Morning Call For October 12, 2016

OVERNIGHT MARKETS AND NEWS

Dec E-mini S&Ps (ESZ16 -0.05%) are down -0.06% and European stocks are down -0.01% on concerns over Q3 company earnings results after Alcoa on Tuesday reported weaker-than-expected profits. Weakness in European technology stocks are weighing on the overall market with Ericsson AB down 17% after it reported a slump in Q3 sales. Losses in European stocks were contained as exporters rallied as EUR/USD fell to a 2-1/2 month low, which boosts the earnings prospects of exporters. Also, Eurozone Aug industrial production rose more-than-expected by the most in 7 months. Asian stocks settled mostly lower: Japan -1.09%, Hong Kong -0.60%, China -0.22%, Taiwan +0.36%, Australia -0.09%, Singapore -1.49%, South Korea +0.02%, India closed for holiday.

The dollar index (DXY00 +0.06%) is up +0.08% at a fresh 7-month high. EUR/USD (^EURUSD) is down -0.27% at a 2-1/2 month low. USD/JPY (^USDJPY) is up +0.14%.

Dec 10-year T-note prices (ZNZ16 -0.12%) are down -4.5 ticks.

Eurozone Aug industrial production rose +1.6% m/m, stronger than expectations of +1.5% m/m and the biggest increase in 7 months.

U.S. STOCK PREVIEW

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous +2.9% with purchase sub-index -0.1% and refi sub-index +4.7%), (2) New York Fed President William Dudley (voter) speaks to the Business Council of New York State, (3) Kansas City Fed President Esther George (voter) speaks at the Chicago Fed’s Annual Payments Symposium, (4) Aug JOLTS job openings (expected -96,000 to 5.775 million, Jul +228,000 to 5.871 million), (5) the Treasury's auction of $24 billion of 3-year T-notes and $20 billion of 10-year T-notes, (6) the minutes of the Sep 20-21 FOMC meeting, and (7) USDA Oct WASDE crop production.

Russell 1000 companies that report earnings today: CSX Corp (consensus $0.45).

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

Equity conferences during the remainder of this week include: Australia FIX Conference on Wed, Calgary Energy Roundtable Conference on Wed.

OVERNIGHT U.S. STOCK MOVERS

Xilinx (XLNX -2.34%) was downgraded to 'Neutral' from 'Outperform' at Baird.

GrubHub (GRUB -2.89%) was rated a new 'Buy' at Argus Research with a price target of $52.

Hanesbrands (HBI +1.09%) was downgraded to 'Market Perform' from 'Outperform' at Cowen.

Norfolk Southern (NSC -1.21%) was downgraded to 'Market Underperform' from 'Market Perform' at Avondale Partners LLC.

Euronet Worldwide (EEFT +1.11%) was rated a new 'Buy' at SunTrust with a price target of $98.

Motorola Solutions (MSI -1.57%) was upgraded to 'Outperform' from 'Market Perform' at BMO Capital Markets with a target price of $84.

Barracuda Networks (CUDA -2.95%) climbed nearly 7% in after-hours trading after it reported Q2 adjusted EPS of 21 cents, higher than consensus of 13 cents.

Blackhawk Network Holdings (HAWK -0.84%) gained nearly 2% in after-hours trading after it reported Q3 adjusted EPS of 14 cents, well above consensus of 8 cents, and then raised guidance on full-year adjusted EPS to $1.45-$1.64 from a prior view of $1.43-$1.62.

Fortinet (FTNT -2.57%) slumped over 10% in after-hours trading after it said it sees Q3 adjusted EPS of 15 cents-16 cents, below consensus of 18 cents.

VOXX International (VOXX unch) surged 15% in after-hours trading after it reported Q2 EPS of 12 cents versus a loss of -18 cents y/y.

Intellipharmaceutics International (ICPI) jumped over 15% in after-hours trading after it granted Makkinckrodt an exclusive license to market, sell and distribute in the U.S. extended-release drug products in which ICPI has ANDAs filed with the U.S. FDA.

Idera Pharmaceuticals (IDRA -7.18%) rose almost 10% in after-hours trading after Baker Brothers Advisors increased their stake in the company to 7.2% from 4.9%.

MARKET COMMENTS

Dec E-mini S&Ps (ESZ16 -0.05%) this morning are down -1.25 points (-0.06%). Tuesday's closes: S&P 500 -1.24%, Dow Jones -1.09%, Nasdaq-1.47%. The S&P 500 on Tuesday sold off to a 3-week low and closed lower on some concern about Q3 earnings reporting season which started off on a negative note after Alcoa plunged by more than -9% on a disappointing Q3 earnings report. Stocks were also undercut by interest rate concerns after Chicago Fed President Evans said a Fed rate hike at the December FOMC meeting "could be fine." There was also weakness in energy and commodity producers after the rally in the dollar index to a 7-month high.

Dec 10-year T-notes (ZNZ16 -0.12%) this morning are down -4.5 ticks. Tuesday's closes: TYZ6 +3.00, FVZ6 +2.00. Dec 10-year T-notes on Tuesday closed higher on increased safe-haven demand with the slide in the S&P 500 to a 3-week low and on dovish comments from Minneapolis Fed President Kashkari who said "we are undershooting our inflation target and I don't see the urgency" in raising interest rates.

The dollar index (DXY00 +0.06%) this morning is up +0.075 (+0.08%) at a new 7-month high. EUR/USD (^EURUSD) is down -0.0030 (-0.27%) at a 2-1/2 month low. USD/JPY (^USDJPY) is up +0.15 (+0.14%). Tuesday's closes: Dollar index +0.761 (+0.79%), EUR/USD -0.0085 (-0.76%), USD/JPY-0.10 (-0.10%). The dollar index on Tuesday surged to a 7-month high and settled higher on hawkish comments by Chicago Fed President Evans (non-voter) who said a Fed rate hike at the December FOMC meeting "could be fine." In addition, EUR/USD fell to a 2-month low on speculation the ECB may need to boost stimulus measures after ECB Governing Council member Mersch said that the Eurozone economy lost some momentum in Q3 and that the risks to the economic outlook remain on the downside.

Nov WTI crude oil (CLX16 +0.53%) this morning is up +1 cents (+0.02%) and Nov gasoline (RBX16 +0.26%) is up +0.0007 (+0.05%). Tuesday's closes: Nov crude -0.49 (-0.95%), Nov gasoline -0.0086 (-0.57%). Nov crude oil and gasoline on Tuesday closed lower on the surge in the dollar index to a 7-month high and on doubts about whether Russia will join an OPEC deal to curb crude oil output after the CEO of Rosneft PJSC, Russia's biggest oil producer, said it won't cut oil production. Crude oil was also undercut by expectations that Thursday's weekly EIA data will show U.S. crude inventories rose by +1.75 million bbl.