Morning Quant Ride Mar 6, 2018

Mar 06, 2018

Traders’ Corner

Asian & Australia Equities Recap

 

Asian markets closed up across the board with declining concerns about a global trade war and speculation that North Korea is willing to give up its nuclear program.  The Nikkei and Topix were up 1.79% and 1.27% respectively with energy, tech and utilities stocks outperforming.  While all sectors were up, telecom, financials and real estate were the largest underperformers.  Bank of Japan (BOJ) Governor Haruhiko Kuroda reiterated that the 2% inflation target is a top priority for the Bank of Japan.  This may allay investor concerns about a deceleration in the quantitative easing policy pursued by the BOJ.

Hong Kong and Chinese markets closed up with the Hang Seng +2.09%, Hang Seng China Enterprise Index +2.67% and the CSI 300 +1.12%.  All sectors were positive with tech, energy and financials stocks the largest outperformers while consumer staples, financials and real estate stocks were the biggest laggards. 

In the Land Down Under, Aussie stocks were up in sympathy with Chinese and Japanese equities.  The ASX finished +1.14% with telecom, utilities and energy stocks the largest outperformers. Consumer staples, financials and real estate stocks with the biggest underperformers.  Retail sales for January were below consensus  at 0.1% m/m vs. consensus 0.4%.  The Reserve Bank of Australia (RBA) decided to leave its policy rate unchanged. 

European Equities Recap

European equities are up across the board with the Euro Stoxx 600 +0.57%.  Regional indices are also positive with the FTSE 100 +1.14%, DAX +1.00% and the CAC 40 +0.71%.  Autos & Parts, materials and insurance stocks are the largest outperformers with real estate, media and food & beverage stocks the biggest underperformers.  Germany February PMI was reported to be 52.7 vs. 59.8 for January.  Germany Retail PMI for February was reported as 53.8 vs. 53.0 for January.  Italian equities are rebounding this morning following yesterday’s sell-off after the mixed results from Italian parliamentary elections.  If today’s rally holds, Italian equities will close above last Friday’s close.

Rates & Commodities Recap

US government bond yields are rallying with the yield on the 10-year back to 2.90%.  2-year fixed swaps rates are now imply a rate of 2.53%.  The US Dollar index is down  0.44% with weakness against most major G7 currencies.  In spite of the mixed Italian parliamentary elections, the EUR€ is up 0.73% this week.  The strength in AUD$ is surprising given the the RBA’s decision to hold rates unchanged.  While interest rate differentials favor the USD$, the AUD$ appears to be trading on speculation about capital flows.  As a result, given Aussie exposure to capital flows related to industrial and base metals, we would expect the AUD$ to trade on speculation about potential for more tariffs.  While the USD$ is weak in aggregate this AM, commodity prices are up across the board.  WTI is now currently well above USD$63/barrel.  We continue to reiterate our play on US E&Ps:SPDR S&P Oil & Gas Exploration & Production ETF (XOP) Bull Call SpreadPrecious metals are up across the board, even in the face of a weaker JPY¥.  Does this suggest that investors are hedging the recent bounce back from concerns about a global trade war?  We continue to favor our two Gold-related options trades as hedges for long-only portfolios:VanEck Vectors Gold Miners ETF (GDX) Bull Call SpreadSPDR Gold Trust (GLD) Bull Call SpreadCryptocurrencies Recap

Major cryptocurrencies are down across the board.  Ripple is now down over 11% after trading up yesterday on speculation that Coinbase is posed to add the cryptocurrency to its suite of cryptocurrencies.  Coinbase has denied this is under consideration.  Two of Japan's major cryptocurrency organizations will merge and form a self-regulating body: Japan Cryptocurrency Business Association (JCBA) and Japan Blockchain Association (JBA) will be merging in the wake of deepening discussions about stronger regulations. Zhang Ye, head of the technology unit at China's Securities Regulatory Commission suggests Blockchain technology will need centralization.  While he believes in the potential of blockchain, he suggests it needs to rely on a centralized infrastructure.

US Markets Pre-Market Preview & Recap

US equities are pointing to a positive open in NY again.  The VIX is currently trading below 18.0.  Implied volatility continues to mean-revert downwards for S&P 500, Russell 2000 and Nasdaq index options. However, while overall implied volatility is coming down, Skew on S&P 500, Russell 2000 and Nasdaq options remains rich.  This “implies” investors are buying puts, but not at the same rate as they were last week.

US equity markets rallied again yesterday, with the S&P 500 +1.10%, Russell 2000 +0.84%, and the Nasdaq +1.00%.  All sectors of the S&P 500 were higher, with Utilities, Financials, and Real Estate the biggest outperformers, while Healthcare, Tech, and Consumer Staples were the biggest underperformers. Market breadth was positive for the second day in a row with advances outpacing declines; the put-call ratio supports this sentiment as call buying outpaced put buying on the S&P500. 

XL Group Ltd (XL), CF Industries Holdings (CF), and Everest Re Group (RE) were the biggest gainers in the S&P 500 yesterday, while Marriott International (MAR), JB Hunt Transport Services (JBHT), and Nordstrom Inc. (JWN) were the biggest laggards. Clearside Biomedical (CLSD) and Transcontinental Realty Investors (TCI) were two of the most notable gainers on the Russell 2000, while Dermira Inc. (DERM) and Sparton Corp. (SPA) were two notable laggards. Micron Technology (MU) and Incyte (INCY) were the biggest positive movers in the Nasdaq, while Marriott International (MAR) and JB Hunt Transport Services (JBHT) were the biggest negative movers.

Following yesterday’s market rally, we are watching a few of our A-rated stocks that underperformed:

QuantShot: AbbVie Inc. - 8.10% off its 52wkH, reports earnings on 04/26/2018

ACCO Brands Corporation - 14.24% off its 52wkH, reports earnings on 05/02/2018

Comcast Corporation - 16.41% off its 52wkH, reports earnings on 04/26/2018

QuantShot: Kohl's Corporation - 4.88% off its 52wkH, reports earnings on 05/11/2018

Louisiana-Pacific Corporation - 9.91% off its 52wkH, reports earnings on 05/04/2018

ON Semiconductor Corporation - 4.45% off its 52wkH, reports earnings on 05/07/2018

QuantShot: Pfizer Inc. - 8.39% off its 52wkH, reports earnings on 05/01/2018

QuantShot: Target Corporation - 4.52% off its 52wkH, reports earnings on 03/06/2018

Twenty-First Century Fox, Inc. - 6.35% off its 52wkH, reports earnings on 05/10/2018

Our Top Picks in the News

Click headline for story

Lockheed Martin (LMT)

Lockheed Martin gets $481 million FMS long-lead contract for MMSC (MarineLog)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Industrials report

Domino's Pizza (DPZ)

Why Domino's is winning the pizza wars (CNN Money)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Consumer Discretionary report

 

See more on our Domino's QuantShot company report from February 9th

YY Inc (YY)

YY, Inc. (YY) Tops Q4 EPS by 43c (Street Insider)
Top Conviction Buy in March, please see Quantamize Global Top Picks Investable China report

Walmart Inc (WMT)

Walmart steps up grocery war with Amazon (Seeking Alpha)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Consumer Staples report

 

See more on our Walmart QuantShot company report from February 6th

Amazon.com (AMZN)

Amazon is bringing free Whole Foods delivery to Prime members in San Francisco and Atlanta (CNBC)
What to Buy in Retail? In an Amazon World, Buy Amazon (Barrons)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Consumer Discretionary report

 

See more on our Amazon.com QuantShot company report from March 6th

Comcast Corporation (CMCSA)

Comcast: Contrarian Play On Overdone Price Decline (Seeking Alpha)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Consumer Discretionary report

Global Indices

Index

Levels

1 Day Return

5 Day Return

MTD

YTD

S&P 500

2,720.94

0.00%

1.59%

-2.82%

2.64%

Russell 2000

1,546.05

0.00%

0.30%

-2.44%

0.06%

DJ Industrial Average

24,874.76

0.00%

2.47%

-2.83%

2.79%

NASDAQ Composite Index

7,330.70

0.00%

1.55%

-1.09%

6.18%

CBOE Market Volatility Index

17.86

-

-

-

-

Germany DAX (TR)

12,184.97

0.78%

0.16%

-5.61%

-3.30%

France CAC 40

5,200.42

0.64%

0.79%

-2.94%

0.59%

Japan Nikkei 225

21,417.76

1.79%

1.91%

-4.46%

-1.65%

Hang Seng Index

30,510.73

2.09%

-0.52%

-6.21%

4.51%

Hang Seng China Enterprises

12,311.54

2.67%

-0.32%

-8.70%

8.00%

S&P ASX 200

5,962.40

1.14%

1.90%

-0.36%

-0.14%

Source: FactSet          
 

Large Cap Conviction Buy Movers

Large Cap A Winners Ticker Sector Industry 1 Day Return 5 Day Return YTD
Liberty Broadband Corporation LBRD.K Consumer Discretionary Cable and Satellite

3.32%

1.31%

4.54%

Caterpillar Inc. CAT Industrials Construction Machinery and Heavy Trucks

3.24%

-2.27%

-4.10%

Loews Corporation L Financials Multi-line Insurance

3.17%

2.11%

0.68%

SS&C Technologies Holdings, Inc. SSNC Information Technology Application Software

3.11%

4.58%

27.94%

Reinsurance Group of America, Incorporated RGA Financials Reinsurance

2.97%

1.01%

-0.37%

Large Cap A Losers Ticker Sector Industry 1 Day Return 5 Day Return YTD
J.B. Hunt Transport Services, Inc. JBHT Industrials Trucking

-2.43%

-0.98%

-0.98%

DENTSPLY SIRONA Inc. XRAY Healthcare Healthcare Supplies

-1.93%

-0.36%

-0.36%

Louisiana-Pacific Corporation LPX Materials Forest Products

-1.44%

-1.63%

-1.63%

Domino's Pizza, Inc. DPZ Consumer Discretionary Restaurants

-1.56%

-1.26%

-1.26%

Darden Restaurants, Inc. DRI Consumer Discretionary Restaurants

-1.07%

2.45%

2.45%

Source: Capital IQ            

Large Cap Conviction Short Movers

Large Cap F Winners Ticker Sector Industry 1 Day Return 5 Day Return YTD
Pacira Pharmaceuticals, Inc. PCRX Healthcare Pharmaceuticals

-4.14%

1.84%

1.84%

Ambarella, Inc. AMBA Information Technology Semiconductors

-3.69%

3.81%

3.81%

Longfin Corp. LFIN Financials Financial Exchanges and Data

-3.39%

-1.17%

-1.17%

ADT Inc. ADT Industrials Security and Alarm Services

-3.16%

1.52%

1.52%

Realogy Holdings Corp. RLGY Real Estate Real Estate Services

-2.43%

-0.98%

-0.98%

Large Cap F Losers Ticker Sector Industry 1 Day Return 5 Day Return YTD
Square, Inc. SQ Information Technology Data Processing and Outsourced Services

9.56%

9.49%

45.43%

Teladoc, Inc. TDOC Healthcare Health Care Technology

8.82%

4.61%

20.37%

ARMO BioSciences, Inc. ARMO Healthcare Biotechnology

8.71%

10.69%

0.00%

Nutanix, Inc. NTNX Information Technology Internet Software and Services

8.13%

15.31%

19.13%

Puma Biotechnology, Inc. PBYI Healthcare Biotechnology

7.39%

16.76%

-22.81%

Source: Capital IQ            

Upcoming Earnings

Company Name Ticker Earnings Date
Entercom Communications Corp. Class A ETM 03/08/2018
National Beverage Corp. FIZZ 03/08/2018
Cooper Companies, Inc. COO 03/09/2018
Darden Restaurants, Inc. DRI 03/22/2018
MSC Industrial Direct Co., Inc. Class A MSM 04/10/2018

Line for QuantShots

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