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Growth and trade concerns dampen sentiment, sending US stocks to a three week low

Mar 06, 2019

 

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US Markets End of Day Snapshot

  • US stocks drift lower in a slow slide throughout the session today with growth and trade concerns dampening sentiment, stocks close at a 3-week low
  • The S&P 500 finished down 0.65%, Nasdaq Composite is down 0.93%, and Russell 2000 is down 2.01%
  • 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's 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 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. 
  • 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 S&P 500 finished down 0.65%, Nasdaq Composite is down 0.93%, and Russell 2000 is down 2.01%
  • Materials (+0.2%), Utilities (+0.03%), and Telecom (-0.02%) stocks were the top performers in the S&P 500 today
  • Industrials (-0.94%), Energy (-1.28%), and Healthcare (-1.47%) 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 0.25x
  • 33 stocks in the S&P 500 hit 4-week highs while 25 stocks reached 4-week lows
  • 53 stocks in the S&P 500 closed overbought while 9 stocks closed oversold according to the 16-day RSI Measure
  • 220 stocks in the Nasdaq Composite hit 4-week highs while 62 stocks reached 4-week lows
  • 263 stocks in the Nasdaq Composite closed overbought while 214 stocks closed oversold according to the 16-day RSI Measure
  • The VIX finished flat at 14.37 after closing at 14.74 yesterday

Stocks Trending in the News

Click name for Q-Factor rating and financials data.

Global Consumer Stocks Trending in the News

  • 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
  • British American Tobacco Plc (LSE: BATS) shares traded notably higher after the head of the US Food and Drug Administration stepped down, invoking speculation that the agency may walk back on proposals to restrict menthol cigarette sales. Jefferies analyst Owen Bennett wrote in a note to clients, “Without Gottlieb pushing this forward, then we think near-term risk around this is reduced significantly.” British American Tobacco is rated “Top Buy” in our United Kingdom All-Cap Global Top Stock Ideas.  
  • Burberry Group Plc (LSE: BRBY) shares slipped after Goldman Sachs downgraded the high-end trench-coat maker from neutral to sell, citing a need for higher incremental investments to sustain brand momentum. “We continue to see positive brand momentum ahead but now apply higher incremental costs medium term,” wrote Goldman Sachs analyst Louise Singlehurst in a note to clients. Goldman Sachs cut its price target for Burberry from 2,148 pence/share to 1,855 pence/share. Burberry is rated “Attractive” in our United Kingdom All-Cap 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.
  • HelloFresh (DB: HFG) shares slid despite the company reporting an adjusted Ebitda loss of 2.9mm euros, narrower than the expected loss of 14.8mm euros. HelloFresh told investors that it expects FY2019 revenue to grow by between 25% and 30%. HelloFresh is rated “Unattractive” in our European SMID-Cap 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.  
  • Fitbit (FIT) announced the release of 4 new or updated models today.  Fitbit will release a cheaper version of its Versa and Inspire smartwatches.  A version of the Versa with Sp02 sensor for sleep apnea will also be released.  Fitbit also intends to redesign its app to allow for more personalization.  Fitbit is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas. 
  • Micron (MU) has its revenue outlook cut at Cleveland Research to USD$24 billion from USD$25.5 billion for 2019.  Micron will continue to see pricing headwinds and competition remains strong.  Cleveland also highlights that numerous clients have a high level of inventory, contributing to the weak end-demand.  Micron will report second quarter results March 20th.  Micron is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology 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

  • DS Smith (LSE: SMDS) shares edged higher after the company announced the sale of its plastics unit for USD$585mm. Jefferies wrote in a note to clients that the valuation of the business is, “attractive,” and ahead of what investors expected. DS Smith is rated “Neutral” in our United Kingdom All-Cap Global Top Stock Ideas.  
  • 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 Financial Stocks Trending in the News

  • Deutsche Bank (DB:DBK) made deep cuts to the bonuses it paid today according to a report in Bloomberg.  The bank was said to have cut is bonus pool by 15% with some people in New York and London receiving zero.  Deutsche Bank’s continued weak performance is primarily to blame for the cuts.  Deutsche Bank is rated “Unattractive” in our European Large-Cap 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 -3.05 basis points to 2.51%
  • US 5-Year Treasury Bonds are higher with yields down -3.2 basis points to 2.49%
  • US 10-Year Treasury Bonds are higher with yields down -2.72 basis points to 2.68%
  • The US Treasury 2s-5s Spread has narrowed 0.15 basis points to -0.02%
  • The US Treasury 2s-10s Spread has widened 0.33 basis points to 0.18%
  • US Treasury 5s-10s Spread has widened 0.48 basis points to 0.19%

Currencies

  • EUR€ is little changed 0.009% against the USD$ in after hours to 1.1309
  • GBP£ is little changed 0.03% against the USD$ in after hours to 1.3174
  • CHF is little changed 0.05% against the USD$ in after hours to 0.9952
  • JPY¥ is little changed 0.116% against the USD$ in after hours to 111.76

Commodities

  • WTI Crude is down -0.6% to USD$56.22/bbl with the Brent-WTI spread up USD$1.29 to USD$9.06/bbl
  • Gold is little changed -0.09% to USD$1286.79/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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S&P 500 Movers

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Outperformers Sector Price 1D % Chg Volume
LyondellBasell Industries NV Materials 84.4 6.11%                332,388
Dollar Tree Inc Consumer Discretionary 96.1 5.11%            3,019,484
Aon PLC Financials 149 4.29%                439,045
Altria Group Inc Consumer Staples 47.9 3.39%            2,859,930
QUALCOMM Inc Information Technology 55.8 2.78%            5,255,898
 
Underformers Sector Price 1D % Chg Volume
General Electric Co Industrials 8.72 -7.89%          39,415,118
Willis Towers Watson PLC Financials 155 -6.13%                452,531
Goodyear Tire & Rubber Co/The Consumer Discretionary 19 -5.36%            2,266,369
Nektar Therapeutics Health Care 44.5 -5.23%                938,925
Western Digital Corp Information Technology 37.7 -5.16%            1,545,656
Morning BriefA quick GLOBAL RECAP TO START YOUR DAY
Morning BriefA quick GLOBAL RECAP TO START YOUR DAY