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Early gains give way to losses with US stocks closing lower on the lack of US-China trade deal specifics

Mar 04, 2019

 

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US Markets End of Day Snapshot

  • US stocks open strong on news that US and Chinese trade officials are nearing a comprehensive agreement on the trade dispute but drifted lower, into negative territory and closed lower, with a lack of specifics announced.  
  • There are rumors that US trade officials are prepared to lift tariffs on USD$200 billion on Chinese goods if Chinese trade officials commit to better address intellectual-property rights for American products. 
  • The S&P 500 finished down 0.39%, Nasdaq Composite is down 0.23%, and Russell 2000 is down 0.89%
  • China is planning a 3 percentage point cut to its VAT on manufacturing, in an effort to spur growth, according to press reports
  • US December construction spending fell 0.6%, coming well below the 0.1% consensus rise and 0.8% seen in November
  • According to strategists at Citigroup, the idea that US companies have been focusing only on stock buybacks is a false narrative.  Their research suggests cash flow dedicated to capital expenditures in CY2018 broke a record set in CY2014. 
  • The current rally in tech stocks is one of the hottest in years.  The rally in the Nasdaq 100 over the past 2 ½ months is the longest in nearly 7 years.  According to strategists at Credit Suisse, the “E” in the P/E is growing so fast, valuations can’t keep up.  That may point to a further rally in tech stocks in CY2019. 
  • JP Morgan is reiterating that clients buy US stocks.  This recommendation is in contrast with the rising skepticism among the bank’s clients who are becoming alarmed by the current rally in US stocks.  JP Morgan argues that a dovish US Federal Reserve and momentum in global economic indicators suggests that the current bounce back in US stocks can continue.   
  • Real Estate (+0.41%), Utilities (+0.21%), and Energy (+0.2%) stocks were the top performers in the S&P 500 today
  • Industrials (-0.48%), Financials (-0.62%), and Healthcare (-1.34%) stocks were the worst performers in the S&P 500 today
  • Investor sentiment for US stocks finished negative with the advance/decline ratio for the S&P 500 closing at 0.52x
  • 162 stocks in the S&P 500 hit 4-week highs while 21 stocks reached 4-week lows
  • 106 stocks in the S&P 500 closed overbought while 4 stocks closed oversold according to the 16-day RSI Measure
  • 346 stocks in the Nasdaq Composite hit 4-week highs while 43 stocks reached 4-week lows
  • 481 stocks in the Nasdaq Composite closed overbought while 169 stocks closed oversold according to the 16-day RSI Measure
  • The VIX finished flat at 14.4 after closing at 13.57 last week

Stocks Trending in the News

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Global Consumer Stocks Trending in the News

  • Alibaba (BABA) announced it is pairing with Office Depot (ODP) in its first partnership with a US company.  Alibaba is creating a new destination for US businesses to come and access Alibaba’s business-to-business platform of suppliers.  Alibaba will gain access to 10 million customers and 1800 sales agents at Office Depot.  Alibaba is rated “Top Buy” in our China All-Cap Global Top Stock Ideas.   Office Depot is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.
  • Amazon (AMZN) is reported to be planning to open dozens of grocery stores around the US, according to a report in the Wall Street Journal.  Amazon will open the first of the additional grocery stores in Los Angeles.  Amazon is in discussions about locations in most of the major US cities, the report highlights.  Amazon is looking to build on its Whole Foods acquisition with stores at a lower price point.  Amazon is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas
  • Bed, Bath & Beyond (BBBY) was downgraded today by Barclay’s to underweight from equal-weight.  Barclay’s cut its price target for Bed, Bath & Beyond to USD$13 from USD$15, implying it sees 22% downside for the stock.  Barclay’s no longer believes in the turnaround plans of Bed, Bath & Beyond.  Bed, Bath & Beyond is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.  
  • The Children's Place (PLCE) shares tanked after it reported weak CY4Q2018 results and offered a, “very disappointing,” FY2019 outlook. Citi analyst Paul Lejuez wrote in a note to clients that, “the near-term pressures seem much worse than feared.” Children's Place also told investors that it will purchase IP assets from Gyboree Group, Inc. (GYMB) and Crazy 8 totaling USD$76mm, a move that Lajuez said, “makes sense.” Children's Place is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas. Gymboree Group is not rated in our Global Top Stock Ideas.  

Global Information Technology & Communication Services Stocks Trending in the News

  • 58.com (WUBA) was downgraded to neutral from outperform at Macquarie.  Macquarie also cut the price target to USD$73 from USD$91.  The downgrade comes in the wake of results that came in line as Macquaries raises concerns about growth in the coming year.  58.com is rated “Top Buy” in our China All-Cap Global Top Stock Ideas. 
  • CenturyLink Inc. (CTL) shares slipped after the company announced it discovered a, “material weakness,” in its accounting, specifically with the value of assets it acquired in the 2017 purchase of Level 3 Communications. As a result, CenturyLink notified relevant regulators that its 10-K filing will be late. CenturyLink cited problems with its internal controls as reasoning for the accounting oversight. CenturyLink is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas.  
  • China Tower (SEHK:788) reported a 36% jump in annual profit, matching consensus.  China Tower delivered net income of 2.65 billion yuan (USD$396 million) in 2018, this compared to 2.66 billion yuan a year earlier in 2017.  China Tower expects continued strength anticipating strong spending on the coming 5G rollout from which it will benefit.  China Tower is rated “Unattractive” in our China All-Cap Global Top Stock Ideas.
  • Juniper Networks (JNPR) announced its intent to buy Mist Systems for USD$405 million.  Mist Systems is a leader in the use of AI in the management of wireless cloud networks.  Juniper has made expansion into cloud-management of wireless network a priority.  Juniper expects the deal to close in the second quarter.  Juniper Network is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
  • Salesforce.com (CRM) reported fourth quarter adjusted EPS of USD$0.70 beating consensus of USD$0.55.  Salesforce.com reported first quarter 2019 adjusted revenue of USD$3.6 billion in line with consensus of USD$3.54 billion.  Salesforce.com Inc gave first quarter EPS guidance of 60-61 cents per share.  Salesforce.com Inc is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
  • Versum (VSM) was downgraded today by Jefferies to hold from buy.  Jefferies raised the price target for Versum to USD$47 from USD$44.  The downgrade comes after Versum declined Merck’s USD$48-per-share offer.  After rejecting the offer, Jefferies sees an unattractive risk/reward scenario.  Versum is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.  Merck is rated “Attractive” in our US Large-Cap Global Top Stock Ideas.
  • Xilinx (XLNX) saw its rating lowered at BMO to market perform from outperform.  BMO has been bullish on Xilinx for 3 years with this being the first downgrade of Xilinx during that time.  BMO increased Xilinx’s price target to USD$125 from USD$100 while cutting its rating.  Xilinx is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas. 

Global Industrials Stocks Trending in the News

  • Lockheed Martin (LMT) will see a reduced order for F-35 jets in 2020.  The Pentagon will request 78 jets be built in 2020, down from the initially expected 84.  The report appeared in Bloomberg and has yet to be confirmed by the Pentagon.  Lockheed Martin is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Industrials Global Top Stock Ideas.

Global Financials Stocks Trending in the News

  • Aviva (LSE:AV) announced Maurice Tulloch will be appointed CEO effective today.  Aviva has spent 5 months searching for a new CEO.  Tulloch is a veteran if the company, having joined in 1992.  He is presently head of the international insurance business and was appointed to the board 2 years ago.  Aviva is rated “Neutral” in our United Kingdom All-Cap Global Top Stock Ideas. 
  • Nordea Bank (OM:NDA SE) is falling today after a report that it is being implicated in the larger money laundering investigation going on in the country.  Sweden’s largest broadcaster reported today that Nordea in involved in the money laundering scandal as investigators expand the existing investigation. Nordea Bank is rated  “Top Short” in our European Large-Cap Global Top Stock Ideas.

Global Commodities & Power Stocks Trending in the News

  • Newmont Mining (NEM) has rejected the unsolicited USD$17.4 billion offer from Barrick Gold (ABX).  The deal would have created the world’s largest gold company.  Newmont’s board unanimously rejected the offer and submitted a proposal to create a JV encompassing both companies’ Nevada operations.  Newmont Mining is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas.  Barrick Gold “Neutral” in our Canada All-Cap Global Top Stock Ideas.
  • NextEra Energy Partners LP (NEP) received a USD$900, investment from private equity firm KKR & Co. (KKR). NextEra said in a statement Friday that the investment will allow the company to manage any cash flow disruptions stemming from plants that sell power to the troubled PG&E Corp. (PCG). NextEra is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas. KKR & Co. Is rated “Neutral” in our US Large-Cap Global Top Stock Ideas. PG&E Corp. is rated “Attractive” in our US Large-Cap Global Top Stock Ideas.  
  • Vale (VALE) saw most of its senior executives leave over the weekend.  Regulators in Brazil recommended the removal of the CEO and most other senior executives in the wake of the dam disaster.  The interim CEO is a 10-year veteran of the company as a search for a new CEO begins.  Vale is rated “Neutral” in our Brazil All-Cap Global Top Stock Ideas.

Global Health Care Stocks Trending in the News

  • Biogen (BIIB) is acquiring Nightstar Therapeutics (NITE) for USD$25.50 per share.  Biogen is looking to establish a clinical pipeline in ophthalmology.  Biogen is paying a 70% premium over its last closing price.  Biogen is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.  Nightstar is not rated in our Global Top Stock Ideas.
  • Eli Lilly (LLY) announced it is launching an authorized generic version of its best-selling insulin Humalog that will have a list-price of 50% below Humalog.  Insulin prices have soared and have been the spotlight of much negative press for drug makers.  Humalog is a 20-year old drug and critics complain its price has only continued to rise.  Eli Lilly is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.

 

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US Treasuries

  • US 2-Year Treasury Notes are higher with yields down -1.21 basis points to 2.54%
  • US 5-Year Treasury Bonds are higher with yields down -2.86 basis points to 2.52%
  • US 10-Year Treasury Bonds are higher with yields down -3.08 basis points to 2.72%
  • The US Treasury 2s-5s Spread has narrowed 1.65 basis points to -0.01%
  • The US Treasury 2s-10s Spread has narrowed 1.87 basis points to 0.18%
  • US Treasury 5s-10s Spread has narrowed 0.22 basis points to 0.19%

Currencies

  • EUR€ is down 0.202% against the USD$ in after hours to 1.1342
  • GBP£ is down 0.182% against the USD$ in after hours to 1.3178
  • CHF is little changed 0.03% against the USD$ in after hours to 1.0012
  • JPY¥ is little changed 0.134% against the USD$ in after hours to 111.74

Commodities

  • WTI Crude is up 1.42% to USD$56.59/bbl with the Brent-WTI spread down USD$-0.63 to USD$8.21/bbl
  • Gold is down -0.53% to USD$1286.59/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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Get Unbiased Quantitative Investment Research from Advanced AI Machine Learning Technology and Maximize your ReturnsGet Unbiased Quantitative Investment Research from Advanced AI Machine Learning Technology and Maximize your Returns

S&P 500 Movers

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Outperformers Sector Price 1D % Chg Volume
DISH Network Corp Communication Services 28.2 3.85%                474,493
PulteGroup Inc Consumer Discretionary 28.1 3.52%                496,726
Noble Energy Inc Energy 22.7 3.50%            2,248,467
Facebook Inc Communication Services 149 3.14%            6,769,574
DR Horton Inc Consumer Discretionary 38.4 3.12%            1,420,339
 
Underformers Sector Price 1D % Chg Volume
CenturyLink Inc Communication Services 16.2 -6.32%            3,281,254
WellCare Health Plans Inc Health Care 256 -6.08%                  50,988
Gap Inc/The Consumer Discretionary 24.9 -6.00%            2,635,035
Anthem Inc Health Care 260 -4.90%                430,702
Humana Inc Health Care 288 -4.59%                222,693
Morning BriefA quick GLOBAL RECAP TO START YOUR DAY
Morning BriefA quick GLOBAL RECAP TO START YOUR DAY