A slight pause in the U.S. markets yesterday may find the major averages resuming their upward trend near term and as overseas markets continue to rally. A good many headlines continue to excite and build on investor sentiment in the U.S., but let’s quickly take a reading of overseas markets before digging into some corporate headlines. Shall we?
European equities are higher for a 5 session in 2018. DAX 30 index added 0.2% to reach 13,394.60, wavering around a two-month high. A batch of German economic data out Tuesday added to the positive backdrop. German industrial output outpaced forecasts with growth of 3.4% in November, adding to the sentiment that Europe’s largest economy may have performed better than anticipated in 2017. France’s CAC 40 was up 0.5% at 5,515.99. Asian markets continued their rally led by Japan’s Nikkei. The Nikkei pared its gains after the Bank of Japan trimmed the size of its bond-repurchase offer by 5% in its latest market operation. Japan’s Nikkei Average still ended up 0.6% at 23,849.99, hitting a new 26-year closing high. In Hong Kong, the Hang Seng Index topped 31,000 for the first time since 2007. It was up 0.4%, matching a record 11-day winning streak recorded in 1999.
Corporate Headlines
As anticipated, Target has released stronger than anticipated holiday sales and boosted its Q4 and FY17 guidance. After, Kohl’s, J.C. Penney and Macy’s all reported better than expected holiday period sales last week, Target has followed suit by reporting same-store-sales comparisons growth of 3.4% during the November/December period.
- Comparable sales growth of 3.4 percent in the November/December period was driven by strong traffic growth and continued strength in digital sales, which are expected to grow more than 25 percent in 2017.
- The Company raised its fourth quarter and full-year 2017 EPS guidance, based on the benefit of stronger-than-expected sales and recently enacted federal tax reform.
- Stores fulfilled 70 percent of Target digital volume in November/December, meaning that stores enabled approximately 80 percent of the Company’s comparable sales growth in that period.
- Comparable sales were positive and accelerated from the third quarter in all five of the Company’s core merchandise categories: Home, Apparel, Food & Beverage, Hardlines and Essentials.
- The Company now expects fourth quarter comparable sales growth in a range around 3.4 percent and full-year 2017 comparable sales growth of more than 1 percent.
- The Company is currently planning for a low single-digit increase in its 2018 comparable sales and year-over-year stability in EPS generated by its core business, excluding the benefit from recently enacted federal tax reform.
2017 proved a difficult year for many brick & mortar retailers, but many factors contributed to the retail category during the holidays and found some retailers coming into 2018 with stronger results. Unfortunately, Express is not one of those better performing retailers as the company announced disappointing results leading up to Christmas. The company said it expects earnings per share for the quarter to January to be 31 cents to 33 cents, below the FactSet consensus of 43 cents. Same-store sales are expected to be down 1% to down 2% from a year ago, compared with the FactSet of up 2.4%. The company said that while e-commerce sales have increased by double-digit percentages, traffic in retail stores was worse than expected. “From a product perspective, dresses and sweaters were the primary drivers of the sales miss relative to our expectations,” said Chief Executive David Kornberg.
Facebook’s Oculus said on Monday it is partnering with Chinese phone maker Xiaomi Technology Co to make its new standalone virtual reality headset and also revealed that it will launch a version of the product exclusively for the Chinese market. Oculus said Xiaomi would be its hardware partner for the new Oculus Go headset. Oculus also said it is working closely with Qualcomm Inc. and would use the company’s Snapdragon 821 chipsets to power the mobile VR headsets.
Carter Worth, a world renowned Technical Analyst said last night on CNBC that now is the time to buy Apple Inc. On last night’s CNBC Fast Money Show, he identifies several chart characteristics that identify a buying opportunity in shares of the consumer goods giant.
At the CES show Monday, Intel’s CED displayed its first autonomous vehicle in a 100-vehicle test fleet alongside its longer-term aspirations for all to see. The car features 12 cameras, radars, laser scanners and computing technologies from Mobileye and Intel. There are three high-resolution cameras at the front of the vehicle that allow for a 180-degree field of view and let the car’s image processor see at a distance of up to 300 meters. Intel added on Monday that about two million vehicles from carmakers BMW, Nissan and Volkswagen will use technology from Mobileye to build high-definition maps throughout 2018.
U.S. Equity futures are flat to slightly higher in the pre-market trade. The economic data calendar is relatively light today with greater points of economic data still to come later in the trading week. The Producer Price Index, Consumer Price Index and Monthly Retail Sales will be delivered in succession on Thursday and Friday this week. Treasury yields remain in check with the 10-year yield just below 2.50 percent. Economists and investors are currently baking in a 70% chance rate hike come March 2018.
The VIX and VIX Futures are currently lower on the day with the VIX reading still a half point under 10. Contango has been ramping since the last roll period and is currently reading around 11.5% as depicted below.
With VIX Futures expiring next week, contango costs remain elevated and hint at another potential significant move for VIX-Leveraged ETPs.
Finom Group founder Seth Golden continues to maintain a core holding of VIX-Leveraged ETPs via VXX, TVIX, UVXY and VIXY as well as shares of TGT and AAPL cited within. In order to review Finom Group’s trades and investment grade research reporting, grab your subscription today and participate in our forums with our skilled investors and traders. Check out Finom Group’s free, Half Time Show as well!
