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US stock rally midday to a four month high with risk-on fueled by trade progress

Feb 25, 2019

 

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Market data as of 12 noon EST

US Market Snapshot

  • US stocks are rallying midday with risk-on being fueled by progress between the US and China in trade talks
  • President Trump said “The US had made substantial progress in our trade talks with China” in a tweet late this weekend 
  • While Chinese officials echoed President Trump’s optimistic tone, China’s official Xinhua News Agency later published a commentary saying talk may face “new uncertainties” and that the challenges between the countries are “long-term, complicated and arduous” 
  • The S&P 500 is currently up 0.61%, Nasdaq Composite is up 0.82%, and Russell 2000 is up 0.66%
  • Dallas Fed Manufacturing Index for February came at 13.1, well above the 4.7 expected and up from 1.0 in January. The beat may bring back talks of a rate hike
  • US Wholesale inventories rose 1.1% in December, above the 0.4% expected and above the 0.3% rise in November
  • Comments from Chinese officials make clear their near-term focus will be on growth and not the deleveraging of heavily leveraged companies
  • Emerging Markets ETFs rose for the 19th straight week and have seen USD$31.7 billion 
  • Financials (+1.37%), Tech (+0.94%), and Industrials (+0.89%) stocks are the top performers in the S&P 500 today
  • Consumer Staples (-0.1%), Utilities (-0.65%), and Real Estate (-0.7%) stocks are the worst performers in the S&P 500 today
  • Investor sentiment for US stocks is positive with the advance/decline ratio for the S&P 500 currently at 2.14x
  • 185 stocks in the S&P500 are at 4-week highs while 14 stocks are at 4-week lows
  • 144 stocks in the S&P 500 are overbought while 2 stocks are oversold according to the 16-day RSI Measure
  • 480 stocks in the Nasdaq Composite are at 4-week highs while 30 stocks are at 4-week lows
  • 605 stocks in the Nasdaq Composite are overbought while 126 stocks are oversold according to the 16-day RSI Measure
  • The VIX is currently little changed at 13.74 from last week's close of 13.51

Stocks Trending in the News

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  • Amazon (AMZN) said its thoughts are with the crew after one of its 767 cargo planes crashed in Texas on Saturday.  The plane had a crew of three and upon descent to land it crashed.  Debris from the crash was strewn over a mile-long stretch.  The cargo jet was owned and operated by Atlas Air Worldwide (AAWW).  Amazon is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.  Atlas Air Worldwide is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Industrials Global Top Stock Ideas.  Danaher is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.
  • Barrick Gold (TSX:ABX) has made a hostile bid for Newmont Mining (NEM) in a USD$19.4 billion deal.  The deal offers Newmont at its market price as Barrick attempts its second acquisition in the last 6 months.  Barrick and Newmont have had on and off talks about linking up for the last few years.  The gold sector has sees a number of recent deals as its consolidation ramps up.  Barrick Gold is rated “Neutral” in our Canada All-Cap Global Top Stock Ideas.  Newmont Mining is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas.
  • Covestro (DB:1COV) gave guidance well below market consensus.  Covestro said it sees ebitda of 1.5-2 billion euros, well below the 2.07 billion euros consensus.  Covestro said the glut of advanced polymers and plastics in the market will weigh on its results this year.  Covestro cited Chinese companies undercutting its pricing.  Covestro is rated “Unattractive” in our European Large-Cap Global Top Stick Ideas. 
  • Hammerson Plc (LSE: HMSO) shares edged higher following reports that the company is in discussions to sell 900mm pounds (USD$1.2bn) worth of properties. The discussions come following increased pressure from activist shareholder Elliott Advisors after the value of the company’s portfolio dropped 5.9% in 2018. Hammerson is rated “Top Short” in our United Kingdom All-Cap Global Top Stock Ideas.
  • General Electric (GE) is selling its biopharma unit to Danaher (DHR)  in a USD$21.4 billion deal.  GE will receive USD$21.4 billion in cash from the sale while also transferring certain pension liabilities to Danaher.  GE CEO Larry Culp ran Danaher for 10 years until 2014.  GE will halt the spinoff of its broader healthcare unit to focus on the transaction.  General Electric is rated “Top Short” in our US Large-Cap Global Top Stock Ideas and “Top Short” in our US Industrials Global Top Stock Ideas.
  • Ipsen SA (ENXTPA:IPN) has agreed to acquire Clementia Pharmaceuticals (CMTA) in a USD$1.3 billion deal.  Ipsen will pay USD$25 per share up front and an additional right value of USD$6 per share.  This is a 77% premium to the last close for the Canadian company.  The acquisition of Clementia will expand the rare disease portfolio of Ipsen, an area of biotech that has seen a lot of deal focus recently.  Ipsen is rated “Unattractive” in our US SMID-Cap Global Top Stock Ideas.  Clementia is not rated in our Global Top Stock Ideas.
  • Warren Buffet said this morning he was “wrong in a couple of ways” about Kraft Heinz Corp. (KHC), which he insists is still a “wonderful” business.  Buffet said “we overpaid for Kraft”, a statement not normally heard from him.  Kraft Heinz Corp took at USD$15.4 billion write-down as part of its most recent results last week, surprising the market.  Kraft Heinz Corp is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Staples Global Top Stock Ideas.
  • Microsoft (MSFT) is dropping the price of its augmented reality goggles HoloLens 2.  The goggles will be cut to USD$3,500 from USD$5,000.  The HoloLens 2 goggles are targeting commercial applications and not consumers at this point, things such as teaching industrial processes or other educational applications.  Microsoft is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas. 
  • Persimmon (LSE: PSN) shares slipped notably lower after a weekend report from the Financial Times indicates that the homebuilder could be banned from the United Kingdom’s Help to Buy program. The report cites that Housing Secretary James Brokenshire is concerned that the company requires buyers to pay annual rent for their new home. Persimmon is rated “Attractive” in our United Kingdom All-Cap Global Top Stock Ideas.
  • Ping An Insurance Co. (SEHK:2318) is planning an IPO of its fintech unit that could value it at up to USD$8 billion.  Ping An Insurance plans an IPO of its OneConnect unit in Hong Kong that could see it reap up to USD$1 billion in the offering.  The IPO could happen as soon as the second half of 2019.  Ping An Insurance is rated “Neutral” in our China All-Cap Global Top Stock Ideas. 
  • Piper Jaffray (PJC) announced it will acquire Weeden & Co., an execution broker-dealer.  Piper Jaffray will pay USD$42 million with USD$24.5 million in cash and USD$17.5 million in retention stock.   Weeden’s owners also have a change to earn an additional USD$31.5 million in non-equity compensation if certain sales and trading revenue targets are hit.  Piper Jaffray is rated “Attractive” in our US SMID-Cap Global Top Stock Ideas.
  • Roche (SWX:ROG) is acquiring Spark Therapeutics (ONCE) in a USD$4.8 billion deal.  Roche is paying a 122% premium for Sparks which will transform it from a laggard to a leader in gene therapy, paying USD$114.50 or share for Spark.  Spark will give Roche a stable of experimental drugs that it is presently lacking.  Roche is rated “Attractive” in our European Large-Cap Global Top Stock Ideas.  Spark Therapeutics is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas.
  • Senvion SA (DB: SEN) shares fell to record lows after the company postponed the publication of its FY2018 financial results. Senvion told investors on Sunday that it is seeking a, “restructuring opinion,” the first step required in Germany to begin negations with banks. Stephan Lienert, a credit analyst with Jefferies, wrote, “We believe delaying results and commissioning solvency reports simply means the cash issues is more acute than even we estimate.” Senvion is not rated in our Global Top Stock Ideas.

 

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US Treasuries

  • US 2-Year Treasury Notes are lower with yields up 2.08 basis points to 2.51%
  • US 5-Year Treasury Bonds are lower with yields up 2.37 basis points to 2.49%
  • US 10-Year Treasury Bonds are lower with yields up 2.88 basis points to 2.68%
  • The US Treasury 2s-5s Spread has widened 0.29 basis points to -0.02%
  • The US Treasury 2s-10s Spread has widened 0.8 basis points to 0.17%
  • US Treasury 5s-10s Spread has widened 0.51 basis points to 0.19%

Currencies

  • EUR€ is currently little changed against the USD$ at 1.1343
  • GBP£ is currently little changed against the USD$ at 1.3054
  • CHF is currently little changed against the USD$ at 0.9992
  • JPY¥ is currently up 0.361% against the USD$ to 111.09

Commodities

  • WTI Crude is currently down -3.34% to USD$55.2/bbl with the Brent-WTI spread little changed USD$-0.03 to USD$9.08/bbl
  • Gold is currently little changed -0.15% to USD$1327.4/oz

 

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

S&P 500 Sector ETFs - Intraday

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

Russell 1000 Factor ETFs - Intraday

*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 Electric Co Industrials 8.72 9.00%          21,341,971
Danaher Corp Health Care 105 8.01%                649,250
Western Digital Corp Information Technology 37.7 4.06%            1,144,346
Goodyear Tire & Rubber Co/The Consumer Discretionary 19 3.82%                707,563
Capri Holdings Ltd Consumer Discretionary 40.4 3.49%                130,928
 
Underperformers Sector Price 1D % Chg Volume
H&R Block Inc Consumer Discretionary 25.4 -2.35%                376,208
Extra Space Storage Inc Real Estate 91.4 -1.98%                  45,091
Yum! Brands Inc Consumer Discretionary 90.4 -1.92%                  93,461
Iron Mountain Inc Real Estate 34.8 -1.88%                166,027
O'Reilly Automotive Inc Consumer Discretionary 344 -1.77%                  78,589
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