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Performance anxiety! US stocks lower midday on concern earnings season may not propel markets higher

Apr 11, 2019

 

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Market data as of 12:15pm EST

US Market Snapshot

  • US stocks turn negative midday, despite favorable data releases, as concerns that earnings season won't perform well enough to push the markets higher dampens sentiment
  • The S&P 500 is currently down 0.1%, Nasdaq Composite is down 0.23%, and Russell 2000 is down 0.08%
  • Volumes traded so far today are 10-15% below recent averages
  • US PPI (Producer Price Index) rose 0.6% in March, double the 0.3% expected and well above the 0.1% seen in February
  • US PPI (Producer Price Index) ex-food and energy rose 0.3% in March, above the 0.2% expected and above the 0.1% seen in February
  • Initial Jobless Claims for the week ending April 6th were 196k, coming better than the 210k expected and the 202k from the prior week 
  • The US and China have agreed on an enforcement mechanism for the trade deal being discussed, according to comments from Treasury Secretary Steve Mnuchin
  • The minutes from the last Federal Reserve FOMC meeting confirmed its dovish bias, with a majority of the Committee agreeing the wait-and-see approach would be best amid growing uncertainty
  • Just touching a little bit on the point we highlighted earlier this week that earnings estimates for 1Q have been cut the most in 3 years.  Something to consider is that if earnings surprise, now that expectations are so slow, we may actually see continued improvement in operating margins.  Improving operating margins could really support US stocks valuations going into the 2H.  You can read more about what we said regarding cuts to earnings estimates here: As the 1Q Earnings Train Barrels Towards Us, We Take a Quick Look at Expectations
  • Here comes Disney!  Walt Disney’s (DIS) Analyst Day is today.  DIS is up 6.4% since we called it a BUY for you back near the end of March, click here.  Today’s Analyst Day is going to touch on the upcoming Avengers: End game movie as well the potential for a new buyback program, upgrades to parks and the launch of Disney+, Disney’s streaming business, at the end of the year.  Bullish sentiment is really building for this stock... 
  • Back in the day, our Co-Founder & CIO Stephen was given the responsibility to determine whether the investment management company where he worked should participate in the Facebook (FB) IPO.  After reading the prospectus about 6 times, he declined to participate in the IPO.  It was definitely the right call as Facebook dropped after its IPO.  LYFT (LYFT) is starting to resemble the same track Facebook took after its IPO...we are not arguing it is a short but the current trend doesn’t look great. 
  • A look at flows into growth vs. valueThe Growth vs Value Debate – Which one does Mr. Market love more? 
  • Check out our Top US Consumer BUYS: SHOP TIL YOU DROP! US Consumer Stocks to BUY NOW for maximum gains in your portfolio!
  • We look at the upcoming earnings season: As the 1Q Earnings Train Barrels Towards Us, We Take a Quick Look at Expectations
  • Industrials (+0.56%), Financials (+0.22%), and Utilities (+0.22%) stocks are the top performers in the S&P 500 today
  • Real Estate (-0.43%), Energy (-0.58%), and Healthcare (-1.14%) stocks are the worst performers in the S&P 500 today
  • Investor sentiment for US stocks is positive with the advance/decline ratio for the S&P 500 currently at 1.22x
  • 78 stocks in the S&P500 are at 4-week highs while 8 stocks are at 4-week lows
  • 48 stocks in the S&P 500 are overbought while 1 stock is oversold according to the 16-day RSI Measure
  • 147 stocks in the Nasdaq Composite are at 4-week highs while 55 stocks are at 4-week lows
  • 330 stocks in the Nasdaq Composite are overbought while 170 stocks are oversold according to the 16-day RSI Measure
  • The VIX is currently little changed at 13.27 from yesterday's close of 13.3

Stocks Trending in the News

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Global Consumer Stocks Trending in the News

  • Bed, Bath & Beyond (BBBY) delivered another weal results, with same store sales falling 1.4% during the most recent quarter.  Gross margin fell to 34.7% from 35.9%.  Adjusted EPS of $1.20 beat $1.12 consensus, revenue of $3.31 billion was in line.  Bed, Bath & Beyond gave 2019 EPS guidance of $2.11-$2.20 while present consensus is $1.80.  Bed, Bath & Beyond is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Caesars Entertainment (CZR) shares edged higher following a CNBC report that Eldorado Resorts (TCK) and billionaire Tilman Fertitta, the owner of Golden Nugget casino and the Houston Rockets NBA team, are both considering bids for the company. Although Caesars is not actively exploring a sale, the board of directors would consider a bid if it created enough value. Caesars Entertainment is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Unattractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • Chipotle (CMG) was downgraded to hold from buy at Jefferies.  Chipotle saw its price target hiked to $700 from $600 at the same time.  Chipotle’s average price target in the market today is $595.  Chipotle is set to report earnings on April 24th.  Chipotle is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Pick” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Keurig Dr. Pepper (KDP) shares fell today after the stock was downgraded by Morgan Stanley from equal-weight to underweight. Morgan Stanley also cut its price target for Keurig Dr. Pepper from USD$27/share to USD$24/share, slightly below Keurig Dr. Pepper’s average price target of USD$$28/share across 21 analyst forecasts. According to Morgan Stanley, the rating cut comes as Keurig Dr. Pepper faces increased business and financial risks. Keurig Dr. Pepper is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Staples Global Top Stock Ideas.
  • Rite-Aid (RAD) reported fiscal fourth quarter revenue of $5.38 billion, trailing consensus of $5.56 billion.  Rite-Aid reported a loss of 1 cent per share compared with a 2 cents loss expected.  Rite-Aid provided fiscal 2020 revenue guidance of $21.5-$21.9 billion, below the $22.09 billion average expectation.   Rite-Aid expects same stores sales growth of 0%-1% in fiscal 2020.  Rite-Aid is rated “Attractive” in our US SMID-Cap Global Top Stock Ideas and “Unattractive” in our US Consumer Discretionary Global Top Stock Ideas
  • Tesla (TSLA) may receive a boost after a group of Senators proposed extending the tax credit that will expire for Tesla vehicles soon.  The $7500 credit will expire once their production exceeds 200,000 EVs, which will happen in the near future.  The legislation would increase the threshold for its expiration to 400,000 vehicles.  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.  
  • Weight Watchers International Inc. (WTW) shares slid after JPMorgan pulled-back its earnings forecast for the company as the number of daily active users using the company’s application has, “tracked even worse,” than expected. According to JPMorgan analyst Christina Brathwaite, the decline in app users during the first 3 months of 2019 suggest that overall subscribers will fall 18% y/y. Weight Watchers is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Unattractive” in our US Consumer Discretionary Global Top Stock Ideas.

Global Information Technology Stocks Trending in the News

  • Facebook (FB) announced a host of new measures to control false, extreme and violent content.  Facebook will expand its use of the Associated Press as its fact-checker.  Facebook will also make Group administrators more responsible for removing content and allow users to remove posts even after they are no longer members.  Facebook has made progress but this type of harmful content persists, it acknowledges.  Facebook is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
  • IBM (IBM) was initiated at Credit Suisse with an outperform rating.  Credit Suisse gave IBM a market-high price target of $173.  IBM’s acquisition of Red Hat has positioned itself as a dominant player in the fast growing hybrid cloud computing sector.  IBM is expected to return to revenue-driven EPS growth in the near future.  IBM is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
  • Microsoft (MSFT) and Amazon (AMZN) are the finalists to win the contract for the Pentagon’s cloud computing update, the Defense Department said.  The Pentagon is awarding a $10 billion contract to update its network in a program called JEDI-joint enterprise defense infrastructure.  The Pentagon said a final decision could come as early as mid-July.  Microsoft is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.  Amazon is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Pick” in our US Consumer Discretionary Global Top Stock Ideas.  
  • PagerDuty Inc. (PD) shares soared as much as 64% in debut trading after the maker of tools for software developers raised USD$218mm in its public offering. PagerDuty sold roughly 9.07mm total shares at USD$24/share and the stock opened today at USD$36.75/share. PagerDuty is not yet rated in our Global Top Stock Ideas.

Global Industrials Stocks Trending in the News

  • JetBlue (JBLU) announced it plans to start flights to London in 2021.  JetBlue said it intends to have multiple flights per day to London from both New York and Boston.  JetBlue is studying which of London’s 4 airports make the most sense, it has not yet secured gate space at any of them.  JetBlue has been looking to add flights to London for some time.  JetBlue is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Industrials Global Top Stock Ideas
  • Lyft (LYFT) shares continued their descent on news that Uber’s IPO could be $10 billion, dwarfing Lyft’s $2.3 billion deal.  Uber is targeting a $100 billion valuation, also dwarfing Lyft’s $17.5 billion.  When Lyft started trading it was greeted with fanfare as the only listed ride-sharing company.  Lyft’s shares are down 12% since going public.  Lyft is not yet rated in our Global Top Stock Ideas.  

Global Industrials Stocks Trending in the News

  • Banca Monte dei Paschi di Siena SpA (BIT: BMPS) shares traded notably hiher after CEO Marco Morelli said that the firm’s executives are regularly evaluating the potential merger of the company with other banks. Morelli clarified that the firm’s executives do this even though the final decision would be up to the Italian state. Morelli is currently trying to turn around the struggling Italian lender through cost cuts and the curbing of risk. Banca Monte dei Paschi di Siena SpA is rated “Top Short” in our European SMID-Cap Global Top Stock Ideas.

Global Power & Commodities Stocks Trending in the News

  • Cairn India (NSEI: CAIRN) shares slipped today after CEO Sudhir Mathur and CFO Pankaj Kalra simultaneously resigned from the company. According to a spokesperson from Cairn India, “Such movements in management are part of natural evolution in any organization, and are in line with career aspirations and personal priorities of individuals.” Cairn India is not rated in our Global Top Stock Ideas.
  • Duke Energy (DUK) issued a formal response to the state of North Carolina’s demand that it excavate ash basins.  Duke is arguing that the process used by the North Carolina Dept of Environmental Quality was not scientifically sound and lacked full consideration of the science and engineering required.  Duke will lay out details on the engineering needed and the costs to its customers when it formally appeals the decision with the state of North Carolina soon.  Duke Energy is rated “Top Buy” ” in our US SMID-Cap Global Top Stock Ideas.
  • Dominion Energy (D) suffered an explosion on one of its gas lines after a contractor struck the line.  The line struck was under a sidewalk and the explosion rocked downtown Durham where it happened.  One person was killed and injured 15 in the accident.  The explosion happened in a building adjacent to a warehouse that houses the largest collection of vintage Porsches in the world, which were damaged in the blast.  Dominion Energy is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas.
  • Vale (VALE) executives will be charged in connection with its recent dam collapse, Brazilian prosecutors said.  Prosecutors said they have evidence that Vale employees knew the dam was unsafe.  Prosecutors explained that charges could include murder, manslaughter and environmental damage.  Prosecutors said they need 2-3 months to discover if senior executives knew of the unsafe conditions.  Vale is rated “Neutral” in our Brazil All-Cap Global Top Stock Ideas.
 
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US Treasuries

  • US 2-Year Treasury Notes are lower with yields up 2.67 basis points to 2.34%
  • US 5-Year Treasury Bonds are lower with yields up 3.37 basis points to 2.30%
  • US 10-Year Treasury Bonds are lower with yields up 2.85 basis points to 2.494%
  • The US Treasury 2s-5s Spread has widened 0.7 basis points to -0.04%
  • The US Treasury 2s-10s Spread has widened 0.18 basis points to 0.15%
  • US Treasury 5s-10s Spread has narrowed 0.52 basis points to 0.19%

Currencies

  • EUR€ is currently little changed against the USD$ at 1.1258
  • GBP£ is currently down 0.199% against the USD$ to 1.3065
  • CHF is currently little changed against the USD$ at 0.9969
  • JPY¥ is currently up 0.45% against the USD$ to 111.51

Commodities

  • WTI Crude is currently down -1.58% to USD$63.59/bbl with the Brent-WTI spread up USD$0.6 to USD$6.94/bbl
  • Gold is currently down -1.14% to USD$1293.14/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
Fastenal Co Industrials 54.5 4.71%                762,874
United Rentals Inc Industrials 116 3.13%                157,973
American Airlines Group Inc Industrials 32.1 2.56%                834,864
Hanesbrands Inc Consumer Discretionary 13.8 2.50%                399,623
Unum Group Financials 32.6 2.49%                379,692
 
Underperformers Sector Price 1D % Chg Volume
Concho Resources Inc Energy 122 -5.56%                183,934
eBay Inc Consumer Discretionary 30.7 -3.57%            2,233,330
ABIOMED Inc Health Care 325 -3.35%                104,006
Diamondback Energy Inc Energy 105 -3.10%                336,819
Republic Services Inc Industrials 74.8 -2.99%                153,402
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