Morning Quant Ride Mar 7, 2018

Mar 07, 2018

Traders’ Corner

Asian & Australia Equities Recap

 

Asian equity markets closed down across the board with worries about a potential global trade war following the departure of NEC Chief Gary Cohn.  The Nikkei was down 0.77% while the Topix was 0.72%.  Consumer staples stocks were the only positive sector along Japanese equities while utilities, materials and energy stocks were the biggest laggard.  Press previews of the Bank of Japan policy meeting indicates disagreements among board member about whether the BOJ should begin to unwind its quantitative easing policy.  Total volume traded on the Tokyo Stock Exchange was 9.5% above its 10-day average.

Hong Kong and Chinese equities closed negative in sympathy with Japanese equities and on news that US is considering targeting Chinese investments in the US.  The Hang Seng finished -1.03% while the Hang Seng China Enterprise Index and CSI 300 finished down 1.07% and 0.74% respectively.   All sectors of the Hang Seng were negative with telecom, industrials and utilities stocks outperforming.  The China Banking Regulatory Commission announced a relaxation of commercial banks' bad loan coverage ratio to 120-150% compared to the current floor of 150%.  China February FX reserves $3.13T vs $3.16T in January.  Total share volume traded in Hong Kong was light with total volume 14.6% below its 10-day average.

Indian stocks finished down for the sixth day in a row amid a widening fraud probe into state-run Punjab National Bank.  The Sensex closed down 0.85% with financial stocks the largest underperformers.

In the Land Down Under, Aussie stocks finished negative.  The ASX closed down 1.01% with all sectors down; consumer staples, energy, and healthcare stocks were the biggest underperformers while real estate, telecom, and tech stocks were relative outperformers.  4Q GDP growth came in at 0.4% q/q, below consensus of 0.5%.  Reserve Bank of Australia Governor Philp Lowe highlighted that there remains upward pressure on rates.

European Equities Recap

European equities, in aggregate, are flat with a negative bias with the Euro Stoxx 600 down 0.09%.  Regional indices are mixed with the FTSE 100 +0.05%, DAX +0.29% and the CAC 40 -0.15%.  Utilities, real estate, and tech stocks are the biggest outperformed while materials, autos & parts, and E&Ps are the biggest laggards.  Eurozone 4Q final GDP Y/Y was +2.7% vs the previous estimate of +2.7%; Q/Q GDP was +0.6% vs. 2nd estimate +0.6%.  France Jan trade balance -€5.6B vs consensus -€3.7B.

Rates & Commodities Recap

US government bond yields are back to 2.85% with Fed Funds futures continuing to imply 3 to 4 rate hikes in CY2018 (though the implied probability for 4 rate hikes is decreasing!).  The US dollar index (DXY) is flat with a negative bias.  Weakness in AUD$ and EUR€ are being offset by strength in JPY¥ this morning.  That said, the JPY¥ is still well above 105 (+0.37%) with little signs of a significant risk-off feels in global currency markets.  This sentiment is obviously at odds with equity markets which suggests Forex traders are discounting the probability of global trade war.  Commodities markets are down in general with energy prices off though not significantly.  WTI continues to hold above USD$62/barrel.  Precious metals are down this AM, in contrast to the strengthening JPY¥.  Over the past few weeks, we have recommended options trades on gold and gold miners as hedges for tail risk of global equity portfolios:

VanEck Vectors Gold Miners ETF (GDX) Bull Call Spread

SPDR Gold Trust (GLD) Bull Call Spread 

Only base metals are up this morning on expectations that US tariffs will drive up global prices for industrial metals.

Cryptocurrencies Recap

Major cryptocurrencies are down across the board.  Coinbase has announced it is looking to launch a market-weighted cryptocurrency index fund that will include only coins listed on the GDAX.  A market-cap weighted fund would favor Bitcoin and Ethereum which make up ~60% of the total cryptocurrency market capitalization.  Twitter announces it is implementing measures to prevent crypto scams.  The company says it is aware of cryptocurrency-related "manipulation," and is looking install measures to "prevent these types of accounts from engaging with others in a deceptive manner,"

US Markets Pre-Market Preview & Recap

US equity futures are pointing to a negative open in NY this morning.  The VIX, after trading above 20 early in the morning is now back below that level but still 1.53 points versus yesterday’s closed.  Overall implied volatility for the S&P 500, Russell 2000 is relatively muted though that may change once options market open this AM.

US Equity markets rallied yesterday, with the all US markets climbing higher. Small-cap stocks outperformed Large-caps, with the Russell 2000 up 1.04% and the S&P 500 0.26% higher. Most sectors of the S&P 500 were higher, led by Materials, Consumer Discretionary, and Industrials. Utilities and Healthcare stocks were the only negative sectors. The Nasdaq, +0.56%, outperformed the S&P 500 Tech Sector, +0.24%.  Market breadth was positive for the third day in a row with advances outpacing declines; the put-call ratio flipped with put buying slightly outpacing call buying.

Lam Research (LRCX), Western Digital (WDC), and Applied Materials (AMAT) were the biggest gainers in the S&P 500 yesterday, while Newfield Exploration (NFX), Target Corp (TGT), and Cimarex Energy (XEC) were the biggest laggards. CommerceHub Inc. (CHUBK) and Clearside Biomedical (CLSD) were two of the most notable gainers on the Russell 2000, while Orchids Paper Products (TIS) and Deciphera Pharmaceuticals (DCPH) were two notable laggards. MercadoLibre (MELI) and Lam Research (LRCX) were the biggest positive movers in the Nasdaq, while Qualcomm (QCOM) and Vertex Pharmaceuticals (VRTX) were the biggest negative movers.

After yesterday's market rally, we are watching some of our A-Rated Laggards:

QuantShot: AbbVie Inc. - 8.98% off its 52wkH, reports earnings on 04/26/2018

DXC Technology Company - 3.00% off its 52wkH, reports earnings on 05/25/2018

Huntington Ingalls Industries, Inc. - 6.53% off its 52wkH, reports earnings on 05/03/2018

Huntsman Corporation - 11.33% off its 52wkH, reports earnings on 04/25/2018

QuantShot: Kohl's Corporation - 3.83% off its 52wkH, reports earnings on 05/11/2018

QuantShot: Pfizer Inc. - 9.00% off its 52wkH, reports earnings on 05/01/2018

The J. M. Smucker Company - 7.66% off its 52wkH, reports earnings on 06/07/2018

Our Top Picks in the News

Click headline for story

Alphabet (GOOGL)

Pentagon Drone Program Is Using Google AI (Bloomberg)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Tech report

 

See more on our Alphabet QuantShot company report from January 11th

Walmart (WMT)

Walmart, Nike Suppliers Put on Notice by China Tariff Threat (Bloomberg)
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

Lowe's Corporation (LOW)

Why Housing Stocks Won't Crash Like 2007 (Investopedia)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Consumer Discretionary report

 

See more on our Lowe's QuantShot company report from February 14th

UnitedHealth (UNH)

UnitedHealth Will Pass Drug Rebates Directly to Some Consumers (Wall Street Journal)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Large Cap report

 

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

Domino's Pizza (DPZ)

Baird sees global growth lifting Domino's (Seeking Alpha)
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

AbbVie (ABBV)

AbbVie: Poised For Continued Growth In 2018 (Seeking Alpha)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Large Cap report

 

See more on our AbbVie QuantShot company report from January 23rd

Amazon.com (AMZN)

Amazon orders first animated series; Amazon coming to Vietnam? (Seeking Alpha)
Amazon, Oracle, Microsoft Jockey for Pentagon's Cloud Business (Bloomberg)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Consumer Discretionary report

 

See more on our Amazon QuantShot company report from March 2nd

United Parcel Service (UPS)

UPS Can Still Pack a Punch (Barron's)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Industrials report 

Global Indices

Index

Levels

1 Day Return

5 Day Return

MTD

YTD

S&P 500

2,728.12

0.00%

0.53%

0.53%

2.04%

Russell 2000

1,562.20

0.00%

3.29%

3.29%

1.74%

DJ Industrial Average

24,884.12

0.00%

-0.58%

-0.58%

0.67%

NASDAQ Composite Index

7,372.01

0.00%

1.36%

1.36%

6.79%

CBOE Market Volatility Index

19.86

-

-

-

-

Germany DAX (TR)

12,160.50

0.38%

-2.59%

-2.21%

-6.22%

France CAC 40

5,165.52

-0.09%

-2.82%

-2.93%

-2.68%

Japan Nikkei 225

21,252.72

-0.77%

-2.95%

-3.70%

-5.92%

Hang Seng Index

30,196.92

-1.03%

-1.08%

-2.10%

1.98%

Hang Seng China Enterprises

12,180.29

-1.07%

-0.57%

-1.63%

5.14%

S&P ASX 200

5,902.00

-1.01%

-0.89%

-1.89%

-1.69%

Source: FactSet          

Large Cap Conviction Buy Movers

Large Cap A Winners Ticker Sector Industry 1 Day Return 5 Day Return YTD
United Parcel Service, Inc. UPS Industrials Air Freight and Logistics

3.77%

3.17%

-7.85%

Copart, Inc. CPRT Industrials Diversified Support Services

3.24%

6.72%

13.54%

MSC Industrial Direct Co., Inc. MSM Industrials Trading Companies and Distributors

2.70%

4.47%

-6.49%

Federated Investors, Inc. FII Financials Asset Management and Custody Banks

2.41%

6.51%

-5.74%

Raymond James Financial, Inc. RJF Financials Investment Banking and Brokerage

2.39%

4.16%

7.33%

Large Cap A Losers Ticker Sector Industry 1 Day Return 5 Day Return YTD
LogMeIn, Inc. LOGM Information Technology Internet Software and Services

-1.76%

2.61%

3.94%

CenterPoint Energy, Inc. CNP Utilities Multi-Utilities

-1.40%

0.19%

-1.04%

Liberty Broadband Corporation LBRD.K Consumer Discretionary Cable and Satellite

-1.01%

0.87%

0.17%

Walmart Inc. WMT Consumer Staples Hypermarkets and Super Centers

-1.02%

-0.02%

-1.06%

UnitedHealth Group Incorporated UNH Healthcare Managed Healthcare

-0.96%

0.77%

0.01%

Source: Capital IQ            

Large Cap Conviction Short Movers

Large Cap F Winners Ticker Sector Industry 1 Day Return 5 Day Return YTD
Matador Resources Company MTDR Energy Oil and Gas Exploration and Production

-6.33%

0.52%

0.52%

The Medicines Company MDCO Healthcare Pharmaceuticals

-4.97%

-2.80%

5.62%

Carrizo Oil & Gas, Inc. CRZO Energy Oil and Gas Exploration and Production

-4.52%

2.39%

3.70%

Riot Blockchain, Inc. RIOT Healthcare Biotechnology

-4.06%

2.57%

-1.80%

Nektar Therapeutics NKTR Healthcare Pharmaceuticals

-3.91%

16.01%

13.32%

Large Cap F Losers Ticker Sector Industry 1 Day Return 5 Day Return YTD
Cree, Inc. CREE Information Technology Semiconductors

9.72%

12.53%

12.44%

Portola Pharmaceuticals, Inc. PTLA Healthcare Biotechnology

6.60%

18.16%

-23.40%

Nutanix, Inc. NTNX Information Technology Internet Software and Services

5.00%

21.91%

25.09%

Tesaro, Inc. TSRO Healthcare Biotechnology

4.38%

11.35%

-24.97%

Uniti Group Inc. UNIT Real Estate Specialized REITs

4.32%

2.61%

-11.75%

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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