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Morning Brief

Wake up to the Morning Quant Ride, your global markets update every morning!

Risky Business! Risk-Appetite strong today on positive trade sentiment and dovish Fed-speak

Apr 11, 2019

Actionable and Transparent Quantitative ResearchActionable and Transparent Quantitative Research
Actionable and Transparent Quantitative ResearchActionable and Transparent Quantitative Research

Market data as of 7am EST

 

US Stocks

  • European stocks turn positive after a weak start and US stock futures are following pre-market with front-month Dow Jones minis +0.11%, S&P 500 minis +0.16% and Nasdaq 100 minis +0.11%
  • The US and China have agreed on an enforcement mechanism for the trade deal being discussed, according to comments from Treasury Secretary Steve Mnuchin
  • The minutes from the last Federal Reserve FOMC meeting confirmed its dovish bias, with a majority of the Committee agreeing the wait-and-see approach would be best amid growing uncertainty
  • Just touching a little bit on the point we highlighted earlier this week that earnings estimates for 1Q have been cut the most in 3 years.  Something to consider is that if earnings surprise, now that expectations are so slow, we may actually see continued improvement in operating margins.  Improving operating margins could really support US stocks valuations going into the 2H.  You can read more about what we said regarding cuts to earnings estimates here: As the 1Q Earnings Train Barrels Towards Us, We Take a Quick Look at Expectations
  • Here comes Disney!  Walt Disney’s (DIS) Analyst Day is today.  DIS is up 6.4% since we called it a BUY for you back near the end of March, click here.  Today’s Analyst Day is going to touch on the upcoming Avengers: End game movie as well the potential for a new buyback program, upgrades to parks and the launch of Disney+, Disney’s streaming business, at the end of the year.  Bullish sentiment is really building for this stock... 
  • Back in the day, our Co-Founder & CIO Stephen was given the responsibility to determine whether the  investment management company where he worked should participate in the Facebook (FB) IPO.  After reading the prospectus about 6 times, he declined to participate in the IPO.  It was definitely the right call as Facebook dropped after its IPO.  LYFT (LYFT) is starting to resemble the same track Facebook took after its IPO...we are not arguing it is a short but the current trend doesn’t look great. 
  • UK PM Theresa May accepted the EU offer of an extension of Brexit until October 31st, now she must convince Parliament
  • Initial jobless claims for the week ending 4/6/2019 come at 8:30 AM today. Economists expect the US to report initial jobless claims of 210,000, up from the 202,000 reported for the prior period. 
  • US PPI will come at 8:30am today as well, with consensus expecting 0.3% rise m/m
  • A look at flows into growth vs. value: The Growth vs Value Debate – Which one does Mr. Market love more? 
  • Check out our Top US Consumer BUYS: SHOP TIL YOU DROP! US Consumer Stocks to BUY NOW for maximum gains in your portfolio!
  • We look at the upcoming earnings seasonAs the 1Q Earnings Train Barrels Towards Us, We Take a Quick Look at Expectations
  • The VIX is little changed this morning and is currently at 13.28 after closing at 13.3 yesterday
  • Financial Select Sector SPDR Fund (XLF)  June 24 OTM Calls, Ensco (ESV) June 21 Calls and Cenovus Energy Inc.(CVE) May 17 OTM Calls are the most actively traded options contracts in US pre-market trading this morning.
  • US 10-Year Treasury Bonds are lower with yields up 1.24 basis points to 2.4773%
  • The US Treasury 2s-10s Spread has widened 0.41 basis points to 0.15%
  • WTI Crude is currently up 0.98% to USD$64.61/bbl with the Brent-WTI spread down USD$-1.44 to USD$6.29/bbl
  • Gold is currently little changed -0.24% to USD$1304.85/oz

Stocks Trending in the News

 

Click name for Q-Factor breakdown, latest price details, more financial info and sentiment data.

Global Consumer Stocks Trending in the News

  • Bed, Bath & Beyond (BBBY) delivered another weal results, with same store sales falling 1.4% during the most recent quarter.  Gross margin fell to 34.7% from 35.9%.  Adjusted EPS of $1.20 beat $1.12 consensus, revenue of $3.31 billion was in line.  Bed, Bath & Beyond gave 2019 EPS guidance of $2.11-$2.20 while present consensus is $1.80.  Bed, Bath & Beyond is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Chipotle (CMG) was downgraded to hold from buy at Jefferies.  Chipotle saw its price target hiked to $700 from $600 at the same time.  Chipotle’s average price target in the market today is $595.  Chipotle is set to report earnings on April 24th.  Chipotle is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Pick” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Rite-Aid (RAD) reported fiscal fourth quarter revenue of $5.38 billion, trailing consensus of $5.56 billion.  Rite-Aid reported a loss of 1 cent per share compared with a 2 cents loss expected.  Rite-Aid provided fiscal 2020 revenue guidance of $21.5-$21.9 billion, below the $22.09 billion average expectation.   Rite-Aid expects same stores sales growth of 0%-1% in fiscal 2020.  Rite-Aid is rated “Attractive” in our US SMID-Cap Global Top Stock Ideas and “Unattractive” in our US Consumer Discretionary Global Top Stock Ideas
  • Tesla (TSLA) may receive a boost after a group of Senators proposed extending the tax credit that will expire for Tesla vehicles soon.  The $7500 credit will expire once their production exceeds 200,000 EVs, which will happen in the near future.  The legislation would increase the threshold for its expiration to 400,000 vehicles.  Tesla is rated “Top Short” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.  

Global Information Technology Stocks Trending in the News

  • Facebook (FB) announced a host of new measures to control false, extreme and violent content.  Facebook will expand its use of the Associated Press as its fact-checker.  Facebook will also make Group administrators more responsible for removing content and allow users to remove posts even after they are no longer members.  Facebook has made progress but this type of harmful content persists, it acknowledges.  Facebook is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
  • IBM (IBM) was initiated at Credit Suisse with an outperform rating.  Credit Suisse gave IBM a market-high price target of $173.  IBM’s acquisition of Red Hat has positioned itself as a dominant player in the fast growing hybrid cloud computing sector.  IBM is expected to return to revenue-driven EPS growth in the near future.  IBM is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
  • Microsoft (MSFT) and Amazon (AMZN) are the finalists to win the contract for the Pentagon’s cloud computing update, the Defense Department said.  The Pentagon is awarding a $10 billion contract to update its network in a program called JEDI-joint enterprise defense infrastructure.  The Pentagon said a final decision could come as early as mid-July.  Microsoft is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.  Amazon is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Pick” in our US Consumer Discretionary Global Top Stock Ideas.  

Global Industrials Stocks Trending in the News

  • JetBlue (JBLU) announced it plans to start flights to London in 2021.  JetBlue said it intends to have multiple flights per day to London from both New York and Boston.  JetBlue is studying which of London’s 4 airports make the most sense, it has not yet secured gate space at any of them.  JetBlue has been looking to add flights to London for some time.  JetBlue is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Industrials Global Top Stock Ideas
  • Lyft (LYFT) shares continued their descent on news that Uber’s IPO could be $10 billion, dwarfing Lyft’s $2.3 billion deal.  Uber is targeting a $100 billion valuation, also dwarfing Lyft’s $17.5 billion.  When Lyft started trading it was greeted with fanfare as the only listed ride-sharing company.  Lyft’s shares are down 12% since going public.  Lyft is not yet rated in our Global Top Stock Ideas.  

Global Power & Commodities Stocks Trending in the News

  • Duke Energy (DUK) issued a formal response to the state of North Carolina’s demand that it excavate ash basins.  Duke is arguing that the process used by the North Carolina Dept of Environmental Quality was not scientifically sound and lacked full consideration of the science and engineering required.  Duke will lay out details on the engineering needed and the costs to its customers when it formally appeals the decision with the state of North Carolina soon.  Duke Energy is rated “Top Buy” ” in our US SMID-Cap Global Top Stock Ideas.
  • Dominion Energy (D) suffered an explosion on one of its gas lines after a contractor struck the line.  The line struck was under a sidewalk and the explosion rocked downtown Durham where it happened.  One person was killed and injured 15 in the accident.  The explosion happened in a building adjacent to a warehouse that houses the largest collection of vintage Porsches in the world, which were damaged in the blast.  Dominion Energy is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas.
  • Vale (VALE) executives will be charged in connection with its recent dam collapse, Brazilian prosecutors said.  Prosecutors said they have evidence that Vale employees knew the dam was unsafe.  Prosecutors explained that charges could include murder, manslaughter and environmental damage.  Prosecutors said they need 2-3 months to discover if senior executives knew of the unsafe conditions.  Vale is rated “Neutral” in our Brazil All-Cap Global Top Stock Ideas.

 

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European Stocks

  • The Euro Stoxx 600 is currently up +0.05%, the FTSE 100 is higher by 0%, the DAX has risen +0.12%, and the CAC 40 is up +0.57%
  • Utilities (-0.87%), Banks (+0.24%), and Basic Resources (-1.4%) stocks are the top performers in the Euro Stoxx 600 today
  • Retail (+0.67%), Health Care (-0.21%), and Construction & Materials (+0.19%) stocks are the worst performers in the Euro Stoxx 600 today
  • Investor sentiment for European stocks is positive with the advance/decline ratio for the Euro Stoxx 600 currently at 1.84x
  • 71 stocks in the Euro Stoxx 600 are at 4-week highs while 31 stocks are at 4-week lows
  • 51 stocks in the Euro Stoxx 600 are overbought while 4 stocks are oversold according to the 16-day RSI Measure
  • The Nikkei 225 finished up +0.11%, the Hang Seng ended down -0.93%, the Hang Seng China Enterprise declined -1.24%, and the CSI 300 was -2.16%
  • Investor sentiment for Japanese stocks finished negative with the advance/decline ratio for the Nikkei 225 closing at 0.74x
  • 10 stocks in the Nikkei 225 hit 4-week highs while 51 stocks reached 4-week lows
  • 6 stocks in the Nikkei 225 closed overbought while 7 stocks 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 0.09x
  • 7 stocks in the Hang Seng hit 4-week highs while 2 stocks reached 4-week lows
  • 11 stocks in the Hang Seng closed overbought while 0 stocks closed oversold according to the 16-day RSI Measure

 

*Data in Price Return and Updated Real-Time (with a delay), Source: StockDio

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