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Quantamize End of Day Market Update March 26

Mar 26, 2018

US Market Recap

US equities moved higher throughout today's trading following last week’s sharp declines. There was little economic news driving investor sentiment, and the focus remained on US-Chinese trade relations. The VIX declined steeply, falling to 21.03 (-15.44%) as an indication of easing investor uncertainty. Market breadth was positive today, with only 20 stocks in the S&P 500 declining (485 advances). Today’s returns in the S&P 500 were the biggest 1-day gains in the index since August 2015. The NASDAQ closed 3.26% higher today, as technology began to rebound from last week’s losses. Technology and financials, which comprise 40% of the S&P 500, were the biggest outperforming sectors in today’s trading. Semiconductors, which declined 1.82% on Friday, were the best performer in the S&P 500 today rising 4.77%.

The S&P 500 advanced 2.72% in today’s trading. Technology was a strong outperformer, as increases in information technology (+4.03%) and telecommunications (+0.92%) lifted the sector higher. Financials were up 3.24% with returns in banking (+3.44%) driving the sector higher today. In continuation from midday, consumer stocks were up at the close. Consumer discretionary and consumer staples rose 2.91% and 1.36%, respectively. There were no sectors in the S&P 500 with negative returns, but utilities were an underperforming sector with gains of only 1.04%.

Russell 2000 stocks finished trading up 2.23% and were in-line with the broader market. Technology was the best performing sector in the index led by strong returns in production technology equipment (+4.19%). Financials (+2.37%) performed well due to returns in insurance (+3.56%). As with the S&P 500, no sector in the Russell 2000 posted negative returns. The worst performing sector was consumer staples, which returned 1.16%.

Stocks Trending the News

ALLSTATE (ALL) is offering $500M in debt across two tranches. $250M of the debt will expiry in three years, and the other $250M will expiry in five years. The bonds carry an “A3” rating by Moody’s and an “A-” rating by Standard & Poor’s and Fitch. Allstate shares closed up 2.45%

ALPHABET (GOOGL) and SHOPIFY (SHOP) have agreed to a deal to help host e-commerce online stores on Alphabet’s cloud service. Alphabet closed up 2.68%, and Shopify shares closed down 3.60%.

JP MORGAN (JPM) and AMAZON (AMZN) are partnering to integrate Amazon’s Alexa onto trading floors. Shares of JP Morgan closed up 3.06%, while shares of Amazon closed up 4.03%.

Morgan Stanley raised MICROSOFT’s (MSFT) Price Target to $130, up from $110. The bank feels that Microsoft’s cloud unit could double over the next three years. Shares of Microsoft closed up 7.57%.

S&P 500 Gainers

  • MSFT +7.57%
  • LOW +6.60%
  • ADBE +6.46%
  • NFLX +6.45%
RTY 2000 Gainers
  • FINL +31.09%
  • TVPT +17.07%
  • WATT +12.07%
  • SGH +10.38%
S&P 500 Laggards
  • ABBV -2.24%
  • AMD -1.79%
  • MAT -1.59%
  • GE -1.38%
RTY 2000 Laggards
  • LFIN -16.62%
  • KALA -13.78%
  • MER -12.88%
  • ASNS -10.33%

Rates & Commodities

US bonds remained weaker across the curve as yields on all maturities settled higher as of the market close on Friday. The 10-Year is unchanged on the day at 2.843%, but up from Friday's close of 2.814%, and the 30-Year returned to 3.084% from 3.067% at midday. Providing some support for investors, Federal Reserve Bank of Cleveland President, Loretta Mester, stated today that there is no evidence that a flat yield curve would signal a weak US economy; structural factors would likely be at play. Additionally, she said that real GDP growth could be more than 2.5% in 2018 and 2019.

The USD$ (89.05) continues to be sold against major G10 pairs as a risk-on sentiment was evident in today’s trading session. USD$ weakness has been a proxy for risk-on as of late. One exception for the USD$ was its reversal against the JPY ¥ (105.38). The USD$ finished as low as 104.74 against the JPY¥ last week.

WTI Crude oil is trading at $65.50/barrel, down 58bps, as the oil market seems to be stabilizing around USD$ 65/barrel following continued efforts to balance supply & demand. Precious metals finished higher on the day with gold at 1,353 USD$/ounce, +45bps, silver at 16.70 USD$/ounce, +82bps, platinum and palladium are also +82bps & +8bps respectively at 952.95 USD$/ounce and 977.17 USD$/ounce. The rise in precious metals today breaks traditional correlation with the JPY¥. Investors who considered our Bull Call trade on Japan (FXY) from February would have performed well last week as the Yen strengthened, and investors who considered our SPDR Gold Trust (GLD) trade would have seen strong performance today.

Cryptocurrencies

Major cryptocurrencies have remained negative all day as most major coins are posting negative returns on the day. News was light in the afternoon, and the sell-off in cryptos appears to be driven from profit taking after last week’s strong rally. Crypto startup, Circle, has hired a Square vet as CFO to aid expansion. Circle plans to hire up to 250 individuals this year and has said that the firm had facilitated more than USD$ 75bn in transactions last year. Twitter will be banning ads relating to ICOs, token sales, and wallet services starting tomorrow. The market may be reacting negatively to this announcement; however, these bans will assist with elimination in scam accounts, or bot accounts seeking cryptocurrencies. Lastly, the CBOE has made gestures towards the SEC for a bitcoin exchange-traded product (ETP) to be rolled out soon as the success Bitcoin futures are supporting the argument that an exchange-traded product could be supported.

EU Market Recap

After trading higher on the open, European equities reversed, and finished broadly lower today. News from the region was light, and US-Chinese trade actions were the primary focus in financial markets. Regional economic news included the release of 4Q GDP for France and the Netherlands. Both results were in-line with consensus estimates (0.7% growth vs 0.6% estimate) and (0.8% vs 0.8% estimate), respectively.

The Euro Stoxx 600 fell 0.72%. Healthcare was the biggest underperformer and fell 1.18%. In contrast to US markets, EU technology continued to slide today and retreated 1.15%. Oil & Gas was the only sector in the Euro Stoxx 600 with positive returns, edging higher by 0.16%. Regional markets closed lower with the FTSE 100 (-0.48%), DAX (-0.83%), and the CAC40 (-0.57%) all declined on the day.

EU Gainers

  • LN +19.2%
  • SW +6.3%
  • GR +5.0%
  • GR +4.6%
EU Laggards
  • NA -13.4%
  • B.SS -9.2%
  • GR -8.0%
  • GR -7.9%