Morning Call: Strength in energy stocks lifts the overall market; Dec E-mini S&Ps up +0.09% at a fresh 2-1/2 week high; Oct WTI crude oil up +0.66% to a 2-1/4 month high.
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 ESZ18 - S&P 500 E-Mini
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ESZ182,564.50+28.75+1.13%
CLV1870.80s-0.32-0.45%
DXY0096.630-0.474-0.49%
ZNZ18120-310+0-005+0.01%
GCZ181,255.8+6.6+0.53%
SIZ1814.585s-0.054-0.37%
HGZ182.6935+0.0225+0.84%
RBV182.1012s+0.0188+0.90%
CAT128.09+3.82+3.07%
DRI102.45-1.40-1.35%
RHT176.19+0.19+0.11%
CRSP30.35+0.81+2.74%
MLHR31.08+0.37+1.20%
AMD19.02-0.48-2.46%
SKY16.14+0.14+0.88%
VKTX8.52+0.11+1.31%
KOS3.92+0.09+2.35%
MTEM4.24+0.11+2.66%
DRYS5.71+0.12+2.15%
AVP1.66-0.02-1.19%

Overnight Markets and News

Dec E-mini S&Ps (ESZ18 +0.19%) this morning are up +0.09% at a 2-1/2 week high and European stocks are up +0.74% at a 2-week high as strength in energy stocks pushes the overall market higher. Energy stocks gained on the heels of a rally in Oct WTI crude oil (CLV18 +0.66%) by +0.66% to a 2-1/4 month high on concern about tight global oil supplies after U.S. crude inventories fell for a fifth week to a 3-1/2 year low and as U.S. sanctions reduce Iran's crude exports. Another positive for stocks is the sign that China may act to further open its markets after people familiar with the matter said that China plans to cut the average tariff on imports from the majority of its trading partners as soon as next month. Stronger-than-expected UK Aug retail sales pushed GBP/USD up +0.66% to a 2-month high. On the negative side, the OECD cut its global 2018 GDP forecast to 3.7% from a May estimate of 3.8%, citing deterioration in emerging markets and intensification of global trade tensions. Asian stocks settled mixed: Japan +0.01%, Hong Kong +0.26%, China -0.06%, Taiwan -0.24%, Australia -0.33%, Singapore +0.12%, South Korea +0.81%, India -0.45%.

The dollar index (DXY00 -0.39%) is down -0.35% at a 1-1/2 month low on signs that the U.S. and Canada are unlikely to reach a deal on NAFTA this week. EUR/USD (^EURUSD +0.46%) is up +0.38%. USD/JPY (^USDJPY -0.04%) is down -0.06%.

Dec 10-year T-note prices (ZNZ18 +0-015) are up +1.5 ticks.

The Organization for Economic Cooperation and Development (OECD) cut its global 2018 GDP forecast to 3.7% from a May estimate of 3.8% and said the global economy is shrouded in "high uncertainty" as the outlook for emerging markets deteriorates and trade tensions intensify.

UK Aug retail sales ex auto fuel rose +0.3% m/m and +3.5% y/y, stronger than expectations of -0.2% m/m and +2.4% y/y. Aug retail sales including auto fuel rose +0.3% m/m and +3.3% y/y, stronger than expectations of -0.2% m/m and +2.3% y/y.

U.S. Stock Preview

Key U.S. news today includes: (1) weekly initial unemployment claims (expected +6,000 to 210,000, previous -1,000 to 204,000) and continuing claims (expected +9,000 to 1.705 million, previous -15,000 to 1.696 million), (2) Sep Philadelphia Fed business outlook survey index (expected +6.1 to 18.0, Aug -13.8 to 11.9), (3) Aug leading indicators (expected +0.5%, Jul +0.6%), (4) Aug existing home sales (expected +0.4% to 5.36 million, Jul -0.7% to 5.34 million), (5) Treasury auctions $11 billion of 10-year TIPS.

Notable Russell 2000 earnings reports today include: Carnival (consensus $2.31), Darden Restaurants (1.24), Thor Industries (2.06), Micron Technology (3.33).

U.S. IPO's scheduled to price today: none.

Equity conferences during the remainder of this week: Autonomous Research Future of Commerce Symposium on Thu, BMO Capital Markets Real Estate Conference on Thu, Buckingham Industrials Conference on Thu, D.A Davidson Diversified Industrials & Services Conference on Thu, IAA Commercial Vehicles Trade Show on Thu, Keefe, Bruyette, & Woods Insurance Conference on Thu.


Market Comments

Dec S&P 500 E-minis (ESZ18 +0.19%) this morning are up +2.75 points (+0.09%) at a fresh 2-1/2 week high. Wednesday's closes: S&P 500 +0.13%, Dow Jones +0.61%, Nasdaq 100 -0.05%. The S&P 500 on Wednesday rose to a 2-1/2 week high and closed higher on a slight easing of trade tensions after Chinese Premier Li Keqiang said China won't "stimulate exports by devaluing the yuan." Stocks were also boosted by the U.S. Aug housing starts report of +9.2% to 1.282 million, stronger than expectations of +5.7% to 1.238 million. There was also strength in energy stocks as crude oil prices rose +1.82%. Stocks were undercut by the unexpected decline in U.S. Aug building permits, a proxy for future construction, which fell -5.7% to a 15-month low of 1.229 million, weaker than expectations of +0.5% to 1.310 million.

Dec 10-year T-notes (ZNZ18 +0-015) this morning are up +1.5 ticks. Wednesday's closes: TYZ8 -7.50, FVZ8 -3.50. Dec 10-year T-notes on Tuesday sold off to a new 3-3/4 month low and closed lower on negative carry-over from a slump in 10-year British gilts to a 7-month low and a slide in 10-year German bunds to a 3-month low. T-note prices were also undercut by the stronger-than-expected U.S. Aug housing starts report, which was hawkish for Fed policy. T-notes were also hurt by increased inflation expectations after the 10-year breakeven inflation expectations rate rose to a 2-1/4 month high.

The dollar index (DXY00 -0.39%) this morning is down -0.332 (-0.35%) at a 1-1/2 month low, EUR/USD (^EURUSD +0.46%) is up +0.0044 (+0.38%), and USD/JPY (^USDJPY -0.04%) is down -0.07 (-0.06%). Wednesday's closes: Dollar Index -0.103 (-0.11%), EUR/USD +0.0006 (+0.05%), USD/JPY -0.08 (-0.07%). The dollar index on Wednesday closed lower on strength in the yuan versus the dollar after Chinese Premier Li Keqiang said China won't "stimulate exports by devaluing the yuan." There was strength in GBP/USD which climbed to a 2-month high after UK Aug CPI rose more than expected, which was hawkish for BOE policy.

Metals prices this morning are weaker with Dec gold (GCZ18 unch) -0.8 (-0.07%), Dec silver (SIZ18 -0.18%) -0.030 (-0.21%) and Dec copper (HGZ18 -0.42%) -0.015 (-0.53%). Wednesday's closes: Dec gold +5.4 (+0.45%), Dec silver +0.095 (+0.67%), Dec copper -0.10 (-0.04%). Metals on Wednesday settled mixed. Metals prices were boosted by dollar weakness and by gold-supportive comments from BOJ Governor Kuroda who said the BOJ won't quit easing before inflation reaches its 2% target. Copper prices were supported by the stronger-than-expected U.S. Aug housing starts report of +9.2% to 1.282 million, better than expectations of +5.7% to 1.238 million, although Aug building permits fell by -5.7% to a 15-month low of 1.229 million.

Oct WTI crude oil prices (CLV18 +0.66%) this morning are up +47 cents (+0.66%) at a 2-1/4 month high and Oct gasoline (RBV18 +0.09%) is +1.21 (+0.60%). Wednesday's closes: Oct crude oil +1.27 (+1.82%), Oct gasoline +1.58 (+0.79%). Oct crude oil and gasoline on Wednesday closed higher on a weaker dollar and the -1.25 million bbl decline in crude supplies at Cushing. Gasoline prices were boosted by the unexpected -1.72 million bbl decline in EIA gasoline inventories vs. expectations of +100,000 bbl.

Overnight U.S. Stock Movers

Caterpillar (CAT +2.48%) was upgraded to 'Outperform' from 'Neutral' at Baird with a price target of $191.

Darden Restaurants (DRI -0.85%) may open higher initially this morning after the company reported Q1 comparable slaes rose +3.3%, stronger than expectationsof +2.1%, and after it raised guidance on full-year EPS from continuing operations to $5.52 to $5.65 from a prior view of $5.40 to $5.56, better than consensus of $5.54.

Red Hat (RHT +0.32%) slid 3% in after-hours trading after it reported Q2 revenue of $822.7 million, weaker than consensus of $828.1 million, and then forecast full-year revenue of $3.36 billion to $3.40 billion, the midpoint below consensus of $3.40 billion.

CRISPR Therapeutics AG (CRSP -2.43%) dropped more than 4% in after-hours trading after it announced that it had commenced an underwritten public offering of $200 million of its common stock.

Herman Miller (MLHR +0.54%) jumped almost 7% in after-hours trading after it reported Q1 net sales of $624.6 million, better than consensus of $623.3 million, and then forecast Q2 sales of $635 million to $655 million, the midpoint above consensus of $639 million.

Advanced Micro Devices (AMD -2.25%) may move higher initially this morning after Stifel raised its target price on the stock to $38 from $21.

Skyline Champion (SKY +1.59%) may move lower initially this morning after it announced that it intends to offer 6 million shares of its common stock in a secondary offering.

Viking Therapeutics (VKTX +0.98%) announced after the close of trading Wednesday that it intends to sell shares of its common stock in an underwritten public offering, although no amount was given.

Kosmos Energy Ltd (KOS +0.54%) fell nearly 3% in after-hours trading after it announced more than 10 holders of the company's stock will sell 9 million shares.

Molecular Templates (MTEM +52.44%) tumbled more than 10% in after-hours trading after it announced that it intends to sell $30 million of its shares of common stock in an underwritten public offering.

DryShips (DRYS +10.02%) may move higher initially this morning after Economou George reported a 76.2% stake in the company.

Avon Products (AVP +1.31%) gained more than 2% in after-hours trading after it said it will consolidate its U.S. operations into existing facilities and reduce its workforce by about 100 jobs.