Tuesday, October 18, 2016

Tuesday, October 18, 2016 On Tap SNAPSHOT 7:45 a.m. 10/15 The Retail Economist/Goldman Sachs Weekly Chain Store Sales Index Chain Store Sales, W/W% ...
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Tuesday, October 18, 2016 On Tap

SNAPSHOT

7:45 a.m. 10/15 The Retail Economist/Goldman Sachs Weekly Chain Store Sales Index Chain Store Sales, W/W% (previous 1.0%), M/M% (previous +1.5%)

U.S. stock futures rise; dollar falls; 10-year Treasury yield 1.768%; Nymex $50.35; gold $1262.70

8:30 a.m. Sep Real Earnings

OPENING CALL

8:30 a.m. Sep CPI, M/M% (expected +0.3%), Core CPI, M/M% (expected +0.2%), Energy Idx, M/M% (previous +0.0%), Food Idx, M/M% (previous +0.0%), Real Avg Wkly PayInfla Adj, M/M% (previous -0.4%), CPI, Y/Y% (previous +1.1%), Core Annual, Y/Y% (previous +2.3%)

Watch for: Inflation data; chain store and retail sales indexes; earnings from BlackRock, Intel, Johnson & Johnson, Philip Morris International and Yahoo!

Stocks and commodities rebounded Tuesday while government bonds stabilized after a recent rout. Futures pointed to a 0.5% opening gain for the S&P 500, after the index closed at its lowest level in over a month. Markets in Asia ended higher, while the Stoxx Europe 600 advanced 1.2% in morning trading, led by miners and oil and gas companies. Dollar-denominated commodities got a lift as the greenback pulled back from its highest level since March. The WSJ Dollar Index extended declines early Tuesday and was last down 0.2%.

8:30 a.m. Obamas hosts Official Visit from Italian PM Renzi and his wife

Investors were keeping a close eye on inflation data. The British pound rose 0.5% against the dollar to $1.2250. U.K. inflation figures released in morning trade came in slightly above expectations and close to a two-year high.

8:55 a.m. 10/15 Johnson Redbook Retail Sales Index Ret Sales Mo-to-Date, M/M% (previous -0.2%), Ret Sales Mo-to-Date, Y/Y% (previous +0.5%), Latest Wk, Y/Y% (previous +0.5%)

U.S. September inflation data is due later Tuesday, with economists forecasting a rise of 0.3%, extending six months without a drop. Rising inflation pressures could bolster the case for the Federal Reserve to raise interest rates later this year.

10:00 a.m. Oct NAHB Housing Market Index Housing Mkt Idx (expected 63) 4:00 p.m. Aug Treasury International Capital Data 4:30 p.m. 10/14 API Weekly Statistical Bulletin Crude Stocks, Net Chg (Bbls) (previous +2.7M), Gasoline Stocks, Net Chg (Bbls) (previous +0.7M), Distillate Stocks, Net Chg (Bbls) (previous -4.5M), Refinery Runs N/A Alaska Day

Fed Vice Chairman Stanley Fischer said Monday that the bank is within spitting distance of its official policy goals. “I’ll tell you a little secret. We are very close” to the job and inflation mandates that drive Federal Reserve interest-rate policy, he said. A number of Fed officials are building a case to skip over the November policy meeting and raise rates again in December.

EQUITIES Ford Motor plans to trim F-150 truck production and idle several other assembly plants in North America this month, aiming to whittle down unsold-car inventory amid a slowdown in U.S. light-vehicle sales. The No. 2 U.S. car maker will suspend production for a week at an assembly plant in Kansas City, Mo., where it builds its full-size F-150 pickup, the company’s top seller and biggest moneymaker. Ford will also shut down a crossover factory in Louisville, Ky. for two weeks in October and idle output for a week at two plants in Mexico producing sedans and small cars. Ford’s U.S. sales fell 8% in September as the broader new-car market sputtered, despite generous Labor Day deals and deeper discounts during the month. Ford’s light-duty truck inventory stood at a 93 days’ supply at the month’s end, well above the level considered healthy by the industry, according to WardsAuto.com.

Tuesday, October 18, 2016 Recent Analyst Ratings Actions

Pfizer said Monday it will begin selling a biosimilar version of blockbuster rheumatoid-arthritis treatment Remicade in late November at a 15% discount off the brandname drug’s list price.

Apptio Initiated at Neutral by Goldman Sachs

The announcement is likely to set up a fierce battle, in the courts as well as in contract talks with health insurers, between two of the biggest drug companies in the world by sales. Pfizer is launching its version, called Inflectra, before the resolution of an ongoing patent dispute with Remicade’s maker Johnson & Johnson.

Carrizo Oil & Gas Cut to Neutral From Buy by Goldman Sachs Cousins Properties Raised to Hold From Sell by Stifel Nicolaus Cypress Semi Cut to Equal-Weight From Overweight by Barclays Fortune Brands Cut to Sector Weight From Overweight by KeyBanc Guggenheim LC Opt Div Cut to Neutral From Outperform by Credit Suisse Guggenheim LC Opt Div Cut to Neutral From Outperform by Credit Suisse Gulfport Energy Raised to Buy From Neutral by Goldman Sachs IBM Is Maintained at Neutral by Citigroup IBM Is Maintained at Overweight by Morgan Stanley

Johnson & Johnson in a statement promised to fight the biosimilar’s launch on a range of fronts. The company vowed to “defend our intellectual property rights” and to “compete through a variety of innovative contracting options.”

FOREX The dollar was weaker against its rival currencies as investors opted to lock in profits after recent gains in anticipation of a rate increase from the Federal Reserve. The greenback has gained traction in recent trade as brisk economic data bolstered investors’ expectations that the Federal Reserve would increase interest rates later this year. But following a downbeat New York-area manufacturing data Tuesday, some investors moved to unwind their positions in Asian trade. “Amid a lack of fresh trading cues, selling on recovery is pulling down the dollar,” said Mizuho Securities FX strategist Kenji Yoshii. “Investors are locking in profits” after the dollar’s recent rally.” Investors are now awaiting U.S. inflation data later today. At 4.50am ET, USD/JPY was at 104.02-03, EUR/USD was at $1.1012-15 and GBP/USD was at $1.2234-36.

BONDS

IBM Is Maintained at Underperform by Credit Suisse

The yield on the benchmark 10-year U.S. Treasury note was 1.768% in European trading, compared with 1.766% Monday.

IBM Is Maintained at Underweight by Barclays

The yield on the 10-year U.K. gilt was steady Tuesday at 1.125%.

Monogram Residential Initiated at Neutral by Mitsubishi UFJ Netflix Is Maintained at Neutral by Goldman Sachs Netflix Is Maintained at Overweight by Morgan Stanley Nutanix Initiated at Market Outperform by JMP Securities

While the recent rise in long-dated bond yields “feels like it’s U.K.-led,” this looks like a much more widespread reassessment of monetary and fiscal policy around the world, said James Athey, investment manager at Aberdeen Asset Management. “Officials continue to signal a shift from monetary to fiscal stimulus,” he said, which should suggest an environment where yields are higher and the yield curve is steeper. Outside the U.K., investors had also grown concerned in recent weeks about the European Central Bank’s plans for the future of its bond-buying program. The bank holds a meeting Thursday, with many investors expecting confirmation that it doesn’t plan to swiftly end its asset purchase program.

Tuesday, October 18, 2016 Oasis Petroleum Cut to Sell From Neutral by Goldman Sachs Ply Gem Holdings Cut to Sector Weight From Overweight by KeyBanc Quanex Building Products Cut to Sector Weight From Overweight by KeyBanc USD Partners Cut to Neutral From Buy by Janney Capital Valvoline Initiated at Equal-Weight by Morgan Stanley

Despite media reports, “We believe the ECB is still committed to its ultraloose monetary policy and that its main target is to fight off deflation,” said Jean-FranÁois ClÈment, investment director at Unigestion.

COMMODITIES Crude oil prices clawed back minor gains in early Asia trade Tuesday following an overnight decline, but trading is expected to be muted now that the market has priced in a potential production cut. The December contract for global benchmark Brent was up 0.6% at $51.85 a barrel while its U.S. counterpart West Texas Intermediate gained 0.8% to $50.35. Oil futures fell overnight, with profit taking given as the most likely reason by most observers. However, doubts also remain that members of the Organization of the Petroleum Exporting will be able to agree on the details of proposed production cuts of 1%-2%, particularly where they are going to come from. Oil prices have been trading in the $48-$53 a barrel bracket since the preliminary deal was announced in late September, but some market watchers say the news has been largely priced in and the market now has little fuel to sustain momentum. “Moreover, given that countries like Libya, Iran, and Nigeria are excluded from deal, the expected increases in their production could easily offset reductions from other members,” Dominick Chirichella from the New York-based Energy Management Institute said. Gold was trading up at $1,262.70 in London.

Other Top Stories Of The Day Fed’s Fischer Says Central Bank Is ‘Very Close’ to Job, Inflation Goals Federal Reserve Vice Chairman Stanley Fischer said the U.S. central bank is within spitting distance of its official policy goals, although he refrained from commenting on what that might mean for U.S. monetary policy.

U.K. Inflation Nears Two-Year High U.K. consumer prices rose at the fastest annual pace in nearly two years in September, but statisticians said there was little evidence so far the uptick was driven by the recent slump in sterling after the Brexit vote in June.

Tuesday, October 18, 2016 Germany Hosts Putin and Poroshenko for Ukraine Summit Leaders of Germany, France, Russia and Ukraine will gather in Berlin Wednesday to discuss the Ukraine conflict.

Iraq Forces Advance to Edges of ISIS-Held Mosul Government troops and Kurdish fighters push toward the outskirts of Iraq’s secondlargest city, the Islamist militant group’s last major stronghold in the country.

Bombing of Aleppo Paused to Allow Aid, Russia Says Russian and Syrian troops suspended bombing sorties around Aleppo on Tuesday in preparation for aid convoys to reach the besieged Syrian city, Russian Defense Minister Sergei Shoigu said.

Melania Trump Says Husband Was ‘Egged On’ in Making Lewd Remarks Donald Trump’s wife said she believes her husband was “egged on” in making his lewd comments about women in a now-infamous 2005 tape, remarks she called “inappropriate” but classified as “boy talk.”

Retired General Pleads Guilty to Lying in Leak Probe A retired four-star general has pleaded guilty to a charge that he lied to investigators who were examining leaks about secret U.S. government hacking efforts directed at Iran’s nuclear program.

Tuesday, October 18, 2016 Today In Canada Earnings scheduled none

Economic Indicators (all times ET) August manufacturing shipments

Stocks to watch Mining company Teck Resources’ (TCK) shares climbed Monday after RBC upgraded its rating to outperform, citing a strong outlook for coal

Calendar items (all times ET) none

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