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Stocks dropping in early trading as worries about decelerating global growth remain in focus

Mar 07, 2019

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Market data as of 7am EST

 

US Stocks

  • US stocks index futures are edging down in pre-market trading with front-month Dow Jones minis –0.22%, S&P 500 minis –0.14% and Nasdaq 100 minis –0.16% 
  • US Industrials stocks are sending out cautionary signals on global trade and economic growth according to DataTrek Research.  As of Wednesday’s close, the S&P 500 Industrials sector was +16% YTD but finished down 2.3% for the day yesterday.  According to DataTrek Research, given that we are in the last innings of the US-China trade talks, yesterday’s share negative move is unexpected and alarming. 
  • In spite of the rally in emerging markets stocks to start the year, EPS trends remain negative.  Analysts at investment banks continue to cut their forecasts and price targets for emerging markets stocks.  It will be interesting to see how this impasse between bullish and bearish investors plays out. 
  • The fees war among ETFs has reached socially responsible strategies (ESG) as well!  Starting today, DWS Group’s Xtrackers MSCI USA ESG Leaders Equity ETF (USSG) will drop its fees to USD$1 for every $1,000 invested, or a net expense ratio of 0.10%. 
  • The VIX is  moving down this morning and is currently at 14.37 after closing at 15.74 yesterday
  • Eli Lilly (LLY) March 15 OTM Calls & Puts, NIO (NIO) March OTM Calls and FXI April 18 OTM Calls are some of the most heavily traded options in the US pre-market this morning. 
  • According to strategists at JP Morgan, options markets are pricing in too much of a bullish outlook for General Electric (GE).  At the moment, General Electric (GE) options are pricing in a strong probability that the share-price moves to USD$10 vs. Dropping back to USD$7.50.  General Electric (GE) closed at USD$9.11 at yesterday’s market close. 
  • Goldman Sachs strategists are arguing investors should buy straddles on SPDR S&P Biotech ETF (XBI) to play volatility in the Biotech sector.  The resignation of FDA Commissioner Scott Gottlieb created uncertainty for the sector and has raised overall levels of volatility.  For those readers who are new to options, a straddle is a type of options strategy that benefits from upside and downside moves.  The buyer of a straddle is buying a call and put on an “underlying asset”.  In this case, the underlying would be the SPDR S&P Biotech ETF (XBI).  This structure is typically used to play rising volatility of the underlying security. 
  • US 10-Year Treasury Bonds are higher with yields down -1.09 basis points to 2.6825%
  • The US Treasury 2s-10s Spread has narrowed 0.07 basis points to 0.18%
  • WTI Crude is currently down -0.6% to USD$56.22/bbl with the Brent-WTI spread up USD$2.19 to USD$10.07/bbl
  • Gold is currently little changed 0.02% to USD$1286.64/oz

Stocks Trending in the News

 

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Global Consumer Stocks Trending in the News

  • Amazon (AMZN) said it is closing its pop-up electronics stores as it adjusts its bricks and mortar strategy.    Amazon had opened 87 pop-up stores in malls and some larger retailers and expects to close them all within a month, calling it an experiment that will no longer continue.  Amazon will continue with its book stores and 4-star stores, where it sells only items rated 4 stars or more on its site.  Amazon is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • Continental AG (DB:CON) said it is seeing a “muted” start to the year, saying it expects 2019 to see lower vehicle production as compared to 2018.  Continental is the largest maker of auto parts in the world.  Continental sees a slowdown in China in the first half and expects margins to drop to 8-9%, down from 9.3% in 2018.  Continental is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.
  • Dollar Tree (DLTR) announced it is closing or rebranding almost 600 Family Dollar Stores.  Dollar Tree took a USD$2.73 billion charge in its most recent results on an asset it paid USD$9 billion for in 2015. Dollar Tree's Family Dollar stores have lagged in performance and are weighing on Dollar Tree’s results.  Dollar Tree is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas. 

Global Information Technology & Communication Services Stocks Trending in the News

  • Care.com (CRCM) fourth quarter revenue was USD$49.9 million matching consensus of USD$49.8 million.  Fourth quarter ESP of 26 cents beat 21 cents consensus.  Care.com gave first quarter EPS guidance of 8 cents below consensus of 17 cents and revenue of USD$52.5-52.8 million while consensus is USD$53.3 million.  Care.com is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas and “Top Short” in our US Information Technology Global Top Stock Ideas.
  •   Facebook (FB) said it intends to focus on private communications and not as much on shareable content.  Facebook will encrypt its messaging service and is working to combine its messenger, Whatsapp and Instagram platforms to give users 1 integrated platform for messaging.  Facebook said it sees the future of social media as small chat groups and not public sharing of content.  Facebook is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
  • Fitbit (FIT) announced the release of 4 new or updated models today.  Fitbit will release a cheaper version of its Versa and Inspire smartwatches.  A version of the Versa with Sp02 sensor for sleep apnea will also be released.  Fitbit also intends to redesign its app to allow for more personalization.  Fitbit is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas. 
  • Micron (MU) has its revenue outlook cut at Cleveland Research to USD$24 billion from USD$25.5 billion for 2019.  Micron will continue to see pricing headwinds and competition remains strong.  Cleveland also highlights that numerous clients have a high level of inventory, contributing to the weak end-demand.  Micron will report second quarter results March 20th.  Micron is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.

Global Financials Stocks Trending in the News

  • Deutsche Bank (DB:DBK) made deep cuts to the bonuses it paid today according to a report in Bloomberg.  The bank was said to have cut its bonus pool by 15% with some people in New York and London receiving zero.  Deutsche Bank’s continued weak performance is primarily to blame for the cuts.  Deutsche Bank is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas

 

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International Stocks Recap

  • The Euro Stoxx 600 is currently down -0.48%, the FTSE 100 is down -0.45%, the DAX is down -0.5%, and the CAC 40 is down -0.4%
  • Basic Resources (-2.18%), Oil & Gas (-0.18%), and Media (-0.42%) stocks are the top performers in the Euro Stoxx 600 today
  • Automobiles & Parts (-1.83%), Technology (-0.59%), and Real Estate (+0.48%) stocks are the worst performers in the Euro Stoxx 600 today
  • Investor sentiment for European stocks is negative with the advance/decline ratio for the Euro Stoxx 600 currently at 0.34x
  • 84 stocks in the Euro Stoxx 600 are at 4-week highs while 19 stocks are at 4-week lows
  • 71 stocks in the Euro Stoxx 600 are overbought while 6 stocks are oversold according to the 16-day RSI Measure
  • The Nikkei 225 finished down --0.65%, the Hang Seng ended down -0.89%, the Hang Seng China Enterprise declined -1.14%, and the CSI 300 was -1.02%
  • Investor sentiment for Japanese stocks finished negative with the advance/decline ratio for the Nikkei 225 closing at 0.3x
  • 17 stocks in the Nikkei 225 hit 4-week highs while 12 stocks reached 4-week lows
  • 9 stocks in the Nikkei 225 closed overbought while 1 stock closed oversold according to the 16-day RSI Measure
  • Investor sentiment for Hong Kong stocks finished negative with the advance/decline ratio for the Hang Seng closing at 0.35x
  • 4 stocks in the Hang Seng hit 4-week highs while 2 stocks reached 4-week lows
  • 3 stocks in the Hang Seng closed overbought while 0 stocks closed oversold according to the 16-day RSI Measure

 

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