Quantamize Afternoon Market Update March 23rd

Mar 23, 2018

US Midday Update

As a continuation of yesterday’s trading, US equities are broadly lower at midday. Negative sentiment from escalating trade tensions between the US and China continues to drive markets down. The $60 billion in tariffs levied against China take effect today. After the VIX reached a session low of 21.56 early this morning, it has risen above opening levels to 23.53. Market breadth in the S&P 500 is negative with an advance/decline ratio of 0.63 (196 advances and 309 declines). Semiconductors (-1.80%) are reacting strongly to trade developments between the US and China with stocks such as Western Digital, Micron Technology, and Applied Materials being some of the biggest underperformers in the S&P 500 today. The NASDAQ is down 0.50% with semiconductors leading the way.

President Donald Trump is weighing a veto of the $1.3 trillion spending bill approved by Congress yesterday. A White House news conference concerning the spending bill has been scheduled for 1:00 p.m EST.  Current funding for the federal government is set to expire this evening, and the new bill would provide enough funding for the federal government through September. The release of new home sales for February came in slightly below consensus estimates (618, 000 vs 622,000 estimate), and fell 0.6% m/m. Average housing prices were higher, however, increasing 9.9% y/y.

The S&P 500 is compounding on the 2.5% losses from yesterday and has fallen 0.50% at midday today. Financials (-1.10%) continue to trend downward due to poor returns in banking (-1.26%). Information technology has declined by 0.83% resulting from the slide in semiconductors. Energy is up by 0.92%, led higher by outperforming oil & gas consumables (+0.96%).

Small-cap stocks are faring poorly in relation to the broader market, and the Russell 2000 has slid 0.78%. Technology (-1.32%) is the biggest underperformer, and the sector has been weighed down by weak returns in production technology equipment (-2.23%). Financials have declined today, in-line with the broader market. Russell 2000 financials are down 1.15%. Energy (+0.84%) has posted the strongest returns in the Russell 2000, led higher by a rise in oil refining & materials (+2.09%)

Stocks Trending in the News

DROPBOX (DBX) shares went public today, and the company is trading 43% above its IPO price.

FERRARI (RACE) is recalling forty 2016 488 GTB & 488 Spider cars due to a software issue. Ferrari shares are down 0.46%.

ROYAL DUTCH SHELL (RDSA.LN) will be selling its 19.6% stake in Iraq’s West Qurna 1 to ITOCHU (8001-JP) for $406 million. Shell shares closed 0.23% lower. Itochu shares closed 2.98% lower.

CNBC says that there is no validity in the rumors that TARGET (TGT) and KROGER (KR) are in merger talks. Shares of Target are 0.48% lower, while Kroger shares are 0.30% higher.

On Wednesday and Thursday, Steve Wynn sold his entire 12% stake in WYNN RESORTS (WYNN) for $2.1 billion. Wynn Resorts shares are 1.46% higher today. 

S&P 500 Gainers

  • CTAS +4.57%
  • FL +4.08%
  • NEM +3.22%
  • NOC +3.19%
Russell 2000 Gainers
  • HOME +20.14%
  • SGH +12.75%
  • CRC +9.50%
  • MDGL +9.11%
S&P 500 Laggards
  • WDC -6.58%
  • MU -6.21%
  • AMAT -3.78%
  • LRCX -3.18%
Russell 2000 Laggards
  • GKOS -11.12%
  • RETA -9.44%
  • BHVN -7.17%
  • TORC -7.13%

Rates & Commodities Review

The theme behind US Bonds has remained the same from earlier this morning, investors are buying shorter dated bonds and reducing exposure to the 10-Year & 30-Year. Currently the 10-Year is flat at 2.826% in comparison to 2.824% from yesterday’s close and the 30-Year is moderately higher at 3.068% from 3.063% from yesterday’s close. In the FX markets, the USD$ is lower by 35bps at 89.50 measured by the U.S. Dollar Currency Index (DXY). The USD$/JPY¥ (104.88) marginally weaker on the day and is below 105 again. The USD$/JPY¥ seems to have found support as risk-aversion is still felt across global asset classes. USD$ weakness is stemming from mutual tariff announcements yesterday between the US and China. Additional rationale for why investors may be selling USD$ is that Trump has threatened to veto the Omnibus spending bill which is supposed to fund the US government through September.

Following USD$ weakness, and the market continuing to price in Iran hardliner John Bolton replacing General McMaster, WTI Crude oil is higher at $65.42/barrel, up 174bps on the day. Precious metals continue to be higher on the day as gold is at 1,349 USD$/ounce, up 155bps, silver is following at 16.59 USD$/ounce, up 123bps and platinum at 951 USD$/ounce, up 28bps.

Cryptocurrency Review

Most major cryptocurrencies remain lower as of midday, however, some cryptos have bounced back and are positive. EOS, the sixth largest crypto by market capitalization is up 3.45%, while Monero +2.57%, Dash +.80%, Tron +6.26% and Icon +15.09% follow. News on the day is positive; Yahoo Japan is planning to launch its own cryptocurrency exchange according to the Nikkei Asian Review. Yahoo Japan will take a 40% stake in BitARG Exchange Tokyo next month and will build a new exchange with BitArg’s technology. Additionally out of Asia, nine Malaysian banks have teamed up to develop blockchain applications for trade finance according to the country’s central bank. Deputy governor of Bank Negara Malaysia (BNM) has said the country is embracing emerging financial technologies, to defray the cost of experimentation involved in developing scaleable use cases. Following the news regarding the Binance exchange this week, CEO Changpeng Zhao, has said that he has been invited to Malta by the government to look at an upcoming bill “favorable” to crypto businesses. Binance is looking forwards to a partnership in Malta soon as it is progressive in the crypto and FinTech space.