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Travails of Trade: US and China remain toe to toe in global trade standoff as week begins, futures lower

May 20, 2019

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Market data as of 7am EST

 

US Stocks Preview Ahead of the Open

  • The US-China trade standoff continues to weight on global sentiment and in pre-market trading futures are lower with front-month Dow Jones minis -0.47%, S&P 500 minis -0.58% and Nasdaq 100 minis -1.21%
  • Chinese President Xi visited a rare earths metals plant in China, stoking speculation its next trade response may involve these essential metals
  • OPEC is getting closer to extending its production cuts to all of 2019 as the group meets in Jeddah 
  • Emerging Markets ETFs saw a total outflow of $3.54 billion last week, over double the $1.69 billion outflow from the week before
  • Japan's economy unexpectedly grew 2.1% in the first quarter, supported by government spending
  • The VIX is little changed this morning and is currently at 17.10 after closing at 15.96 last week
  • SPDR S&P 500 ETF Trust (SPY) May 31 OTM Puts, iShares MSCI Emerging Markets ETF (EEM) June 21 OTM Calls and iShares iBoxx $ High Yield Corporate Bond ETF (HYG) October 18 OTM Calls are the most actively traded options in today's pre-market
  • US 10-Year Treasury Bonds are higher with yields down -0.35 basis points to 2.3874%
  • The US Treasury 2s-10s Spread has narrowed 0.35 basis points to 0.19%
  • WTI Crude is currently little changed -0.17% to USD$62.76/bbl with the Brent-WTI spread up USD$0.42 to USD$10.68/bbl
  • Gold is currently little changed -0.04% to USD$1276.99/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

  • Clorox (CLX) was downgraded to hold from buy at Argus Research.  Clorox is up 25% over the last year and Argus points out competition is growing for many of its most popular items.  Clorox saw decelerating revenue growth in the third quarter and it was a sign of that competition.  Clorox is expected to deliver slower revenue growth, a main reason for the downgrade.  Clorox is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Staples Global Top Stock Ideas
  • Uber Technologies' (UBER) debut was hampered by some large investors not buying additional shares at the last minute.  The WSJ highlights how hyped the Uber IPO was and how, just before the IPO was placed, a number of large investors did not opt to buy more shares.  Uber was priced at $45 but immediately traded lower and closed Friday at $41.91.  Uber has been the most disappointing IPO in a long time.  Uber Technologies is not yet rated in our Global Top Stock Ideas.
  • Wynn Resorts (WYNN) has had preliminary talks with MGM Resorts International (MGM) about selling its soon to be opened casino just outside Boston in a surprise bit of news.  Wynn recently was approved to keep the casino in the wake of a sexual assault allegations against its CEO.  The Wynn project is a $2.6 billion endeavor that is slated to open shortly.  MGM already owns a casino in the state, where no company can own 2 so any deal would require it to sell the casino it owns outside Springfield.  Wynn Resorts is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.  MGM Resorts International is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.

Global Information Technology Stocks Trending in the News

  • Alphabet’s (GOOGL) Google said it is banning some services for smartphones from China’s Huawei Technologies.  The ban follows the US decision to deny Huawei access to US technology.  The move is sure to dent Huawei strong consumer technology business.  Existing phones are expected to function normally though some functions could be hampered.  The US has added Huawei to its “Entity List” on national security grounds.  Alphabet is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas
  • Dish Network (DISH) announced it signed a deal to buy Echostar’s (SATS) Broadcast Satellite Service business in an all-stock deal valued at $800 million.  Dish said it expects the addition to improve free cash flow and ebitda.  The deal is structured to be tax free and should close in the second half of 2019.  Dish Network is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.  Echostar is rated “Attractive” in our US SMID-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas
  • Hewlett Packard Enterprise (HPE) announced it agreed to acquire Cray Inc in a $1.4 billion deal.  Cray (CRAY) shareholders will receive $35 per share, a 17% premium to yesterday’s close.  Cray is a maker of supercomputers that Hewlett Packard Enterprise is acquiring to bolster its position in the market as it focuses on artificial intelligence and distributed computing.  This is Hewlett Packard Enterprise’s biggest deal since it was created in 2015 from the breakup of Hewlett Packard.  Hewlett Packard Enterprise is rated “Top Short” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.  Cray Inc is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.  
  • Netease (NTES) announced it will work with Disney’s (DIS) Marvel Entertainment on developing games, comics and TV shows.  The partnership in China will be exclusive.  Netease expects to develop new products using the vast stable of Marvel characters.  The companies will reveal more specifics about the tie-up later in the year.  Netease is rated “Top Buy” in our China All-Cap Global Top Stock Ideas.  Walt Disney is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas
  • Qualcomm (QCOM) has suspended shipments of its chips to Huawei Technologies in the wake of the US government adding the company to the “Entity List” for national security reasons.  Qualcomm has told its employees not to speak to Huawei, the WSJ is reporting.  Huawei uses Qualcomm chips in a number of its phones.  Qualcomm or any other company that wants to exports technology to Huawei would need to apply to the US government for a license that it has indicated will be denied.  Qualcomm is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas
  • Nvidia (NVDA) continues to struggle with its data center sales even as its video gaming business grows strongly.  Nvidia reported its first miss in data center focused sales for the first time in four years.  Nvidia is seeing operators of data centers take a pause after years of rampant growth.  Nvidia said it expects the weakness to persist into the present quarter.  Nvidia is rated “Top SHort” in our US Large-Cap Global Top Stock Ideas and “Unattractive” in our US Information Technology Global Top Stock Ideas

Global Industrials Stocks Trending in the News

  • Ryanair (ISE:RY4C) gave a profit warning, saying profit will be hurt by the grounding of the 737 Max.  Ryanair said it is facing higher than expected costs in the wake of the global grounding of the 737 Max.  Ryanair is the largest customer of the 737 Max in the region.  Ryanair was due to receive its first delivery of the 737 Max this spring.  The newer plane is more fuel efficient and seats more passengers than the aircraft presently being used.  Ryanair is rated “Unattractive” in our European SMID-Cap Global Top Stock Ideas.

Global Health Care Stocks Trending in the News

  • Bayer (DB:BAYN) is now worth less than the $63 billion it paid for Monsanto barely a year ago.  Bayer has suffered $2 billion in losses in court over its RoundUp weed killer.  Bayer has seen its market cap fall by over 40% since it acquired Monsanto in the wake of its losses in court.   A number of large investors have withdrawn their support for management in the wake of the problems, as the 155-year old company struggles to adapt.  Bayer is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas
  • Bristol-Myers Squibb (BMY) was cut to neutral from buy at Argus Research on concern over its Celgene (CELG) acquisition.  Argus has very serious concerns about the deal and does not think Celgene can deliver the revenue that Bristol-Myers Squibb thinks it can.  Argus notes that the combined company will have a $45 billion debt load to contend with, a potential limit to its ability to fund further growth.  Bristol-Myers Squibb is rated “Attractive” in our US Large-Cap Global Top Stock Ideas.  Celgene is rated “Attractive” in our US Large-Cap Global Top Stock Ideas.

 

 

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International Stock Markets Recaps

  • The Euro Stoxx 600 is currently down -1.07%, the FTSE 100 is down -0.89%, the DAX is down -1.41%, and the CAC 40 is down -1.39%
  • Telecommunications (-0.17%), Real Estate (-0.18%), and Oil & Gas (-0.32%) stocks are the top performers in the Euro Stoxx 600 today
  • Technology (-2.25%), Chemicals (-1.95%), and Banks (-1.67%) 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 0.16x
  • 63 stocks in the Euro Stoxx 600 are at 4-week highs while 48 stocks are at 4-week lows
  • 28 stocks in the Euro Stoxx 600 are overbought while 24 stocks are oversold according to the 16-day RSI Measure
  • The Nikkei 225 finished up +0.24%, the Hang Seng ended down -0.57%, the Hang Seng China Enterprise declined -0.52%, and the CSI 300 was -0.85%
  • Investor sentiment for Japanese stocks finished positive with the advance/decline ratio for the Nikkei 225 closing at 1.27x
  • 28 stocks in the Nikkei 225 hit 4-week highs while 19 stocks reached 4-week lows
  • 5 stocks in the Nikkei 225 closed overbought while 53 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 0.85x
  • 3 stocks in the Hang Seng hit 4-week highs while 15 stocks reached 4-week lows
  • 0 stocks in the Hang Seng closed overbought while 11 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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