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Options

Volatility 411


CBOETV - Dan Deming, KKM Financial, discusses put activity in the VIX and touches on the upcoming Fed meeting.

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This video is from CBOE and is being posted with CBOE’s permission. The views expressed in this article are solely those of the author and/or CBOE and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Stocks

Sector News Breakdown


Consumer

  • Restoration Hardware (RH) Q3 EPS 20c/$549.3M vs. est. 16c/$527.13M; Q3 comp sales declined (-6%)) vs. 7% increase last year; direct revenues decreased 3% to $242.5M; cuts year EPS view to $1.19-$1.29, down from $1.60-$1.80, and est. $1.63 citing lower-than-expected holiday sales
  • United Airlines (UAL) sees 4Q PRASM down (3%-4%) better than prior view of down (4%-6%) due to stronger than expected bookings during second half of quarter; sees Q4 CASM up 4%-4.5% vs. prior view of 4.75%-5.75%; had record low number of cancellations in November
  • Duluth Holdings (DLTH) Q3 EPS 1c/$67M vs. est. 0c/$69.2M; sees year GAAP EPS 52c-60c down from prior 66c-70c; cuts year sales view to $360M-$370M from prior $370M-$380M; lowers year Ebitda outlook
  • Macau’s government said the limit on daily cash withdrawals for mainland China-issued ATM cards remains unchanged, while it capped each card transaction at 5,000 patacas ($626), contradicting a South China Morning Post report that the Chinese city was planning to cut daily limits. The daily ATM withdrawal limit of 10,000 yuan ($1,450) remains unchanged – Bloomberg report (the report in the ACMP sent shares of casinos WYNN, MPEL lower by over 10% yesterday)
  • Vail Resorts (MTN) Q1 revs $178.3M vs. est. $183.6M; Q1 Ebitda loss $48.3M vs. est. loss $40.3M
  • Fred's (FRED) Q3 EPS ($1.05) which includes 78c of charges on sales $516.6M vs. est. $514.27M; said recorded charges totaling $38M; 3Q gross margin 21.5%, down 480 bps YoY and Nov comps down (-2.9%) citing continued challenges in both front store and pharmacy sales
  • NCI Building (NCS) Q4 EPS 28c/$480.3M vs. est. 31c/$483.75M; sees Q1 revenue $370M-$390M below consensus $398.9M and sees Q1 gross profit margins to be in the range of 21.0% to 23.5%
  • Good Times Restaurants (GTIM) revises FY17 revenue to $80M-$82M from $80M-$84M (est. $83.55M); backs FY17 year-end revenue run rate $94M-$98M and reaffirms same store sales of approximately +1% to +2% for Good Times
  • Household appliance maker Electrolux AB said it expects moderate growth in its largest markets of Europe and North America next year, but warned that continued economic pressures in Latin America will see demand there fall by around 5%.
  • Bebe Stores (BEBE) reports 1-for-10 reverse stock split
     

Energy

  • Oil futures moved higher as traders looked ahead to a key weekend meeting between OPEC and non-OPEC countries about whether or not to cut oil production.
  • USA Compression (USAC) 4.5M share secondary priced at $16.25
     

Financials

  • Navient (NAVI) announces approval of new $600M share repurchase program
  • Valley National (VLY) files to sell 8.4M shares of common stock
     

Healthcare

  • Athene Holding (ATH) 27M share IPO priced at $40.00
  • Cooper Companies (COO) Q4 EPS $2.28/$518.7M s. est. $2.25/$505.03M; sees FY17 EPS $9.00-$9.30 on revs $2.09B-$2.13B vs. est. $9.55/$2.09B
  • Galapagos (GLPG.NA) says start of Colitis study triggers $10M milestone; says first patient dosed in “Selection” Phase 2b/3 study of filgotinib in ulcerative colitis
  • Bristol Myers (BMY) raises quarterly dividend to 39c from 38c
     

Industrials & Materials

  • Genesee & Wyoming (GWR) November carloads up 3.7% YoY; Nov. traffic 247,470 carloads vs 238,614, rising 7.6% YoY citing increased coal & coke, agricultural products, metals shipments
  • Ichor Holdings (ICHR) 5.9M share IPO priced at $9.00
  • Hudson Technologies (HDSN) 6.429M share Secondary priced at $7.00
  • Digital security firm Gemalto NV has agreed to buy 3M Co.'s (MM) identity-management business for $850 million, 3M said
  • C.H. Robinson (CHRW) raises quarterly dividend to 45c per share from 43c
     

Technology, Media & Telecom

  • Broadcom (AVGO) Q4 EPS $3.47/$4.14B vs. est. $3.36/$4.12B; sees Q1 revenue $40.08B, plus or minus $75M vs. est. $3.97B
  • Finisar (FNSR) Q2 EPS 58c/$369.9M vs. est. 46c/$361.99M; sees Q3 EPS 58c-64c on revs $378M-$398M above est. 48c/$376.56M; sees Q3 non-GAAP gross margin of approximately 37% to 38%, non-GAAP operating margin of approximately 18.5% to 19.5% citing favorable product mix and leverage from vertical integration with larger volumes for “significantly” improved gross margins
  • Xactly (XTLY) Q3 EPS loss (6c)/$23.9M vs. est. loss (13c)/$23.78M; says ended the quarter with 287K subs, up 22% YoY; sees Q4 EPS loss (13c)-(10c) on revs $23.6M-$24.4M, vs. est. loss (13c)/$25.94M
  • Pure Storage (PSTG) 1.7M share Block Trade priced at $12.15
  • BlackBerry (BBRY) unveiled its mobile-native approach to security with the launch of a comprehensive platform designed for the Enterprise of Things. BlackBerry's new platform is designed to be the foundation that drives the company's ongoing move to software
  • Dell Technologies Inc. posted strong results for its personal computers but reported declining server sales in the third quarter

The content of this post was created by the Hammerstone Group. The Hammerstone Institutional Forum, a chat-based platform for traders, provides subscribers with up-to-the-minute breaking news headlines and instant analysis that drive the market. For more information please visit www.thehammerstone.com. For more information on the stocks mentioned in the Hammerstone Recap, please contact Brian Ducey at brian@thehammerstone.com.

This article is from the Hammerstone Group and is being posted with the Hammerstone Group's permission. The views expressed in this article are solely those of the author and/or the Hammerstone Group and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Stocks

Nasdaq Market Intelligence Desk - Equity Market Insight December 9, 2016


Market Update: As of 11:50AM EST

NASDAQ Composite +0.4% Dow +0.3% S&P 500 +0.22% Russell 2000 +0.06%
NASDAQ Advancers: 1319 / Decliners: 899
Today’s Volume (100day avg):  +25%

The S&P 500 is advancing for the 6th consecutive session, despite analysts suggesting stocks are overbought. 7 out of 11 S&P Indices are in the green, with the Healthcare group the best performer. The DXY Index (US Dollar) has surged over the past 2 days, up more than 1.4%, the largest 2 day gain since late June (Brexit).

  • All the major indices are on track to post more than 2% this week, with the Russell 2000 adding more than 5%. The small-cap index has inflated by more than 19% over the past 5 weeks, which marks the best streak since April 2009. Biotechs (NBI +1.9%) are getting a boost today from Biogen after investors are betting that the company’s Alzheimer drug will be more potent than their competitors.  
  • Looking at recent fund flows, Fixed Income ETFs saw inflows of $3 billion over the past two weeks in a partial reversal of the nearly $7.3 billion in outflows post-election.  The bulk of the inflows were directed toward Corporate Junk ETFs while emerging-market bond ETFs saw over $3.5 billion in outflows.  On a sector view, equity ETFs had inflows of 2.6% billion according to Bloomberg with about 45% going into financial sector ETFs.
  • Crude Oil is holding above $50, up more than 12% since OPEC’s production cut deal, but the deal has approached a hurdle this weekend as several non-OPEC members will meet. OPEC said non-OPEC nations have committed to a 600k/day cut, with Russia apparently cutting by 300k. The intent on this weekend’s meeting is to nail-down a pact, but any disconnect might send the price per barrel lower.

Technical Take:

One of the standout moves this week within the global marketplace is happening in Europe’s strongest economy, Germany.  The German DAX has gained 6.7% this week for its best weekly gain since October 2015.  More importantly this week’s move broke out above the 10,740 - 10,800 resistance zone where the DAX has been consolidating below for the prior four months.  While US equity indices have been in party mode since the catalyst of the US elections, the music has been low and few have been dancing in Europe and Germany.  This week however someone must have broken a glass stein in Germany because the party in the DAX Index appears to just be starting. 

Nasdaq's Market Intelligence Desk (MID) Team includes:  

Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.

Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading.

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Brian Joyce, CMT has 16 years of trading desk experience. Prior to joining Nasdaq Brian executed equity orders and provided trading ideas to institutional clients. He also contributed technical analysis to a fundamental research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Airline companies among others understand the trading in their stock. Brian is a Chartered Market Technician.

This article is from Nasdaq and is being posted with Nasdaq’s permission. The views expressed in this article are solely those of the author and/or Nasdaq and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Macro

Finding the Positives from a Tumultuous Week in Europe


Developments in Europe, including the resignation of Italian Prime Minister Matteo Renzi and the shock decision of the European Central Bank to reduce the amount of its monthly bond-buying program next year, have contributed to a tumultuous week for investors. Here David Zahn, head of European fixed income, Franklin Templeton Fixed Income Group, offers his analysis of these situations and explains why he sees a silver lining in both instances.
 

Politics has dominated many global investors’ concerns for the last six-to-12 months, and nowhere more so than in Europe. While I think it’s important to continue to look at the underlying fundamentals, I maintain that politics and monetary policy will be the most important drivers of financial markets over the next year.

For that reason, we were eagerly anticipating the latest pronouncements from the European Central Bank (ECB). Its announcement included confirmation that the ECB intends to extend its asset-buying program until the end of 2017, but to reduce the monthly purchases in April of next year to €60 billion from the current €80 billion.

Initially, a number of investors seem to have assumed this move amounts to a tapering of the program. We have a different view.

The absolute amount the ECB is now expecting to purchase over the lifetime of the program has been increased. In addition, we believe that by removing some of the constraints on the eligibility of assets for purchase, the ECB has enhanced its ability to do quantitative easing (QE) for longer.

While the market is assuming the ECB may not be as accommodative, we would think it could be just as accommodative and continue to be so for longer than originally anticipated.

We would expect one consequence of this announcement to be much steeper yield curves in Europe, which implies notably higher interest rates on debt of long-term maturities than on short-term. Outside of Europe, Japan’s authorities have also indicated that they are looking for steeper yield curves, so investors may want to consider whether their portfolios are positioned for this to emerge as a long-term trend.

It’s also worth noting that ECB President Mario Draghi and his colleagues have demonstrated they are conscious of the potential political risks on the horizon; the ECB statement at its latest meeting explicitly notes that it could increase the buying program again if it deems it necessary.

The Italian Connection

Meanwhile, markets in general seem to have shrugged off the defeat of Italian Prime Minister Matteo Renzi in his country’s constitutional referendum and his subsequent resignation. Unlike other plebiscites this year—namely, the United Kingdom’s European Union (EU) referendum and the US presidential election—the result was largely in line with expectations and any perceived negative sentiment seems largely to have been priced in.

More significant, in our view, will be how the situation in Italy plays out from here. Our view is that an early Italian election is unlikely; we think there needs to be some kind of electoral reform to ensure the electoral process can work appropriately.

Ironically, investors may consider that Renzi’s failure to secure support for his constitutional reforms, which would have weakened the oversight role of the upper house of Italy’s parliament and strengthened the hand of the ruling prime minister, may prove a blessing in limiting the disruptive potential of an incoming administration.

It means no new government could automatically change all the laws or rules within the country without scrutiny from Italy’s upper house. That may offer some degree of reassurance to those concerned about a more extremist government, either from the left or right wings of the political spectrum.

All Eyes on France

So while we’re skeptical about the prospects of imminent elections in Italy, we are very focused on the situation in France, which is due to host its own presidential elections in April and May of next year.

There has been a lot of attention on the prospects of Far Right Front National leader Marine Le Pen winning power in France. She is a committed Euro-skeptic and the question many observers are asking is: If Le Pen were to become the French president, would she be able to call a referendum on France’s continued membership in the eurozone—or even its membership in the EU?

The prospect of an EU without France as a member would be problematic, in our view, so we think many investors are likely to be very focused on opinion polls in France over the coming months, and we’d expect to see French government securities and French assets in general really moving largely in line with what the polls are showing.

The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Because market and economic conditions are subject to rapid change, comments, opinions and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy.

This information is intended for US residents only.

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What Are the Risks?

All investments involve risks, including possible loss of principal. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments.

 

This article is from Franklin Templeton and is being posted with Franklin Templeton’s permission. The views expressed in this article are solely those of the author and/or Franklin Templeton and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Macro

Three Cheers For The Coming Great Rotation


A little bit like a Yeti, the Loch Ness monster, or Big Foot, signs of a much anticipated “great rotation” out of bonds and into stocks have engendered a fair amount of random-yet-unsubstantiated sightings and derision over the last few years.  Of course, a bond bull market for the ages has encouraged all but the most intrepid and deep-pocketed bond bears to take the package and enter early-hibernation.  At the same time, many erstwhile stock pickers had been forced to consider buying Consumer Staples stocks at 20X earnings.  With their adoption of financial repression to cure all that ailed the global economy, the world’s central bankers imposed a certain financial purgatory on the rest of us.  In much the same way there is little incentive to open up a new savings account yielding negative real interest rates, picking stocks and bonds seems rather pointless in an environment in which there is little economic volatility and the cost of debt capital is so low that the vicissitudes of the markets that make the business so much fun are all-but-eliminated.  While it may be premature to make grand proclamations about the economy and the markets next year without knowing a whole lot about the specifics of the new Administration’s economic plans, we believe that easier fiscal and regulatory policies may reintroduce the concept of the business cycle to investors and businessmen.  As much as people fear that stocks prices have gotten ahead of themselves, we would be loath to fade the current rally here for one simple reason – the bull market that started on March 9, 2009 has occurred without the participation of the individual investor.


 

As the table on the prior page indicates, the bull market that started seven years ago has occurred during a period in which there have been net redemptions from domestic equity mutual funds and ETFs.  In many ways this has been the most joyless bull market of all time, fueled not by optimism, animal spirits, or good old-fashioned cupidity, but by financial engineering, debt issuance, and share repurchases.  Yawn.  It still counts, of course, but it’s a lot less fun if you love this great parade we call Wall Street.  In fact, the only year in which there have been net inflows into domestic equity mutual funds since 2009 was in 2013, a year in which the “taper tantrum” reminded the average investor that it was in fact possible to lose money in a bond fund.  “Harold, what are these brackets around our Munis?”  With a 58 basis point back-up in the 10-year since the election, one would presume a reprise of such uncomfortable conversations has taken place as monthly statements have been opened over the last few days.

It would be natural at this point to ask precisely who has been buying all these stocks if the retail investor has been so absent.  There are a variety of answers to this question of course, but it appears as if companies themselves have been the single greatest source of demand for equities since the financial crisis.  In fact, we estimate that the S&P 500 has been consistently buying-in the equivalent of 3.5-4% of its stock over the last few years.  The individual investor, burned by two 50% declines in stocks since 2000, has been content to clip coupons in a period of low inflation.  What is far more surprising is that it appears that few public companies have any interest in even luring its customers to buy their stocks.  In fact, the average price of a share in the S&P 500 is at an all-time high of $90.  Many companies that might have a wonderful ability to attract additional equity capital from the little guy - GOOGL, AMZN, CMG- appear content to have their stock in what is perceived to be strong hands.  While stock splits theoretically add no economic value, they might not hurt, at least at this stage, to restore some interest in the capital markets among average people.

Our extensive travels to visit clients since the election has led us to believe that many institutional investors are bullish on equities in rough proportion to their happiness about the results of the election a month ago.  Given the bruising nature of the campaign, this is understandable.  Still, we get the sense that among those who are bearish that this is becoming an REO Speedwagon market – you just Can’t Fight This Feeling any longer…More sleigh bell.


 

Strategas Research Partners' Institutional Investor-ranked Research Team works to identify the major themes with broad implications for global financial markets. Strategas covers the broad investment landscape, with published reports discussing Investment Strategy, Economics, Washington Policy, Quantitative and Fixed Income research. The team's thematic and macro-driven approach relies on empirical data as well as fundamental and technical research to provide readers with an integrated investment strategy for a variety of time horizons.

 

This article is from Strategas Research Partners and is being posted with Strategas Research Partners’ permission. The views expressed in this article are solely those of the author and/or Strategas Research Partners and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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