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Risk-on Relief Rally: US stocks surge after US gives a limited reprieve to tech companies as trade tension percolate

May 21, 2019

 

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Market data as of 12:30 pm EST

US Market Snapshot

  • US stocks rally after US government relief for tech companies, the relief was clear, for now....trade tensions continue
  • The S&P 500 finished up 0.85%, Nasdaq Composite up 1.08%, and Russell 2000 up 1.33%
  • The US is allowing a 90-day relief period permitting some imports of Huawei products for those broadband players that presently depend on Huawei products
  • new anti-US song is going viral in China, with the lyrics "If the perpetrator wants to fight, we will beat him out of his wits"
  • The US has dramatically slowed the approval of Chinese nationals entrance into the US for advanced manufacturing jobs, WSJ is reporting
  • Is this next in the US-China fight?   Are rare earth metals China's next weapon to deploy in the trade war?
  • Existing home sale for April fell 0.4% while consensus was for 2.7% growth
  • For all the market turmoil, US stocks are trading within 5% of their all-time highs
  • Interest rate cuts: You check YOUR yield curve, I'll check mine: The Fed vs. Investors
  • Top ETF Ideas of the Week: Opportunity a Plenty Amid Global Market Pullback
  • Stocks the markets feel bad about: Top Trending Stocks by Negative 1-Month Sentiment
  • First quarter earnings recapclick here for first quarter earnings so far
  • Materials (+1.51%), Tech (+1.2%), and Industrials (+1.18%) stocks were the top performers in the S&P 500 today
  • Consumer Discretionary (+0.57%), Utilities (+0.06%), and Consumer Staples (-0.31%) 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 8.62x
  • 45 stocks in the S&P 500 hit 4-week highs while 105 stocks reached 4-week lows
  • 20 stocks in the S&P 500 closed overbought while 55 stocks closed oversold according to the 16-day RSI Measure
  • 78 stocks in the Nasdaq Composite hit 4-week highs while 274 stocks reached 4-week lows
  • 133 stocks in the Nasdaq Composite closed overbought while 649 stocks closed oversold according to the 16-day RSI Measure
  • The VIX finished lower at 14.95 after closing at 16.31 yesterday

Stocks Trending in the News

Click name for Q-Factor rating and financials data.

Global Consumer Stocks Trending in the News

  • AutoZone (AZO) reported fiscal third quarter same store sales and earnings that beat consensus.  AutoZone reported fiscal third quarter EPS if $15.99, ahead of $15.11 consensus.  Same store sales grew 3.9%, beating 2.9% consensus.  AutoZone is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Ford (F) will eliminate about 10% of its workforce, or 7,000 employees, in its latest restructuring effort.  Ford is trying to stem years of declining profits in an industry that has seen massive changes recently.  Some of those layoffs have already occurred and the entire process should be complete by August.  The cuts are due to save $600 million annually.  Ford is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Home Depot (HD) reported first quarter earnings that beat with same store sales that trailed consensus.  Home Depot reported first quarter EPS of $2.27 beating consensus of $2.18.  First quarter revenue of $26.38 billion came in line with $26.4 consensus.  Same store sales in the first quarter grew 2.5% trailing consensus of 4.3%.  Home Depot reaffirmed full year EPS guidance of $10.03, a touch below consensus of $10.09.  Home Depot is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.  
  • JC Penny (JCP) reported a loss that was wider than expected.  JC Penny first quarter adjusted loss of 46 cents came worse than the 38 cents expected.  First quarter same store sales fell 5.5%m worse than the 3.8% drop expected.  JC Penny first quarter net sales of $2.44 billion came in line with consensus of $2.47 billion.  Inventory dropped 16% in the quarter.  JC Penny is rated “Unattractive” in our US SMID-Cap Global Top Stock Ideas and “Unattractive” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Kohl’s (KSS) reported first quarter same store sales that came well below consensus.  Kohl’s first quarter same store sales fell 3.4%, much worse than the 0.1% fall that was expected.  First quarter EPS of 61 cents trailed 67 cents consensus.  Total sales of $3.82 billion also trailed consensus of $3.93 billion.  Kohl’s cut full year EPS guidance to $5.15 to $5.45, down from $5.80 to $6.15 while present consensus is of $6.04.  Kohl’s is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Nike (NKE) has called the recently enacted tariffs on Chinese imports “catastrophic” in an open letter to President Trump.  Tariffs on footwear would be part of the next round of tariffs and Nike with 173 other companies pleaded with the President to not act further.  There is much less production of shoes in China than was the case a few years ago, but the companies argue it would still be terrible if fully implemented.  Nike is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Tesla (TSLA) received some unpleasant news yesterday from Morgan Stanley when it laid out its bear case scenario with a $10 price target.  Tesla’s main problem is demand and Morgan highlights the fear that the market could be saturated with its main product.  The previous bear case for Tesla was $97.  Morgan writes, “Tesla has grown too big relative to near term demand.”  Tesla is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.  
  • TJX Companies (TJX) reported first quarter same store sales that beat consensus.  TJX first quarter sale store sales grew 5% while consensus was for 3.5%.  First quarter EPS of 57 cents beat 55 cents consensus.  TJX boosted full year EPS guidance to $2.56 to $2.61.  TJX is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.  

Global Information Technology Stocks Trending in the News

  • Baidu (BIDU) is planning to spin off its autonomous driving unit according to early reports that shortly follow the company’s first quarterly net loss since going public in 2005. According to reports, Baidu is seeking external investors amid the business’ increased financial pressures. Baidu is rated “Neutral” in our China All-Cap Global Top Stock Ideas.
  • Marvell Technology Group (MRVL) shares edged higher after announcing the acquisition of Avera Semiconductor’s chip design unit for $650 million in cash. The acquisition will reportedly introduce the capability for Marvell Technology to produce specialized semiconductors required by 5G phone networks and cloud-data centers. International Business Machines Corp. (IBM) formerly owned the business unit before selling it to Globalfoundries in 2015. Marvell Technology is not rated in our Global Top Stock Ideas. IBM is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
  • Qualcomm’s (QCOM) selloff in the wake of the Huawei ban is “overdone,” according to Canaccord Genuity.  In a note it is pointed out that any loss of market share in handsets for Huawei is positive for Qualcomm.   Any players that gain market share from Huawei are likely paying full royalties to Qualcomm, a main reason cited when discussing the over sell-off.  Qualcomm is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas
  • Sony’s (SNE) CEO laid out his full long-term vision for the company at the company’s investors day.  Sony is working on a successor to the PS4.  The new console with permit remote-play on cell phones and tablets and will have load times 10 times faster than the present console.  Sony is not investing aggressively in China given the country’s uncertain censorship scenario.  Sony is rated “Attractive” in our Japan Large-Cap Global Top Stock Ideas. 
  • T-Mobile US Inc. (TMUS) and Sprint Corp. (S) shares both soared after Federal Communications Commission (FCC) Chairman Ajit Pai announced that he will recommend his agency approve the $26.5 billion merger of the two telecommunications companies. The Department of Justice does not like the deal as presently structured and Sprint may need to make further concessions.  According to Paul Gallant of Cowen & Co., however, approval from the US Justice Department “seems likely” as it has never diverged from the FCC’s decision. T-Mobile is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas. Sprint is rated “Top Short” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas.

Global Industrials Stocks Trending in the News

  • Astaldi Spa (BIT: AST) shares jumped following reports that the company and its Turkish partner IC Yatirim Holding AS have resumed talks to sell a bridge linking Europe and Asia to a group of Chinese investors. The reports shortly follow the resolution of a dispute relating to toll charges. The two parties are in talks with a consortium of Chinese investors led by China Merchants Group, according to reports. Astaldi is rated “Unattractive” in our European SMID-Cap Global Top Stock Ideas.
  • Boeing’s (BA) 737 Max crash involving Ethiopian Airlines was likely caused by a bird strike to a suspected sensor, WSJ reports.  The sensor in the Boeing 737 Max in question, part of the MCAS system, does not have a back-up source of information in the event there is a problem with it.  The addition of a back-up is part of the modifications Boeing is testing.  Boeing is rated “Top Short” in our US Large-Cap Global Top Stock Ideas and “Unattractive” in our US Industrials Global Top Stock Ideas.  
  • Crane Co. (CR) is making a hostile bid for rival Circor International (CIR).  Crane is making an all-cash offer valued at $1.7 billion, according to press reports.  Crane tried to privately acquire Circor earlier in the year but was rebuffed by management.  Crane is not taking the offer directly to shareholders.  Crane is rated “Top Buy” in our US SMID-Cap Global Top Stock Ideas and “Top Buy” in our US Industrials Global Top Stock Ideas.  Circor International is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas and “Neutral” in our US Industrials Global Top Stock Ideas.  
  • Lockheed Martin (LMT) is locked in a battle with the Pentagon that is jeopardizing funding for spare parts for the F-35.  The Pentagon wants Lockheed Martin to sell it technical data related to the spare parts, data that will allow it to have other manufacturers make the parts as it attempts to contain costs.  Lockheed has yet to sign an agreement relating to this and without one, half of the funding for spare parts is being withheld.  Lockheed Martin is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Industrials Global Top Stock Ideas.  
  • Royal Mail (LSE: RMG) shares slid to a record low prior to its FY2019 results which Jefferies believes will be weighed down by deteriorating revenue trends and rising cost pressures. Jefferies expects Royal Mail to report a 26% y/y decrease in operating profit to between 500 million pounds and 530 million pounds. The company’s progressive dividend policy may also face challenges as a result. Royal Mail is rated “Top Short” in our United Kingdom All-Cap Global Top Stock Ideas.
  • Senvion (DB: SEN) shares soared following reports that cited unidentified people familiar with the matter that Toshiba (TSE: 6502), Siemens AG (DB: SIE), and Blackstone (BX) are among the parties interested in acquiring the distressed maker of wind turbines. According to reports, Senvion has hired Rothschild to advise on the sale of the company prior to insolvency proceedings that begin on July 1st. Senvion is not rated in our Global Top Stock Ideas. Toshiba is not rated in our Global Top Stock Ideas. Siemens is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas. Blackstone is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.
  • United Airlines (UAL) saw its price target hiked to $110 from $101 at Morgan Stanley.  Its buy rating on United Airlines was reiterated.  Morgan said of United, “…United has done a solid job executing on its mid-continent strategy” and expects the strong performance to continue.  United will have significant competition near-term in those new markets.  United Airlines is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Industrials Global Top Stock Ideas.  

Global Financials Stocks Trending in the News

  • Eaton Vance (EV) shares traded higher after the company announced adjusted earnings in the fiscal second quarter that beat the highest analyst estimate. Eaton Vance observed adjusted earnings of $0.89/share that came ahead of all analysts estimates ranging between $0.71/share and $0.82share. Eaton Vance’s revenue of $411.9 million in the fiscal second quarter, however, fell from $414.3 million a year prior although it beat consensus of $409.4 million. Eaton Vance is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.
  • Morgan Stanley (MS) is planning to make job cuts at its London equities business, according to reports that cite people familiar with the matter. According to reports, five Morgan Stanley employees at the firm’s equities trading and sales business in London have already been affected. The news follows Morgan Stanley earnings, which contained equities revenue that trailed the average analyst estimate. Morgan Stanley is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas.

Global Commodities & Power Stocks Trending in the News

  • Lynas Corp. (ASX: LYC), China’s largest producer of rare earth products outside of China, told investors that it plans to increase output and extend its footprint to the US. Lynas shares soared by more than 20% on the news that shortly follows worries China will weaponize its leading status in the rare earth metals industry in trade negotiations with the US. Lynas intends to double its output of rare earths neodymium and praseodymium by 2025. Lynas is rated “Unattractive” in our Australia Large-Cap Global Top Stock Ideas.

Global Health Care Stocks Trending in the News

  • Merck & Co. (MRK) announced the acquisition of Peloton Therapeutics Inc. for up to $2.2 billion in cash and other payments just a day before the company planned to IPO.  Merck will pay $1.05 billion in cash for the developer of cancer therapies in addition to $1.15 billion of additional payments based on the success of Peloton’s experimental drugs that will be further developed by Merck. Analysts expected Peloton to IPO at a market value of roughly $756 million. Merck & Co. is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.

 

 

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US Treasuries

  • US 2-Year Treasury Notes are lower with yields up 3.71 basis points to 2.25%
  • US 5-Year Treasury Bonds are lower with yields up 2.18 basis points to 2.22%
  • US 10-Year Treasury Bonds are lower with yields up 1.07 basis points to 2.42%
  • The US Treasury 2s-5s Spread has narrowed 1.53 basis points to -0.03%
  • The US Treasury 2s-10s Spread has narrowed 2.64 basis points to 0.17%
  • US Treasury 5s-10s Spread has narrowed 1.11 basis points to 0.2%

Currencies

  • EUR€ is little changed 0.045% against the USD$ in after hours to 1.1161
  • GBP£ is down 0.189% against the USD$ in after hours to 1.2702
  • CHF is down 0.262% against the USD$ in after hours to 0.9889
  • JPY¥ is up 0.445% against the USD$ in after hours to 110.55

Commodities

  • WTI Crude is little changed -0.17% to USD$62.99/bbl with the Brent-WTI spread down USD$-0.27 to USD$9.2/bbl
  • Gold is down -0.26% to USD$1274.56/oz

 

*Data in Price Return and Updated Real-Time (with a delay), Source: StockDio

S&P 500 Sector ETFs - Intraday

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S&P 500 Movers

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Outperformers Sector Price 1D % Chg Volume
AutoZone Inc Consumer Discretionary 829 5.57%                  98,069
DISH Network Corp Communication Services 28.2 5.29%                379,180
Xilinx Inc Information Technology 91.2 4.63%            2,271,115
PG&E Corp Utilities 6.95 4.36%                966,685
Anthem Inc Health Care 260 4.04%                516,553
 
Underperformers Sector Price 1D % Chg Volume
Kohl's Corp Consumer Discretionary 67.3 -12.37%            1,516,568
Lamb Weston Holdings Inc Consumer Staples 68.9 -3.21%                  52,681
Varian Medical Systems Inc Health Care 124 -1.97%                  50,121
JB Hunt Transport Services Inc Industrials 97.1 -1.77%                359,075
Tyson Foods Inc Consumer Staples 58.6 -1.54%                844,113

 

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