mln. Strength was noted in materials processing, high power, QCW, and pulsed lasers. Firm sees an improving int'l industrial picture, especially in Europe. This coupled with revs from new products such as UV fiber lasers is seen driving growth in 2017. For 2017, they now see earnings of $6.02 per diluted share on sales of $1.19 bln versus their prior est which called for earnings of $5.42 per diluted share on sales of $1.10 bln; Buy.

 

 

 

 Walgreens Boot Alliance lowers high end of FY17 EPS guidance: $4.90-5.08 from $4.90-5.20 vs. $5.04 consensus  (81.46 -0.04)

• The Company continues to expect that it will realize synergies from the acquisition of Rite Aid in excess of $1 billion, to be fully realized within three to four years of the closing of the Merger.
• Based on the terms and conditions of the Amendment, the Company no longer expects any material accretion from Rite Aid in fiscal year 2017. This takes into account the extended timeframe for closing, the updated potential store divestitures, and the new per share merger consideration.

 

 NRG Energy: Carlson Capital increases passive stake to 5.41% (To approximately 17.08 mln shares vs. approximately 14.68 mln held at the end of Q3)  (16.01 -0.41)

 CalAmp: Falcon Point Capital discloses 5.6% passive stake  (14.92 -0.27)

 

 Today's most active stocksThe following are today's most active stocks ranked by volume and relative volume, categorized by sectors (over $300 mln market cap and 100K average daily volume).

Today's top 20 volume

• Materials: AKS (10.62 mln -3.1%), FCX (10.05 mln -1.68%), NGD (8.8 mln -19.44%), VALE (8.35 mln -3.37%), X (7.74 mln -4.2%)
• Industrials: GE (9.57 mln -0.4%)
• Consumer Discretionary: F (14.85 mln -1.08%), TPX (11.81 mln -28.69%)
• Information Technology: FIT (21.98 mln -11.51%), AMD (14.14 mln -3.37%), AAPL (11.28 mln -0.71%), MSFT (9.87 mln -1.25%), MU (8.79 mln -1.79%), FB (8.28 mln -1.59%), NOK (8.12 mln -2.37%)
• Financials: BAC (42.58 mln -2.35%), QQQ (9.97 mln -1.23%)
• Energy: CHK (24.22 mln -6.56%), WFT (8.17 mln -4.09%)
• Consumer Staples: RAD (68.59 mln -16.74%)

Today's top relative volume (current volume to 1-month average daily volume)

• Healthcare: NOVN (1.63x -5.25%)
• Materials: NGD (1.64x -19.44%)
• Industrials: CMRE (2.12x -10.07%), DOOR (2.08x +0.37%)
• Consumer Discretionary: TPX (13.48x -28.69%), SCSS (1.64x -1.31%)
• Information Technology: XXIA (8.4x +6.87%), BAH (2.34x -8.08%), NQ (2.25x +7.46%), FIT (1.86x -11.51%), IPGP (1.6x +6.65%), STM (1.54x -1.47%), VIAV (1.48x -6.18%)
• Financials: OPB (2.69x -23.67%)
• Energy: EEP (2.94x -8.77%), EEQ (2.59x -6.82%), DHT (1.95x +11.94%), WLB (1.54x -1.68%)
• Consumer Staples: RAD (2.43x -16.74%)
• Utilities: NEP (3.18x +8.28%)

 Conduent: Darwin A. Deason discloses 6.08% passive stake  (14.82 -0.09)

 Inventure Foods: Falcon Point Capital discloses 7.9% passive stake  (5.99 -0.16)

 Xerox: Darwin A. Deason discloses 6.08% passive stake  (6.90 -00.8)

 Hearing Tempur Sealy Int'l was downgraded to Sell at SunTrust  (43.79 -19.40)Hearing firm cut FY17 EPS ~58% to $1.93; consensus is at $4.29.

 Coach Earnings Preview  (35.78 +0.20)

Coach (COH) is set to report Q2 results tomorrow before the open with a conference call to follow at 8:30 AM ET. Co reported last quarter's results at 6:45 AM ET. Current Q2 Capital IQ consensus stands at EPS of $0.74 (vs. $0.68 last year) on revs up 2% to $1.32 bln.

• Last quarter, COH reported in-line EPS, missed on revs, and reaffirmed its FY 17 guidance.
  
  • The co continues to expects revs to grow low-to-mid single digits, ex-fx
  • Maintained operating margin forecast of 18.5-19%
  • Continued to project double-digit growth in EPS
  • Expects Coach brand directly operated square footage to grow lsd globally
  • Internationally, co expects msd increase in sq footage led by growth in Europe and msd increase in mainland China
  • Outlook assumes positive low single-digit comp for the brand in North America for the year and in each quarter
• Consensus Estimates of FY 17 EPS of $2.13 (+8%) on revs of $4.6 bln (+2%).
• Currently, the XRT Retail ETF has fallen ~12% following the Trump rally. Retail stocks have sold off on concerns of online shopping hurting foot traffic during the sectors' crucial holiday period.
  
  • On January 4, Macy's (M) preannounced November/December comps and announced restructuring.
    • On the call, Macy's noted ongoing weakness in handbags and watches. 
    • In its Q4 call, COH announced strategic actions to streamline its distribution in the North American department store channel by taking down its door count in North American department store by about 25% over 2017.

Other Notables from Q1

• Stated the co is looking to make strategic acquisitions to help growth (nothing imminently planned)… could explain why the co is constantly being mentioned in M&A chatter w/ Kate Spade (KATE)
• Expects dividends to grow in-line w/ earnings
• Total North American Coach brand sales decreased 3% reflecting its deliberate department store pullback, while direct sales were flat
  
  • Bricks and mortar comps ~+4%, driven by ticket and conversion, while traffic was down modestly
• Aggregate comp was ~+2% with e-commerce, notably lower eOS flash sales, impacting results
• International sales +3% on a constant currency basis
  
  • Greater China sales +5% on constant currency basis in dollars, driven by double-digit growth and positive comps on the Mainland offset by continued weakness in Hong Kong and Macau
  • Europe business sales grew at a double-digit pace, driven by new distribution and positive double-digit comps, excluding Paris
• Gross margin +120 bp Y/Y 68.9% for Q1
• Operating margin +100 bps Y/Y 17%
• Inventory levels were $547, -5% Y/Y

News During Quarter

• On January 23, Bloomberg reported that Coach and/or Michael Kors (KORS) might make a bid for Kate Spade (KATE)
  
  • On December 2, shares traded higher following report KATE is mulling a sale after coming under pressure from an activity investor
  • On November 14, M&A speculation was circulated involving the co and Kate Spade (KATE) after reports that KATE was being urged to sell itself
• On December 4, 2016, an FT article reported that Burberry (BURBY) had rejected takeover offers from Coach.
• On January 4, the co appointed Kevin G. Willis as CFO. Wills joined Coach from AlixPartners LLP, a global business advisory firm, where he has served as Managing Director and CFO since March 2014.

Stock Action During Quarter

• The stock initially gapped up ~3% to open at 37 after reporting Q1, but it was not able to hold these gains as the stock sold off to the 35 level over the course of the next 3 trading sessions.
• The stock did trend in conjunction w/ the broader market as it tested resistance at 39 twice during the late Nov/early December.
• On November 15, the stock was down ~4% to close at 36.36 on heavy volume after a NPD report noting that retail traffic continues to suffer b/c of online shopping.
• The stock found sound support at the 34 level and it has been trading in a 34/37 range for the last month as investors await earnings.
• Short interest as % of float is the lowest its been all year (currently under 3%).

Analyst Actions

• On January 25, CLSA downgraded to Outperform from Buy
• On January 25, Atlantic Equities downgraded to Neutral from Overweight
• On January 3, Jefferies removed from Franchise Pick List

Related Stocks: KATE, KORS, M, JWN

 Hearing Moneygram was downgraded to Hold from Buy at Feltl & Co. in light of last week's merger agreement with Ant Financial  (12.60 -0.07)

 Ingenico acquires TechProcess; terms not disclosed  (16.57 -0.68)The co announced it has reached an agreement in principle to acquire 100% of TechProcess Payment Services Ltd, a leading Indian electronic payments services provider from its current shareholders (major global and Indian investors). Closing is expected to take place in Q1 2017.

 Hearing BP was upgraded to Buy from Hold at Societe Generale  (36.02 -0.56)

 European Markets Closing PricesEuropean markets are now closed; stock markets across Europe performed as follows:

• UK's FTSE: -0.9%
• Germany's DAX: -1.1%
• France's CAC: -1.1%
• Spain's IBEX: -1.5%
• Portugal's PSI: -2.8%
• Italy's MIB Index: -3.0%
• Irish Ovrl Index: -1.3%
• Greece ASE General Index: -3.5%

 

 Rumor Round Up

Rumor Activity was slow to start out the week.

• Bloomberg reported that Keysight Technologies (KEYS 36.97 -0.04) is close to $1.6 billion acquisition of Ixia (XXIA 19.45 +1.28).
• M&A blog Betaville in weekly video interview discussed vague chatter that Roche (RHHBY 29.41 -0.27) may again be looking at Illumina (ILMN 158.90 -2.09).
• Straitstimes discussed that Las Vegas Sands' (LVS 53.27 -0.07) Marina Bay Sands unit plans to sell 49% stake in Shoppes mall.

While many rumors circulate during the day, and the validity of the source of these rumors can be questionable, the speculation may increase volatility in the near term.

 Market Internals

The broader market begins the week in the red, led lower by the Nasdaq Composite which sheds about 58 points (-1.02%) to 5603, the S&P 500 is down about 20 (-0.89%) to 2274, and the Dow Jones Industrial Average loses 167 (-0.83%) to 19926. Action has come on higher than average volume (NYSE 345 vs. avg. of 327; NASDAQ 807 mln vs. avg. of 776), with decliners outpacing advancers (NYSE 686/2299, NASDAQ 547/2243) and new highs outpacing new lows (NYSE 27/26, NASDAQ 38/36).

Relative Strength:

Short-Term Futures-VXX +4.9%, Turkey-TUR +4.5%, Japanese Yen-FXY +1.2%, Jr. Gold Miners-GDXJ +0.8%, Gold Miners-GDX +0.6%, Indian Rupee-ICN +0.5%, Singapore-EWS +0.5%, Canadian Dollar-FXC +0.4%, Gold-GLD +0.4%, India-INP +0.3%, Swiss Franc-FXF +0.2%, Silver-SLV +0.2%, US Diesel/Heating Oil-UHN +0.1%, US Preferred Stock-PFF +0.1%.

Relative Weakness:

Greece-GREK -4.5%, US Nat Gas-UNG -3.8%, Oil Svcs.-OIH -3.3%, Oil&Gas E&P-XOP -3.1%, Italy-EWI -3.0%, Emrg. Mkts. M. East&Africa-GAF -2.7%, Steel-SLX -2.7%, Homebuilders-XHB -2.3%, Clean Energy-PBW -2.2%, US Energy-IYE -2.1%, Egypt-EGPT -1.9%, S. Africa-EZA -1.8%, Poland-EPOL -1.7%, Russia-RSX -1.6%.

 

 

 Fitbit target lowered to $6.50 at Mizuho in light of the recent end user demand slowdown; Neutral  (6.19 -1.02)Mizuho lowers their FIT tgt to $6.50 from $9 9 to reflect surprisingly sharp end user demand slowdown. The stock is now trading at ~0.5x EV/Sales, akin to GPRO's multiple at the height of its struggles in 2016. Despite FIT's leading position within wearables and projected $2.70 cash/share at 4Q-end, slowing category growth, potential domestic saturation, and weak adoption abroad suggest declining unit demand and pressure on ASP for the foreseeable future. Furthermore, while opex cuts and indications to pursue smart watch business are encouraging, firm believes lack of topline visibility will continue to pressure the stock.

 

 Index Changes Reminder: Varex Imaging (VREX) will replace Stage Stores (SSI) in the S&P Small Cap 600 after the close of trading

 Midday Market Summary:Equity Indices Hold Losses at Midday

The stock market has opened the week under selling pressure as investors digest some of President Trump's latest executive orders. The S&P 500 is lower by 1.0% while small caps underperform with the Russell 2000 falling 1.5%.

On Friday night, Mr. Trump ordered a temporary suspension of the U.S. refugee program in addition to barring travelers from seven countries-- Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen — from entering the U.S. The executive order has raised global concerns over President Trump's protectionist agenda, which seems to have taken priority over the pro-growth promises of his campaign trail.

To be fair, this week will feature a heavy dose of economic data, a number of quarterly reports, and policy updates from the Bank of Japan and the Federal Reserve, so today's caution may be related to more than just one item.

Succumbing to Monday's broad selling pressure, all eleven sectors are in negative territory. Cyclical sectors have led the retreat, with energy (-2.3%) posting the widest loss. The space has been hurt by a downbeat response to Enterprise Products' (EPD 28.40, -0.68) quarterly earnings report and a 1.0% downtick in crude oil; the energy component currently trades at $52.63/bbl. The consumer discretionary space (-0.6%) is the only growth-sensitive space that trades ahead of the broader market thus far.

On the non-cyclical side, all five spaces outperform the benchmark index. Consumer staples (-0.2%) tops the day's leaderboard, while the remaining four spaces--health care, utilities, telecom services, and real estate--show losses between 0.5% and 0.7%.

Conversely, the Treasury market has profited from the risk-off tone with the benchmark 10-yr yield lower by one basis point at 2.48%. Larger gains have been recorded up front, with the 2-yr yield falling two basis points to 1.20%.

Today's economic data included December Personal Income and December Pending Home Sales:

• December personal income rose 0.3% while the Briefing.com consensus expected an increase of 0.4%. Meanwhile, December personal spending increased 0.5% while the Briefing.com consensus expected a reading of 0.4%. The November Personal Spending reading was left unrevised at 0.2% while November Personal Income was revised to 0.1% from 0.0%. Core PCE prices for December rose 0.1% (Briefing.com consensus 0.2%), while the November reading was left unrevised at 0.0%.
  • With spending rising faster than income, the drop in the personal savings rate suggests consumers were spending out of savings — something that wouldn't typically be done unless it was out of necessity or consumers were feeling better about their income prospects.
• Pending Home Sales for December rose 1.6% while the Briefing.com consensus expected an increase of 1.3%. Today's reading follows a 2.5% downtick in November.

 

 SPY down 0.83% w/ all sectors in the red; Energy is the worst performing sector and Staples are the best performing sector

 

 Unusual Options Activity

The following options are exhibiting notable trading, potentially indicating changing sentiment toward the underlying stocks, and/or potentially representing positioning for increased volatility.

Bullish Call Activity:

• GGP Feb 24.74 calls are seeing interest ahead of earnings tonight after the close  (volume: 4170, open int: 230, implied vol: ~32%, prev day implied vol: 25%) 
• JBLU Feb 20 calls (volume: 4070, open int: 1620, implied vol: ~37%, prev day implied vol: 31%) — co reported earnings last week and is expected to report its next quarterly earnings report late April.
• CRM Mar 85 calls (volume: 12.7K, open int: 11.4K, implied vol: ~35%, prev day implied vol: 30%) — over 5.9K traded in a single transaction. Co is expected to report earnings early march.

Bearish Put Activity:

• HIG Feb 46 puts are seeing interest ahead of earnings Thursday, February 2 after the close (volume: 1670, open int: 11.1K, implied vol: ~36%, prev day implied vol: 32%) — we noted activity in the same strike last week (see 1/26 13:44 OPTNX). M&A speculation circulated last month.

Sentiment: The CBOE Put/Call ratio is currently: 1.09… VIX: (12.37, +1.79, +16.9%).
February 17 is options expiration — the last day to trade February equity options.
*Please use the Talk to Us link at the top of the page to provide feedback on this comment as well as the OPTNX comments.

 Events and conferences of interest tomorrow

Events and conferences of interest tomorrow, January 31st include:

• Metro Connect Conference (January 31st- February 1st)
  • Scheduled to appear: CCOI, CNSL, CCI, FCN, WFC, ZAYO, LMOS
• DistribuTECH 2017 (January 31st — February 2nd)
  • Notable to appear: ACN, T, BDC, CSCO, DGII, ADSK, BBSI, BRKS, GIB, CIEN, CLSH, CPA, DVMT, WIRE, EXPR, HTHIY, HUBB, HON, IBM, INFY, ITRI, KYO, LDOS, LMT, MXWL, MSBHY, MTU, MSI, NCI, NNBR, NOK, ORCL, PCRFY, QTM, RHT, RLH, SAGE, SRTS, SIEGY, SWIR, TESO, TRR, WCC, HRS, XPLR
• Rockwell Collins (COL) Business Aviation Operators Conference at 11:15 ET

Conference in progress:

• NobleCon13 Conference 2017-Noble Capital Annual Small Cap and Emerging Growth Investor Conference (January 30-31st)
  • Scheduled to appear: EXK, ORN, GALE, SFE, IEC, PRTS, PHX, EGL, PAR, ORBT, DLHC, TRNC, BTX, MXPT, CVU, TSQ, SAUC, SSNT, RAND, ACLS, FSNN, LLEX, MTNB, APDN, CAPC, ITUS, EYEG, INOD, AVXL, RLJE, SEAC, OPRX, UNIR, SRAX, HDYN, MBOT, FNJN, CVSI, TNXP, HTBX, SSP, CTG, DCTH, CRAI, KTOS, AGRX, SYMX, ONCS, BNKL, IDXG, EXCC, QRHC, TRCH, BSTC, NVCR, AYTU, ARTH (List of Attendees)

 Metals Closing Prices

• Feb 2017 gold ended today's session up $5.00 (+0.4%) to $1193.20/oz
• Mar 2017 silver closed today's session $0.02 higher (+0.1%) at $17.15/oz
• Mar 2017 copper closed $0.03 lower (-1.1%) at $2.66/lb

 Earnings Calendar for Monday, January 30th

• Today after the close look for the following companies to report:
  • BSAC, PFG, RGA, SANM, PKG, LEG, CR, GGP, IEX, WERN, GGG, ARE, UDR, RYAM, IDTI, ISIL, AEIS, HTLF, RMBS, BOFI, TFSL, DHT, CORT
    
• Tomorrow before the open look for the following companies to report:
  • XOM, ABC, VLO, UPS, AET, PFE, HCA, IMO, S, CNHI, LLY, TMO, DHR, PCAR, NUE, MA, XRX, ZBH, AXE, SPG, UAA, ALLY, COH, PNR, TMHC, HOG, HUBB, SF, CIT, CNX, NDAQ, FLWS, NS, NTCT, WDR, HW, GK, SMG, PCH, UBSI, OFG, MMYT, TWIN, AUDC

 Sears Holdings -13% to further all-time lows after closing sale-leaseback transaction CBL & Associates Properties (CBL)  (6.49 -0.93)

CBL & Associates Properties (CBL) this morning announced that it has closed on a sale-leaseback transaction for five Sears department stores and two Sears Auto Centers located at CBL malls, providing CBL with control of these locations for future redevelopment. CBL has acquired the locations for a total consideration of $72.5 million. Sears will continue to operate the department stores under new 10-year leases. Under the terms of the leases, CBL will receive aggregate initial base rent of approximately $5.075 million, with Sears also responsible for paying common area maintenance charges, taxes, insurance and utilities.

• Also weighing on shares, Durban Capital's David Berman in a Barron's piece this weekend detailed his cautious outlook on the company.

 Ixia downgraded to Neutral at DA Davidson; tgt $19.65  (19.47 +1.27)DA Davidson downgrades XXIA to Neutral from Buy and sets target price at $19.65 following the KEYS deal. Firm feels the acquisition price is fair, and the combination of Keysight and Ixia makes strategic sense. With the Boards of both companies having approved the deal, as well as significant shareholders of Ixia, firm does not expect additional acquisition offers. To maintain exposure to the network visibility market, they would suggest redeploying XXIA investment resources to Gigamon.

 

 Hearing OceanFirst Finl and Atlantic Capital (ACBI) were both downgraded to Hold from Buy at Sandler O'Neill  (28.50 -1.24)

 Hearing Briggs & Stratton was upgraded earlier to Buy from Neutral at Northcoast  (21.84 +1.05)

 Hearing New Gold was downgraded earlier to Underperform from Sector Perform at Scotia  (3.01 -0.95)

 SunPower target lowered to $8 at Mizuho  (6.37 -0.20)Mizuho lowers their SPWR tgt to $8 from $25. The downturn in the industry and limited visibility into the future leads to firm's reductions. SPWR's CEO believes the industry will recover in 2H17, but much of that may be in the hands of Congress as it contemplates tax reform (including renewables incentives). Their 4Q16 rev, EBITDA, and EPS ests are $1,014M, $43M, and ($0.50) per share, respectively. This compares with Street views of $1,057, ($12M), and $(0.48) per share. Firm's presumed MWs deployed, recognized and produced are all within mgmt expectations; Neutral.

 Agriculture Closing Prices

• Mar 2017 corn closed $0.05 lower (-1.4%) at $3.58/bushel
• Mar 2017 wheat closed $0.06 lower (-1.4%) at $4.14/bushel
• Mar 2017 soybeans closed $0.26 lower (-2.5%) at $10.23/bushel

 Eli Lilly, Novo Nordisk (NVO), and Sanofi (SNY) accused of Insulin price fixing, according to NY Times  (74.48 -0.88)

 Currency Market Summary

Dollar Rally Stumbles Again

• The U.S. Dollar Index fell 0.05% to 100.48 today as the dollar slipped against the Japanese yen ahead of tonight's rate decision from the Bank of Japan. The 10-year JGB yield has not traded down to 0.00% since November despite the BoJ's policy of yield curve control, which is supposed to keep the 10-year yield close to that level. The rise in government bond yields in first the U.S. and now in Europe should eventually put pressure on the BoJ to defend the presumed 0.10% upper end of its target range for the 10-year JGB yield. Some analysts expect the BoJ to upgrade its assessment of the economy in tonight's monetary policy statement. The central bank is virtually guaranteed to keep its benchmark rate at -0.10%. Due out early on Tuesday morning is the preliminary consumer price inflation reading for the eurozone as well as GDP growth for the fourth quarter
• EUR/USD: -0.09% to 1.0689
  
  • Germany's consumer price index fell 0.6% m/m in January, in line with estimates. January's drop reversed December's 0.7% m/m jump but easier year-on-year comparisons allowed the y/y pace to rise to 1.9% from 1.7%. The ECB's target is just under 2%
  • The eurozone's Business and Consumer Survey index unexpectedly increased to a nine-year high of 108.2 for January from 107.8 in December
  • Greece's debt burden will «become explosive» after 2022, according to an IMF report. The report said that «Greece cannot grow out of its debt problems» and that debt restructuring is necessary. Greece's 10-year note yield rose by 43 basis points to 7.52% today
• GBP/USD: -0.58% to 1.2476
  
• USD/CHF: -0.31% to 0.9961
  
  • In Switzerland, KOF Leading Indicators unexpectedly fell to 101.7 for January from 102.1 for December
• USD/JPY: -1.15% to 113.75
  
  • In Japan, retail sales rose 0.6% y/y in December, missing economists' expectations and slowing from November's 1.7% growth rate
  • Household spending and industrial production data are due out this evening
  • The Bank of Japan will announce its rate decision tonight
• USD/CNY: +0.02% to 6.882
  
• USD/RUB: +0.15% to 59.93
  
• USD/TRY: -2.31% to 3.781
  
• USD/BRL: -0.59% to 3.1228
  
  • Brazil's IGP-M Inflation Index rose less than expected in January to 0.64% from December's 0.54%
• USD/MXN: -0.66% to 20.75
  
• USD/CAD: -0.23% to 1.3120
  
• AUD/USD: +0.03% to 0.7550
  
• NZD/USD: +0.26% to 0.7283
• New Zealand's trade deficit narrowed to NZD41 mln in December from NZD746 mln in November