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Good Morning!Paul Georgy with the early morning commentary forOctober 5, 2016 Grain marketsare mixed as global supplies continue to grow. The US

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BT Morning Call for October 5

Commentary — BT analyst Date — October 5, 2016

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OVERNIGHT MARKETS AND NEWS

Dec E-mini S&Ps (ESZ16 +0.01%) are down -0.08% and European stocks are down -0.65% on the prospects for tighter Fed policy after Chicago Fed President Evans said Tuesday night that he expected the Fed to raise interest rates by the end of the year. Government bond markets around the world sold-off on the prospects of tighter central bank policy with 10-year German bunds falling to a 3-week low on Tuesday's report that the ECB will begin to taper bond purchases before it ends QE. Stock losses were contained as energy producing companies rose with the price of crude oil (CLX16 +1.54%) up +1.68% at a 3-1/4 month high after API data released late Tuesday showed U.S. crude inventories fell -7.6 million bbl last week. Asian stocks settled mixed: Japan +0.50%, Hong Kong +0.42%, China closed for holiday, Taiwan -0.17%, Australia -0.57%, Singapore -0.10%, South Korea -0.07%, India -0.40%. Japan's Nikkei Stock Index moved up to a 1-month high on strength in exporters stocks after USD/JPY climbed to a 4-week high.

The dollar index (DXY00 -0.14%) is down -0.09%. EUR/USD (^EURUSD) is up +0.18%. USD/JPY (^USDJPY) is up +0.22% at a 4-week high.

Dec 10-year T-note prices (ZNZ16 unch) are down -3 ticks at a 3-week low.

Chicago Fed President Evans said he expects the Fed to increase interest rates once by the end of the year and that a Fed rate hike "would most likely be the December" FOMC meeting, but "could be the earlier meeting."

U.S. STOCK PREVIEW

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous -0.7% with purchase sub-index +0.8% and refi sub-index -1.6%), (2) Sep ADP employment change (expected +165,000, Aug +177,000), (3) Aug trade balance (expected -$39.2 billion, Jul -$39.5 billion), (4) final-Sep Markit services PMI (expected unch at 51.9, prelim-Sep +0.9 to 51.9), (5) Sep ISM non-manufacturing PMI (expected +1.6 to 53.0, Aug -4.1 to 51.4), (6) Aug factory orders (expected -0.2%, Jul +1.9% and +0.2% ex-transportation), (7) Richmond Fed President Jeffrey Lacker (non-voter) speaks to students at Marshall University on the topic “Does Federal Reserve Governance Need Reform?” and (8) EIA Weekly Petroleum Status Report.

Russell 1000 companies that report earnings today: Yum Brands (consensus $1.10), Constellation Brands (1.65), Global Payments (0.83), RPM Intl (0.80), Accuity Brands (2.39), Monsanto (-0.02).

U.S. IPO's scheduled to price today: AquaVenture Holdings (WAAS), Advanced Disposal Services (ADSW), Coupa Software (COUP), Obalon Therapeutics (OBLN).

Equity conferences during the remainder of this week include: Capital Link Shipping, Marine Services & Offshore Forum on Wed, ACI European Biomass to Power Conference on Wed, Seaport Global Securities Dallas Energy Day on Thu.

OVERNIGHT U.S. STOCK MOVERS

Norwegian Cruise Line Holdings Ltd. (NCLH +0.71%) was dowmgraded to 'Neutral' from 'Buy' at UBS.

Parker-Hannifin (PH -0.84%) was upgraded to 'Buy' from 'Hold' at Stifel with a price target of $141.

State Street (STT +2.19%) was upgraded to 'Market Perform' from 'Underperform' at KBW with a price target of $69.

Gigamon (GIMO +0.33%) was downgraded to 'Neutral' from 'Buy' at DA Davidson with an 18-month target price of $59.

Twitter (TWTR -2.00%) is up over 3% in pre-market trading on heightened takeover talks from companies that include Salesforce.com, Disney and Google.

Blue Buffalo Pet Products (BUFF -0.92%) was rated a new 'Buy' at DA Davidson with a price target of $29.

Acacia Communications (ACIA +2.51%) jumped over 5% in after-hours trading after it raised guidance on Q3 adjusted EPS to 83 cents-90 cents from a September 26 view of 72 cents-81 cents.

Micron Technology (MU +0.39%) lost over 4% in pre-market trading after it reported Q4 gross margin of 18.0%, below consensus of 19.0%.

Team Health Holdings (TMH +16.46%) gained over 1% in after-hours trading after the WSJ reported the company is in talks with Blackstone and Bain about a possible sale.

Corbus Pharmaceuticals Holdings (CRBP +2.18%) rallied almost 7% in after-hours trading after it was rated a new 'Buy' at Cantor Fitzgerald with a 12-month target price of $17.

Universal Logistics Holdings (ULH -0.60%) sank over 10% in after-hours trading after it said sees Q3 EPS between 16 cents and 20 cents, well below consensus of 29 cents.

Cascadian Therapeutics (CASC +3.70%) dropped over 10% in after-hours trading after it said it plans a reverse stock split.

MARKET COMMENTS

Dec E-mini S&Ps (ESZ16 +0.01%)this morning are down -1.75 points (-0.08%). Tuesday's closes: S&P 500 -0.50%, Dow Jones -0.37%, Nasdaq -0.15%. The S&P 500 on Tuesday closed lower on the IMF's cut its U.S. 2016 GDP forecast to 1.6% from its 2.2% forecast in July. Stocks were also undercut by hawkish comments from Richmond Fed President Lacker who said he favored an immediate Fed rate hike to head off a likely pickup in inflation that would force bigger increases in interest rates later.

Dec 10-year T-notes (ZNZ16 unch) this morning are down -3 ticks at a 3-week low. Tuesday's closes: TYZ6 -14.50, FVZ6 -6.75. Dec 10-year T-notes on Tuesday fell to a 1-1/2 week low and closed lower on negative carryover from a slide in German bund prices to 1-1/2 week low after a report that the ECB is building a consensus to taper bond purchases before it decides to end QE. T-notes were also undercut by increased inflation expectations after the 10-year T-note breakeven inflation rate climbed to a 4-1/2 month high.

The dollar index (DXY00 -0.14%) this morning is down -0.084 (-0.09%). EUR/USD (^EURUSD) is up +0.0020 (+0.18%). USD/JPY (^USDJPY) is up +0.23 (+0.22%) at a 4-week high. Tuesday's closes: Dollar index +0.474 (+0.50%), EUR/USD -0.0008 (-0.06%), USD/JPY +1.25 (+1.23%). The dollar index on Tuesday rallied to a 1-3/4 month high and settled higher on Richmond Fed President Lacker's comment that he favors an immediate Fed rate hike to head off a likely pickup in inflation that would force bigger increases in interest rates later. The dollar was also boosted by weakness in the British pound against the dollar after GBP/USD tumbled to a 31-1/4 year low on Brexit concerns. EUR/USD rebounded from a 1-1/2 week low after Bloomberg reported that ECB officials said the ECB will probably wind down bond purchases before the conclusion of its QE program.

Nov WTI crude oil (CLX16 +1.54%) this morning is up +82 cents (+1.68%) at a 3-1/4 month high and Nov gasoline (RBX16 +0.98%) is up +0.0141 (+0.94%) at a 1-1/2 month high . Tuesday's closes: Nov crude +0.38 (+0.78%), Nov gasoline +0.0313 (+2.13%). Nov crude oil and gasoline on Tuesday closed higher with Nov crude at a 3-month high. Oil prices were boosted by Hurricane Matthew which has shut-in 33 million bbl of oil in storage in the Bahamas and may disrupt shipping traffic along the U.S. East Coast that may limit U.S. gasoline supplies. In addition, the crack spread rose to a 2-week high, which may boost refinery demand for crude to refine into gasoline. Crude oil prices were undercut by the rally in dollar index to a 1-3/4 month high.

GLOBAL EVENT CALENDAR10/05/2016

Wednesday, Oct 5
US 0700 ET Weekly MBA mortgage applications, previous -0.7% with purchase sub-index +0.8% and refi sub-index -1.6%.
0815 ET Sep ADP employment change expected +165,000, Aug +177,000.
0830 ET Aug trade balance expected -$39.2 billion, Jul -$39.5 billion.
0945 ET Final-Sep Markit services PMI expected unch at 51.9, prelim-Sep +0.9 to 51.9. Final-Sep Markit composite PMI, prelim-Sep +0.5 to 52.0.
1000 ET Sep ISM non-manufacturing PMI expected +1.6 to 53.0, Aug -4.1 to 51.4.
1000 ET Aug factory orders expected -0.2%, Jul +1.9% and +0.2% ex-transportation.
1030 ET EIA Weekly Petroleum Status Report.
1300 ET Richmond Fed President Jeffrey Lacker (non-voter) speaks to students at Marshall University on the topic Does Federal Reserve Governance Need Reform?
Thursday, Oct 6
US 0730 ET Sep Challenger job cuts, Aug -21.8% y/y.
0830 ET Weekly initial unemployment claims expected +2,000 to 256,000, previous +3,000 to 254,000. Weekly continuing claims expected +34,000 to 2.096 million, previous -46,000 to 2.062 million.
0830 ET USDA weekly Export Sales.
1100 ET Treasury announces amount of 3-year T-notes (previous $24 billion), 10-year T-notes (previous $20 billion) and 30-year T-bonds (previous $12 billion) to be auctioned Oct 12-13.
n/a G-20 finance ministers and central bankers meet in Washington D.C.

U.S. STOCK CALENDAR10/05/2016

CompanyTickerTimeEvent DescriptionPeriodEstimate
RPM International Inc RPM US Bef-mkt Q1 2017 Earnings Release Q1 2017 0.8
Constellation Brands Inc STZ US Bef-mkt Q2 2017 Earnings Release Q2 2017 1.649
Global Payments Inc GPN US Bef-mkt Q1 2017 Earnings Release Q1 2017 0.831
Acuity Brands Inc AYI US Bef-mkt Q4 2016 Earnings Release Q4 2016 2.39
Monsanto Co MON US 8:00 Q4 2016 Earnings Release Q4 2016 -0.022
Global Payments Inc GPN US 8:00 Q1 2017 Earnings Call Q1 2017
Leucadia National Corp LUK US 9:30 Investor Day Y 2016
Monsanto Co MON US 9:30 Q4 2016 Earnings Call Q4 2016
Alcoa Inc AA US 10:00 Extraordinary Shareholders Meeting Y 2016
RPM International Inc RPM US 10:00 Q1 2017 Earnings Call Q1 2017
Acuity Brands Inc AYI US 10:00 Q4 2016 Earnings Call Q4 2016
Constellation Brands Inc STZ US 10:30 Q2 2017 Earnings Call Q2 2017
Yum! Brands Inc YUM US Aft-mkt Q3 2016 Earnings Release Q3 2016 1.1
salesforce.com Inc CRM US 18:30 Investor Day - Q&A Session Y 2016
Costco Wholesale Corp COST US 21:00 September 2016 Sales and Revenue Release 2016
Xcel Energy Inc XEL US Investor Meeting - Day 2 Y 2016

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