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Morning Quant Ride Mar 28, 2018

Mar 28, 2018

Traders’ Corner

US Market Preview

US options, pre-markets, are implying a mixed bias with the VIX currently at 21.88 after closing at 22.50 yesterday.  OTM April 20 SPY Puts, OTM March 29 Puts, and OTM May 18 IWM Puts are the most actively traded options this morning.

Following broad declines in US equities yesterday, led a by sharp decline in US technology, futures are mixed this morning. The Dow Jones and S&P 500 are both higher by 0.20% and 0.37% respectively, while the Nasdaq Composite is flat.

Social media stocks, which were significantly down yesterday, are higher this morning with Facebook climbing 1.99%, and Twitter up 1.53%. Developments in the Facebook data breach scandal may be lifting these stocks higher (see below).

The US government is selling a total of $294 billion of debt by weeks end, which would be the highest weekly total since the 2008 financial crisis. Revised 4Q 2017 US GDP came in higher than expected -- 2.9% vs 2.7% estimate for this revision, substantially higher than the 2.5% previous estimate for the previous revision). Additional economic data scheduled for release today includes Pending Homes Sales for February at 10:00 a.m EST, and weekly DOE Crude Inventories at 10:30 a.m EST.

Companies reporting earnings today include Walgreens Boots Alliance Inc. (WBA), GameStop Corp. (GME), and Progress Software Corp (PRGS).

Asian & Australia Equities Recap

The negative investor sentiment that drove the sell-off in US markets yesterday spread to Asian markets as the region broadly closed negative.  In Japan, the Nikkei 225 closed down -1.34% while the Topix was -1.02%.  Telecom, tech and industrials stocks were the worst performing sectors while utilities stocks were the only group positive.  Market breadth finished negative with the Advance/Decline ratio closing at 0.17.  Notable movers included: SUMCO -5.41%, Panasonic -5.09%, Furukawa -4.86%, and SCREEN Holdings -4.73%.  Bank of Japan (BOJ) Governor Haruhiko Kuroda states that the BOJ should stick to its current framework for monetary easing to meeting its inflation target.  Prime Minister Shinzo Abe is set to meet US President Donald Trump on April 18 ahead of the US -North Korea summit.  The Prime Minister is expected to raise issues related to North Korea and ask for exemptions form the steel and aluminum tariffs.

Hong Kong and Chinese equities finished their trading sessions negative with the Hang Seng -2.50%, Hang Seng China Enterprise Index -2.44% and CSI 300 -1.80%.  Consumer staples stocks were the only positive sector in the Hang Seng while tech, consumer discretionary and financials stocks were the worst performers.  Market breadth in Hong Kong was notably negative with the Hang Seng Advance/Decline ratio closing at 0.04.  Notable movers included: Sunny Optical -8.05%, AAC Technologies -6.33%, Geely Automobile -5.83%, Tencent Holdings -4.63% ang Ping An Insurance -4.07%.  Volume traded in Hong Kong was notably weak, 30.53% below its 10-day average (volume in Shanghai was 4.03% below its 10-day average).  During a meeting between North Korea’s Kim Jong-Un and China’s Xi Jinping, Kim expressed a commitment to denuclearize the Korean peninsula.

Indian equities closed down with the Sensex -0.62% and Nifty 50 -0.69%.  Telecom stocks were the worst performing sector in the Sensex.  Market breadth in Indian equity markets was negative, albeit, less so than Japanese and Hong Kong equities with the Nifty 50 Advance/Decline ratio finishing at 0.56.  Notable mover included: Wipro +3.27%, Tata Steel -3.25%, Bharti Airtel -3.05%, Coal India +2.94% and Adani Ports & Special Economic Zone -2.93%.

In the Land Down Under, Aussie equities finished their trading session negative with the ASX 200 -0.73%.  Materials, consumer discretionary and healthcare stocks were the worst performing stocks while utilities and real estate stocks were the best performing sectors.  Market breadth was negative with the ASX 200 Advance/Decline ratio finishing at 0.38.  Notable movers included: Syrah Resources -8.89%, a2 Milk -7.52%, Orocobre -4.67% and Galaxy Resources -4.64%.  Debate in Australian Parliament about legislation to cute the corporate tax rate to 25% (from 30%) has been delayed to after the Easter break following opposition from 2 independent senators.

While equity markets sold-off, options markets were priced with only 1-month implied volatility for Hang Seng index options jumping upwards.  At the moment, 1-month implied volatility for Hang Seng index options are more than 3 standard deviations above their 1-year average. Options skew remains elevated for which highlights investor demand for OTM Puts.  March 28 and April 27 OTM Puts on the Hang Seng China Enterprise index were the most actively traded options in Hong Kong.  Nikkei 225 April 13 strangles were the most actively traded options in Tokyo.

European Equities Recap

European equities are broadly negative this morning with the Euro Stoxx 600 -0.37%.  Regional indices are down across the board with the FTSE 100 -0.04%, DAX -0.64% and the CAC 40 -0.71%.  Utilities, healthcare, and food &  beverage stocks are the best performing sectors this AM while materials, tech and auto & parts are the biggest laggards.  Market breadth is mixed with Advance/Decline ratio for the Euro Stoxx 50 and the major regional indices hovering around 1.0.  Notable movers include: ASML Holding -3.39%, Unilever +2.51%, Iberdrola +2.02%, Volkswagen -1.87% and Enel +1.75%.  News headlines this morning are highlighting that 1Q2018 was the worst quarter for European stocks since 2016 and that defensive stocks have outperforming cyclical stocks since the initial global equity markets correction in mid-January.  The European Commission is proposing to make cross-border Euro€ payment cheaper throughout the EU.  Reuters is reporting 5,000 finance jobs may be moved out of the UK by Brexit, this is half of the expected total from six months ago.

The French Consumer Confidence Index for March was 100 vs. consensus of 100 and 100 for February.  Italy January Industrial Turnover was reported +5.3% Y/Y and December’s estimate was revised to +7.4% from +7.2%.  Spanish February Retail Sales +1.9%% Y/Y vs +2.2% in January.  Both Italian and Spanish equities are down this AM with the IBEX 35 +0.23% and the FTSE MIB -0.13%.

Implied volatility for European options is moving upwards this morning with the VSTOXX currently at 19.44 after closing at 18.97 yesterday.  1-month options skew remains elevated for major European index options with average skew above the 85th percentile.  The most actively traded options this morning are OTM June 15, April 20, Dec 18 Puts on the Euro Stoxx 50 and Dec 18 Puts on the Euro Stoxx 50 Banks sector.

Latin American Equities

Latin American equities rolled over with the US markets yesterday. Brazil’s Ibovespa was down 150bps with 13 companies out of 63 advancing, Argentina’s Merval declined 127bps with 10 of 29 companies advancing and Mexico’s Mexbol down 15 bps with 15 companies advancing out of 33. Volatility in the LatAm region is picking up as Brazil’s 10D Vol of 14.61 is higher than its 30D Vol of 13.42, Argentina’s 10D Vol is at 20.95 just under its 30D Vol of 21.78 and Mexico’s 10D Vol is at 13.22 vs. its 30D Vol of 12.29. The pickup in volatility reverses trends from earlier this week when 10D volatility was moderately lower than 30D across the region. In Peru today, President Martin Vizcarra, who succeeded Pedro Pablo Kuczynski, holds first cabinet meeting ahead of further changes to government. Argentina held its 7-day repo rate at 27.25% yesterday and analysts see Argentina’s CPI above 20% in the foreseeable future. In Mexico today, Canada’s Prime Minister and Mexican President Pena Nieto will discuss the NAFTA trade agreement regarding steel & aluminum implications from the US. On the economic front in the LatAm region today, Brazil’s MoM and YoY inflation will be released as well as data its budget balance and Net Debt % of GDP. In Mexico, outstanding loans data as of February will be released and its budget balance as of February. Lastly, Colombian unemployment measures will be released, and economic activity, construction activity and industrial production will be released in Argentina.

Rates & Commodities

The US 10-Year bond has rallied this week as investors have been flocking to safety this week. The 10-Year yield is now at 2.757% in comparison to 2.843% from Monday’s open. The US 10-Year has been range bound in a 20bp range from 2.80% to 3.00% since early February, however, following yesterday’s risk asset sell-off this range has finally broke. The US 30-Year bond is following, and the 30-Year Yield is at 3.013%, down from 3.087% from Monday’s open. Bonds across the globe are trading in tandem with US bonds as yields are lower across EMEA & Asia-Pacific. Notably, UK bonds have rallied the most in the EMEA region, and Japan’s 10-Year Yield is at .023%. According to the OIS market, traders are now pricing in less than two Federal Reserve rate hikes for the remainder of the year. The USD$ is surprisingly stronger on the day (89.48), notably 58bps higher against the JPY¥ (106.01), and 52bps higher against the CHF (.95) which are known to be safe-haven currencies. Investors have been selling USD$ in both risk-on and risk-off sentiments this year, however, investors seem to be fleeing to US assets during this week’s trading sessions. Gold is down 59bps at USD$ 1337.08/ounce while silver is down 41bps at USD$ 16.46 and platinum also down 52bps at (USD$ 938.85) while palladium is up 25bps at (USD$ 976.80/ounce). Following USD$ strength, WTI Crude oil is down 72bs at USD$ 64.78/barrel. WTI Crude has been trading above USD$ 65/barrel since last week, however, oversupply concerns have returned to the market. Currently inventory data is driving prices and data released yesterday showed continued buildup in inventories by the US.


Most cryptocurrencies are up on the day; however, they remain lower on the week. Bitcoin is at USD$ 8089.13 up 1.40%, Ethereum is at 464.13 up 1.01%, and Ripple is at USD$ .589 up 1.57%. Technical analysts have been paying very close attention to the “death cross” in Bitcoin. A death cross occurs when the 50-day moving average intersects with the 200-day moving average. This is considered a major bearish technical indicator by traders. These two moving averages are as close as they ever have been in recent history to touching and investors and traders will be paying close attention to price action going forward. A patent has been issued to Ford to use blockchain technology, called the CMMP system, to let cars on the road communicate with each other and reduce traffic. In China, the Investment Association of China (IAC) has scrapped previously reported plans to launch a funding center to boost blockchain development in the country. The Bank of England (BoE) said yesterday that it is undertaking a new proof-of-concept to explore ways its planned real-time gross settlement (RTGS) system could connect with distributed ledger networks. The BoE first announced its intentions to develop a distributed ledger system in 2017. Following this news, the European Central Bank (ECB) and Bank of Japan (BoJ) have said that distributed ledger technology could be used to create new securities settlement mechanism, including “cross-chain atomic swaps” between unconnected ledgers. United States company, Advanced Micro Devices (AMD) has updated one of its drivers to better handle cryptocurrency mining. This updated driver will improve GPU performance when mining cryptocurrencies. Lastly, Massachusetts has halted 5 initial coin offerings (ICO) because the securities that were being sold were unregistered. All the companies will be required to return funds to investors within the next 30 days.

After yesterday's market rally, we are watching these stocks that lagged the market:

QuantShot: AbbVie Inc. - 26.89% off its 52wkH, reports earnings on 04/25/2018

QuantShot: Allison Transmission Holdings, Inc. - 17.05% off its 52wkH, reports earnings on 04/25/2018

QuantShot: Brooks Automation, Inc. - 20.68% off its 52wkH, reports earnings on 04/27/2018

QuantShot: Comcast Corporation - 25.02% off its 52wkH, reports earnings on 04/25/2018

CVS Health Corporation - 27.86% off its 52wkH, reports earnings on 05/02/2018

Eaton Vance Corp. - 10.48% off its 52wkH, reports earnings on 05/23/2018

QuantShot: Kohl's Corporation - 9.61% off its 52wkH, reports earnings on 05/22/2018

QuantShot: Norfolk Southern Corporation - 14.99% off its 52wkH, reports earnings on 04/20/2018

*All returns are price returns**All returns in local currency

Companies Trending in the News

Apple Inc (AAPL) is facing dozens of lawsuits from iPhone users who are accusing the company of slowing older models of its devices down to encourager users to buy new phones.

Alphabet Inc (GOOGL) subsidiary Waymo has agreed to a deal with Jaguar for the purchase of 20,000 cars for its driverless fleet.

Concho Resources Inc (CXO) has agreed to purchase rival shale oil producer RSP Permian Inc. (RSPP) for $8 billion. The deal was for a 100% stake in Permian.

Daimler AG (DAI.GR) and Bayerische Motoren Werke AG (BMW.GR) are planning to merge their Car2Go and DriveNow car-sharing operations. The new entity will serve 4 million customers with a fleet of 20,000 cars.

Facebook (FB) CEO Mark Zuckerberg has agreed provide his first testimony to US lawmakers regarding how Facebook manages the data of its users. Shares of Facebook are down nearly 18% since news of the data breach scandal broke. Facebook has stated that it will put into place new security settings to address privacy concerns in order to avoid the imposition of external regulation on the company.

SoftBank Group Corp. (SFTBY) has announced its plans for a $200 billion solar power project in Saudi Arabia, which would be the largest in the world.

Takeda Pharmaceutical Co (4502 JP) is considering a bid for Shire Plc that could be worth more than $50 billion.

Walgreens Boots Alliance (WBA) has completed the takeover of 1,932 Rite Aid Pharmacies. The deal was agreed upon last year.

Large-Cap Conviction Buy Movers

Winners   Ticker   Sector   Industry   1 Day Return   5 Day Return   YTD
The Procter & Gamble Company   PG   Consumer Staples   Household Products  






Atmos Energy Corporation   ATO   Utilities   Gas Utilities  






Black Hills Corporation   BKH   Utilities   Multi-Utilities  






CenterPoint Energy, Inc.   CNP   Utilities   Multi-Utilities  






National Beverage Corp.   FIZZ   Consumer Staples   Soft Drinks  






Losers   Ticker   Sector   Industry   1 Day Return   5 Day Return   YTD
J.B. Hunt Transport Services, Inc.   JBHT   Industrials   Trucking  






LogMeIn, Inc.   LOGM   Information Technology   Internet Software and Services  






AbbVie Inc.   ABBV   Healthcare   Biotechnology  






Reinsurance Group of America, Incorporated RGA   Financials   Reinsurance  






Eagle Materials Inc.   EXP   Materials   Construction Materials  






Source: S&P Capital IQ                      

Large-Cap Conviction Short Movers

Winners   Ticker   Sector   Industry   1 Day Return   5 Day Return   YTD
Longfin Corp.   LFIN   Financials   Financial Exchanges and Data  






Editas Medicine, Inc.   EDIT   Healthcare   Biotechnology  






Nutanix, Inc.   NTNX   Information Technology   Internet Software and Services  






Array BioPharma Inc.   ARRY   Healthcare   Biotechnology  






Tesla, Inc.   TSLA   Consumer Discretionary   Automobile Manufacturers  






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






Dynavax Technologies Corporation   DVAX   Healthcare   Biotechnology  






Carrizo Oil & Gas, Inc.   CRZO   Energy   Oil and Gas Exploration and Production  






HCP, Inc.   HCP   Real Estate   Healthcare REITs  






Realogy Holdings Corp.   RLGY   Real Estate   Real Estate Services  






Source: S&P Capital IQ                      

Upcoming Earnings & Events

Company Name




Earnings Date


Event Type

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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