Quantamize Midday Market Update April 17

Apr 17, 2018

US Markets Midday Review

US equities are advancing sharply midday, extending gains from the morning. Robust earnings before the open set the tone for today’s trading. Stronger than expected March housing starts (1.32m vs 1.26m estimated) and industrial production growth (0.5% vs 0.4% expected) further improved market outlook. An S&P 500 advance/decline ratio of 5.46 (442 advances and 81 declines), along with the VIX moving down to 15.19, both indicate positive investor sentiment. Surging returns in technology, and outperformance by consumer discretionary, lead markets higher.

S&P 500 stocks are 1.07% higher midday, with only the consumer staples sector in the red. Large-cap technology (+2.30%) has been a significant outperformer. Consumer discretionary has been a significant outperformer, increasing 1.68%, sharply contrasting disappointing returns in consumer staples. Real estate, industrials, and materials have each gained nearly 1% today. Financials rose 0.69% but continue to be a laggard. Energy edged 0.13% higher. Healthcare and utilities underperformed as well, gaining only 0.79% and 0.65%, respectively.

The Nasdaq Composite is advancing 1.74%, as technology is a strong outperformer today. The Nasdaq 100 has risen 2.05%, with large-cap technology stocks providing robust returns. Large-cap semiconductors (+1.84%) and software services (+2.16%) have lifted the Nasdaq 100 index.

The Russell 2000 gained 1.06%, with small-cap equities relatively in-line with large cap stocks. All sectors in the Russell 2000 are in positive territory. Technology (+2.12%) provided the most significant gains, with the technology sector being a broad market outperformer. Small-cap healthcare rose 1.73%, reversing from the 0.28% decline in the sector at yesterday’s close. Materials moved 1% higher, as have energy stocks, as the continued rotation into small-cap energy pushes the sector higher. Consumer stocks are broadly higher with consumer discretionary rising 0.74%, while consumer staples advanced 0.89%. Financials (+0.54%), a laggard since the end of last week, continue to produce relatively disappointing returns.

Stocks Trending in the News

Apple (AAPL) is exploring creating a premium news subscription service. This comes after Apple’s purchase Texture, a magazine app. Shares of Apple are up 1.50%.

Cummins (CMI) and CVC Capital Partners are considering bidding for General Electric (GE)’s Jenbacher segment. Jenbacher, the maker of gas engines, is expected to be worth more than $3 billion.  GE shares are up 3.64%, while Cummins shares are up 0.96%.

Netflix (NFLX) is expected to expand its use of Alphabet (GOOGL)’s Google Cloud. Google shares are up 3.38%, while Netflix shares are up 9.72% on earnings.

PayPal (PYPL)’s mobile payment service, Venmo, will now be able to use their balance to purchase food from services such as GrubHub (GRUB) and Seamless. PayPal shares are up 2.81%, and GrubHub shares are up 5.51%.

Target (TGT) is expanding its same day Drive Up pick-up service to 270 additional stores, with the goal of expanding to 1,000 stores by the end of 2018. Target shares are up 1.01%.

Twitter (TWTR) was upgraded to equal weight from underweight by Morgan Stanley. Twitter’s price target was raised to $29 from $28. Twitter shares are up 10.50%.

 

S&P 500 Gainers

  • NFLX +9.07%
  • NWL +4.51%
  • PLD +4.11%
  • ALXN +4.07%

 

S&P 500 Laggards

  • CMA -2.61%
  • Nov -2.55%
  • BMY -2.27%
  • PAYX -1.90%

 

Russell 2000 Gainers

  • CLXT +20.65%
  • GTHX +12.07%
  • MTSI +10.24%
  • NVCR +10.21%

 

Russell 2000 Laggards

  • APLS -14.0%
  • LADR -5.57%
  • NUVA -5.12%
  • HTZ -3.73%

 

Cryptocurrencies

Major cryptocurrencies are extending gains from earlier this morning. Bitcoin is back above USD$8,000 and is at $USD8,071.72 +1.12% over the last 24-hours. EOS is the only crypto out of the top 25 with double digit gains on the day, the rest of the top 25 by market cap are up around 5% as of midday. Blockchain, a crypto wallet and data provider, has hired former Goldman Sachs executive Breanne Madigan who will now serve as head of institutional sales and strategy. Madigan previously served as the head of instructional wealth services at Goldman Sachs where she oversaw relationships with funds managing total assets of USD$1.49 trillion. Zimbabwe now has two domestic cryptocurrency exchanges with the opening of Styx24 who now rivals Golix. Following Styx24’s entry into the market, Golix has introduced a Bitcoin ATM for its customers. Christine Lagarde, the head of the International Monetary Fund (IMF), wrote in a blog post that cryptocurrencies have the power to minimize transaction costs and she mentioned that blockchain technology could help financial markets function more efficiently. A beta version of EliPay technology will be rolled out to select retailers in BTC City, one of Europe’s largest shopping centers. The Slovenian based complex boasts more than 450 stores and will become the first mall to allow cryptocurrency payments. New York Attorney General, Eric Schneiderman has sent a letter requesting information from 13 cryptocurrency exchanges specializing in bitcoin and other cryptocurrencies. Schneiderman’s hopes are to bring more transparency to the industry.

 

Latin American Equities

Latin American equities rallying sharply today, recovering from the losses over the previous two trading days. Brazil’s Ibovespa is up 110bps, Argentina’s Merval is up 153bps and Mexico’s Mexbol is up 57bps. LatAm markets are following the positive attitude for US equities and an update in the outlook for economic growth in Latin America by the IMF. The IMF published its global outlook report today and sees growth of 2.0% for the region in and 2.8% in 2019. For South America, the expectation is for 1.7% growth in 2018 and 2.5% in 2019. Mexican economic growth is seen to benefit from faster US growth and its forecast has been raised to 2.3% in 2018 and 3% in 2019. For Brazil, 2.3% growth is expected in 2018 and 2.5% for 2019. Lastly, Argentina’s growth is expected to moderate to 2% in 2018 vs. recorded growth of 2.9% in 2017. Brazil’s agriculture minister, Blairo Maggi, has said that the country’s chicken industry may be shut out from the European Union following a food scandal. Maggi is calling this measure a trade war and local company BRF may have to cut as many as 15,000 workers.

 

Rates & FX

US bonds are slightly higher today following a risk-on appetite. The 10-Year Yield is at 2.829%, from today’s open of 2.834% and the US 30-Year Yield is at 3.020% from today’s open of 3.035%. The 2s10s spread has narrowed to a recent low of .4405, the lowest since September 2007. The spread between the US 2-year and the 3-Month LIBOR is now at 3.5bps. US Federal Reserve FOMC Member, Williams, has said he doesn’t expect an inverted yield curve in the next few years, however, the market has been trending otherwise. The USD$ is higher from yesterday’s close of 89.42 and is currently at 89.58 up 17ps. The USD$ moderately stronger against the EUR€ by 18bps, at 1.2357. Interestingly, the USD$ is stronger against the CHF by 66bps at .9663, breaking the 200-Day Moving Average but is down against the JPY¥ by 16bps at 106.94. 

 

Commodities

Precious metals are mostly higher on the day as investors may be cautious despite the rally in the positive trends in equity markets as of late. Gold is down 12bps (USD$1344.30), silver is up 48bps (USD$16.75), platinum up 59bps (USD$934.80), and palladium is up 18bps (USD$10005.78). WTI is mostly flat today, down 5bps at USD$66.12/barrel. Most recently, Russia’s energy minister said today that Russia and Iran could extend bilateral deal on oil supplies for 5 years.