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Quantamize Afternoon Market Update March 22

Mar 22, 2018

US Midday Review

US equities are trading broadly lower at midday. Negative market sentiment is being driven largely by President Donald Trump’s decision to impose nearly $60 billion in tariffs targeted towards China. The VIX is currently trading at 20.76 (+16.24%), which is an indicator of increased market uncertainty. Market breadth in the S&P 500 was negative with an advance/decline ratio of 0.24 (97 advances and 404 declines). Economic news today included the release of weekly US jobless claims, which came in slightly higher than expected (229,000 vs 225,000 estimated). The US House of Representatives has approved a $1.3 trillion spending bill, which is enough to fund federal agencies through September 30th. Technology is down 2% today, and this week’s sell-off in the sector is on pace to be the worst since early February.

The S&P 500 is down 1.69% at midday. Financials (-2.06%) are the biggest underperformer as losses in banks (-2.42%) and capital goods (-1.77%) drive the financial sector lower. Returns in healthcare (-1.79%) have also been subpar due to losses in pharmaceuticals, biotech, and life sciences (-2.41%). Utilities (+2.07%) have performed strongly today in contrast to the broader S&P 500. Consumer stocks are mixed with consumer discretionary stocks declining 1.24%, while consumer staples stocks advanced 0.19%. Strong returns posted by food & beverage (+0.74%) lifted the consumer staples sector.

Small-cap stocks are outperforming the broader market, Russell 2000 stocks receding only 0.65%. Materials are the biggest underperformer today as poor returns in aluminum (-5.4%) and steel (-4.7%) are weighing the sector down. Consumer durables (-1.3%) have also posted poor returns today. Utilities (+1.08%) are a broad outperformer. As with the S&P 500, it is the top performing sector. Strong returns from breweries & distilleries (+3.13%) pushed consumer staples (+0.27%) higher.

Stocks Trending in the News

William Blair downgraded ACUITY BRANDS (AYI) to market perform from outperform. William Blair analyst Ryan Merkel is concerned that that price competition could lead to margin pressures. Acuity Brands shares are down 9.00%.

Beijing granted BAIDU (BIDU) a license to begin testing sell driving cars in the city. The cars will have to pass a test on an enclosed course prior to being allowed on a public road. Baidu shares are down 4.81% today.

An error in BNP PARIBAS’s (BNP.FR) system on Wednesday caused a Taiwanese stock, Formosa Petrochemical, to close down 10%, or lose $3 billion in market value. Today, the Senior Executive Vice President of the Taiwan Stock Exchange, David Yang, said that the trades would not be canceled. BNP Paribas shares are down 2.06% today.

DEUTSCHE BANK (DB.GR) is likely to raise 1.63 billion euros ($2 billion) from the IPO of its DWS asset management division. Shares are expected to be sold for 32.50 euros each. Deutsche Bank shares are down 3.95%.

GENERAL MILLS (GIS) was upgraded to hold from sell at Société Générale. General Mills price target remains at $48. General Mill shares are up 0.15%.  

Steve Wynn, the former founder of WYNN RESORTS (WYNN), sold 4.1 million shares of the company. This reduces his staked from 12% to 7.8%. This sale increases the chance Wynn Resorts becomes an acquisition target. Wynn shares fell 2.36%.

S&P 500 Gainers

  • SCG +3.23%
  • PCG +3.21%
  • EIX +3.07%
  • VTR +2.85%
Russell 2000 Gainers
  • OMER +40.29%
  • GES +28.41%
  • LE +19.58%
  • MGPI +8.40%
S&P 500 Laggards
  • ABBV -14.03%
  • AYI -9.22%
  • CAN -7.40%
  • DRI -7.18%
Russell 2000 Laggards
  • GIII -13.92%
  • CENX -12.99%
  • MLHR -11.99%
  • ODT -8.74%
Rates & Commodities Review

US bond yields have remained lower from this morning as risk-aversion is certainly felt today. The 10-Year is trading at 2.832% in comparison from 2.850% at the open, and the 30-Year is trading at 3.065% in comparison to 3.075% from the open. Bonds across the world are trading in tandem with US Bonds as bond yields remain down across EMEA and Asia-Pacific. Most notably, the UK 10-year is at 1.438% in comparison to 1.526% from yesterday’s close. The UK 10-Year seems to be trading off the news from this morning that the Bank of England (BoE) will most likely hike their overnight rate at their next meeting in May. The surprising news was that the announcement today to maintain the overnight rate was not anonymous, as two of the nine members voted for a rate hike today. The USD$ (89.85) is slightly higher on the day, up 14bps from this morning. The USD$ has been performing well against major currencies when a risk-off sentiment is felt. Confirming this sentiment, the USD$/JPY¥ is lower by 30bps at 105.67. Despite dollar weakness, WTI Crude is continuing to give back gains from the high it hit earlier this week. Currently WTI Crude is trading at $64.63/barrel. Surprisingly, precious metals are lower on the day even with trade announcements by Robert Lighthizer and President Trump today. This has been a common theme as of late; gold has had a positive correlation with the S&P 500 over the past month and a half which breaks conventional trading correlations.

Cryptocurrency Review

Cryptocurrency news is light on the day. Binance CEO has refuted the financial watchdog warning reports. Changpeng Zhao, Binance’s CEO, tweeted this morning that "Nikkei showed irresponsible journalism. We are in constructive dialogs with Japan FSA and have not received any mandates. It does not make sense for JFSA to tell a newspaper before telling us, while we have an active dialog going on with them". Additionally, out of Asia, JD.com has unveiled a white paper detailing its plans for a new blockchain-as-a-service (BaaS) platform. Despite the positive news, major cryptocurrencies remain lower this afternoon. Possibly keeping cryptocurrencies lower on the day may be the fact that Edward Snowden broadcast via his webcam today that Bitcoin’s public ledger is a big flaw. He went on to say that Zcash is the most interesting cryptocurrency for him based on its privacy properties. Lastly, a Swiss foundation has accrued $30mm in investments and plans to issue a complimentary global currency with an initial price of $0. The foundation has said that they are targeting individuals who are holding digital currencies and are looking for safe harbors form the raging volatility.