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Optimism from bullish GM guidance offset by concern over US government shutdown, US stocks close flat

Jan 11, 2019

 

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US Markets End of Day Snapshot

  • Bullish guidance from General Motors (GM) was offset by growing concern over the US government shutdown and US stocks end the day flat
  • The S&P 500 finished down 0.01%, Nasdaq Composite is down 0.21%, and Russell 2000 up 0.14%
  • US Consumer Price Index rose 1.9% y/y in December, matching expectations; it fell 0.1% m/m, also matching expectations
  • Chinese Vice Premier Liu He will visit the US January 30th and 31st for additional trade talks.
  • The volatility in retail stocks, exacerbated by the moves in department store stocks following yesterday’s negative guidance from Macy’s (M) and disappointing results from Kohls’s Corp (KSS), is beginning to resemble the levels of volatility observed in tech stocks like Apple (AAPL)Applied Materials (AMAT) and Lam Research (LRCX) 
  • President Trump has cut off negotiations with Democrats on funding for a border wall, saying he would “likely” invoke a national emergency to break the impasse and get the funding he wants
  • Germany and France are trying to kick-start negotiations for a 0.2% transaction tax in the EU on all stock trades; talks have been on and off for 7 years
  • The Euro Stoxx 600 closed up +0.09%, the FTSE 100 declined -0.36%, the DAX fell -0.31%, and the CAC 40 finished down -0.51%
  • UK Prime Minister Theresa May denied media reports that there will be a delay in Brexit, with her representative saying "It's government policy that this is not something we are going to do"
  • Healthcare (+0.33%), Consumer Staples (+0.3%), and Real Estate (+0.24%) stocks were the top performers in the S&P 500 today
  • Materials (-0.4%), Utilities (-0.44%), and Energy (-0.63%) stocks were the worst performers in the S&P 500 today
  • Investor sentiment for US stocks finished positive with the advance/decline ratio for the S&P 500 closing at 1.34x
  • 104 stocks in the S&P 500 hit 4-week highs while 4 stocks reached 4-week lows
  • 2 stocks in the S&P 500 closed overbought while 2 stocks closed oversold according to the 16-day RSI Measure
  • 62 stocks in the Nasdaq Composite hit 4-week highs while 18 stocks reached 4-week lows
  • 510 stocks in the Nasdaq Composite closed overbought while 33 stocks closed oversold according to the 16-day RSI Measure
  • The VIX closed down 1.31 points today to18.19 after closing at 19.5 yesterday
     

Stocks Trending in the News

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  • Activision Blizzard (ATVI) is cutting ties to Bungie Inc, the developer of one of its most successful titles “Destiny”.  The Wall Street Journal is reporting that Activision Blizzard was not happy with the most recent version of the game and had decided to end a collaboration that began in 2008.  Neither company would comment on the story.  Activision Blizzard is rated  “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas.
  • Alphabet’s (GOOG.L) board is being sued in a pair of lawsuit in California over allegations they failed in their duties.  The suit refer is a payout package for a top executive at Alphabet’s Google after allegations of sexual misconduct.  The executive was paid USD$90 million and the package was approved by the board and is the basis of the suits. Alphabet is rated  “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
  • Alibaba (BABA) backed Megvii is considering an IPO that would value the company at up to USD$1 billion.  Megvii is the owner of Face++, the AI-powered facial recognition software.  Megvii hopes to raise USD$500 million, according to press reports.  Alibaba is rated “Unattractive” in our China All-Cap Global Top Stock Ideas.
  • Amazon’s (AMZN) IMDb will launch a free video streaming service that is ad supported.  This will be Amazon’s first ad supported video service and it will be called IMDb Freedive.  Amazon is looking to grab more of the USD$210 billion digital ad market with this service, a market where it had already risen to #3.  Amazon is hiring new ad sellers as it seeks to grow its advertising business.  Amazon is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas. 
  • Apple (AAPL) will introduce 3 new versions of the iPhone during the coming year, the Wall Street Journal is reporting.  One of the models will be a successor the poorly selling, least expensive XR model.  The high-end model will have 3 cameras on the back, up from 2.  Apple is making the effort as it tried to boost iPhone sales.  Apple is rated  “Top Buy” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas.
  • Anheuser-Busch Inbev (ENXTBR: ABI) is considering an IPO of its Asian unit, according to a report from Bloomberg.  Anheuser-Busch Inbev is talking to advisers about the potential deal that could raise up to USD$5 billion.  Anheuser-Busch Inbev has been looking for ways to unlock value for shareholders and this could be an obvious choice.  Anheuser-Busch Inbev would look to value to business at USD$70 billion, according to the report.  Anheuser-Busch Inbev is rated “Top Short” in our European Large-Cap Global Top Stock Ideas.
  • AO World (LSE: AO) updated 3Q sales, saying they are growing at 8.2%, slowing down from its first half run rate of 9.9%.  AO World maintained its recently lowered guidance.   Shore Capital noted that it is positive there was not another cut in guidance and reiterated its sell rating.  AO World is not rated is rated in our Global Top Stock Ideas.
  • Archer Daniels Midland (ADM) is acquiring Florida Chemical Company for USD$175 million from Flotek Industries (FTK).  Florida Chemical Company is a leading provider of citrus oils and fragrances and ADM is adding this acquisition to its stable of natural flavor solutions.  ADM commented that citrus is one of the fastest growing flavor categories.  ADM is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Staples Global Top Stock Ideas.  Flotek is rated “Top Short” in our US Large-Cap Global Top Stock Ideas.
  • Autoliv (ALV) was upgraded at UBS to buy from hold.  UBS upgraded Autoliv in the wake of the departure of its CEO earlier this week.  Autoliv is not rated is rated in our Global Top Stock Ideas.
  • Embraer’s (ERJ) credit rating was placed on credit watch by S&P today ahead of the sale of its commercial aviation business to Boeing (BA).   S&P said the sale will considerably weaken Embraer’s credit profile.  S&P cited the lower margins of its executive jet and defense businesses-that which would remain if the sale goes through-as the reason for the downgrade.  Embraer is rated “Neutral” in our Brazil All-Cap Global Top Stock Ideas.  Boeing is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Industrials Global Top Stock Ideas.
  • Geely Automotive (SEHK:175) denied a report that it had sold part of its stake in Daimler (XTRA:DAI).  Bloomberg had earlier reported that Geely Automotive was selling half of its 9.7% stake in Daimler.  Geely vehemently denied this, and in a statement on its website it said that it is a long-term investor in Daimler, that its stake has not changed and that it has no plans to change it.  Daimler is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.  Geely Automotive is rated “Neutral” in our China All-Cap Global Top Stock Ideas
  • General Motors (GM) surprised investors and provided guidance that was generally upbeat and ahead of expectations.  General Motors expects diluted-adjusted EPS of USD$6.50-7.00., with adjusted automotive free cash flow of between USD$4.5-6.0 billion.  The expectation was for a downbeat guidance report, but General Motors sees demand holding up.  General Motors is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.
  • JP Morgan (JPM) is increasing its bonus pool for corporate and investments bankers.  JP Morgan will increase bonuses for equity traders the most as that unit has had the best year.  In the first 9 months of the year JP Morgan’s stock traders generated USD$5.57 billion of revenue, a 22% hike y/y.  JP Morgan is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas.
  • Netflix (NFLX) is over-valued and should fall to USD$300 according to short-seller Citron Research.  Citron is issuing its short call after the stock has run 24% since Christmas Eve.  On the same day, UBS hiked its rating on the Netflix to buy from hold while Jefferies raised its rating to strong-buy from outperform.  Netflix will report fourth quarter earnings January 17th.  Netflix is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.
    PG&E (PCG) had its credit rating cut to junk status by Moody’s Investor Service.  PG&E was not offered assurances by regulators that it will remain solvent as ratepayers protested against passing the costs on to them.  The path forward for PG&E is not yet clear.  PG&E is rated “Attractive” in our US Large-Cap Global Top Stock Ideas.
  • PVH Corp (PVH) gave guidance that is above consensus estimates.  PVH expects 4Q EPS to be at least USD$1.75 while present consensus is USD$1.61.  PVH expects 4Q revenue of USD$2.4 billion, matching consensus estimates.  PVH is working on efforts to streamline its Calvin Klein operations.  PVH is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.
  • Richemont (SWX:CFR) reported fiscal 3Q organic sales growth of 5%, a slowdown from 8%.  The main driver of growth was high-margin Jewelry Maisons business.  Growth was maintained in the Americas and Japan, while slowing in Asia Pacific and declined in Europe.  Vontobel sees growth strengthening in the coming quarter and reiterates its buy.  Richemont is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.
  • Sharp Corp (TSE: 6753) had its price target cut to 1200 yen from 1400 yen by Morgan Stanley, sending the stock on a 10%+ rally.  Morgan Stanley raised the rating of Sharp Corp to equal weight from underweight.  Morgan Stanley believes its challenges will continue and that Sharp will struggle to hit its own targets.  Sharp is not rated is rated in our Global Top Stock Ideas. 
  • Starbucks (SBUX) was downgraded by Goldman Sachs to neutral from buy.  In its Starbucks downgrade, Goldman Sachs cited weaker China growth as a key reason for the downgrade.  Starbucks’ price target was cut to USD$68 from USD$75.  Starbucks recently lowered its long-term earnings growth to ~10% from 12%.  Starbucks is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.
  • Volkswagen (XTRA:VOW3) warned investors that 2019 will be a challenging year given uncertain economic condition.  Volkswagen’s CEO said, “The headwinds for our business won’t ease given the geopolitical volatile developments”, joining other carmakers in highlighting what a tough year 2019 may be.  Volkswagen is rated “Neutral” in our Europe Large-Cap Global Top Stock Ideas.
  • Xiaomi (SEHK:1810) will invest USD$1.48 billion in areas related to AI and Internet of Things (IoT) over the next 5 years, its CEO said.  Xiaomi’s CEO said AI and IoT will become parts of its “core development strategy over that time.  Xiaomi will also introduce its first 5G wireless phone in the second half of 2019.  Xiaomi is rated “Neutral” in our China All-Cap Global Top Stock Ideas.

 

Actionable and Transparent Quantitative ResearchActionable and Transparent Quantitative Research

US Treasuries

  • US 2-Year Treasury Notes are higher with yields down -3.88 basis points to 2.53%
  • US 5-Year Treasury Bonds are higher with yields down -4.55 basis points to 2.52%
  • US 10-Year Treasury Bonds are higher with yields down -4.67 basis points to 2.69%
  • The US Treasury 2s-5s Spread has narrowed 0.67 basis points to -0.01%
  • The US Treasury 2s-10s Spread has narrowed 0.79 basis points to 0.16%
  • US Treasury 5s-10s Spread has narrowed 0.12 basis points to 0.17%
     

Currencies

  • EUR€ is down 0.322% against the USD$ in after hours to 1.1463
  • GBP£ is up 0.722% against the USD$ in after hours to 1.2839
  • CHF is little changed 0.039% against the USD$ in after hours to 1.0162
  • JPY¥ is little changed 0.074% against the USD$ in after hours to 108.51
     

Commodities

  • WTI Crude is down -1.9% to USD$51.59/bbl with the Brent-WTI spread up USD$0.84 to USD$8.22/bbl
  • Gold is little changed 0.15% to USD$1288.52/oz
     

 

*Data in Price Return and Updated Real-Time (with a delay), Source: StockDio

S&P 500 Sector ETFs - End of Day

*Data in Price Return and Updated Real-Time (with a delay), Source: StockDio

Russell 1000 Factor ETFs - End of Day

*Data in Price Return and Updated Real-Time (with a delay), Source: StockDio

 

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S&P 500 Movers

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Outperformers Sector Price 1D % Chg Volume
General Motors Co Information Technology 34 7.05%            5,547,770
PVH Corp Industrials 91.9 6.90%                451,941
Netflix Inc Real Estate 256 3.98%            4,386,628
Perrigo Co PLC Financials 39.6 3.28%                422,353
         
 
Underformers Sector Price 1D % Chg Volume
Activision Blizzard Inc Consumer Discretionary 47 -9.37%            7,733,383
Advance Auto Parts Inc Communication Services 155 -3.42%                256,240
ABIOMED Inc Energy 316 -3.38%                161,780
VF Corp Information Technology 70.4 -2.96%                798,223
Dominion Energy Inc Industrials 73.3 -2.85%            1,356,750

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