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Global growth concerns weigh on US stocks after European Central Bank extends stimulus

Mar 07, 2019

 

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Market data as of 12:30pm EST

US Market Snapshot

  • US stocks are broadly lower midday with growth concerns front and center in the wake of the European Central Bank's decision to extend stimulus amid economic weakness
  • The S&P 500 is currently down 0.7%, Nasdaq Composite is down 0.62%, and Russell 2000 is down 0.46%
  • Initial Jobless Claims for the week of March 2nd were 223,00 in line with consensus of 225,000 and last week's 225,000
  • Continuing Claims of 1,755,000 came a touch below 1,772,000 consensus and below last week's 1.805,000
  • Nonfarm Productivity grew at 1.9% in the fourth quarter, coming better than the 1.5% consensus
  • Unit labor costs grew at a 2% rate in the fourth quarter, above the 1.7% consensus
  • US Industrials stocks are sending out cautionary signals on global trade and economic growth according to DataTrek Research.  As of Wednesday’s close, the S&P 500 Industrials sector was +16% YTD but finished down 2.3% for the day yesterday.  According to DataTrek Research, given that we are in the last innings of the US-China trade talks, yesterday’s share negative move is unexpected and alarming. 
  • In spite of the rally in emerging markets stocks to start the year, EPS trends remain negative.  Analysts at investment banks continue to cut their forecasts and price targets for emerging markets stocks.  It will be interesting to see how this impasse between bullish and bearish investors plays out. 
  • The fees war among ETFs has reached socially responsible strategies (ESG) as well!  Starting today, DWS Group’s Xtrackers MSCI USA ESG Leaders Equity ETF (USSG) will drop its fees to USD$1 for every $1,000 invested, or a net expense ratio of 0.10%. 
  • The VIX is  moving down this morning and is currently at 14.37 after closing at 15.74 yesterday
  • Eli Lilly (LLY) March 15 OTM Calls & Puts, NIO (NIO) March OTM Calls and FXI April 18 OTM Calls are some of the most heavily traded options in the US pre-market this morning. 
  • According to strategists at JP Morgan, options markets are pricing in too much of a bullish outlook for General Electric (GE).  At the moment, General Electric (GE) options are pricing in a strong probability that the share-price moves to USD$10 vs. Dropping back to USD$7.50.  General Electric (GE) closed at USD$9.11 at yesterday’s market close. 
  • Goldman Sachs strategists are arguing investors should buy straddles on SPDR S&P Biotech ETF (XBI) to play volatility in the Biotech sector The resignation of FDA Commissioner Scott Gottlieb created uncertainty for the sector and has raised overall levels of volatility.  For those readers who are new to options, a straddle is a type of options strategy that benefits from upside and downside moves.  The buyer of a straddle is buying a call and put on an “underlying asset”.  In this case, the underlying would be the SPDR S&P Biotech ETF (XBI).  This structure is typically used to play rising volatility of the underlying security. 
  • Real Estate (+0.5%), Utilities (+0.38%), and Energy (-0.41%) stocks are the top performers in the S&P 500 today
  • Materials (-0.89%), Consumer Discretionary (-0.91%), and Financials (-1.08%) 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
  • 34 stocks in the S&P500 are at 4-week highs while 46 stocks are at 4-week lows
  • 32 stocks in the S&P 500 are overbought while 12 stocks are oversold according to the 16-day RSI Measure
  • 123 stocks in the Nasdaq Composite are at 4-week highs while 84 stocks are at 4-week lows
  • 170 stocks in the Nasdaq Composite are overbought while 430 stocks are oversold according to the 16-day RSI Measure
  • The VIX is currently  moving down at 14.37 from yesterday's close of 15.74

Stocks Trending in the News

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Global Consumer Stocks Trending in the News

  • Amazon (AMZN) said it is closing its pop-up electronics stores as it adjusts its bricks and mortar strategy.    Amazon had opened 87 pop-up stores in malls and some larger retailers and expects to close them all within a month, calling it an experiment that will no longer continue.  Amazon will continue with its book stores and 4-star stores, where it sells only items rated 4 stars or more on its site.  Amazon is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • American Eagle’s (AEO) weak first quarter guidance is a temporary situation that will revert by the second quarter, according to Telsey Advisory.  American Eagle’s spending in the first quarter will deliver better EPS for the remainder of 2019.  Telsey highlights a number of positives for the stock that far outweighs the temporary weakness expected in the first quarter, including continued strength in denim and the Aerie brand.  American Eagle is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • Burlington Stores (BURL) reported fourth quarter EPS of USD$2.83, beating consensus of USD$2.77.  Fourth quarter revenue of USD$2 billion came in line with USD$2.05 billion consensus.  Merchandise inventory of USD$954 million is well above the USD$752 million consensus.  Burlington gave first quarter EPS guidance of USD$1.21-1.31 while below present consensus of USD$1.36 and same store sales growth of 0-2%.  Burlington Stores is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.
  • Continental AG (DB:CON) said it is seeing a “muted” start to the year, saying it expects 2019 to see lower vehicle production as compared to 2018.  Continental is the largest maker of auto parts in the world.  Continental sees a slowdown in China in the first half and expects margins to drop to 8-9%, down from 9.3% in 2018.  Continental is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.
  • Dollar Tree (DLTR) announced it is closing or rebranding almost 600 Family Dollar Stores.  Dollar Tree took a USD$2.73 billion charge in its most recent results on an asset it paid USD$9 billion for in 2015. Dollar Tree's Family Dollar stores have lagged in performance and are weighing on Dollar Tree’s results.  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. 
  • Quiz Plc (AIM:QUIZ) issued its third profit warning in the last six months.  Quiz shares have fallen 92% from the July peak as Quiz battles intense online competition.  Analysts have commented that is it unlikely to see growth in the near term from Quiz as management has not come up with a turnaround strategy.  Quiz is not rated in our Global Top Stock Ideas.

Global Information Technology & Communication Services Stocks Trending in the News

  • Care.com (CRCM) fourth quarter revenue was USD$49.9 million matching consensus of USD$49.8 million.  Fourth quarter ESP of 26 cents beat 21 cents consensus.  Care.com gave first quarter EPS guidance of 8 cents below consensus of 17 cents and revenue of USD$52.5-52.8 million while consensus is USD$53.3 million.  Care.com is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas and “Top Short” in our US Information Technology Global Top Stock Ideas.
  • Facebook (FB) said it intends to focus on private communications and not as much on shareable content.  Facebook will encrypt its messaging service and is working to combine its messenger, Whatsapp and Instagram platforms to give users 1 integrated platform for messaging.  Facebook said it sees the future of social media as small chat groups and not public sharing of content.  Facebook is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology 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. 
  • International Game Technology (IGT) reported fourth quarter EPS of USD0.24, missing consensus of USD$0.35.  Fourth quarter revenue of USD$1.27 billion came in line with USD$1.26 billion consensus.  International Game Technology gave 2019 adjusted ebitda guidance of USD$1.70-1.76 billion while present consensus is USD$1.75 billion.  International Game Technology is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas. International Game Technology is not rated in our 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.
  • Xerox (XRX) said its board has approved a reorganization iof its corporate structure into a holding company.  The change will allow Xerox greater strategic, operational and financial flexibility. Holders of Xerox will receive an equal number of shares in the holdning company with the change being implemented mid-2019.  Xerox is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.

Global Financials 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 its 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 Industirals Stocks Trending in the News

  • Fedex (FDX) had its price target cut to USD$210 from USD$225 at Citi ahead of reporting results on March 19th.  Fedex has seen “one of the rockiest periods in memory” according to Citi while maintaining its buy rating.  Citi is looking for clarity on progress on the integration of TNT that it acquired.  Fedex is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Industrials Global Top Stock Ideas.

 

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US Treasuries

  • US 2-Year Treasury Notes are higher with yields down -4.48 basis points to 2.47%
  • US 5-Year Treasury Bonds are higher with yields down -5.88 basis points to 2.44%
  • US 10-Year Treasury Bonds are higher with yields down -5.05 basis points to 2.64%
  • The US Treasury 2s-5s Spread has narrowed 1.4 basis points to -0.03%
  • The US Treasury 2s-10s Spread has narrowed 0.57 basis points to 0.17%
  • US Treasury 5s-10s Spread has widened 0.83 basis points to 0.2%

Currencies

  • EUR€ is currently down 0.734% against the USD$ to 1.1224
  • GBP£ is currently down 0.448% against the USD$ to 1.3111
  • CHF is currently down 0.523% against the USD$ to 0.9899
  • JPY¥ is currently down 0.188% against the USD$ to 111.56

Commodities

  • WTI Crude is currently up 0.82% to USD$56.68/bbl with the Brent-WTI spread little changed USD$-0.12 to USD$9.03/bbl
  • Gold is currently little changed -0.08% to USD$1285.32/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
Allergan PLC Health Care 153 4.74%                572,854
H&R Block Inc Consumer Discretionary 25.4 4.25%                565,932
CenturyLink Inc Communication Services 16.2 4.24%            1,760,984
PG&E Corp Utilities 6.95 3.49%                342,269
Cooper Cos Inc/The Health Care 268 2.96%                  33,429
 
Underperformers Sector Price 1D % Chg Volume
Kroger Co/The Consumer Staples 28.6 -9.81%            3,667,140
Mosaic Co/The Materials 31.4 -4.00%                544,048
Eastman Chemical Co Materials 75.7 -3.89%                110,559
Wynn Resorts Ltd Consumer Discretionary 108 -3.88%                251,993
Brighthouse Financial Inc Financials 34.2 -3.40%                156,517
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