Risk-off Friday: Bonds rallying, stocks falling and gold hits 14-month high as global tension from Persian Gulf to China weigh on sentiment
Jun 14, 2019
Market data as of 7:45am EST
US Stocks Preview Ahead of the Open
- It's a risk-off Friday morning as investors sell stocks, buy bonds and gold as global concerns mount, front-month Dow Jones minis are -0.12%, S&P 500 minis -0.26% and Nasdaq 100 minis -0.72%
- White House Economic Adviser Larry Kudlow said President Trump is still waiting for an answer about his meeting with President Xi Jinping
- We ask the question: To Xi or not to Xi: Will he meet with Trump at the G-20?
- The situation on Hong Kong is calmer today as its reputation as a global financial center suffers, read more: Rubber bullets and tear gas fill the air in Hong Kong as protesters rally against China’s new extradition law
- The US claims Iran was behind the multiple tanker attacks in the Persian Gulf yesterday: Multiple tanker attacks in Gulf today send oil surging, fears grow of a US-Iran confrontation
- US May retail sales are expected to grow 0.6%, up from a 0.2% drop in April
- US May Industrial Production is expected to grow 0.2% in May, up from a 0.5% drop in April
- University of Michigan Sentiment Index for June is expected at 98, a drop from 100 in May
- Small-Cap Sentiment: Small-Cap, BIG Sentiment: Consumer, Tech, and Financials are Top Trending Russell 2000 Stocks by Positive Sentiment
- Cluster analysis: Our Stable Dividend Yield Q-Folio Diversified through a unique concentrated approach
- EU ETF flows: Don’t Own the Eurozone? European ETFs Observe Notable Negative Outflows but Bright Spot Exists in Spanish Stocks
- iShares MSCI Emerging Markets ETF (EEM) June 21 OTM Calls & Puts, SPDR S&P 500 ETF Trust (SPY) June 14 OTM Puts and Invesco QQQ Trust (QQQ) July 28 OTM Puts are the most actively traded options in today's pre-market
- The VIX is little changed this morning and is currently at 16.25 after closing at 15.82 yesterday
- Is the VIX with a 15 handle a sign of a benign market? Not all options strategists agree with some pointing to recent sell-offs in US stocks with a relatively muted VIX.
- US 10-Year Treasury Bonds are higher with yields down -2.79 basis points to 2.0666%
- The US Treasury 2s-10s Spread has widened 0.19 basis points to 0.26%
- WTI Crude is currently up 2.23% to USD$52.28/bbl with the Brent-WTI spread down USD$-2.39 to USD$9.96/bbl
- Gold hit a 14-month highest yesterday as global economic uncertainty drive demand for the safe haven
- Gold is currently up 0.86% to USD$1353.81/oz
Stocks Trending in the News
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Global Consumer Stocks Trending in the News
- Amazon (AMZN) responded to presidential candidate Joe Biden’s complaint about the taxes it pays by saying his complaints should be with the tax code, not with Amazon. Amazon pointed out that it has paid $2.6 billion in corporate taxes since 2016, saying it pays “every penny” it owes. Amazon said the US tax code is designed to encourage companies to reinvest and it has reinvested $200 billion into the American economy. Amazon is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.
- Hudson’s Bay Co. (TSX:HBC) said it is moving production away from China due to the tariffs. Hudson’s Bay has limited exposure since 70% of its revenue comes from luxury goods retailer Saks Fifth Avenue and those products are not made in China. Hudosn’s Bay said it is confident it can mitigate any other negative effects. Hudson’s Bay Co. is rated “Attractive” in our Canada All-Cap Global Top Stock Ideas
- Red Robin (RRGB) shares jumped by more than 30% after Vintage Capital disclosed that it’s prepared to bid $40/share for the company. Stephens analyst Will Slabaugh wrote to clients that Red Robin could be a good candidate for a private equity takeout. Red Robin is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas and “Unattractive” in our US Consumer Discretionary Global Top Stock Ideas.
- Volkswagen (XTRA:VOW3) plans to offer up to 15% of its truck unit Traton AG in its upcoming IPO. Traton will be offered between 27 and 33 euros. Volkswagen hopes to raise up to 1.9 billion euros in the IPO. Volkswagen is valuing Traton at about 16.5 billion euros. Traton is the first of a number of divestitures Volkswagen is likely to undertake to unlock value. Volkswagen is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.
Global Information Technology Stocks Trending in the News
- Broadcom (AVGO) cut its revenue forecast for the full year as the trade war with China will negate the rebound it has hoped for in the second half of the year. Broadcom ow expects full-year revenue of $22.5 billion, down from $24.5 billion. The higher estimate was given just three months ago. Broadcom’s CEO said customers are drawing down inventory amid the uncertainty. Broadcom is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas
- IBM (IBM) demonstrated its debating program that used artificial intelligence and crowd sourced response to provide pro and con arguments about a subject. IBM collected over 1,000 opinions on whether or not marijuana should be legalized. Within an hour IBM’s Debater Program correlated them into coherent pro and con arguments. The project is not ready for commercial use yet and is intended to help corporations in decision making. IBM is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas
- Sony (SNE) is being called upon to break itself up once again by activist hedge fund Third Point. Third Point is again complaining that Sony’s stock is undervalued and breaking up the company could unlock value. Third Point has a $1.5 billion position in the stock and said in a letter that Sony needs a less complex structure and should spin off its semiconductor unit. Sony is rated “Attractive” in our Japan Large-Cap Global Top Stock Ideas.
- Walt Disney Co (DIS) saw its price target hiked to $165 from $140 at Loop Capital. Disney saw its buy rating reiterated. Disney should see strong performance from its Disney+ streaming service and Loop expects its to perform better than the market is expecting. Loop writes that it believes Disney will be successful in transforming itself into a direct-to-consumer video provider and will be revalued higher by the market. Walt Disney is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas
Global Financial Stocks Trending in the News
- AllianceBernstein (AB) is laying off 200 people in New York as it prepares to move all of its operations to Nashville, TN. AllianceBernstein had previously announced its move. Jobs in New York City in White Plains, NY, will be lost. The move should be completed by 2022 and a total of 1,050 jobs will be lost in New York in the end. AllianceBernstein has a total of 3,657 employees. AllianceBernstein is rated “Attractive” in our US SMID-Cap Global Top Stock Ideas
Global Power & Commodity Stocks Trending in the News
- Ashland Global (ASH) was downgraded to neutral from overweight at JP Morgan. Ashland saw its price target cut to $82, implying just 2.4% upside. Eminence Capital has taken an 8.3% stake in Ashland and is seeking talks with the board to discuss “operational and strategic opportunities,” according to a 13-D filling. They apparently do not include a merger or attempt to acquire a controlling stake. Ashland Global is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas
- Transocean (RIG) was downgraded to neutral from buy at Citi. Citi cites intense cash burn at Transocean as well as the potential for an oversupplied market in 2020. Citi is cautious on offshore drillers overall with all expected to see cash burn continuing into 2021. Transocean is not rated in our Global Top Stock Ideas.
- Vale (VALE) often did not have all the required stability certificates for its dams, a WSJ report highlights today. Vale often did not have the full documentation for years and is presently investigating the stability of one of its dams in Canada. In January, a dam collapsed at a Vale mine in Brazil, killing 270 people, a leading it to review all of its dams. Vale is rated “Neutral” in our Brazil All-Cap Global Top Stock Ideas
International Stock Markets Recaps
- The Euro Stoxx 600 is currently down -0.66%, the FTSE 100 is down -0.55%, the DAX is down -0.86%, and the CAC 40 is down -0.49%
- Utilities (+0.32%), Banks (-1.07%), and Basic Resources (-1.04%) stocks are the top performers in the Euro Stoxx 600 today
- Retail (-0.5%), Health Care (-0.25%), and Construction & Materials (-0.69%) 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 0.21x
- 138 stocks in the Euro Stoxx 600 are at 4-week highs while 30 stocks are at 4-week lows
- 31 stocks in the Euro Stoxx 600 are overbought while 11 stocks are oversold according to the 16-day RSI Measure
- The Nikkei 225 finished up +0.4%, the Hang Seng ended down -0.65%, the Hang Seng China Enterprise declined -0.5%, and the CSI 300 was -0.83%
- Investor sentiment for Japanese stocks finished positive with the advance/decline ratio for the Nikkei 225 closing at 1.5x
- 6 stocks in the Nikkei 225 hit 4-week highs while 12 stocks reached 4-week lows
- 2 stocks in the Nikkei 225 closed overbought while 5 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 0.39x
- 1 stock in the Hang Seng hit 4-week highs while 7 stocks reached 4-week lows
- 1 stock in the Hang Seng closed overbought while 3 stocks closed oversold according to the 16-day RSI Measure
*Data in Price Return and Updated Real-Time (with a delay), Source: StockDio