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Quantamize Afternoon Market Update April 12

Apr 12, 2018

US Markets Midday Review

US equities are broadly higher, extending earlier gains. Market focus has shifted from concerns over Sino-American trade rhetoric and geopolitical pressure, to the expectation of strong 1Q 2018 corporate earnings. The VIX has fallen to 18.69, down from 19.49 this morning, as market confidence finds its footing. Robust returns in technology and financials lead US markets higher.

Following months of negotiations, the Treasury Department has reached an agreement with the Office of Management and Budget (OMB). Under the deal, the OMB is granted more authority to review Treasury tax rules for policy issues. Last year’s significant tax cuts, expected to boost corporate earnings in 1Q 2018, will be among the items reviewed.

The S&P 500 is up 0.96%. Financials moved 1.92% higher, led by outperformance in banking (+2.19%). Returns in information technology and industrials are in-line with each other, rising 1.44%. Materials advanced 1.11%, contrasting yesterday’s 0.78% declines. Consumer stocks are broadly higher with consumer staples gaining 0.22%, while consumer discretionary rose 0.53%. Real estate (-1.19%) is the worst performing sector in the S&P 500, followed by disappointing returns in utilities (-0.94%). Large-cap energy is relatively flat (-0.03%), showing signs of weakness following returns of 4.36% over the previous two sessions.

Nasdaq Composite stocks are 1.07% higher, outpacing returns in the S&P 500 and Russell 2000. Large- cap semiconductors (+2.34%) are strong performers today, compounding on yesterday’s higher returns. Micron Technology (+4.42%), Applied Materials (+2.17%), and Lam Research (+2.54%) all significantly outperformed the broader Nasdaq Composite index.

The Russell 2000 advanced 0.65%, but small-cap stocks underperform the broader market. Technology rose 1.10%, with the sector being a broad market outperformer. Small-cap healthcare increased by 1.02%, while financials added 0.61%.  as consumer staples and consumer discretionary rose by 0.30% and 0.46%, respectively. Utilities (-0.83%) and energy (-0.16%) are the worst performing sectors, as was the case with the S&P 500.

Stocks Trending in the News

Bed Bath & Beyond (BBBY) reported earnings that beat expectations this morning but provided disappointing guidance due to its price war with Amazon and other e-commerce companies. BBBY reported Adjusted EPS of $1.486 beating consensus of $1.395. Reported revenue was $3.716B beating estimates of $3.682B. The company expects fiscal year 2018 earnings to be between $2.00-$2.50, while analysts were expecting FY2018 earnings guidance of $2.77. Bed Bath & Beyond shares are down 18.49% today.

ESPN, a Disney (DIS) company, is creating a new product for niche sports called ESPN+. The service will have over 10,000 live programs a year and cost $5 a month. Disney shares are down 0.21%.

L Brands (LB) said that an early Easter will negatively affect its April comparable sales by 2-3 points. L Brands shares are down 4.85%.

MDC Partners (MDCA) was upgraded to Outperform by Wells Fargo. Wells Fargo feels that the company was oversold after its 4Q17 earnings 29% selloff. MDCA shares rallied 13.14%.

A McDonald (MCD)’s employee may have spread Hepatitis A in Eastern Kentucky, according to a Madison County Health Department official. McDonald shares are up 0.08%.

Tesla Inc. (TSLA) withdrew from a cooperation agreement with the US National Transportation Safety Board. Tesla said that they were restricted with what information they could release to the public. Tesla shares are down 1.04%.  

S&P 500 Gainers

  • INCY +4.75%
  • MU +4.30%
  • MGM +3.85%
  • HST +3.76%
S&P 500 Laggards
  • LB -4.46%
  • Re -4.12%
  • NFX -3.40%
  • DLR -3.03%
Russell 2000 Gainers
  • ESND +19.60%
  • SELB +19.48%
  • QNST +17.26%
  • CBI +11.38%
Russell 2000 Laggards
  • HCC -23.63%
  • AGX -12.94%
  • APOG -10.50%
  • LRN -8.35%
Rates & Commodities

Bonds in the are lower across the curve; the US 10-Year yield is at 2.828% from today’s open of 2.792% and the US 30-Year Yield is at 3.041% from today’s open of 3.011% The USD$ is moderately higher at 89.79, higher by 31bps. The USD$ is notably stronger against the JPY¥ by 44bps, currently at 107.29 and remains higher against the CHF by 54bps which is at 0.9625. The move in bonds and USD pairs show a risk-on appetite for investors today as geopolitical tensions remain muted for the time being. Precious metals have found direction from the open and predictably are lower with gold down 106bps at USD$ 1339.03/ounce, silver down 82bps at USD$16.54/ounce, palladium down 48bps at USD$961.37 and platinum down 2bps at USD$932.15. WTI Crude is mostly flat on the day, up 4bps even with USD$ strength. WTI is trading at $66.85/barrel. The OPEC monthly market report showed estimated oil demand rising 1.7% while also a tighter market forming as output drops to its lowest level in a year.


Major cryptocurrencies have held onto their strong rally as of midday. Litecoin remains outside the top 5 by market capitalization, trailing EOS by roughly USD$ 100mm in value. The new top five are trading at; Bitcoin USD$7,598.65 +9.71%, Ethereum USD$462.48 +9.84%, Ripple USD$0.5565 +11.84%, Bitcoin Cash USD$704.03 +7.58% and EOS USD$8.74 +19.93%. The sharp rally in cryptos seems to stem from short liquidations, or in other words, unwinding of short positions on Bitcoin due to stop losses being triggered. Moody’s stated today that blockchain technology could save the US mortgage industry USD$1bn by reducing redundancies in the mortgage process. The world’s second largest crypto exchange, OKEx is moving to “blockchain island” – Malta. This move follows Binance’s move to Malta from just a few weeks ago. Binance is the world’s most active exchange.

Latin American Equities

Latin American equities are mostly neutral today with a slightly positive bias. Brazil’s Ibovespa is up 1bps, Argentina’s Merval is up 7bps and Mexico’s Mexbol is up 24bps. Brazil’s retail sales unexpectedly fell in February, which now raise speculation in an extension of the monetary easing cycle. The central bank has mentioned that one more Selic rate cut seems appropriate, however this economic miss may point to further easing. Retail sales fell 0.2% M/M in February vs. the forecast of a 0.7% increase. On a Y/Y basis, retail sales rose 1.3% from a year ago, the lowest reading in almost a year. President Trump’s NAFTA negotiator, Robert Lighthizer cancelled his participation in the Summit of the Americas, following President Trump’s lead. Instead, Lighthizer will discuss trade at the White House.