Quantamize Midday Market Update April 16

Apr 16, 2018

US Markets Midday Review

US equities are broadly higher, marginally extending earlier gains. Diminishing concerns over further escalation of US-Syria conflict was a source of the positive sentiment. Stronger than expected retail sales for March helped the market, but ex-Autos sales were not impressive. Investor focus is shifting to the expectation of strong earnings, providing a tailwind. The VIX is down to 16.71 from 17.31 as investor uncertainty abates.

The S&P 500 is up 0.76%, with all sectors in positive territory. Utilities (+1.39%) are the strongest performers. Technology is advancing broadly, with telecommunications rising 1.16%, while information technology gains 0.66%. Large-cap energy is moving 1.04% higher, as strong momentum rolls over from last week. Consumer stocks are broadly higher. Consumer staples are up 0.89%, as consumer discretionary increases by 0.75%. Industrials are 1% higher midday. Financials (+0.35%) are the biggest underperformer, showing continued weakness from Friday’s trading.

US retail sales growth increased for March increased 0.6% M/M, snapping a 3-month streak of consecutive declines, and beating estimates (0.6% vs 0.4% expected). Retail sales for March were also 4.5% higher Y/Y. Auto sales drove stronger results, with ex-Auto retail sales up only 0.2% in March. Major US auto manufacturers, such as Ford (+0.98%) and General motors (+1.20%), are outperformers today.

The Nasdaq Composite is advancing 0.58%, with technology slightly underperforming the broader market. Returns in the Nasdaq 100 are in-line with the broader Nasdaq Composite. Large-cap semiconductors are rising 0.41%, reversing from Friday’s 0.70% decline.

The Russell 2000 is 0.70% higher today. Utilities (+1.53%) are the biggest outperformer and show broader market strength. Small-cap consumer stocks are posting strong returns with consumer staples and consumer discretionary stocks in the Russell 2000 both advancing more than 1.00%. Small-cap healthcare (-0.30%) is the only sector in the Russell 2000 in the red, weighed down by disappointing returns in biotech (-1.59%), despite a rise in medical service stocks (+7.54%). Energy, 0.74%, continues to trend positively after finishing as the best performing sector in the Russell 200 last week. Returns in financials and technology are in-line with each other, advancing 0.52%. Financials and technology are also the biggest underperformers.   

Stocks Trending in the News

The ’60 Minutes’ report on the number of midair breakdowns of Allegiant Travel (ALGT)’s planes aired last night. Allegiant Travel shares are down 2.48% today, after falling 12.43% last week.

Eldorado Resorts (ERI) is acquiring Tropicana Entertainment (TPCA) for $1.85 billion. Icahn Enterprises (IEP) was the majority owner of Tropicana Entertainment. Eldorado shares are up 17.51%, Tropicana shares are up 26.82%, and Icahn Enterprise shares are up 0.43%.

Merck (MRK)’s lung cancer drug “Keynote-189” exceeded test data expectations, while Bristol-Myers Squibb (BMY)’s lung cancer drug was in-line with expectations. This is considered a huge victory for Merck, sending shares up 2.43%, while BMY’s shares fell 8.03%.

Target (TGT) was upgraded to peer perform from underperform at Wolfe Research. Target shares are up 0.74%.

Visa (V) and MasterCard (MA) are being taken to court by UK retailers who are arguing that the credit card companies’ fees are anti-competitive. Shares of Visa are down 1.17%, while MasterCard shares are flat.

Wingstop (WING)’s price target was raised to $52 from $50 at Morgan Stanley. Wingstop shares are up 6.12%.

The US government blocked ZTE Corp. (763-HK), a Chinese telecommunications-gear producer, from exporting technology out of the US. ZTE suppliers are falling on the news, with Acacia Communications (ACIA) and Oclaro Inc. (OCLR) shares falling 36.05% and 12.10% respectively. ZTE Group shares closed down 1.92% in Hong Kong.

S&P 500 Gainers

  • JBHT +6.66%
  • CHRW +3.68%
  • ULTA +3.61%
  • WHR +3.51%

S&P 500 Laggards

  • NKTR -8.46%
  • BMY -8.25%
  • Nov -6.18%
  • FL -3.52%

Russell 2000 Gainers

  • ERI +17.51%
  • APLS +12.91%
  •  FSCT +10.63%
  • RGNX +10.19%

Russell 2000 Laggards

  • ACIA -36.00%
  • BPMC -11.65%
  • FIV -10.34%
  • ASNS -10.17%

Rates & Commodities

US bonds are slightly higher despite a modest rally in the equity markets today. the US 10-Year Yield is at 2.832%, down from today’s open of 2.858% and the US 30-Year Yield is at 3.031%, down from today’s open of 3.065%. The USD$ continues to be lower today, at 89.46, down 42bps. The USD$ traded lower following comments from President Trump saying China and Russia “are playing the Currency Devaluation game”. The USD$ is weaker against the RUB? by 100bps and is up 4bps against the CNY¥. The USD$ started the day higher against the JPY¥ BY 17bps but is now lower by 36bps as the FX market and bond market are showing investor caution. Precious metals mostly confirm this sentiment as gold is now up 19bps at USD$ 1348.78/ounce, silver is up 31bps at USD$16.71/ounce, palladium is up 247bps at USD$1012.75 and platinum remains down 23bps at USD$929.19. Despite USD$ weakness, WTI Crude is lower by 123bps at USD$66.56.

Cryptocurrencies

Major cryptocurrencies are mostly lower as of midday. Profit taking may be occurring as last week cryptos posted solid gains. Bitcoin is just below USD$8,000 and is at $USD7,992.48 -3.49%. Cardano and Icon are holding onto their gains; up 9.25%, and up 6.12% respectively. Mastercard has filed a patent for a blockchain system to store and verify identity data. A new platform called MoneyToken, will allow individuals to borrow money based on their crypto assets which will be used as collateral. This platform will be backed by blockchain technology and artificial intelligence. The American Council for Technology and Industry Advisory Council (ACT-IAC) released a blockchain resource specifically targeting government usage of blockchain technology.

Latin American Equities

Latin American equities continue their losses from last Friday as the whole region is down on the day, diverging from US equity markets. Brazil’s Ibovespa is down 122bps, Argentina’s Merval is down 110bps and Mexico’s Mexbol is down 17bps. Growth expectations for Brazil’s economy fell for the third straight week to 2.76% in a central bank survey. Inflation fell with growth estimates and now the forecast for inflation is 3.48% while the central bank’s target is 4.25%. Data has been disappointing as of late, and Brazil’s central bank is likely to extend its monetary easing. The Peruvian government plans changes to selective consumer tax known as ISC that will increase government revenue by USD$620mm.