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US stocks lower midday on soft data and a record trade deficit with China in 2018

Mar 06, 2019

 

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Market data as of 12 noon EST

US Market Snapshot

  • US stocks drifting lower today on soft economic data and the record trade deficit with China weighing on sentiment 
  • The S&P 500 is currently down 0.61%, Nasdaq Composite is down 0.57%, and Russell 2000 is down 1.11%
  • ADP February Employment Changes showed a gain of 183,000 jobs, a touch below 190,000 consensus and down from 213,000 in January
  • US trade deficit in December was USD$59.7 billion, above the USD$57.9 billion consensus and up from USD$49.8 billion in November; 2018 total deficit was USD$621 billion, the highest in 10 years
  • The US trade deficit with China hit USD$419.2 billion for 2018,  a record level despite President Trump efforts
  • US President Donald Trump is allegedly pressuring US trade officials to reach a deal with their Chinese counterparts.  The hope is that an end to the US-China trade spat will fuel a continued rally in US stocks. 
  • The Dow Jones Transport Index may be primed for a sharp rally after falling for 8 straight sessions.  Since 1990, there have only been 9 losing streaks longer than the current one.  The current daily decline in the Dow Jones Transport index is the longest in 7 ½ years. 
  • According to Investors Intelligence (II), newsletter writer optimism continues to edge up, now currently sitting at 52.9% (52.4% in the previous reading last week).  The II reading has improved 9 straight weeks in a row, the longest streak since September-November 1998. 
  • The domination of the FAANG stocks in the current rally in US stocks has been limited to start the year.  This is in stark contrast to 2017 rally in US stocks where Facebook (FB)Amazon.com (AMZN)Apple (AAPL)Netflix (NFLX) and Alphabet/Google (GOOGL) drove the overall US stock market.  While limited direction from the FAANGs could be a worrisome trend, we believe it is actually healthier for US stocks since the current rally is less dependent on the performance of 5 mega-cap tech/consumer tech stocks. 
  • While European stocks have been rallying to start the year, net flows into US-listed European ETFs have been notably negative Just as an example, the iShares Euro Stoxx 50 ETF (FEZ) has lost nearly 10% of its total assets to start the year. 
  • Telecom (+0.01%), Real Estate (+0.36%), and Consumer Discretionary (-0.21%) stocks are the top performers in the S&P 500 today
  • Financials (-0.16%), Materials (+0.41%), and Industrials (-0.62%) stocks are the worst performers in the S&P 500 today
  • Investor sentiment for US stocks is negative with the advance/decline ratio for the S&P 500 currently at 0.34x
  • 33 stocks in the S&P500 are at 4-week highs while 25 stocks are at 4-week lows
  • 53 stocks in the S&P 500 are overbought while 9 stocks are oversold according to the 16-day RSI Measure
  • 220 stocks in the Nasdaq Composite are at 4-week highs while 62 stocks are at 4-week lows
  • 263 stocks in the Nasdaq Composite are overbought while 214 stocks are oversold according to the 16-day RSI Measure
  • The VIX is currently little changed at 14.37 from yesterday's close of 14.74

Stocks Trending in the News

Click name for Q-Factor rating and financials data.
 

Global Consumer Stocks Trending in the News

  • Abercrombie & Fitch Co. (ANF) shares soared after reporting comparable sales growth of 3% in CY4Q2018, more than double the average analyst estimate. Abercrombie also told analysts that it expects net sales to grow between 2% and 4% in FY2019, the low end of which would result in sales of USD$3.66bn for the year, surpassing consensus of USD$3.61bn. Abercrombie & Fitch is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Anheuser-Busch Inbev (ENXTBR:ABI) CEO Oliver Goudet will soon, an unexpected development.  Mr. Goudet will assume the top spot at JAB Holdings Ltd. (AIM:JBH), the consumer goods giant.  Anheuser-Busch Inbev said it will announce succession plans in due course with Mr. Goudet pledging to assist however possible.  He will leave right after the company’s annual shareholders meeting on April 24th.  Anheuser-Busch Inbev is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas
  • Dollar Tree (DLTR) shares edged higher after reporting Enterprise comparable sales growth of 2.4% in CY4Q2018 while analysts expected just 1.6%. Dollar Tree told analysts that it expects CY1Q2019 net sales of between USD$5.74bn and USD$5.85bn, the midpoint of which is in line with consensus of USD$5.81bn. Dollar Tree is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Harley-Davidson (HOG) announced the acquisition of StaCyc Inc, a maker of electric powered two-wheelers for children.  Harley-Davidson said the acquisition reinforces its “commitment to lead in the electrification of motorcycling”.   Harley-Davidson has been seeking to expand its electric portfolio and is likely to make other acquisitions along the same line.  Harley-Davidson is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.
  • Just Eat (LSE:JE) reported full year revenue of 779.5 pounds, in line with consensus of 786 million pounds.  Just Eat expects 2019 revenue of 1.0-1.1 billion pounds.  Investors expect an announcement of a potential divestiture of its stake in Latin-American food delivery concern iFood, which could generate up to 650 million pounds for Just Eat in a sale of its stake.  Just East is rated “Top Short” in our United Kingdom All-Cap Global Top Stock Ideas.
  • Proctor & Gamble (PG) will delist its shares from the Euronext Paris due to low trading volume.  Proctor & Gamble said the costs to keep the listing are not justified given the high costs of maintaining the listing.  Holders will be given the chance to swap their Euronext shares for those on the NYSE at a point in the near future.  Proctor & Gamble is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Revlon (REV) share are lower after Jefferies highlights Nielsen data showing recent weak sales of its products.  Nielsen shows a drop in sales of over 15% over the last 4 weeks.  Jefferies cites ongoing challenges for Revlon with the recent deceleration in sales chief among them.  Revlon is rated “Top Buy” in our US SMID-Cap Global Top Stock Ideas and “Top Short” in our US Consumer Staples Global Top Stock Ideas.  
  • Schaeffler AG (DB: SHA) announced it is cutting 900 jobs, 700 of which are in Germany, as part of a consolidation plan among its 5 factories in Europe.  Schaeffler cut its guidance across the board and now sees single-digit high single-digit profit margins.  Schaeffler in the past was targeting profit margin of 12-13%.  Schaeffler has an 18-24 month plan to turnaround its operations.  Schaeffler is rated “Neutral” in our European SMID-Cap Global Top Stock Ideas.
  • Tesla (TSLA) CEO Elon Musk would better serve the company he founded by being less combative and less outspoken, according to James Anderson, partner and portfolio manager at Baillie Gifford.  He said he registered an “extraordinarily unsuccessful” pleas in July for Musk to run Tesla in a more peaceful manner.  Anderson wondered if Musk could do more by being in the background helping the company and not in the spotlight on a regular basis.  Tesla is rated “Top Short” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Thor Industries (THO) second quarter 2019 loss of 10 cents per share matching consensus.  Thor Industries second quarter 2019 sales of USD$1.29 billion well below consensus of USD$1.57 billion.  Thor Industries affirmed that in 2019 “we expect to face challenges that may affect our financial results.”  Thor Industries is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Unattractive” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Trip Adviser (TRIP) was downgraded to underperform from neutral at Cowen.    Cowen cut Trip Adviser’s price target to USD$40 from USD$50 while the average target price in the market is USD$56.14.  Cowen sees the slow start to 2019 for Trip Adviser weighing on results with weak revenue growth in 2019.  Trip Adviser is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.  

Global Information Technology & Communication Services Stocks Trending in the News

  • Baidu (BIDU) was upgraded to outperform from neutral at CCB International Securities.  CCB cut its price target for Baidu to USD$187 from USD$190, with an 11% upside to its new price target.  The upgrade comes in the wake of updated guidance from Baudi which expects first quarter revenue of USD$3.5-3.68 billion.  Baidu is rated “Unattractive” in our China All-Cap Global Top Stock Ideas. 
  • Dialog Semiconductor (DB:DLG) fourth quarter EPS od USD$1.06 matching consensus of USD$1.06.  Dialog Semiconductor fourth quarter revenue of USD$430.7 million below consensus of USD$442 million.  Dialog Semiconductor affirmed 2019 EPS guidance of USD$2.90 with revenue falling in the single digits.   Dialog Semiconductor is not rated in our Global Top Stock Ideas.  
  • Digital Colony, the communications infrastructure firm backed by Tom Barrack’s Colony Capital Inc. (CLNY) and Digital Bridge Holdings LLC, is reportedly considering a bid for Zayo Group Holdings (ZAYO). According to a Bloomberg report citing people familiar with the matter, the group led by Digital Colony has already fully committed debt financing for the bid. Colony Capital is rated “Attractive” in our US SMID-Cap Global Top Stock Ideas. Zayo Group Holdings is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas.  
  • NIO Inc. (NIO) shares plunged the most in their history after announcing that it canceled plans to build a new manufacturing plant in Shanghai, China. NIO Inc. also slashed its CY1Q2019 delivery outlook in a conference call with investors, further driving the sell off. NIO Inc. is rated “Unattractive” in our China All-Cap Global Top Stock Ideas.  
  • Weibo (WB) reported a 62% jump in profit in 2018, delivering a USD$571.8 million with revenue up 49% from a year ago.  Weibo saw as spending rise 50% in 2018 and made up 87% in Weibo’s revenue.  Weibo saw 462 million daily active users in December.  Weibo is rated “Attractive” in our China All-Cap Global Top Stock Ideas.
  • VMware (VMW) was downgraded to sell from neutral at Goldman Sachs while maintaining its price target of USD$177.  The downgrade of VMware was based on valuation with Goldman saying it sees all the good news priced into the stock.  VMware is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.  

Global Industrials Stocks Trending in the News

  • General Electric (GE) CEO Larry Culp said yesterday the power unit will continue to burn through cash in 2019 and the company will post a negative cash flow, a surprise to investors.  General Electric’s cash burn will be mainly from the power unit and “other operational pressures”.  He added that deleveraging GE Capital “is key to reducing its risk profile.  Culp highlighted that General Electric’s turnaround is a multi-year effort and that the company must “pay the piper” in the ongoing revamp.  General Electric is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Unattractive” in our US Industrials Global Top Stock Ideas.

Global Power & Commodities Stocks Trending in the News

  • Exxon Mobil Corp. (NYSE: XOM) shares slipped after the company announced plans to boost spending to levels not seen since the historic oil market collapse in 2014. Exxon Mobil annual capital outlays will average USD$32bn per year until FY2020’s end, a 24% increase from FY2018 levels. Exxon Mobil CEO Darren Woods told investors that the spending increase is intended to offset anemic investment levels in the oil industry. Exxon Mobil is rated “Unattractive” 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 -2.85 basis points to 2.51%
  • US 5-Year Treasury Bonds are higher with yields down -3.53 basis points to 2.49%
  • US 10-Year Treasury Bonds are higher with yields down -3.08 basis points to 2.68%
  • The US Treasury 2s-5s Spread has narrowed 0.68 basis points to -0.02%
  • The US Treasury 2s-10s Spread has narrowed 0.23 basis points to 0.17%
  • US Treasury 5s-10s Spread has widened 0.45 basis points to 0.19%

Currencies

  • EUR€ is currently little changed against the USD$ at 1.1317
  • GBP£ is currently down 0.22% against the USD$ to 1.3149
  • CHF is currently little changed against the USD$ at 0.9963
  • JPY¥ is currently down 0.17% against the USD$ to 111.7

Commodities

  • WTI Crude is currently down -1.24% to USD$55.86/bbl with the Brent-WTI spread up USD$1.56 to USD$9.18/bbl
  • Gold is currently little changed -0.09% to USD$1286.87/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
LyondellBasell Industries NV Materials 84.4 5.37%                332,370
Aon PLC Financials 149 4.29%                212,752
QUALCOMM Inc Information Technology 55.8 3.39%            3,213,634
PG&E Corp Utilities 6.95 3.28%                398,072
Dollar Tree Inc Consumer Discretionary 96.1 2.79%            1,645,917
 
Underperformers Sector Price 1D % Chg Volume
Brown-Forman Corp Consumer Staples 46 -6.97%                180,120
General Electric Co Industrials 8.72 -6.88%          21,515,094
Willis Towers Watson PLC Financials 155 -6.46%                255,546
Micron Technology Inc Information Technology 33.9 -5.43%            7,421,722
Western Digital Corp Information Technology 37.7 -4.49%            1,545,656
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