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Morning Quant Ride Mar 15, 2018

Mar 15, 2018

Traders’ Corner

US Markets Preview


US equities futures are pointing to a mixed open with S&P 500 nominally positive whole Nasdaq futures are currently negative.  Implied volatility on US index options has begun to pick up with 1-month implied volatility now trending more than 1 standard deviation above 1-year mean levels.  Skew continues to be expensive as demand for OTM puts remains high.  Notably, implied correlations have recently begun to inch upwards with implied correlations for major US indices now 1 standard deviation above 1-year mean levels. Notably, implied correlations for Nasdaq 100 options is near 2 standard deviations!

US Markets Recap

US equities traded modestly lower yesterday with sentiment down as the market deteriorated behind softer than expected retail sales numbers (0.1% vs 0.3% estimated). Market breadth for the S&P was generally negative with an advance/decline ratio of .37 (229 more declines than advances) and a put/call ratio of 1.5, indicating negative investor sentiment.

Large-cap stocks were down slightly during yesterday’s session with the S&P falling 0.57%. Materials -1.32% were the worst performer, weighed down by losses in the steel and chemical industries. Consumer staples -1.27% also underperformed the benchmark S&P index, as grocery stocks declined the most. Utilities +0.97% were the strongest outperformer with real estate +0.1%, and information technology -0.7% finishing the strongest. Technology was largely unchanged as internet & social media stocks advanced, while semiconductors declined.

The Russell 2000 ended trading lower by 0.49%, with small-cap companies in-line with the broader market. Materials were down 1.36%, followed by financials -0.87% as bank stock weakness drew the sector down. Utilities were up 0.28%, and along with technology +0.20% were the only two sectors providing positive returns in the Russell 2000.

S&P Laggards

  • SIG -20.23%
  • RVHC -7.75%
  • ALK -4.54%
  • JCI -4.27%
S&P Movers
  • TRIP +4.19%
  • PYPL +3.88%
  • EXPE +3.42%
  • EIX +2.82%
RTY Laggards
  • CDXS -10.2%
  • ASIX -14.51%
  • RYTM -9.3%
  • NTLA -13.28%
RTY Movers
  • SNDX +28.36%
  • MRSN +13.14%
  • APLS +12.63%
  • CVNA +12.56%
We are watching these A-rated laggards from yesterday’s market action:Gentex Corporation - 3.16% off its 52wkH, reports earnings on 04/20/2018Lear Corporation - 6.88% off its 52wkH, reports earnings on 04/24/2018Federated Investors, Inc. - 9.85% off its 52wkH, reports earnings on 04/26/2018QuantShot: Target Corporation - 10.23% off its 52wkH, reports earnings on 05/18/2018Huntsman Corporation - 12.77% off its 52wkH, reports earnings on 04/26/2018QuantShot: Pfizer Inc. - 7.81% off its 52wkH, reports earnings on 05/01/2018ON Semiconductor Corporation - 5.02% off its 52wkH, reports earnings on 05/08/2018DXC Technology Company - 3.03% off its 52wkH, reports earnings on 05/22/2018QuantShot: Allison Transmission Holdings, Inc. - 16.74% off its 52wkH, reports earnings on 04/25/2018Huntington Ingalls Industries, Inc. - 7.65% off its 52wkH, reports earnings on 05/09/2018CVS Health Corporation - 20.18% off its 52wkH, reports earnings on 05/02/2018QuantShot: Norfolk Southern Corporation - 13.05% off its 52wkH, reports earnings on 04/20/2018QuantShot: Comcast Corporation - 18.14% off its 52wkH, reports earnings on 04/25/2018Asian & Australia Equities RecapAsian equities closed modestly positive following the negative close in US equity markets.  Japanese equities finished flat with a positive bias as the Nikkei 225 and Topix were +0.12% and +0.02% respectively.  Real estate, utilities and tech stocks were the largest outperformers while energy, financials and industrials stocks were the biggest underperformers.  Notable movers included: 8252.JP +7.32%, 5301.JP +4.19%, 6762.JP +3.69%, and 6472.JP -3.21%. Political headlines continue to dominate the headlines, with Finance Minister Taro Aso reported to miss the G20 meeting next week.Chinese/Hong Kong equities finished up with concerns about a deteriorating trade relationship between the US and China abating.  The Hang Seng +0.34%, Hang Seng China Enterprise Index +0.28% and the CSI 300 +0.56% were led higher by tech, real estate and financials stocks.  The largest underperformers were energy, staples and industrials stocks.  Notable movers included: 2007.HK +3.94%, 2319.HK -3.85%, 2318.HK +3.43% and 288.HK +2.90%.  The incoming NEC head Larry Kudlow signaled support for the Trump administration’s tough stance towards trade with China last night.  Investors continue to be concerned about a retaliation against US companies with Boeing (BA) highlighted as a US company that might feel the brunt of any response from Beijing.Indian equities closed negative with the Sensex -0.44% and Nifty Fifty -0.49%.  Energy stocks lead Indian equities down; consumer discretionary stocks were the largest relative outperformers.  Investors appear to be focusing on the potential for earnings growth among SMID companies as SMID stocks outperformed larger companies in Mumbai.In the Land Down Under, Aussie stocks traded with a negative bias.  The ASX finished -0.24% with financials, energy and telecom stocks leading the benchmark Aussie equity index down.  Materials, consumer staples and real estate stocks were the largest outperformer.  Notable movers include: SYR.AU +6.63%, RFG.AU -5.50%, PLS.AU +4.83% and SPK.AU -4.55%.  The big banks were the primary drag on the ASX with the Australia competition regulator, ACCC, highlighting that opaque pricing of discount offered on residential mortgages made it difficult for customer to make informed decisions.European Equities RecapEuropean equities are nominally positive this AM with the Euro Stoxx 600 +0.023%; regional indices have a positive bias with the FTSE 100 +0.10%, CAC 40 +0.23% and the DAX +0.23%.  Insurance, materials and auto & parts stocks are the biggest outperformers this morning with personal & household goods, real estate and media stocks the largest laggards.  Notable movers include: GLE.FR -2.51%, VOW3.GR +2.22%, and ASML.NV +1.65%.  European Central Bank (ECB) executive board member Benoit Coeure said he expects the ECB QE program to improve growth by +0.33% to this year.  French February CPI was reported +1.2% Y/Y vs a preliminary measure of +1.2%.Implied volatility for European index options remains muted on a 1-month basis.  However, Skew continues to trend well above its 1-year average, suggesting demand for OTM  puts continues to outpace demand for OTM calls.Rates & Commodities RecapUS Treasuries, after selling off the past few weeks, have not only stabilized but continue to rally with the yield on the 10-year now at ~2.81% after touching 2.90% last week.  The US Dollar index is +0.13% with USD$ strength against the EUR€ and GBP£ overcoming USD$ weakness against the JPY¥.  The USD$/JPY¥/ pair is now trading below 106.  Commodities markets are mixed with a positive move in energy commodities constrasting against a negative move in precious metal.  WTI crude oil continues to hold above USD$60/barrel, currently at ~USD$61/barrel.  If WTI crude oil can hold these price levels, investors should expect a material improvement in the profitability of US E&Ps.  The weakness in precious metals with Gold down 14 bps is surprising given the strength in JPY¥; in a previous note, we discussed the positive correlation between gold spot and JPY¥.Cryptocurrencies RecapMajor cryptocurrencies are down across the board this morning.  Coinfloor, the UK-based exchange, announced its group of cryptocurrency exchanges will include a bitcoin futures exchange; the stated mission is to build a bridge between Fiat currencies and cryptocurrencies.  Yesterday, speaking in front of the House committee for capital markets, securities and investment, Mike Lempres, Chief Legal and Risk Officer at Coinbase, stated that at the current state US regulatory system is harming healthy innovation due to a lack of understanding of what should be allowed, and what should not be allowed.  Yang Chin-long, the new governor of Taiwan's central bank, said he has doubts about cryptocurrency's role as a payments tool and argued that cryptocurrencies are not fulfilling their originally intended function in payments. He stated the belief that cryptocurrencies have become a commodity with extreme volatility due to market speculation 

Companies Trending in the News

France Finance Minister Bruno Le Maire said that France will take legal action against ALPHABET (GOOGL) and APPLE (AAPL) for abusive commercial practices on their app stores. This is the result of a 2-year investigation, and fines could be in the millions of euros.BOEING (BA) shares fell 2.48% yesterday, after Spirit AeroSystems CEO Tom Gentle said that Boeing is struggling to meet increased production for the 737.BROADCOM (AVGO) still plans to move its headquarter to the US, despite the US government’s blocking of Broadcom’s acquisition of Qualcomm. Broadcom originally planned to redomicle its headquarters to the US in November.CVS HEALTH CORP (CVS) announced a quarterly dividend of $0.50 per share. The dividend will be paid on May 3, 2018.DELTA AIRLINES (DAL) is one of the reported bidders for bankrupt airline Alitalia SpA, which offers strong domestic travel routes in Italy.EXPEDIA (EXPE) has been downgraded from outperform to neutral by MacQuaire as one-year price targets for the stock have been revised downward by 9.7%FORD (F), yesterday, announced a recall of ~1.4mm car following complaints that steering wheels are detaching from the steering column.  The recall only covers Ford Fusion and Lincoln MKZ models from 2014 to 2018.Toys ‘R’ US will be closing all of its US stores, just months after the company filed for bankruptcy protection. HASBRO (HAS) and MATTEL (MAT) have been negatively affected by the news the company missed supplier (JD) is planning to offer technology products to allow unstaffed stores and drone delivery services to Hong Kong citizens as it pushes further into online commerce.KOHL'S (KSS) is investing to migrate their systems into the cloud. The migration will affect Kohl’s e-commerce, mobile, and business operations. This should modernize the company’s technology and optimize the omnichannel delivery process.Credit Suisse downgraded MAXAR TECHNOLOGIES (MAXR) to neutral from outperform, lowering one-year price target for the stock by 6.2%.SIGNENT JEWELERS (SIG) shares fell 20.24% on disappointing earnings yesterday. CEO Gina Drosos announced a three-year plan that revolves around a large e-commerce push. Signet’s business has certainly been negatively affected by the slowing traffic to shopping malls.SOCIETE GENERALE SA (GLE.FR) Deputy Chief Executive Officer Didier Valet will be stepping down from his position following internal disagreements regarding a court case in which the company is accused of manipulating Libor.Goldman Sachs lowered TERRAFORM POWER (TERP) from neutral to sell, reducing the price target to $11 down from $12. TerraForm reported earnings on March 7 that trailed estimates.UNITEDHEALTH GROUP (UNH) is no longer interested in acquiring any part of ENVISION HEALTHCARE (EVHC). Envision shares declined 7.82% on the news, while UnitedHealth shares only fell 0.79%.WALMART (WMT) is expanding its grocery home-delivery services to over 100 metro areas. The plan is for the service to be accessible to more than 40% of US households by the end of 2018.  Uber technologies will be the main provider of the delivery service which will cost $9.95 per delivery.ZENDESK (ZEN) is planning to have a private offering of $500M convertible senior notes due in 2023.

Large-Cap Conviction Buy Movers

 Winners Ticker Sector Industry 1 Day Return 5 Day Return YTD
TransDigm Group Incorporated TDG Industrials Aerospace and Defense




MSCI Inc. MSCI Financials Financial Exchanges and Data




MSC Industrial Direct Co., Inc. MSM Industrials Trading Companies and Distributors




The Allstate Corporation ALL Financials Property and Casualty Insurance




Entercom Communications Corp. ETM Consumer Discretionary Broadcasting




Losers Ticker Sector Industry 1 Day Return 5 Day Return YTD
Norfolk Southern Corporation NSC Industrials Railroads




Huntsman Corporation HUN Materials Diversified Chemicals




National Beverage Corp. FIZZ Consumer Staples Soft Drinks




Kansas City Southern KSU Industrials Railroads




Federated Investors, Inc. FII Financials Asset Management and Custody Banks




Source: S&P Capital IQ            

Large-Cap Conviction Short Movers

 Winners Ticker Sector Industry 1 Day Return  5 Day Return YTD
ARMO BioSciences, Inc. ARMO Healthcare Biotechnology




Riot Blockchain, Inc. RIOT Healthcare Biotechnology




Menlo Therapeutics Inc. MNLO Healthcare Pharmaceuticals




Rite Aid Corporation RAD Consumer Staples Drug Retail




Tesla, Inc. TSLA Consumer Discretionary Automobile Manufacturers




Losers Ticker Sector Industry 1 Day Return  5 Day Return YTD
Square, Inc. SQ Information Technology Data Processing and Outsourced Services




Pandora Media, Inc. P Information Technology Internet Software and Services




Nutanix, Inc. NTNX Information Technology Internet Software and Services




PlayAGS, Inc. AGS Consumer Discretionary Casinos and Gaming




Longfin Corp. LFIN Financials Financial Exchanges and Data




Source: S&P Capital IQ            

Upcoming Earnings & Events

Company Name




Earnings Date


Event Type

Darden Restaurants, Inc.






Earnings Release Date

MSC Industrial Direct Co., Inc.  





Estimated Earnings Release Date

Celanese Corporation






Estimated Earnings Release Date

J.B. Hunt Transport Services, Inc.  





Estimated Earnings Release Date

UnitedHealth Group Incorporated






Estimated Earnings Release Date

Comerica Incorporated  





Earnings Release Date

M&T Bank Corporation






Estimated Earnings Release Date

Quest Diagnostics Incorporated  





Estimated Earnings Release Date

BB&T Corporation






Earnings Release Date

AT&T Inc.  





Estimated Earnings Release Date

Caterpillar Inc.






Estimated Earnings Release Date

Gentex Corporation  





Estimated Earnings Release Date

IDEX Corporation






Estimated Earnings Release Date

Kansas City Southern  





Estimated Earnings Release Date

Lockheed Martin Corporation






Estimated Earnings Release Date

Norfolk Southern Corporation






Estimated Earnings Release Date

Line for QuantShots

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