Morning Brief

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Morning Quant Ride

Apr 30, 2018

Traders' Corner

Key Highlights

  • US equity index futures are rallying on M&A news from T-Mobile-Sprint and Marathon Petroleum-Andeavor
  • McDonald’s reports positive 1Q2018 EPS results with US comp sales +2.9%
  • USD$ Index is +0.36% on expectations for widening interest rate differentials
  • European equities broadly higher, Euro Stoxx 600 +0.18%
  • Japanese and Mainland China markets closed, Hang Seng sharply higher +1.74%
  • Major Cryptocurrencies are mixed to start the week, however, our Crypto Signals have Buy signals on 18 out of the top 30


US Stocks Before the Open

US equity index futures are pointing to a positive open this morning with S&P 500 e-mini futures +0.30%, Nasdaq 100 e-minis +0.46% and Dow Jones e-minis +0.48%. Over the weekend, T-Mobile announced plans to acquire Sprint Corp for USD$26.5bn.  Pre-market, T-Mobile (TMUS) is down 2.7% while Sprint (S) is -13.1%.  This morning Marathon Petroleum announces its intent to buy Andeavor for USD$23.3bn; the combined company would create the largest refiner in the United States.  In addition to the Andeavor deal, Marathon Petroleum also released its 1Q2018 earnings results which missed Consensus expectations. Before the formal open in NY, Marathon Petroleum (MPC) is -1.8% and Andeavor (ANDV) is +18.9%. 

The yield on the US 10-year is relative unchanged this AM at 2.962%.  Unsurprising, Fed Fund Futures are implying a probability north of 90% that the Fed will raises rates in June.  The USD$ is stronger against the G7 currencies with the USD$ Index currently +0.36%.  Weaker than expected inflation data for Germany is pressuring the EUR€/USD$ with the pair currently -0.46%.  major commodity currencies are down with the AUD$/USD$ -0.47% and USD$/ZAR$ -0.90%.  Investors are beginning to come to the conclusion that the Reserve Bank of Australia (RBA) will lag behind the Fed in raising rates for several years.  Crude oil benchmarks are down 1.0% this morning with both WTI and Brent weak with the rising US oil rig count offsetting worries about the potential fallout of the US choosing to leave the Iran deal in the coming weeks. 

The VIX is relatively unchanged this morning, currently at 15.44 after closing at 15.41 on Friday.  OTM June 18 and September Puts on QQQ, May 18 Calls on AMD are the move actively traded options in the US this morning.

Some pre-market highlights from this morning:

  • Affiliated Managers (AMG) reported 1Q2018 results that beat Street expectations with growth in revenues driving the beat.  AMG is -2.5% in pre-market trading.
  • Allergan (AGN) reported 1Q2018 EPS 11.6% ahead of Consensus and raises it FY Guidance for CY2018.  AGN is up 2.4% pre-market.
  • Loew's Corp (L) reported 1Q2018 earnings well ahead of expectations.   Pre-market, the stock is +1.1%.
  • McDonald's (MCD) reported 1Q201 results that top Street estimates driving by a US comp sales print of +2.9%.  MCD is +3.8% in pre-market trading.

Major companies reporting earnings over the next 24 hours:

In today's market action we are watching the following Conviction Buy market laggards (Click name for Q-Factor rating and financial data).

American Eagle Outfitters, Inc. - 3.81% off its 52wkH on 04/13/2018, reports earnings on 05/18/2018

Apple Inc. - 10.51% off its 52wkH on 03/13/2018, reports earnings on 05/01/2018

Micron Technology, Inc. - 25.07% off its 52wkH on 03/13/2018, reports earnings on 06/22/2018

MKS Instruments, Inc. - 18.77% off its 52wkH on 03/12/2018, reports earnings on 07/26/2018

ON Semiconductor Corporation - 15.20% off its 52wkH on 03/13/2018, reports earnings on 04/30/2018

Skyworks Solutions, Inc. - 25.98% off its 52wkH on 11/06/2017, reports earnings on 05/03/2018

Cryptocurrency Morning Brief

Cryptocurrency Market Data

Major cryptocurrencies were mostly flat over the weekend and are mixed to start the week. Bitcoin is down 1.66% as of 7:10AM EST at USD$9,256.40, from yesterday’s UTC close. Bitcoin is down 4.02% over the past 5 days, yet it is up ~USD$200 since Friday’s close. Notable top performers from the thirty cryptocurrencies which our machine learning signals model include: Tron +5.16%, and QTUM +4.41% from yesterday’s UTC close using volume-weighted exchange pricing (VWEP). Total market capitalization for cryptocurrencies is now at USD$430.18bn. Of the 30 cryptocurrencies of which Quantamize produces buy/don’t own machine learning signals on, 18 signals are buys.

Cryptocurrency Market News

MasterCard has filed a patent for a system to speed up the activation of new nodes in a blockchain, according to an application published at the US Patent Office. This patent will allow new nodes to scan and verify the blockchain at greater speeds. The Industrial and Commercial Bank of China (ICBC) is exploring a way to authenticate digital certificates and store data in a shareable blockchain. Iran has developed its own blockchain-based cryptocurrency after its Central Bank banned bitcoin trading amid concerns of money-laundering and erratic price swings of Bitcoin. The cryptocurrency was jointly developed by the Central Bank, the state-run Post Bank, and Iran’s Information and Communications Technology ministry.

Europe at Midday

European equities are higher across the board with the Euro Stoxx 600 +0.18%, the CAC40 +0.23%, the DAX +0.03%, and the FTSE 100 +0.15%. Consumers discretionary (+0.44%), consumer staples (+0.40%), and utilities (+0.40%) were the strongest performing sectors in the Euro Stoxx 600, while energy (-0.62%), information technology (-0.41%), and materials (-0.13%) were the largest underperformers. Notable movers in the Euro Stoxx 600 included: Vivendi SA (+2.01%), Safran SA (+1.51%), Unilever NV (+1.36%), and Anheuser-Busch (-1.69%). Market breadth in the Euro Stoxx 600 was positive with 366 of 600 stocks rising higher.

Eurozone M3 money supply for March grew faster than expected (+4.2% vs +4.0% consensus). The EU is reportedly considering slashing funding to countries where judicial independence is considered to be in jeopardy. Possible targets of the cut include Poland and Hungary.

German retail sales growth for March came in slightly softer than expected on a y/y basis (+1.3% vs 1.4% expected). The ECB is urging Germany to agree to debt relief proposals for Greece, which would enable Greece to repay debt at a rate that is in accordance with the country’s economic condition.

Luigi Di Maio, leader of the Italian Five Star party, is calling for early elections after negotiations with Democratic Party leader Matteo Renzi failed to gain traction. Italian CPI growth for April was slightly softer than expected on a y/y basis (+0.5% vs 0.6% estimated).

Asia & Australia While You Were Sleeping

Japanese equity markets were closed today for Showa Day. Embattled Prime Minister Shinzo Abe’s approval rating increased modestly in March, to 43% from 42%, according to a Nikkei/TV Tokyo survey. In contrast, Abe’s disapproval rating in March rose as well (51% vs 49% previously).

Mainland Chinese equity markets were closed today for Labour Day. Hong Kong equities broadly advanced with the Hang Seng +1.74%. Real estate (+2.67%), consumer discretionary (+2.50%), and financials (+2.32%) were the biggest outperformers in the Hang Seng, with energy (-0.32%), industrials (+0.84%) and utilities (+0.94%) the largest laggards. Notable movers in the Hang Seng included: BOC Hong Kong (+4.61%), Sunny Optical (+3.67%), Sun Hung Kai Properties (+3.26%), and China Mengniu (-3.59%). Market breadth in the Hang Seng was overwhelmingly positive with 44 of 50 stocks finishing higher. Chinese April manufacturing PMI was in-line with consensus (51.4 vs 51.3 expected). Non-manufacturing PMI for April was slightly above estimates (54.8 vs 54.4 consensus). Chinese officials announced on Saturday that the government will be removing restrictions imposed on foreign investors, which limited foreign investment to a maximum 30% joint venture stake in Chinese companies.

Indian equities posted gains with the Sensex +0.55% and the Nifty 50 +0.44%. Industrials (+1.60%), materials (+1.32%), and consumer staples (+0.73%) were the strongest performing sectors in the Sensex, while energy (-2.66%) was the only sector to finish in the red. Notable movers in the Sensex included: Hindustan Unilever (+2.34%), Tata Consultancy (+2.22%), Larsen & Toubro (+1.73%), and Reliance Industries (-3.18%). Market breadth in the Sensex was decidedly positive with 21 stocks advancing to only 9 declines.

Australian equities rose with the ASX 200 +0.49%. Real estate (+1.83%), telecommunications (+0.94%), and financials (+0.77%) were the biggest outperformers while materials (-0.14%), energy (-0.01%), and industrials (+0.6%). Notable movers in the ASX 200 included: ARB Corp (+3.13%), Domino’s Pizza (-3.88%), ResMed Inc (-2.08%), and BlueScope Steel (-2.02%). Market breadth in the ASX 200 was notably positive with 132 of 200 stocks rising. The Melbourne Institutes inflation gauge increased 0.5% m/m in April, higher than the increase in March (+0.1%). Scoot Morrison, the Treasurer of Australia, announced that the government will not increases taxes above 23.9% of GDP.


Stocks Trending in the News

Click name for Q-Factor rating and financial data.

BASF (BAS.GR) has acquired EU antitrust clearance for its acquisition of business units from Bayer (BAYN.GR). Bayer was forced to shed these units after its $62.5 billion deal to purchase Monsanto.

Disney’s (DIS) Avengers: Infinity War film produced the highest grossing opening weekend in cinematic history, pulling in $250 million in domestic US sales alone. The previous record holder was Star Wars: The Force Awakens, which grossed $248 million during opening weekend.

Marathon Petroleum (MPC) has announced that it will be acquiring rival oil refiner Andeavor (ANDV) for $23.3 billion. The deal would create the largest independent oil producer in the US.

Marriot Vacations (MAR) agreed to purchase ILG Inc. (ILG) for $4.7 billion in a cash-and-equity deal. The combined company would be the worlds largest luxury timeshare resort firm.

McDonalds (MCD) reported 1Q2018 EPS that was firmly above consensus ($1.79 vs $1.67 expected).

T-Mobile (TMUS) has reportedly agreed to acquire Sprint Corp (S) for $26.5 billion worth of T-Mobile’s equity. 

Walmart (WMT) has agreed to sell its UK based supermarket unit, Asda Group Ltd, to J Sainsbury PLC (SBRY.LN) for $10.1 billion worth of cash and stock combined.

Xerox’s (XRX) $6.1 billion merger deal with Fujifilm has been temporarily halted after a court ruling determined that a lawsuit filed by shareholders claiming the deal severely undervalued Xerox was justified.

Stock Movers

Conviction Buy Winners & Losers

Winners  Ticker Sector Industry 1 Day Return 5 Day Return  YTD
Encompass Health Corporation EHC Healthcare Healthcare Facilities 7.06% 6.25% 24.55%
Verizon Communications Inc. VZ Telecommunication Services Integrated Telecommunication Services 3.64% 7.66% -2.57%
Medical Properties Trust, Inc. MPW Real Estate Healthcare REITs 2.48% 2.97% -7.04%
O'Reilly Automotive, Inc. ORLY Consumer Discretionary Automotive Retail 2.29% 18.88% 9.46%
Union Pacific Corporation UNP Industrials Railroads 2.28% -0.34% 0.82%


Losers Ticker Sector Industry 1 Day Return 5 Day Return  YTD
Federated Investors, Inc. FII Financials Asset Management and Custody Banks -13.13% -14.37% -19.19%
Micron Technology, Inc. MU Information Technology Semiconductors -5.23% -6.12% -8.86%
Comcast Corporation CMCS.A Consumer Discretionary Cable and Satellite -4.56% -4.22% -6.91%
Prestige Brands Holdings, Inc. PBH Healthcare Pharmaceuticals -2.88% 1.71% -7.82%
MKS Instruments, Inc. MKSI Information Technology Semiconductor Equipment -2.75% -1.47% -9.90%

Source: S&P Capital IQ

Conviction Short Winners & Losers

Winners Ticker Sector Industry 1 Day Return 5 Day Return  YTD
Southwestern Energy Company SWN Energy Oil and Gas Exploration and Production -7.30% -1.41% -3.23%
Cree, Inc. CREE Information Technology Semiconductors -5.02% -5.18% -5.14%
Nutanix, Inc. NTNX Information Technology Internet Software and Services -4.91% -8.22% 0.98%
Radius Health, Inc. RDUS Healthcare Biotechnology -4.43% -5.29% -12.33%
Delek US Holdings, Inc. DK Energy Oil and Gas Refining and Marketing -3.70% -0.38% 14.45%


Losers Ticker Sector Industry 1 Day Return 5 Day Return  YTD
Exact Sciences Corporation EXAS Healthcare Biotechnology 11.63% 9.47% -0.99%
Puma Biotechnology, Inc. PBYI Healthcare Biotechnology 6.31% 11.43% -30.96%
AnaptysBio, Inc. ANAB Healthcare Biotechnology 6.22% 1.71% -7.43%
Seattle Genetics, Inc. SGEN Healthcare Biotechnology 5.57% 3.82% -3.59%
Under Armour, Inc. UAA Consumer Discretionary Apparel, Accessories and Luxury Goods 5.44% 10.75% 23.56%

Source: S&P Capital IQ

Company Name Ticker Earnings Date Event Type
Allison Transmission Holdings, Inc. ALSN 4/30/2018 Estimated Earnings Release Date
Genesee & Wyoming Inc. GWR 4/30/2018 Estimated Earnings Release Date
Pfizer Inc. PFE 4/30/2018 Earnings Release Date
Verisk Analytics, Inc. VRSK 4/30/2018 Earnings Release Date
Jack Henry & Associates, Inc. JKHY 4/30/2018 Earnings Release Date
The Howard Hughes Corporation HHC 4/30/2018 Earnings Release Date
Xylem Inc. XYL 5/1/2018 Earnings Release Date
ServiceMaster Global Holdings, Inc. SERV 5/1/2018 Earnings Release Date
Fidelity National Information Services, Inc. FIS 5/1/2018 Earnings Release Date
TransDigm Group Incorporated TDG 5/1/2018 Earnings Release Date
Unum Group UNM 5/1/2018 Earnings Release Date
Arthur J. Gallagher & Co. AJG 5/1/2018 Earnings Release Date
Fiserv, Inc. FISV 5/1/2018 Earnings Release Date
CDW Corporation CDW 5/1/2018 Earnings Release Date
AMETEK, Inc. AME 5/2/2018 Earnings Release Date