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Morning Quant Ride Mar 21st, 2018

Mar 21, 2018

Traders’ Corner

US Market Preview

US equities are set to open mixed this morning. S&P 500 futures edged higher by 0.02%, while futures for the NASDAQ Composite and Russell 2000 are lower by 0.26% and 0.01%, respectively. Much of the focus today will be on the FOMC, and its decision regarding interest rate hikes. A rate increase of 25 bps is expected. Investors should stay aware of this decision, as well as any guidance provided about potential rate increases above the 3 that have been scheduled for this year. Additional economic data set to be released today includes the US current account balance at 8:30 a.m, as well as existing home sales at 10:00 a.m for the month of February.

US options markets appear to relatively muted this morning with the VIX currently 18.07 ahead of the FOMC announcement later today.  The VVIX, the measure of the volatility of the VIX, remains elevated, hovering well north of 100.  The CBOE Skew index, similar to the VVIX, remains elevate points to continued demand for OTM S&P 500 Puts.  Pre-market, most trading appears to be focused on March 21 SPY strangles and April 20 OTM Puts.

Asian & Australia Equities Recap

Asian equity markets finished their trading session mixed.  Japanese equity markets were closed for a holiday celebrating the Spring Equinox.  News headlines are quiet with the only notable news story the fact that two deputy governors of the Bank of Japan (BOJ) conveyed conflicting views on the BOJ’s quantitative easing policy.

Chinese and Hong Kong equity markets closed down with the Hang Seng -0.43%, Hang Seng China Enterprise index -0.60% and the CSI 300 -0.41%.  Energy, real estate and utilities stocks were the largest outperformers in Hong Kong while consumer discretionary, tech and telecom stocks were the biggest underperformers.  Notable movers include: Geely Automobiles -6.18%, China Resources Land +5.25%, China Overseas Land & Investment +4.32%, AAC Technologies -3.46%, and Ping An -3.23%.  Investment sentiment weakened in the middle of the trading day as investors worry about a rollback in policy to use state funds to stabilize equity markets.  There are concerns that the CCP will roll out additional rules in April and May to further cut leverage in the financial sector (and tighten monetary policy).  A newspaper affiliated with China’s ruling Communist Party urged “strong restrictive measures” against alleged U.S. soybean dumping, underscoring concern that trade disputes pressed by President Donald Trump could extend into other sectors.

Indian equities closed up with the Sensex +0.42% and Nifty 50 +0.31%.  15 of 19 sectors finished positive in Mumbai with telecom and energy stocks the biggest outperformers.  Notable movers included: Bharti Airtel +4.61%, NTPC +2.47% and Tata Steel -1.85%.

In the Land Down Under, Aussie equities finished positive with the ASX 200 +0.23%.  Energy, financials and materials stocks were outperformers in Sydney while utilities, telecom and real estate stocks were the worst performers.  Notable movers include: Whitehaven Coal +8.79%, Retail Food Group -7.59%, Nufarm Ltd/Australia +5.45%, Beach Energy +4.56%, and Bluescope Steel +4.39%.  The Australian government’s proposal to cut the corporate tax rate to 25% from 30% is being backed by key senators in the Australian Parliament.

European Equities Recap

European equities are down nominally with the Euro Stoxx 600 -0.08%.  Regional indices are mixed with the FTSE 100 -0.42%, CAC 40 -0.08% and the DAX +0.11%.  Utitilities, E&Ps, and Auto & Parts stocks are outperformers in European markets this morning; travel & leisure, materials and industrial goods stocks are the biggest underperformers.  Notable movers include: Deutsche Bank -1.91%, Cie de Saint-Gobain -1.78%, Bayer AG +1.28%, Airbus SE -1.20%, and Safran SA -1.18%.  IFO Institute forecasts that German GDP growth will reach +2.6% in CY2018 and +2.1% in CY2019.  EU Commission proposes new measures to ensure that all companies pay fair tax in the EU where tax revenues will be collected by the Member States where the users are located, and will only apply to companies with total annual worldwide revenues of EUR€750M and EU revenues of EUR€50M.  Former Prime Minister Silvio Berlusconi backed a Center-Right Five Star government.  The FTSE MIB is +0.05% on this news.

The VSTOXX index is trending down in sympathy with the VIX, currently at 14.93.  However, in contrast to the VSTOXX, the V-VSTOXX, a measure of the volatility of VSTOXX, is trending up this morning implying heavy Put and Call trading.

Latin American Equities

Latin American equities were mixed yesterday as the Ibovespa was up 30bps with 25 of its 52 constituents positive yesterday. Additionally, the Mexbol was down 109bps and the Argentinian Merval was up 23 bps yesterday. Blackrock has said that the record Brazilian results will extend its performance. In local currency, the Ibovespa is up 10% on the year, outperforming most global equity markets. Currently the index is 40% below its peak in dollar terms. After the market close yesterday, Chile’s Pinera will permit Tianqi Lithium's bid for 32% of SQM to go forward. Tianqi happens to also partner with Albermarle, which has a large share in Chilean lithium mining as well. Economic data in the LatAm region from yesterday includes Chile & Colombia holding their overnight rates steady. Additionally, Argentina will be reporting Q4’17 GDP growth at 4PM today and economists are expecting a 3.6% y/y increase compared with 4.2% in the prior quarter. Lastly, Mexico NAFTA chief, Ildefonso Guajardo, is said to plan a Washington visit today to meet with US Trade Representative, Robert Lighthizer.

Rates & Commodities

US Bond yields are slightly lower to start the day as the 10-Year is at 2.894% from the 2.896% close from yesterday and the 30-Year is at 3.127% from 3.130% from yesterday’s close. The Swaps markets are following as yields are lower across the curve. Investors will be waiting to decipher Jerome Powell’s first FOMC meeting as a rate hike is expected. The Fed raising the overnight rate to a range from 1.50% - 1.75% is priced in with a 78% probability and a 22% probability that the Fed leaves rates unchanged. Earlier this morning, economic data was released out of the UK showing that weekly earnings for January increased 2.8% vs. 2.6% and that the 3-month unemployment rate as of January ticked down to 4.3% as 168K jobs were added. This positive news has Bonds in Europe selling off with yields higher in all major countries in the area. The money market pricing shows the probability of a rate hike by May rising to 88.6%, compared with 81.4% at the end of last week.The USD$ (90.17) is mostly lower across all major G10 pairs this morning as traders seem less confident that the Fed will signal four rate hikes this year and may not sound as hawkish as previously thought. Overnight, the CAD$ (1.30) & MXN$ (18.61) are stronger against the USD, up 34bps & up 100bps respectively, off the news that the US will be removing the auto-content proposal in the NAFTA revisions. The proposal mandated that auto-vehicles made in Canada & Mexico contain at least 50% of its parts from the US. Following the economic news out of the UK, the GBP£ (1.403) is up 41bps against the USD$. Of the 9 members from the Bank of England, three of the members called for an immediate quarter-point increase, while two others said they should raise rates in May.WTI Crude oil is at $64.14/barrel up 94bps from yesterday’s close as the API data release was a big surprise for the market. Headline crude stockpiles had a surprise drawdown. Additionally, there is ongoing Saudi-Iran tensions and further Venezuelan output declines which is being shown to take supply pressure off the oil market. Precious metals are higher to start the day as gold is up 35bps at 1,315 USD$/ounce while silver (16.27 USD$), platinum (945.39 USD$) palladium (984.36 USD$/ounce) are up 41bps, 10bps & 15bps respectively.


Cryptocurrencies are extending gains on the week as mostly all major cryptos are rallying today except for NEM which is down 5.38%. There was positive news out of Asia overnight including South Korea’s leading mobile carrier, Korea Telecom, saying that it plans to use a new telecommunications system powered by blockchain security solutions. Additionally, in South Korea, the Financial Services Commission (FSC) has aired plans to encourage the use of blockchain technology in new payment systems to better protect user information. During the second day of the G20 meeting in Buenos Aires, world economic leaders have set a July deadline for the first step towards unified regulation of cryptocurrencies. The G20 leaders will be offering a very concrete and specific recommendations on what and what not to regulate along with the data they will need going forward. There are two alleged controversial claims from yesterday afternoon – the first being that the Russian government helped the Venezuelan’s launch the Petro. This is a report issued by Time Magazine. The second controversial claim is that Sylvain Ribes, a cryptocurrency trader, wrote a report saying that volumes on most of the small-scale cryptocurrencies are fake or inflated. Ribes analyzed data on OKEx, the fourth largest cryptocurrency trading platform in the world.

Following Tuesday's market decline we are watching a few of our A-Rated Laggards:

ACCO Brands Corporation - 10.85% off its 52wkH, reports earnings on 04/27/2018

AmerisourceBergen Corporation - 16.07% off its 52wkH, reports earnings on 05/07/2018

AT&T Inc. - 14.51% off its 52wkH, reports earnings on 04/20/2018

QuantShot: Campbell Soup Company - 27.09% off its 52wkH, reports earnings on 05/16/2018

QuantShot:Comcast Corporation - 21.43% off its 52wkH, reports earnings on 04/25/2018

CVS Health Corporation - 25.07% off its 52wkH, reports earnings on 05/02/2018

Ennis, Inc. - 6.51% off its 52wkH, reports earnings on 04/23/2018

Huntsman Corporation - 15.66% off its 52wkH, reports earnings on 04/26/2018

Lear Corporation - 6.81% off its 52wkH, reports earnings on 04/24/2018

Louisiana-Pacific Corporation - 7.15% off its 52wkH, reports earnings on 05/04/2018

QuantShot: Pfizer Inc. - 7.86% off its 52wkH, reports earnings on 05/01/2018

The J. M. Smucker Company - 8.26% off its 52wkH, reports earnings on 06/07/2018

Verizon Communications Inc. - 12.93% off its 52wkH, reports earnings on 04/24/2018

*All returns are price returns

Companies Trending in the News

Amazon Inc (AMZN) has surpassed Alphabet Inc (GOOGL) has the second largest US company by market cap. Amazon has a current market cap of $768 billion, compared to Apple’s market cap of $763 billion.

The EU has granted Bayer AG (BAYN.GR) approval to proceed with its $62.5 billion purchase of Monsanto. Before the deal could be completed, antitrust guidelines needed to be satisfied.

The corporate offices of Bayerische Motoren Werke AG (BMW.GR) were raided by German authorities on Tuesday in connection a continuing investigation into an emissions-cheating scandal.

Geely Automobile Holdings (0175 HK) shares are down 6.18% after announcing that domestic sales in China will come under pressure from changes to car-purchasing taxes.

Shares of Nordstrom, Inc (JWN) are 2% lower pre-market after halting plans on a buyout deal to a failure to reach an agreement price.

Tencent Holdings Ltd (TCEHY) posted 4Q earnings that beat consensus estimates. Tencent’s reported net income for the quarter was $3.3 billion, compared to an estimate of $2.6 billion.

Tesla Inc (TSLA) investors are voting on the size of the compensation package for CEO Elon Musk. Tesla’s board of directors is seeking investor permission to pay Musk $2.6 billion in compensation. If the plan is approved, this would be the largest ever compensation package of its kind.

Winnebago Industries (WGO) beat 2Q EPS consensus estimates. the company reported earnings per share of $0.69 compared to a $0.67 estimate.

Large-Cap Conviction Buy Movers

Winners Ticker Sector Industry 1 Day Return 5 Day Return YTD
S&P Global Inc. SPGI Financials Financial Exchanges and Data




Markel Corporation MKL Financials Property and Casualty Insurance




IDEX Corporation IEX Industrials Industrial Machinery




TransDigm Group Incorporated TDG Industrials Aerospace and Defense




Broadridge Financial Solutions, Inc. BR Information Technology Data Processing and Outsourced Services




Losers Ticker Sector Industry 1 Day Return 5 Day Return YTD
Prestige Brands Holdings, Inc. PBH Healthcare Pharmaceuticals




AmerisourceBergen Corporation ABC Healthcare Healthcare Distributors




Celanese Corporation CE Materials Specialty Chemicals




Entercom Communications Corp. ETM Consumer Discretionary Broadcasting




Comcast Corporation CMCS.A Consumer Discretionary Cable and Satellite




Source: S&P Capital IQ            

Large-Cap Conviction Short Movers

Winners Ticker Sector Industry 1 Day Return  5 Day Return YTD
GoPro, Inc. GPRO Consumer Discretionary Consumer Electronics




Riot Blockchain, Inc. RIOT Healthcare Biotechnology




Rite Aid Corporation RAD Consumer Staples Drug Retail




Menlo Therapeutics Inc. MNLO Healthcare Pharmaceuticals




Portola Pharmaceuticals, Inc. PTLA Healthcare Biotechnology




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




Longfin Corp. LFIN Financials Financial Exchanges and Data




PBF Energy Inc. PBF Energy Oil and Gas Refining and Marketing




Dynavax Technologies Corporation DVAX Healthcare Biotechnology




Whiting Petroleum Corporation WLL Energy Oil and Gas Exploration and Production




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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