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US stocks close higher today with risk-on fueled by Chinese stimulus news and fears of an economic slowdown easing

Mar 15, 2019

 

Better Research, Better Investments.Better Research, Better Investments.
Better Research, Better Investments.Better Research, Better Investments.

US Markets End of Day Snapshot

  • US stocks close higher with risk-appetite strong on the news of more Chinese stimulus to come cooling fears of an economic slowdown
  • The S&P 500 finished up 0.5%, Nasdaq Composite up 0.76%, and Russell 2000 up 0.25%
  • Industrial Production grew 0.1% in February, below 0.4% consensus and above the 0.6% drop in January
  • University of Michigan Sentiment Index for March came at 97.8, well above the 95.6 consensus and 93.8 in January
  • Empire Manufacturing Index for March came at 3.7, well below 10.0 consensus and 8.8 in February
  • US Treasury Secretary Steven Mnuchin, US Trade Representative Robert Lighthizer and Chinese Vice Premier Liu Hu allegedly had a very positive phone call last night, with both sides making substantive progress on trade talks. 
  • Chinese Premier Li Keqiang highlighted the different accounting measures he plans to use to fund a record tax cut.  Li is hoping to jumpstart the decelerating Chinese economy using fiscal stimulus 
  • Ritholtz Wealth Management makes the argument that the Dow Jones and the S&P 500 are essentially the same.  According to their analysis, going back to 1970, the daily correlation between the two indices is 0.95.  Month-end correlation is even higher, sitting at 0.97. 
  • According to analysis by Bloomberg, industrials companies have been the “smartest” when buying back stocks.  Notably, management teams at railroads companies have been the most adept at buying back their stock at low prices. 
  • The rally in European stocks faces challenges going forward.  While the Stoxx Europe 600 is +11.3% YTD, future gains will be capped unless without a pick-up in German macroeconomic data and/or an acceleration in European corporate profit growth.  
  • Tech (+1.22%), Consumer Discretionary (+0.71%), and Financials (+0.64%) stocks were the top performers in the S&P 500 today
  • Energy (-0.08%), Industrials (-0.25%), and Real Estate (-0.38%) stocks were the worst performers in the S&P 500 today
  • Investor sentiment for US stocks finished positive with the advance/decline ratio for the S&P 500 closing at 1.94x
  • 69 stocks in the S&P 500 hit 4-week highs while 17 stocks reached 4-week lows
  • 71 stocks in the S&P 500 closed overbought while 3 stocks closed oversold according to the 16-day RSI Measure
  • 171 stocks in the Nasdaq Composite hit 4-week highs while 79 stocks reached 4-week lows
  • 254 stocks in the Nasdaq Composite closed overbought while 251 stocks closed oversold according to the 16-day RSI Measure
  • The VIX finished flat at 13.6 after closing at 13.5 yesterday

Stocks Trending in the News

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Global Consumer Stocks Trending in the News

  • BMW AG (DB:BMW) Oracle reported a 7.9% drop in ebit to 9.12 billion euros.  BMW declared a full year dividend of 3.50 euros per shares, below the 3.86 consensus.  BMW’s CEO said the coming year is full of significant challenges for BMW, the company will shrink its lineup to deal with these challenges.  BMW sees a slight rise in deliveries in 2019.  BMW AG is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.
  • Disney (DIS) has rehired director James Gunn to direct the third “Guardians of the Galaxy” film after firing him eight months ago.  He was fired then after offensive tweets of his from years ago were published.  In a surprise move, Disney announced he is set to return after a backlash from fans demanding his return.  Disney is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.
  • H&M (OM:HM B) reported fiscal first quarter sales of SEK51.02 billion, beating consensus of SEK50.05 billion.  H&M saw sales growth of 4% in the quarter in local currency.  RBC commented that while the progress in inventory management is positive the valuation is still not attractive enough to change it neutral rating.  H&M is rated “Top Short” in our European Large-Cap Global Top Stock Ideas.
  • Live Nation (LYV) was downgraded to neutral from buy at Citi while its price target was raised to USD$63 from USD$59.   Live Nation is unlikely to make any acquisition near-term as it digests its recent acquisitions.  These have been the main driver for the stock’s recent strong run-up, which Citi does not see continuing near-term.  Live Nation is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • Tesla (TSLA) unveiled its newest vehicle, the Model Y.  The Model Y is set to be cheaper than its larger SUV brother and higher-end versions should ship to customers late 2020 with basic models, priced at USD$39,000, to ship mid-2021.  Tesla CEO Elon Musk presented the new model in a rather subdued manner, noticeably different than his charismatic self.  Telsa is rated “Top Short” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.
  • Ulta Beauty (ULTA) reported fourth quarter EPS of USD$3.61 beating consensus of USD$3.56.  Ulta Beauty reported fourth quarter revenue of USD$2.12 billion in line with consensus of USD$2.11 billion.  Ulta saw same store sales growth of +9.4%, well above 7.9% consensus.  Ulta Beauty gave 2019 EPS guidance of around USD$12.65-12.85.  Ulta Beauty is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.

Global Information Technology & Communication Services Stocks Trending in the News

  • Adobe (ADBE) Oracle reported fiscal first quarter 2019 EPS of USD$1.71 beating consensus of USD$1.62.  Oracle reported fiscal first quarter 2019 revenue of USD$2.60 billion beating consensus of USD$2.55 billion.  Adobe gave second quarter EPS guidance of around USD$1.77.  Adobe is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
  • Apple (AAPL) is targeting prestigious awards with its new streaming service, according to a report in Bloomberg.   Apple is hiring established talent from Hollywood, seeking to build a platform that will complete with Netflix (NFLX) and big Hollywood studios.  Apple has put together an awards strategy team to realize its ambitions.  Apple is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.  Netflix is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.
  • Cree (CREE) announced it is selling its lighting unit to Ideal Industries (IFX) for a total of USD$310 million.  Cree will receive USD$225 million cash and up to USD$85 million in earn out payments over the next 12 months that starts 2 years after closing of the deal.  Cree gave fiscal third quarter recurring revenue guidance of USD$271-277 million.  Cree is rated “Top Short” in our US Large-Cap Global Top Stock Ideas and “Unattractive” in our US Information Technology Global Top Stock Ideas. Ideal Industries is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.
  • Facebook (FB) saw the exit of some key executives this week.  Chris Cox, Facebook’s Chief Product Officer, left after 13 years at the company.  Cox was key to the development of Facebook’s newsfeed that has been central to the Facebook experience for so long.  With Facebook shifting away from the newsfeed, it was not a surprise he is leaving.  Facebook is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
  • Lam Research (LRCX) saw its price target raised at Citi to USD$215 saying it sees a pickup in NAND orders.  Citi believes prices for NAND have hit a trough and increased demand will come going forward.  Lam Research remains the top equipment pick at Citi.  Lam Research 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) was downgraded at Cross Research to hold from buy.  Merill Lynch maintains its buy rating and USD$50 price target but warns of falling selling prices in the second quarter of 2019.  This is expected to be temporary with a turnaround coming by the fourth quarter.  Micron is rated “Unattractive” in our US Large-Cap and “Neutral” in our US Information Technology Global Top Stock Ideas.
  • Oracle (ORCL) reported fiscal third quarter 2019 EPS of 87 cents beating consensus of 84 cents.  Oracle reported fiscal third quarter 2019 revenue of USD$9.62 billion in line with consensus of USD$9.59 billion.  Oracle increased its quarterly dividend to 24 cents per share from 19 cents.  Oracle is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
  • Qualcomm (QCOM) won its first patent infringement case against Apple (AAPL) in the United States.  Qualcomm was awarded USD$31.6 million in damages in a San Diego court, giving the company the full amount it asked for.   Qualcomm contends its portfolio of technology patents provides significant value to smartphones.  Qualcomm is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.  Apple is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
  • Snap Inc. (SNAP) shares surged to their highest levels since September 2018 after BTIG announced a Street-high price target of USD$15/share. In a note to clients, BTIG analyst Rich Greenfield wrote, “Virtually everything that could go wrong for Snapchat over the past couple years since going public has gone wrong.” Greenfield believes that overseas advertisers will take advantage of Snap Inc.’s relatively low bid prices for ad inventory in the US, driving a stronger FY2019 than the previous year. Snap Inc. is rated “Top Short” in our US Large-Cap Global Top Stock Ideas and “Unattractive” in our US Information Technology Global Top Stock Ideas.
  • Spotify’s (SPOT) CEO commented today his company has suffered greatly from the restrictions Spotify alleges Apple (AAPL) has placed on it.  These alleged restrictions are the reason Spotify complained to the EU, demanding an investigation of Apple’s business practices.  He added that one of the biggest complaints from customers is their inability to get Spotify to work on Apple’s products.  The EU antitrust regulator said it would take the complaint seriously.  Spotify is not rated in our Global Top Stock Ideas.  Apple 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

  • Air Canada (TSX:A C) has suspended financial guidance for the coming quarter and full year given the grounding of the 737 Max jets.  Air Canada said it is devising a contingency plan for the loss of the jets but does not have anything to announce yet.  Macquarie is recommending clients use the weakness in the stock as a buying opportunity.  Air Canada is rated “Attractive” in our Canada All-Cap Global Top Stock Ideas. 
  • Boeing’s (BA) crisis deepens as preliminary evidence from the 737 Max crash indicates the plane was set to dive, similar to the situation found in the first crash, according to a report in Bloomberg.  Investigators found the jackscrew, which lowers and raises the nose of the jet, in the dive position in the wreckage found.  Bloomberg cites unnamed people close to the investigation.  The report adds that this was the evidence that convinced the US to ground the planes.  Boeing is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Industrials Global Top Stock Ideas.
  • Equifax (EFX) was initiated at Exane BNP Paribas with a neutral.  Equifax saw its price target set at USD$106.  The average price target in the market is USD$117.64 presently.   S&P downgraded Equifax’s credit rating to BBB- with a negative outlook saying its revenues will continue to be pressured by one-time costs and investment spending.  Equifax is rated “Neutral” in our US Large-Cap and “Unattractive” in our US Industrials Global Top Stock Ideas.

Global Commodities & Power Stocks Trending in the News

  • ExxonMobil (XOM) said today it intends to lower the cost of pumping oil in the Permian Basin to USD$15 per barrel.  For comparison, that is a low cost that can only be found in the huge fields of the Middle East.  The Permian Basin total production is close to 4 million barrels per day, equal to all the production in Iraq today.  ExxonMobil is deploying 55 rigs there by 2024 and total production there is expected to double by that time.  ExxonMobil is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas.
  • Nucor (NUE) provided guidance today for first quarter EPS that came below consensus.  Nucor guided EPS of USD$1.45-1.50 while consensus is presently USD1.63.  Nucor is blaming lower average selling prices and wet weather limiting shipments for the miss.  Nucor is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.

Global Healthcare Stocks Trending in the News

  • BioScrip (BIOS) and Option Care Enterprises have agreed to merge in an all stock transaction.  Upon completion, the resulting company will be 80% owned by investment funds that are affiliated with Madison Dearborn Partners and Walgreens Boots Alliance (WBA).  The company will remain listed in Nasdaq.  Bioscrip is rated “Attractive” in our US SMID-Cap Global Top Stock Ideas.  Walgreens Boots Alliance is rated “Attractive” in our US Large-Cap and “Neutral” in our US Consumer Staples Global Top Stock Ideas.
 

 

 

 

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US Treasuries

  • US 2-Year Treasury Notes are higher with yields down -2.09 basis points to 2.43%
  • US 5-Year Treasury Bonds are higher with yields down -3.37 basis points to 2.39%
  • US 10-Year Treasury Bonds are higher with yields down -3.96 basis points to 2.59%
  • The US Treasury 2s-5s Spread has narrowed 1.28 basis points to -0.04%
  • The US Treasury 2s-10s Spread has narrowed 1.87 basis points to 0.15%
  • US Treasury 5s-10s Spread has narrowed 0.59 basis points to 0.19%

Currencies

  • EUR€ is little changed 0.142% against the USD$ in after hours to 1.132
  • GBP£ is up 0.347% against the USD$ in after hours to 1.3288
  • CHF is up 0.161% against the USD$ in after hours to 0.9978
  • JPY¥ is down 0.188% against the USD$ in after hours to 111.49

Commodities

  • WTI Crude is little changed -0.15% to USD$58.52/bbl with the Brent-WTI spread little changed USD$-0.16 to USD$8.01/bbl
  • Gold is up 0.43% to USD$1301.69/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
Ulta Beauty Inc Consumer Discretionary 279 8.29%            1,019,180
Broadcom Inc Information Technology 257 8.24%            5,626,314
Applied Materials Inc Information Technology 33.7 3.75%            9,844,476
NetApp Inc Information Technology 62.4 3.53%            2,784,666
Texas Instruments Inc Information Technology 97.7 3.40%            7,553,584
 
Underformers Sector Price 1D % Chg Volume
Whirlpool Corp Consumer Discretionary 124 -4.92%                180,697
Westrock Co Materials 40.3 -4.09%            5,618,793
Adobe Inc Information Technology 242 -3.96%            4,370,781
General Electric Co Industrials 8.72 -3.30%          64,168,449
International Paper Co Materials 44.7 -3.13%            4,684,611
Morning BriefA quick GLOBAL RECAP TO START YOUR DAY
Morning BriefA quick GLOBAL RECAP TO START YOUR DAY