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Quantamize Afternoon Market Update April 2

Apr 02, 2018

US Markets Midday Review

US equities are down sharply at midday, following the lower open this morning. Investor sentiment is negative, as US-Chinese trade-war concerns drive the market down. The VIX has surged to 22.65, rising 13.52% as market uncertainty becomes more pervasive.  

The S&P 500 has fallen by 2.21% and has broken through its 200-day moving average support level. No sector in the index is posting positive returns at midday, with utilities (-0.44%) being the biggest outperformer. There has been a rout in consumer discretionary, information technology, energy, financials, and industrials with each sector sliding by a minimum of 2%. Healthcare (-1.89%), materials (-1.90%), consumer staples (-1.84%), and telecommunications (-1.72%) have also declined significantly. Retail (-3.81%) has been a laggard, and semiconductors (-3.64%) continue to compound on last week’s woes. Banking has slid by 2.45% after offering disappointing returns last month.

The Russell 2000 has declined by 1.87%, as small-cap stocks slightly outperform the broader market. Energy (-3.25%) is the biggest underperforming sector due to slumping crude producers (-4.54%). Healthcare (-2.59%) has been forced down by weak returns in biotechnology (-3.22%), and along with materials (-2.23%) and technology (-2.23%) is one of the worst performing sectors. Defensive utility stocks are the best performers, though they have still retreated by 1.32%.

Nasdaq Composite stocks are down 2.43%, as the rout in US technology continues. Trade tensions have had a severely negative impact on the sector. The sell-off in technology can also be attributed to various developments such as the Tesla (-3.68%) autonomous driving scandal, President Trump’s focus on collecting more taxes from Amazon (-4.07%), and the Facebook (-1.92%) data breach.

Aside from technology, industrial and food goods stocks such as Caterpillar (-3.14%), Deere & Co (-2.74%), Hormel Foods (-2.74%), and Tyson Foods (-5.93%) (see below) are among the biggest underperformers.

Stocks Trending in the News

President Trump continued his negative comments on AMAZON (AMZN) today, sending shares down 3.88%.

ESPN, a DISNEY (DIS) company, will be releasing its streaming service, ESPN+, later this month. The service will cost $4.99 a month and will include hundreds of live sports events. Disney shares are down 1.76% today.

FITBIT (FIT) shares are down 9.11% today, after Morgan Stanley downgraded the stock to underweight from equal-weight. The price target was lowered to $4 from $5.

TYSON FOODS (TSN) was downgraded to sell from hold by Pivotal Research Group. The price target was lowered to $55 from $75. The downgrade is due to concerns over the pork tariffs enacted by China. Tyson Foods shares are down 5.93%.

WALMART (WMT) is reportedly in the early discussion stages of potentially acquiring HUMANA (HUM). Walmart shares are down 3.65%, while Humana shares are up 4.56%. 

S&P 500 Gainers

  • HUM +4.60%
  • UNH +3.54%
  • NTM +0.98%
  • DISC +0.91%
Russell 2000 Gainers
  • ALA +17.51%
  • MNOV +16.88%
  • NC +6.54%
  • NYNY +4.93%
 S&P 500 Laggards
  • CXO -7.50%
  • TSN -5.85%
  • RRC -5.71%
  • NFLX -5.55%
Russell 2000 Laggards
  • VRTV -18.37%
  • LSKD -18.17%
  • SNX -15.77%
  • CNCE -12.05%
Rates & Commodities

The US 10-Year bond the US 30-Year bond are rallying while investors are selling the front end of the curve. The 10-Year yield is lower at 2.741% from today’s open of 2.753% and the US 30-Year Yield and is at 2.978% from today’s open of 2.984%. The spread from between the US 10-Year and the US 2-Year is at 48bps while the spread between the US 10-Year and 3M LIBOR is at 43bps as the yield curve continues to flatten and LIBOR continues to rise. The USD$ is trading higher today in a risk-off sentiment, currently at 90.12, up 16bps on the day. Most notably, the USD$ is stronger by 60bps against the MXN$ (18.30) following President Trump’s tweets from over the weekend and this morning. Additionally, the USD$ is weaker by 25bps against the JPY¥ (106.02). The White House responded today that China should not target fairly traded U.S. goods after they announced tariffs yesterday. Gold is higher from last week, up 102bps at USD$ 1338.97/ounce. Silver (USD$ 16.58), platinum (USD$ 931.87) and palladium (USD$ 933.10) are mixed and are +1.32%, -0.02% and -2.13% respectively. WTI Crude oil is sharply lower amid USD$ strength, down 270bps at 63.19/barrel.

Latin American Equities

Latin America equities are trading lower in tandem with US markets, however, they are not declining as sharply. Brazil’s Ibovespa is down 59bps, Argentina’s Merval is down 39bps and Mexico’s Mexbol is down 10bps.  Volatilities are slightly elevated as 10D realized Vol is higher across the region, compared to 30D realized Vol. Brazilian economists have updated their forecasts for the Selic rate by year end as well as inflation; economists forecast the benchmark Selic rate will end 2018 at 6.25% and inflation will accelerate to 3.54%. According to the  latest Parametria poll, Morena party presidential candidate Lopez Obrador holds an 18-point advantage for the upcoming Mexican election. Lastly, Argentina reported January economic activity of +4.1% Y/Y vs. estimate of +2.9% and February Industrial Production was +5.3% Y/Y vs. estimate of 2.9%.

Cryptocurrencies

Major cryptocurrencies have remained higher as of midday however they have given back some of their gains from earlier this morning. Bitcoin is trading at USD$ 7,051.24 still up 4.98%, Ethereum is following at USD$ 390.04, up 4.45% and Ripple at USD$ .4970 up 3.23%, to round out the top three. Crypto news is mostly positive on the day. US healthcare conglomerate, UnitedHealth, reportedly will be working with other industry leaders to address US doctor directories on a Blockchain. In China, petrochemical firm Sinochem has allegedly succeeded in utilizing blockchain technology to carry out a gasoline export. The state-owned corporation has claimed that the shipment marks the first time that a blockchain-based commodity trading system has included all the central parties in the process. The first quarter was a challenging quarter for cryptocurrencies as an investment as the total value of cryptocurrencies fell from USD$ 830bn in early January to USD$ 251bn at quarter end.