Morning Call For October 21, 2016

OVERNIGHT MARKETS AND NEWS

Dec E-mini S&Ps (ESZ16 -0.32%) are down -0.35% and European stocks are down -0.04% as the market assesses Q3 company earnings results. Advanced Micro Devices is down over 6% in pre-market trading after predicting weaker-than-expected Q4 revenue while Microsoft is up over 5% in pre-market trading after reporting Q1 earnings that beat estimates. Losses in European stocks were limited as exporting companies rallied after EUR/USD tumbled to a 7-1/2 month low. EUR/USD is under pressure after ECB President Draghi said Thursday that quantitative easing is unlikely to come to an "abrupt" end. Asian stocks settled mostly lower: Japan -0.30%, Hong Kong closed due to Typhoon Haima, China +0.21%, Taiwan -0.11%, Australia -0.22%, Singapore -0.41%, South Korea -0.45%, India -0.19%. The Chinese yuan dropped to a 6-year low of 6.7639 per dollar after the PBOC weakened its daily reference rate by the most since Aug. Japan's Nikkei Stock Index retreated from a 5-3/4 month high and closed lower after a 6.6 magnitude earthquake in western Japan led to power outages and halted bullet trains.

The dollar index (DXY00 +0.21%) is up +0.20% at an 8-1/2 month high. EUR/USD (^EURUSD) is down -0.34% at a 7-1/2 month low. USD/JPY (^USDJPY) is down -0.18%.

Dec 10-year T-note prices (ZNZ16 -0.02%) are down -1 tick.

China's State Administration of Foreign Exchange reported that a net $44.7 billion worth of yuan payments left China in Sep, up from an Aug outflow of $27.7 billion and the most since the government started releasing the data in 2010. The action by the PBOC to allow the yuan to further depreciate may only worsen outflows of the currency in coming months.

U.S. STOCK PREVIEW

Key U.S. news today includes: (1) Fed Governor Daniel Tarullo speaks on “Pedagogy and Scholarship in a Post-Crisis World” at Columbia Law School, (2) San Francisco Fed President John Williams (non-voter) delivers keynote address at the Federal Home Loan Bank’s 2016 conference, (3) USDA Sep Cold Storage, (4) USDA Sep Cattle on Feed.

Notable S&P 500 earnings reports today include: GE (consensus $0.30), Honeywell (1.60), McDonald's (1.48), Moody's (1.20), Interpublic (0.29).

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

Equity conferences today: none.

OVERNIGHT U.S. STOCK MOVERS

Advanced Micro Devices (AMD +2.81%) is down over 7% in pre-market trading after it predicted Q4 revenue will fall 18%, plus or minus 3%, to $1.03 billion, below consensus of $1.1 billion.

Microsoft (MSFT -0.49%) rose over 5% in pre-market trading after it reported Q1 adjusted EPS of 76 cents, above consensus of 68 cents.

Proofpoint (PFPT +0.09%) rallied 10% in after-hours trading after it reported Q3 adjusted EPS of 19 cents, well above consensus of 5 cents, and then raised guidance on full-year EPS to 28 cents-33 cents from a July 21 view of 6 cents-10 cents.

VeriSign (VRSN +0.87%) jumped over 6% in after-hours trading after it amended and extended its registry pact for its .com domain name through Nov 2024.

PayPal Holdings (PYPL -0.37%) had dropped 4% in after-hours trading after it forecast Q4 adjusted EPS of 40 cents-42 cents, weaker than consensus of 42 cents, but then recovered its losses and moved up 4% after it said it sees 16%-17% revenue growth in 3 years, up from a prior forecast of 15% growth.

Boston Beer Co. (SAM -2.74%) lost nearly 3% in after-hours trading after it reported Q3 EPS of $2,48, weaker than consensus of $2.57, and then lowered guidance on full-year EPS to $6.30-$6.70 from a prior view of $6.40-$7.00.

Red Robin Gourmet Burgers (RRGB -0.23%) dropped over 6% in after-hours trading after it reported Q3 adjusted EPS of 38 cents, well below consensus of 48 cents.

SEI Investments (SEIC +0.71%) gained almost 2% in after-hours trading after it reported Q3 EPS of 53 cents, better than consensus of 49 cents.

Athenahealth (ATHN -1.76%) slipped almost 3% in after-hours trading after it reported Q3 revenue of $276,7 million, below consensus of $280.3 million.

KLA-Tencor (KLAC +0.07%) rose nearly 3% in after-hours trading after it reported Q1 adjusted EPS of $1.16, higher than consensus of $1.04.

Sonic (SONC -2.61%) gained over 1% in after-hours trading after it boosted its quarterly dividend to 14 cents from 11 cents and increased its stock buyback plan by $40 million.

Brown & Brown (BRO -0.96%) rose +0.5% in after-hours trading after it reported Q3 adjusted EPS of 52 cents, better than consensus of 49 cents.

Skechers (SKX +0.09%) tumbled 12% in after-hours trading after it reported Q3 EPS of 42 cents, weaker than consensus of 46 cents, and said it sees Q4 net sales of $710 million-$735, million, below consensus of $800 million.

Apollo Education Group (APOL -0.12%) climbed 3% in after-hours trading after it reported Q4 net revenue of $492.5 million, higher than consensus of $466 million.

MARKET COMMENTS

Dec E-mini S&Ps (ESZ16 -0.32%) this morning are down -7.50 points (-0.35%). Thursday's closes: S&P 500 -0.14%, Dow Jones -0.22%, Nasdaq -0.08%. The S&P 500 on Thursday settled lower on the +13,000 increase in U.S. weekly jobless claims to 260,000 and the -2.3% sell-off in crude prices, which undercut energy producer stocks. Stocks found underlying support on the +3.2% increase in U.S. Sep existing home sales to 5.47 million (stronger than expectations of +0.4% to 5.35 million) and the -3.1 point drop in the Oct Philadelphia Fed business outlook index to 9.7 (stronger than expectations of -7.8 to 5.0).

Dec 10-year T-notes (ZNZ16 -0.02%) this morning are down -1 tick. Thursday's closes: TYZ6 +0.50, FVZ6 -1.25. Dec 10-year T-notes on Thursday posted a 2-week high but fell back and settled just slightly higher. T-notes were boosted by carryover support from a rally in German bunds after ECB President Draghi said that ECB bond purchases will not be ending early. T-notes also received a boost from the larger-than-expected increase in U.S. weekly initial unemployment claims and weakness in stocks.

The dollar index (DXY00 +0.21%) this morning is up +0.201 (+0.20%) at an 8-1/2 month high. EUR/USD (^EURUSD) is down -0.0037 (-0.34%) at a 7-1/2 month low. USD/JPY (^USDJPY) is down -0.19 (-0.18%). Thursday's closes: Dollar index +0.395 (+0.40%), EUR/USD -0.0045 (-0.41%), USD/JPY +0.51 (+0.49%). The dollar index on Thursday climbed to a 7-1/4 month high and settled higher on weakness in EUR/USD, which fell to a 3-3/4 month low after ECB President Draghi signaled the ECB won't be ending QE anytime soon when he said there is no "convincing upward trend" in underlying inflation and that "an abrupt ending to bond purchases, I think, is unlikely." The dollar index was also boosted by stronger-than-expected U.S. economic data on Sep existing home sales and the Oct Philadelphia Fed business outlook index.

Dec WTI crude oil (CLZ16 +0.65%) this morning is up +20 cents (+0.40%) and Dec gasoline (RBZ16 +0.74%) is up +0.009 (+0.61%). Thursday's closes: Dec crude -1.19 (-2.30%), Dec gasoline -0.0221 (-1.47%). Dec crude and gasoline on Thursday closed lower on the rally in the dollar index to a 7-1/4 month high and the action by Nigeria, Africa's largest crude producer, to lower the price of every type of crude oil it sells by $1 a barrel in an attempt to boost its global market share of crude sales.

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