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phil
January 12th, 2018 at 3:52 pm

Regulators form working group for Crypto – Mnuchin

• Speaking the The Economic Club in D.C., Treasury Secretary Steven Mnuchin says the Financial Stability Oversight Council has formed a working group to look into cryptocurrencies.
• "We are very focused on cryptocurrencies … We want to make sure that bad people cannot use these currencies to do bad things." Oh, the irony.
• Cryptos, meanwhile, are nearly universally in the green today. About the most modest rally is in Bitcoin, whose overwhelmingly dominant position in cryptos continues to erode. It's higher by less than 2%, while Ethereum – for instance – is up more than 8%.

Xunlei plunges as Chinese industry group warns on crypto trading

• Xunlei Limited (NASDAQ:XNET) — a video/advertising firm before its "Wanke coin mining" project put it into the blockchain/crypto space — is off 27% following a Chinese industry group warning over the burgeoning area.
• On WeChat, China's National Internet Finance Association posted a statement syaing its members shouldn't be conducting illegal activities and shouldn't engage in any ICO-related or cryptocurrency trading.
• The group thinks Xunlei's LinkToken, made for financing by nature, is an example of an ICO in "disguise." (h/t Bloomberg)
• Still, at $16.73 currently, the stock is nearly quadruple its October price pre-pivot.

PNC's Demchak questions tax cut's impact on borrowing

• "This isn't necessarily a condemnation of the economic impact of the tax law,” PNC Financial (PNC -0.4%) CEO William Demchak tells the WSJ, "but will it necessarily cause more borrowing?"
• In other words, with less money needed to pay taxes, companies may not have to borrow as much.
• For PNC's part, average total loans in Q4 were up 5% Y/Y, thanks to commercial lending. Consumer lending actually fell from a year ago. The bank boosted loan loss provisions to $125M from $67M a year ago, with the consumer side being the culprit.
• PNC this morning topped both top- and bottom-line estimates, but the bulls are taking a breather after the stock's big run. Shares are down 0.3% today.
• Previously: PNC Financial beats by $0.09, beats on revenue (Jan. 12)

Another rough session for REITs

• The major averages are on track to set new records at the close, but the REITs (IYR -0.7%) are underperforming by a mile again on interest rate concerns.
• Late yesterday, FRBNY President Bill Dudley was sounding very hawkish, and this morning's core CPI report came in faster than expected. The two-year Treasury yield subsequently jumped above 2% for the first time since 2008.
• Short-term rate markets have only been expecting two rate hikes this year, and have now just begun pricing in a third. Judging from Dudley's talk yesterday, they may want to consider a fourth.
• Welltower (HCN -1.6%), Ventas (VTR -2.3%), Healthcare Trust (HTA -1.3%), National Retail (NNN -1.1%), Essex Property (ESS -1.9%), Weingarten Realty (WRI -0.8%), Kite Realty (KRG-0.9%), Public Storage (PSA -1.1%), Gramercy Property (GPT -1.6%)

Aflac responds; shares remain sharply lower

• "Recent media stories regarding Aflac (NYSE:AFL) contain false allegations made by a very small group of independent contractors," says the company. The claims, says Aflac – insider trading, fraudulent sales and financial manipulation, among them – have been internally investigated and found without merit.
• Shares are a bit off their lows, but still down 7.7% on the day.
• Source: Press Release
• The pullback is overdone, says Evercore, calling The Intercept's news report "filled with hyperbole."
• Previously: Aflac down more than 3% on fraud allegations (Jan. 12)

Trump extends Iran sanctions relief; oil trades near session highs

• Pres. Trump has extended sanctions relief for Iran, as expected, keeping the Obama administration's nuclear deal intact for at least another 90 days.
• The Trump administration says this will be the final time sanctions are waived.
• At the same time, the administration issues new sanctions targeting 14 Iranian officials over Iran’s ballistic missile programs and a crackdown on government protesters.
• U.S. crude +0.5% at $64.14/bbl; Brent crude +0.5% at $69.60/bbl.

U.S. rig count surges by 15, Baker Hughes reports

• The total U.S. rig count rose by 15 to 939 following last week's decline of 5, according to the latest weekly survey from Baker Hughes; it is the largest increase since May.
• The oil rig count jumped by 10 to 752 while gas rigs gained 5 to 187.
• A year ago, the total rig count was just 659, with oil rigs at 522 and gas rigs at 136 (plus one miscellaneous).

Meat production expected to rise to 20-year high

• U.S. meat production is forecast to increase 3.8% this year to mark the biggest jump in more than 20 years.
• Growing flocks and herds in the U.S. have helped to boost profit for meat producers such as Tyson Foods (TSN -0.1%), Sanderson Farms (SAFM) and Pilgrim's Pride (PPC +0.5%) as supply keeps up with demand. Cheap grain has also been a bottom line driver.

Wow, this guy really earned his bonus!  Stifel sees huge benefit for Costco from Sam's Club closings

• Stifel Nicolaus estimates that Costco (NASDAQ:COST) could add $1.8B in sales due to the closing of 69 Sam's Club stores .
• Analyst Mark Astrachan estimates that 47% of the closed Sam's stores clubs are within 5 miles of a Costco and 87% are within 20 miles.
• "We further believe it illustrates Costco’s outperformance relative to Sam’s in recent years, which we anticipate will continue," writes Astrachan about the development.
• Shares of Costco are up 1% today to follow on yesterday's post-announcement pop.
• Source: Bloomberg, Nasdaq.com
• Previously: Costco spikes after reports of Sam's Club closings (Jan. 11)

SunTrust raises Amazon price target to $1,400; shares +2%

• SunTrust Robinson Humphrey raises its Amazon (NASDAQ:AMZN) price target from $1,270 to $1,400.
• Analyst Youssef Squali cites Amazon’s “maniacal focus on the customer” and leveraging technology innovation to disrupt across multiple industries including commerce, entertainment, and IT. 
• The differentiation and sustainable advantages “should continue to enable the company to grow disproportionately faster than peers, gain market share in several segments of the global economy and sustain above-peers valuation multiples for years to come.”   
• Amazon shares are up 2.1%.    
• Previously: Fox TV's Walden out of running for Amazon Studios chief (Jan. 11)

'Battlefront' concerns spur MS to downgrade Electronic Arts

• While some analysts think Electronic Arts (EA +1%) has been punished too hard for flak around tentpole game Star Wars: Battlefront II — recently, Wedbush and BMO — Morgan Stanley is downgrading on the issue.
• Analyst Brian Nowak has lowered his rating to Equal Weight from Overweight, pointing to a poor start for Battlefront II, and lowered his sales forecast to 10M units from 13M.
• It's unlikely the much-discussed microtransactions will make an appearance in the game until fiscal Q4, and when they do they'll be "heavily scrutinized" due to the existing backlash, no matter how conservative the company is, Nowak says.
• He's lowered his fiscal 2018 EPS estimate to $0.13 from $0.16, and cut the stock's price target to $120 from $126, implying 6.1% upside from current pricing.
• Previously: EA +1.3% as BMO sees opportunity in 'Star Wars' sell-off (Jan. 08 2018)
• Previously: Wedbush: Sell-off is overdone, future is bright for EA (Jan. 02 2018)

Barclays increases Microsoft's price target ahead of Q2 earnings

• Barclays raises its Microsoft (NASDAQ:MSFT) price target from $89 to $95 ahead of earnings later this month.
• The raise came in a broader note about the U.S. Software market.
• Barclay’s VAR survey results suggest a healthy spending environment for the market. The VAR survey included increased interest in Enterprise E5 for Office 365, which could drive ARPU expansion.   
• Microsoft shares are up 1.5%.     
• Previously: Microsoft brings end-to-end encryption to Skype (Jan. 11)

Apple roundup: Cowen's iPhone build note, Mac sales +7%, AR glasses discussions

• Cowen says Apple’s (NASDAQ:AAPL) iPhone builds for Q4 CY17 held up well compared to expiations as evidenced by strong seasonal performance in the supply chain.
• But the firm remains cautions for Q1 CY18 as fieldwork showed less of a tailwind mix from the new iPhones versus a month ago. 
• Big Mac quarter:  IDC data shows that Mac shipments grew 7.3% on the year during the December quarter, which pushed the market share up to 8.2% from 7.7%. But those numbers still put Apple in fourth place overall. 
• The PC market achieved its first positive holiday quarter in six years driven by HP (NYSE:HPQ) (share: 23.5%; Y/Y growth: 8.3%), Lenovo (OTCPK:LNVGF) (share: 22.2%; Y/Y growth: flat), and Dell (NYSE:DVMT) (share: 15.7%; Y/Y growth: 0.7%).  
• AR talks:  Bloomberg reports Apple was among the tech giants talking with suppliers of AR glasses parts during #CES18. 
• Apple shares are up 0.8%.  
• Previously: Apple faces questions from U.S. Senator, class-action lawsuits, and tax reveal (Jan. 10)

UXVY/Lala – We tried it once, didn't like it.  All the VIX ever does is go down, the bets are no fun other than the SVXY we played last year that we might do again (after earnings).