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Quantamize Afternoon Market Update March 26

Mar 26, 2018

US Markets Midday Review

After strong upbeat trading pre-market this morning, US equities have broadly continued to advance. The announcement of US-Chinese discussion on trade continues to drive US equities. The VIX receding to 22.47 (-9.65%), and an S&P 500 advance/decline ratio of 0.85 (428 advances and 74 declines) are both indicators of positive market sentiment.

The S&P 500 is up 1.23% midday. After being the second worst performing sector last week, financials (+2.21%) are today’s best performer in the S&P 500. Bank stocks, which declined steadily in last week’s trading, are 2.58% higher today. Information technology stocks are up 1.96% as semiconductors (+2.38%) recover from sharp declines in previous trading. Consumer stocks are broadly higher as consumer discretionary rose 1.51%, and consumer staples advanced by 0.72%.  There are no sectors posting negative returns in the S&P 500, but the worst performing sector midday is real estate (+0.48%). Healthcare (+0.61%) is the next biggest underperformer as weak returns in pharmaceuticals and biotech (+0.31%) weigh on the sector.

NASDAQ stocks are 1.34% higher at midday as the technology sector begins to recover, despite more negative regulatory news about Facebook (see below). Last week was the worst weekly performance by the NASDAQ in over a year. Technology stocks such as Microsoft (+5.13%), Lam Research (+3.58%), and Intel Corp (+3.55%) are among the top performing stocks in the S&P 500. While technology is broadly higher, social media stocks are mixed. Facebook shares are 2.45% lower at midday, and Snap Inc (SNAP) is down 1.28%. Twitter’s stock has moved 1.58% higher.

Russell 2000 stocks are trading 0.54% higher as small-cap stocks underperform the broader market. Technology stocks are up 1.48%, with returns in electronic components (+1.77%) lifting the sector. Consumer discretionary (+1.39%) and financials (+1.29%) were the next biggest outperformers in today’s trading. Energy is the worst performing sector in the Russell 2000 today, falling 0.57%. Gas pipeline production stocks are 2.82% lower. Healthcare is down 0.53% and is the next worst underperforming sector in the Russell 2000.

Stocks Trending in the News

Bad news continues to plague FACEBOOK (FB), as the FTC announced that it is investigating Facebook’s privacy practices. Facebook shares are down 2.45% today.

LOWE’S CORP’s (LOW) CEO, Robert Niblock, announced that he will be retiring once a successor is found. Shares of Lowe’s are up 5.24% today.

Chrissy Teigen announced that she will be stop using SNAP INC.’S (SNAP) flagship app, Snapchat. The list of celebrities who have stopped using the app continues to grow and Snap’s shares are down 1.59% today.

SUEDZUCKER (SZU.GR) sees 2018-2019 operating profit dropping to the 100 million Euro to 200 Million Euro range, down from 431 million Euros in FY 2017. Shares closed down 4.37%.

USG CORP. (USG), a wallboard producer backed by BERKSHIRE HATHAWAY (BRK.A), rejected a $5.9 billion takeover by Knauf, a German building material company. USG shares are up 18.50% today.

S&P 500 Gainers

  • LOW +5.41%
  • MSFT +5.13%
  • LRCX +3.58%
  • INTC +3.55%
Russell 2000 Gainers
  • FINL +30.43%
  • TVPT +10.80%
  • SGH +9.71%
  • WATT +8.66%
S&P 500 Laggards
  • AMD -3.67%
  • ABBV -3.65%
  • FB -3.64%
  • VIAB -2.39%
Russell 2000 Laggards
  • BHVN -21.24%
  • ASNS -13.55%
  • LFIN -13.26%
  • KALA -9.95%

Rates & Commodities Review

US bonds remain weaker across the curve as yields on all maturities are still higher as of midday. The 10-Year is unchanged at 2.843% from this morning, and the 30-Year is moderately lower at 3.067% from 3.087% this morning.  The US Treasury auctioned USD$ 96bn worth of 3-month & 6-month bills today and USD$ 30bn of 2-year notes. The 2-Year priced in at 2.310%, higher than February’s 2.256 auction. Additionally, the US is officially one week away from replacing LIBOR with the Secured Overnight Financing Rate (SOFR). This implementation will be followed with a six-step plan that will create derivatives based on the SOFR. Economic data out of the Chicago Fed and Dallas Fed were released today. However, the release had little effect on the markets as investors are most likely focused on data releases later this week which include consumer confidence, GDP revisions, and the PCE.

The USD$ (89.04) continues to be sold against major G10 pairs, exception for a reversal against The JPY ¥ (105.13). The USD$ is stronger by 26bps against the RUB? as President Trump and European leaders have announced today to expel Russian diplomats because of Russia’s alleged involvement in the UK nerve agent scandal. Lastly, the USD$ is weaker by 102bps against the MXN$ which can be attributed to White House Trade Adviser, Robert Lighthizer, saying today that it looks like the US will have a good deal on NAFTA.

WTI Crude oil is trading at $65.63/barrel as the oil market seems to be stabilizing. Genscape Cushing inventories were increased by +2.1 million/barrels week over week however oil has found support above the $65/barrel level. Precious metals have moved higher on the day from the open as investors seemingly remain cautious despite equities being higher on the day. Gold is slightly higher on the day at 1,355 USD$/ounce, +57bps, silver is following at 16.73 USD$/ounce, +98bps. Platinum and palladium are also +45bps & +46bps respectively at 953.19 USD$/ounce and 980.83 USD$/ounce.

Cryptocurrency Review

Major cryptocurrencies have continued to sell-off to start the week as Bitcoin ($8,105) -5.46%, Ethereum ($484.60) -7.21%, and Ripple ($.59) -4.4%. Despite the crypto market selling off, the news released today remains positive for the cryptocurrency world. German Securities Exchange Deutsche Börse Group has partnered with HQLAx for a blockchain platform. This platform will have a use case for securities lending that is open to multiple custodians and collateral agents. The CEO of Ant Financial, Eric Jing, has called blockchain the cornerstone of trust for the digital society in the future. He went on to say that the technology is not yet ready for a large-scale outbreak. Something to note is that Ant Financial is one of the top holders of blockchain patents among large corporations. In relation to blockchain patents, a report came out today that in 2017, 225 patent filings were submitted in China; far surpassing the 91 submitted in the United States. Lastly, a spinoff from stock trading firm, IEX, has launched a blockchain-powered gold trading platform. Tradewind platform co-founder, Matt Trudeau, has said "Gold and blockchain technology form a uniquely compelling marriage, and we created our platform to enable the gold market to respond to a number of systemic challenges and remove prior limitations."