Quantamize Midday Market Update April 13

Apr 13, 2018
US Markets Midday Review

US equities broadly declined, reversing from a positive opening. Optimistic sentiment from seemingly strong earnings data this morning failed to roll over into the afternoon session. Despite superficially encouraging data, Wells Fargo cautioned that earnings may be revised after a settlement with regulators, while JP Morgan Chase CEO Jamie Diamond cited a competitive environment for “flat” lending in 1Q. There is a trifecta of risks hanging over the market: domestic political risk; geopolitical risk; and remerging aggressive rhetoric on Sino-American trade.

The S&P 500 edged 0.08% lower, with large-cap stocks slightly outperforming the broader market. Financials have fallen 1.12%, due to disappointing returns in banking (-2.14%). Energy (+1.09%) continues to advance and is on pace to be the best performing sector in the S&P 500 this week. Technology in the S&P 500 is mixed as information technology retreated 0.14%, but telecommunications rose 0.90%. Utilities (+0.99%), consumer staples (+0.50%), and real estate (+0.21%) were among the best performers, with defensive equities showing signs of strength. Large-cap healthcare and consumer discretionary stocks were relatively in-line with the S&P 500, sliding 0.06% and 0.07% respectively.  

Market breadth is mixed midday with an S&P 500 advance decline ratio of 1.0 (252 advances and 252 declines), but the VIX falling to 17.56. The University of Michigan’s Consumer Sentiment survey for April fell to 97.8, down from 101.4 in March, indicating waning consumer confidence. Technology and financials sold-off, contrasting this week’s trading trend.

Nasdaq Composite stocks are down 0.20%, but Nasdaq 100 equites are down only 0.10%, indicating relative strength in large-cap technology.

The Russell 2000 retreated by 0.28% as small-cap stocks are underperforming today. Healthcare declined by 0.93%, led lower by disappointing returns in pharmaceuticals (-1.08%) and biotechnology (-1.32%). The Russell 2000 healthcare sector provided some of the most robust returns in the index this week. Financials slid 0.49% and are a broad market underperformer. Consumer stocks are broadly lower as consumer staples and consumer discretionary declined by 0.22% and 0.37%, respectively. Energy (+1.23%) is the biggest outperformer, compounding on small-cap energy’s 8.9% returns over the 4 previous trading sessions. Utilites rose 0.35%, and materials edged 0.135 higher.

Stocks Trending in the News

Allegiant Travel (ALGT) shares are sliding today after CBS News promoted its “60 Minutes” investigation into the discount carrier. Allegiant shares are down 9.17%.

Wedbush Securities raised BJ’s Restaurants (BJRI) price target to $52 from $48. The stock rating remains outperform. BJ’s Restaurants shares are up 5.78%.

Toys R Us has reportedly been approached by Isaac Larian, the founder of MGA Entertainment, and he will submit a bid for the top 274 US Toys R Us stores. The bid will reportedly be for $675M. Hasbro (HAS) shares are up 0.70% and Mattel (MAT) shares are down 0.41%.

Inditex (ITX.SM) was initiated with a hold rating by Bankinter Securities, with a price target of 24.19 euros. Inditex shares closed 2.50% lower.

Wyndham Worldwide (WYN) issued a private offering of $500m in senior unsecured notes due in 2026. The proceeds will be used for Wyndham’s planning acquisition of La Quinta Holdings (LQ). Moody’s rating of Wyndham’s senior unsecured debt is Baa3.  Wyndham shares are down 1.74%, and La Quinta shares are down 0.07%.   

S&P 500 Gainers

  • ALK +7.38%
  • FFIV +4.70%
  • NEM +3.76%
  • AVGO +3.57%
S&P 500 Laggards
  • PNC -4.20%
  • CAH -3.76%
  • RL -3.22%
  • AAP -3.16%
Russell 2000 Gainers
  • PLSE +18.04%
  • BJRI +6.98%
  • LRN +6.56%
  • SCWX +5.37%
Russell 2000 Laggards
  • GKOS -11.35%
  • STMP -8.81%
  • QNST -8.28%
  • ASMB -8.07%
Rates & Commodities

US bonds are mixed today with the yields on the front end of the curve slightly higher and the long end slightly lower. The US 10-Year yield is at 2.821% from today’s open of 2.838% and the US 30-Year Yield is at 3.028% from today’s open 3.042% The USD$ flat on the day, currently the USD$ is at 89.76. The USD$ is slightly higher against the JPY¥ by 14bps, currently at 107.41. Notably the USD$ is weaker against the MXN$ by 60bps at 18.07. A NAFTA deal isn’t as imminent as President Trump has been indicating. Precious metals are confirming investors are uncertain going into the weekend with geopolitical tensions rising. Gold is up 78bps at USD$ 1345.34/ounce, silver is up 64bps at USD$16.64/ounce, palladium is up 235bps at USD$989.10 and platinum is up 5bps at USD$928.60. WTI Crude is extending its sharp gains on the week, currently at WTI is trading at $67.47/barrel, up 60bps on the day.

Cryptocurrencies

Major cryptocurrencies are extending their gains after the sharp spike that started yesterday morning. Bitcoin is above USD$8,000 for the first time in two and a half weeks, currently at USD$8,093.04 +6.23% over the last 24-hours. Other notable performers are Ripple, at USD$0.67 +21.19%, Stellar USD$0.2633 +18.48%, Iota at USD$1.47 +22.24% and Bytom at USD$ 0.9522 +26.14%. India’s crypto exchange, Coinsecure, has reported a USD$3.5mm loss from the company’s Bitcoin wallet. Allegedly, an employee is responsible for the loss and now the authorities are getting involved. Blossom Finance, a microfinance firm based in Indonesia claims that investing in Bitcoin qualifies as Islamic money and that Bitcoin is ‘Halal’. Bermuda is hoping that its virtual currency act will drive business growth to the country. Apparently, the country cannot keep up with the amount of people who want to come to Bermuda, and officials are meeting with 20 companies in London this weekend.

Latin American Equities

Latin American equities were lower today following US markets. Brazil’s Ibovespa is down 119bps, Argentina’s Merval is down 102bps and Mexico’s Mexbol is down 3bps. News is light as of midday in the LatAm region with the major focus being the Summit of Americas. Itau, Latin America’s largest bank by market value, is creating a board to oversee operations outside of Brazil. This development aims to strengthen the bank’s governance and increase its commitment to the LatAm region. First election polls are expected to be released this weekend and next Tuesday for Brazil’s upcoming Presidential Election. Candidates that are in the running include former Finance Minister Meirelles, Lower House Speaker Maia, President Temer, ex-Supreme Court judge Barbosa, Workers’ Party’s Haddad and Wagner as well as Lula.