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Quantamize Afternoon Market Update March 28

Mar 28, 2018

US Markets Midday Review

After moving lower earlier today, US equities have reversed and are trading higher. An earlier sell-off in technology has halted, and the NASDAQ Composite is relatively flat. News is light, and financial markets continue to focus on the US-Chinese trade actions in recent days.

US pending home sales for February were robust and grew more than expected (3.1% vs 2.7% estimate).

Market breadth has turned positive, after being mixed earlier in trading. The VIX has retreated by 1.51% today, falling to 22.34. The S&P 500 advance/decline ratio is 0.63 (318 advances and 185 declines).

The S&P 500 is higher by 0.58%. Technology in the index is mixed with telecommunications rising 2.24%, while information technology (-0.44%) lags behind. Semiconductors are compounding on yesterday’s weak returns and are 1.54% lower. Consumer stocks are mixed with consumer staples climbing 1.23%, while consumer discretionary is 1.04% lower. Energy is the worst performing sector in the S&P 500, declining by 1.33%.

The NASDAQ Composite is up 0.08% after being down over 1.20% earlier today. Regulatory concerns over personal data safety, as well as the potential for further US-Chinese trade tensions, have not impacted technology as strongly today as they did yesterday. Despite reversing earlier losses, underperforming technology stocks such as Tesla (-6.87%), Netflix (-5.22%), and Amazon (-4.87%) continue to weigh on the NASDAQ Composite.

Russell 2000 stocks rose by 0.14%, as small-cap stocks underperform the broader market. Financials (+0.83%) are the best performing sector in the Russell 2000, lifted higher by strong returns in commercial finance and mortgages. Consumer stocks are mixed as consumer staples have risen by 0.35%, while consumer discretionary is flat. Technology is the biggest underperforming sector in the Russell 2000 due to disappointing returns in electrical equipment (-3.44%). Energy (-0.85%) is the next worst underperformer, led lower by poor returns in gas pipeline stocks (-2.39%)

Stocks Trending in the News

Axios reported that President Trump is considering investigating AMAZON (AMZN) for violations against antitrust or competition laws. Amazon shares are down 3.61%.

BLACKBERRY (BB) reported adjusted EPS of $0.05, beating estimates of $0.01. Reported revenue of $239 million, beating estimates of $215.5 million. Blackberry shares are down 0.08%.

CME GROUP INC. (CME) is nearing a takeover of NEX GROUP (NXG.LN). The deal would be worth $5.7 billion. CME shares are up 0.31%, while NEX Group closed up 9.77% in London.

GENERAL MILLS (GIS) is doing a share offering at $44/share. The share offering is being used to finance its Blue Buffalo acquisition. General Mills shares are falling 0.96%.

NASDAQ INC. (NDAQ) will be boosting its quarterly dividend 16% to $0.44/share, from $0.38/share. Nasdaq shares are up 2.49%.

TESLA (TSLA) shares are falling again today. Authorities are looking into a fatal Model X crash on Friday, that may have been caused by the car’s Autopilot system. This adds to the other turmoil that is surrounding Tesla, as the company’s bonds were downgraded by Moody’s yesterday to B3. There are also concerns that the company will run out of cash by year-end and will miss production goals for its Model 3 vehicle. Tesla shares are falling 7.20%.

S&P 500 Gainers

  • M +3.88%
  • ABBV +3.85%
  • CELG +3.15%
  • NDAQ +3.08%
Russell 2000 Gainers
  • RH +22.65%
  • LHO +15.54%
  • AGX +15.31%
  • ASNA +10.32%
S&P 500 Laggards
  • BEN -8.75%
  • CXO -8.62%
  • RHT -5.69%
  • AMZN -4.87%
Russell 2000 Laggards
  • PTCT -13.38%
  • CTMX -11.74%
  • QNST -8.80%
  • TBHP -8.61%
Latin American Equities

Latin American equities continue to be weaker today, diverging from US equities. Brazil’s Ibovespa is down 63bps with 15 companies out of 62 advancing, Argentina’s Merval is down 60bps with 8 of 31 companies advancing and Mexico’s Mexbol is down 121bps with 5 companies advancing out of 20. Volatility in LatAm equity markets remain higher as 10D Vol is higher than 30D Vol across the region. Argentina has rebuffed an investor proposal that it should request a flexible line of credit from the International Monetary Fund (IMF). The thesis behind the request comes from when Argentinian assets experienced significant selling in the January, and that Argentine companies and provinces found themselves shut out of the capital markets. The line of credit is seen as a tool to ease concern about Argentina having the ability to finance itself during turbulent markets. Brazil’s state-controlled oil company Petrobras, hedged part of its 2018 oil production to protect cash flow against downturn in the crude market. Petrobas reportedly hedged 128 million barrels, at an average Brent price of $65 a barrel. Lastly, Peruvian stocks were raised to overweight from neutral by BTG Pactual while Chilean stocks were lowered to neutral in its LatAm model portfolio. BTG Pactual states that greater political stability in Peru supports economic growth and that Chile was downgraded purely on valuations. BTG remains underweight on Mexico, and overweight on Brazil.

Rates & Commodities Review

The US 10-Year yield is now at 2.761%, slightly higher from 2.757% on today’s open. The US 30-Year remains unchanged from the open and its yield is at 3.013%. 3-month LIBOR’s rate, one of the most-watched benchmarks in finance lately, has risen for 36 consecutive sessions. The increase in LIBOR has raised the baseline for many bonds, loans and mortgages while it has also made it more expensive for European & Japanese investors to buy Treasuries and hedge out currency risk. The USD$ continues to advance on the day and is at 89.81 from 89.48 this morning. Notably, the USD$ is 91bps higher against the JPY¥ (106.44), and 80bps higher against the CHF (.953). Gold is sharply lower on the day, down 132bps at USD$ 1327.23/ounce from USD$ 1337.08/ounce this morning. Silver (USD$ 16.30), platinum (USD$ 937.69) and palladium (USD$ 969.16) are following and are down 136bps, 64bps and 49bps respectively. Following USD$ strength and a pickup in US inventories, WTI Crude oil is sharply lower on the day, down 215bs at USD$ 63.85/barrel. WTI Crude seems to have lost support at the USD$ 65/barrel price level it formed last week.

Cryptocurrency Review

The cryptocurrency market has reversed from its gains earlier this morning. Bitcoin is at USD$ 7,895.52 down 2.74%, Ethereum is at USD$ 447.47 down 4.44%, and Ripple is at USD$ .572 down 4.11%. Other major coins are trading downwards with similar percent moves. Negative news that may be driving sentiment includes President and CEO of the Federal Reserve Bank of Atlanta Raphael Bostic claiming that cryptocurrencies cannot be regarded as currencies. Additionally, the biggest bank in Denmark, Danske Bank, has released a report criticizing cryptocurrencies over perceived risks and lack of transparency. Additionally, the bank said it will not be possible to trade cryptocurrencies on their platform. There has been positive news as of midday; digital payments startup, Uphold, announced Wednesday that it will support Ripple’s XRP cryptocurrency. Lastly, a cryptocurrency and blockchain association among Russia, China, and South Korea are planning to file a joint lawsuit in May over the bans by Google, Twitter, Facebook and Yandex on cryptocurrency advertisements.