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Inversion Aversion-US stocks stalled with inverted yield curve dampening risk appetite midday

Apr 02, 2019

 

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Market data as of 12:15pm EST

US Market Snapshot

  • US stocks are stalled midday with an inversion aversion-the inverted yield curve is giving investors reason to pause mid-session
  • The S&P 500 is currently down 0.03%, Nasdaq Composite is up 0.11%, and Russell 2000 is down 0.16%
  • A delegation from China, led by Vice Premier Liu He, will arrive in Washington tomorrow to continue trade talks
  • US trade talks with the EU contiue stalled with European countries unable to come to a consensus on a mandate for the talks to begin
  • Read our blog on interest rates: Like a boxer after that knock-out punch, interest rates have tumbled over the last 2 quarters
  • Banks continue to raise their price expectation for oil, with the average price for Brent crude expected to be $68 in 2019 and WTI at $60, according to a WSJ poll of banks; the general expectation is for a rising price until June and then a pull-back towards the end of the year
  • US Durable Goods Orders for February fell 1.6% in February, better than the 1.8% drop expected
  • US Capital Goods Orders for February fell 0.1% in February, worse than the 0.1% rise expected
  • We  look at the technical signals of the largest German stocks today: Technical Tuesday: Comparing Technical Signals for the largest German stocks
  • Trend-following traders, commonly referred to as CTAS, had their best quarter in 1Q since late May 2017.  Of course, the catch is that the average return was a paltry +1.9%!  What gives?  The reality is that many of the CTA strategies are systematic with the algorithms fitted to older data which is no longer relevant to current market conditions.  The industry had its worst outflows in over 10 years in CY2018.  OUCH! 
  • Bloomberg is out arguing this morning that the S&P500 will make a new all-time high sometime in the next 12-months.  A low interest rate environment should continue to fuel a rally in stocks given the fact that the discount rates for valuations will remain narrow.  However, this optimism is in contrast to analyst expectations for stocks, a good barometer of bottom-up valuation for the S&P 500.  Unless expectations for stocks continue to rise, any rally in the S&P 500 will take valuation multiples like the P/E to extremely high levels -- seems unrealistic.
  • Materials (+0.31%), Telecom (+0.16%), and Financials (+0.13%) stocks are the top performers in the S&P 500 today
  • Utilities (-0.19%), Energy (-0.47%), and Consumer Staples (-0.61%) 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 0.87x
  • 165 stocks in the S&P500 are at 4-week highs while 4 stocks are at 4-week lows
  • 67 stocks in the S&P 500 are overbought while 2 stocks are oversold according to the 16-day RSI Measure
  • 115 stocks in the Nasdaq Composite are at 4-week highs while 72 stocks are at 4-week lows
  • 331 stocks in the Nasdaq Composite are overbought while 185 stocks are oversold according to the 16-day RSI Measure
  • The VIX is currently little changed at 13.48 from yesterday's close of 13.4

Stocks Trending in the News

Click name for Q-Factor rating and financials data.

Global Consumer Stocks Trending in the News

  • Amazon (AMZN) intends to cut prices on hundreds of prices at its Whole Foods stores as it looks to change the high-cost image of the brand.  Amazon is cutting the price of over 500 items, according to a report in the WSJ.  The cuts are set to be made Wednesday and are the largest of its kind at the store, ever, with the average cut around 20%.  Amazon is looking to extend its reputation for low prices to its Whole Foods stores.  Amazon is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas.
  • Lear Corp (LEA) said it will acquire Xevo Inc for $320 million.  Xevo is a maker of automotive software that connects drivers with food, fuel and parking establishments.  Lear expects to close the transaction in the second quarter and will pay for the acquisition through debt financing.  Lear said regulators will need to approve the deal.  Lear Corp is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • Tesco (LSE:TSCO) got further bad news with news that UK supermarket sales grew only 1.2% overall for the four weeks ending March 23rd.  This compares to 2.5% the previous month.  The uncertainty surrounding Brexit and the economy have caused shoppers to pull back from shopping at large chains and have shifted more purchases to discounters.  Tesco is rated “Neutral” in our United Kingdom Global Top Stock Ideas.
  • Walgreens Boots Alliance (WBA) reports weak results and slashes guidance.  Fiscal second quarter EPS of $1.64 came well below $1.72 consensus.  Walgreens posted sales of $34.53 billion came in line with $34.52.  Retail sales fell 3.8% while a 2.2% drop was expected.  Pharmacy sales grew 1.9%, below the 3.0% expected.  Walgreens now sees flat EPS growth this year, cutting its original guidance of 7-12% EPS growth.  Walgreens Boots Alliance is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Staples Global Top Stock Ideas.
  • Walmart (WMT) announced customers will be able to order groceries through Alphabet’s Google (GOOGL) assistant by saying “Hey Google, talk to Walmart.”  This functionality comes from a partnership with Google that Walmart announced in 2017 but has yet to bear any fruit.  Shoppers only use voice assistants for about 4% of purchases presently but that is expected to increase significantly.  Walmart is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Staples Global Top Stock Ideas.  Alphabet is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.

Global Information Technology and Communication Services Stocks Trending in the News

  • Comscore (SCOR) said both its CEO and President are resigning the company, prompting the stock to lose over a quarter of its value.  The announcement also caused a wave of downgrades as both executives were on the job barely a year.  CEO Bryan Wiener said he and the board “had irreconcilable differences on how to execute the company’s strategy.”  Comscore is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
  • Tencent (TCEHY, SEHK:700) is planning to raise $5 billion in a dollar-denominated bond sale as soon as tomorrow.  Tencent has received approval for up to $6 billion to be sold, but reports are for a $5 billion sale.  Tencent will use $3 billion to pay maturing debt and the rest for operations.  Tencent plans to continue to spend heavily on content acquisition.  Tencent is rated “Neutral” in our China All-Cap Global Top Stock Ideas.

Global Industrials Stocks Trending in the News

  • Lyft (LYFT) shares plummeted in the second day of trading, closing well below its IPO price.  As research reports begin to emerge on the stock, analysts are questioning its growth strategy and the likelihood of a slowdown.  Of seven initiations of coverage, 5 are holds and only 2 are buys.  Lyft is not yet rated in our Global Top Stock Ideas.
  • Norfolk Southern (NSC) was upgraded by Bank of America Merrill Lynch to buy.  Bank of America also hiked the price target of Norfolk Southern to $205 from $190.  Norfolk Southern posts “continued gains” in its performance metrics of its Precision Schedule Rail division.  There is room for further upside improvement there, Bank of America notes.  Norfolk Southern traded at its highest level since July 1980.  Norfolk Southern is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Industrials Global Top Stock Ideas.

Global Commodities & Power Stocks Trending in the News

  • ExxonMobil (XOM) is in talks to sell assets in Nigeria in both offshore and onshore businesses, according to Reuters.  ExxonMobil has held talks with local Nigerian companies about sales in assets that it has partnered with Nigeria’s national oil company NNPC.  Sales could raise up to $3 billion for ExxonMobil, Reuters notes.  ExxonMobil is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas. 
  • Vale’s (VALE) curtailed mining operations is being felt more broadly as Brazil’s Ministry of Mines and Industry reports fell to 22.18 tons in March from 29.95 tons a year ago.  Vale had been whittling away at its inventory but going forward the lack of production will begin to be felt more.  Goldman Sachs raised its expectation for iron ore to $85 per ton.  Vale ha shuttered over 90 tons of production and for now is focused on safety and not restoring production.  Vale is rated “Neutral” in our Brazil All-Cap Global Top Stock Ideas.

Global Financial Stocks Trending in the News

  • BlackRock (BLK) is about to embark on a sweeping overhaul of its structure as it seek to maintain growth with its massive size.  BlackRock announced the effort in an internal memo.  BlackRock is reorganizing sales and moving a number of senior executives while adding responsibilities to 2 key executives that are in the running to succeed CEO Larry Fink.  BlackRock presently has over $6 trillion in asset under management and is looking to expand into new areas.  BlackRock is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.
  • Deutsche Bank’s (DB:DBK) potential merge with Commerzbank (DB:CBK) got a push from Germany’s Finance Minister after he called for a “strong banks” in Germany that can funds its export-led economy.  Labor unions have been adamantly against the merger which will require the shedding of thousands of jobs.  Since announcing plans to merge in March, the government has been quiet with these comments the first since then.  Deutsche Bank’s CEO said a decision will be made by April 26th.   Deutsche Bank is rated “Neutral” in our European Large-Cap Global Top Picks.  Commerzbank is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.

 

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US Treasuries

  • US 2-Year Treasury Notes are higher with yields down -3.22 basis points to 2.30%
  • US 5-Year Treasury Bonds are higher with yields down -3.67 basis points to 2.28%
  • US 10-Year Treasury Bonds are higher with yields down -2.68 basis points to 2.47%
  • The US Treasury 2s-5s Spread has narrowed 0.45 basis points to -0.02%
  • The US Treasury 2s-10s Spread has widened 0.54 basis points to 0.17%
  • US Treasury 5s-10s Spread has widened 0.99 basis points to 0.19%

Currencies

  • EUR€ is currently down 0.205% against the USD$ to 1.119
  • GBP£ is currently down 0.557% against the USD$ to 1.303
  • CHF is currently little changed against the USD$ at 1.0016
  • JPY¥ is currently little changed against the USD$ at 111.33

Commodities

  • WTI Crude is currently up 1.27% to USD$62.37/bbl with the Brent-WTI spread down USD$-1.24 to USD$6.64/bbl
  • Gold is currently little changed 0.2% to USD$1290.33/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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We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.

S&P 500 Movers

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Outperformers Sector Price 1D % Chg Volume
Delta Air Lines Inc Industrials 47.8 7.01%            1,321,393
United Continental Holdings Inc Industrials 81 3.91%                585,933
Ameriprise Financial Inc Financials 115 3.54%                  92,444
American Airlines Group Inc Industrials 32.1 3.28%            1,538,515
Mattel Inc Consumer Discretionary 12.6 2.90%                572,122
 
Underperformers Sector Price 1D % Chg Volume
Walgreens Boots Alliance Inc Consumer Staples 71.8 -11.95%            4,726,900
AmerisourceBergen Corp Health Care 77.2 -3.45%                168,070
CVS Health Corp Health Care 63.8 -2.64%            1,681,518
Perrigo Co PLC Health Care 45.1 -2.00%                  79,592
Albemarle Corp Materials 73.5 -1.90%                  85,235
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