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Quantamize Midday Market Update March 29

Mar 29, 2018

US Markets Midday Review

Following a higher open this morning, US equities continue to advance at midday. Positive sentiment in the markets is being driven by US Trade Representative Robert Lighthizer’s announcement that the tariffs levied on China by the US may not be imposed for 60 days, or until early June. US-Chinese trade tensions have been weighing on financial markets, so this delay may improve investor disposition.

The VIX has retreated to 20.47 (-10.49%), and along with an S&P 500 advance/decline ratio of 0.87, both indicate that investor confidence is rising.

US economic data released today showed that personal-consumption expenditures rose 0.2% in February on a M/M basis. This was in-line with the 0.2% M/M growth from December to January. Personal income rose faster than spending in February (+0.4%), as Americans are saving more.

The S&P 500 is 1.10% higher at midday. Energy (+1.68%) is the best performing sector in the index today. S&P 500 technology stocks are broadly higher with information technology (+1.31%) and telecommunications (+0.09%) both in positive territory. Strong returns in media (+1.58%), technology hardware (+1.39%), and software services (+1.37%) lifted the technology sector. Consumer stocks have risen as well, as consumer discretionary (+0.62%) and consumer staples (+0.67%) both advanced. No sector in the S&P 500 is posting negative returns but real estate is relatively flat, edging 0.01% higher. Healthcare also underperforming the S&P 500 and is up only 0.58% at midday.

Nasdaq Composite stocks are up 1.13%, as technology rallies from the recent sell-off. FAANG stocks have fallen broadly during the recent global decline, but they have mostly performed better today. Facebook (+3.88%), Apple (+1.90%), and Alphabet (+2.77%) are higher, Netflix is relatively flat (+0.06%), and Amazon (-1.26%) the only member with negative returns. Comments made by President Trump regarding Amazon, and the need to capture more taxes from the company, are driving shares down.

The Russell 2000 has advanced 1.23%. Energy (+2.13%) is the best performer in the Russell 2000, as gas pipeline stocks (+4.40%) begin to rebound from declines in recent days. Materials (+1.35%) and technology (+1.19%) were the next best performing sectors. All sectors in the Russell 2000 are positive, with the weakest returns in financials (+0.39%) and consumer staples (+0.66%).   

Stocks Trending in the News

AT&T (T) is offering to buy back four series of bonds that expire in 2023, 2037, 2050, and 2058 with $12.7 billion outstanding. AT&T shares are down 0.05%.

BARCLAYS (BARC) will pay $2 billion in penalties for alleged marketing of residential mortgage-backed securities that were backed by defective loans. The marketing of these loans took place from 2005 and 2007. Barclay’s shares closed up 0.24% today in London.

BAXTER INTERNATIONAL's (BAX) senior unsecured bond rating was upgraded to Baa1 from Baa2 by Moody's. Baxter shares are up 2.13%.

FIRSTENERGY CORP. (FE) asked the US government for aid to keep open the company’s nuclear and coal-fired plants. FirstEnergy shares are down 0.41% today.

SOFTBANK (9984.JP) is considering purchasing a quarter SWISS RE (SREN.SW). Softbank will reportedly pay 100-105 Swiss Francs per share, valuing Swiss Re at 37 billion francs ($39 billion). Softbank shares fell 1.46% in Japan, and Swiss Re shares rose 2.23% in Switzerland.

An internal email by TESLA (TSLA) Senior Vice President of Engineering, Doug Field, urged employees to prove the haters wrong and work to exceed production of 300 Model 3s a day. Tesla shares are down 4.00% today. 

S&P 500 Gainers

  • PVH +5.30%
  • CNC +4.95%
  • FMC +4.23%
  • FB +3.88%
Russell 2000 Gainers
  • MOV +17.32%
  • UNT +14.77%
  • HRG +14.73%
  • VRNT +12.57%
S&P 500 Laggards
  • ADS -6.35%
  • WBA -3.68%
  • UHS -2.72%
  • GE -1.79%
Russell 2000 Laggards
  • LFIN -38.95%
  • ACXM -32.16%
  • ANAB -9.27%
  • BSET -7.92%
Latin American Equities

Latin America equities are mixed as of midday. Brazil’s Ibovespa is up 141bps, Argentina’s Merval is down 39bps, and Mexico’s Mexbol is down 143bps. Volatility is elevated in Brazil and Mexico. Brazil’s 10D Vol is at 15.66 vs. 30D Vol of 13.78, and Mexico’s 10D Vol is at 14.28 vs. 30D Vol of 12.42. Volatility in Argentina remains at ~21 on both a 10D and 30D basis. Currently, Brazil’s government is considering alternatives to speed up the privatization of Eletrobas. Brazil’s monetary policy committee urged the importance of inflation converging. This action would target, and at the same time guarantee, that gains in inflation are lasting even amid adverse shocks. The monetary committee has recently signaled that another Selic rate cut is appropriate, even as the economy continues to grow. High expectations of strong IPO activity in Brazil for the first quarter of this year led to disappointment. Only one Brazilian company, PagSeguro Digital, went public this quarter and it debuted in New York, not Sao Paulo. Brazil experienced a high volume of IPOs in 2017, and companies are more hesitant to list publicly.

Rates & Commodities Review

The US 10-Year yield is at 2.746% from today’s open of 2.768% while the US 30-Year Yield is also lower, at 2.978% from today’s open of 3.003%. While risk assets are performing well, investors have continued to push US bond yields lower this week. The USD$ is back above a 90-price level at 90.15, up 8bps on the day. Interestingly, the USD$ is 37bps lower against the JPY¥ (106.40), while the USD$ is stronger against the GBP£ (1.402) +0.42% and +0.18% against the EUR€ (1.228). Gold is slightly lower at midday, down 12bps at USD$ 1323.39/ounce. Silver (USD$ 16.32), platinum (USD$ 931.74) and palladium (USD$ 948.43) are mixed and are +0.13%, -0.64% and -2.18% respectively. WTI Crude oil is reversing losses from the previous four trading sessions despite USD$ strength and is up 75bs at USD$ 64.86/barrel.

Cryptocurrency Review

Major cryptocurrencies remain sharply lower on the day. Bitcoin is now trading at USD$ 7,546.25 (-4.88%). Ethereum is following at USD$ 412.73, down 8.33% with Ripple (USD$ .5474), Bitcoin Cash (USD$ 759.56) and Litecoin (USD$ 123.03) down 4.87%, 12.76% and 7.94% over the last 24-hours, respectively. Bitcoin’s lightning network, still in its beta phase, is now live and has 1,000 lightning nodes estimated to be running the software on live computers. The lightning network hopes to make the bitcoin network more accessible and affordable. The United Kingdom’s financial regulator issued a warning to investors over an unregistered brokerage firm that appears to be offering cryptocurrency-related derivatives. The firm under question, Olsson Capital, is based out of Bulgaria and is not authorized by UK’s Financial Conduct Authority. China’s central bank today has said that cryptocurrencies will be one of its top priorities this year and has outlined an agenda to protect its national currency, the Chinese Yuan. Additionally, the chief of a government-funded blockchain research center in China has said that the center is still in the process of developing a state digital currency.