Morning Quant Ride Mar 8, 2018

Mar 08, 2018

Traders’ Corner

Asian & Australian Equities Recap

 

Asian markets finished up across the board as investors concerns about a global trade war continue to abate.  Japanese equities finished positive with the Nikkei 225 and Topix closing up 0.54% and 0.35% respectively.  Japanese equities were led higher by healthcare, tech and materials stocks while consumer staples, utilities and consumer discretionary stocks were the largest underperformers.  Japan 4Q GDP was revised to +1.6% Q/Q vs. consensus +0.8%.

Chinese equities were up in sympathy with Japanese equities though the major Hong Kong and Shanghai indices outperformed their Tokyo counterparts.  The Hang Seng was +1.52% while the Hang Seng China Enterprise Index and the CSI 300 were +1.27% and +1.01% each.  All sectors were up across the board with consumer discretionary, tech and telecom stocks the largest outperformers.  The February trade balance came in higher than expected at USD$33.7B vs consensus $0.0B and $20.3B in January.  The expansion of the trade balance was driven by a +44.5% Y/Y expansion in exports; expectations were for +12.07% Y/Y growth.

Indian equities finished up with Chinese and Japanese stocks as the Sensex snapped 6 days of declines.  The Sensex closed up +0.96% as investors ignored the widening investigations into fraud at state-run national banks.

In the Land Down Under, Aussie equities also closed positive with declining concerns about a global trade war.  The ASX 200 finished +0.69% with utilities, tech and healthcare stocks leading Aussie equities.  Volume traded on the Sydney Exchange was 11.35% above its 10-day average - - a sign of positive market breadth.

European Equities Recap

European equities are continuing the rally in Asia and Aussie equities with the Euro Stoxx 600 +0.33% this morning.  Regional indices are mxed with the DAX down 0.108% while the FTSE 100 and CAC 40 are +0.10% and +0.40%.  Food & Beverage, tech and telecom stocks are relative outperformers this morning with materials, autos & parts, and retail stocks underperforming  The European Central Bank (ECB) decided to keep rates unchanged.  European investors are waiting from commentary from ECB President Mario Draghi this AM.

Rates & Commodities Recap

US government bond yields are flat this morning, trading at 2.885% and slow inching back to 2.90%; 10-year fixed swap rates have already broken above 2.90%.  Investors are beginning to treat 2.90% as psychological technical level: right now it is serving as a ceiling for yields though if yields were to break strongly above it, investors should expect a move to 3.25%.  The US Dollar index is flat this morning with the USD$ flattish against all major trading pairs.  The AUD$ is notably the only weak G7 currency and is in-line with the column’s expectations that interest rate differentials will finally begin to drive the AUD$/USD$ pair.  Commodity markets are quiet with WTI flat.  The notably moves in commodity markets are in base metals with both copper down 0.77% and aluminum -2.33%.  This move reflects the sentiment that the probability of a global trade war isn’t high.

Cryptocurrencies Recap

Major cryptocurrencies are down across the board.  Japanese financial regulator, Financial Services Agency (FSA),  issued punishment notices for seven Crypto Exchanges which came after the FSA halted trading on Bit Station and FSHO  for one month. The SEC is now requiring US cryptocurrency trading platforms to register with the agency; they will now be governed by the same rules as traditional exchanges.  This is a step in the process of normalizing the trading of cryptocurrencies.

US Markets Pre-Market Preview & Recap

US Equity Markets were mixed yesterday. Small-Cap Stocks outperformed Large-Caps, with the Russell 2000 up 0.79%, and the S&P 500 down 0.05%. Information Technology, Real Estate and Healthcare were the only positive sectors of the S&P 500, while Consumer Staples, Energy, and Consumer Discretionary were the biggest underperformers. The S&P 500 Tech sector outperformed the Nasdaq, returning +0.55% and +0.33%, respectively. 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. Implied volatility on Russel 2000 index options is now less than 1 standard deviation above its 1-year mean.  However, Skew on S&P 500, Russell 2000 and Nasdaq options continues to be extremely rich.   This “implies” investors are still buying puts but not at the same rate as they were last week.  On a side note, Skew on US index options is HIGHER than Skew for international index options.

Autodesk (ADSK), H&R Block (HRB), and Advanced Micro Devices (AMD) were the biggest gainers in the S&P 500 yesterday, while Dollar Tree (DLTR), Kroger (KR), and Ross Stores (ROST) were the biggest laggards. Mediafast (MED) and Regenxbio Inc. (RGNX) were two of the most notable gainers on the Russell 2000, while Aerovironment Inc. (AVAV) and Spectrum Pharmaceuticals (SPPI) were two notable laggards. Autodesk (ADSK) and JD.com (JD) were the biggest positive movers in the Nasdaq, while Dollar Tree (DLTR) and Ross Stores (ROST) were the biggest negative movers.

This morning we are watching a few of our A-Rated stocks that lagged the market yesterday:

QuantShot: Cognizant Technology Solutions Corporation - 0.64% off its 52wkH, reports earnings on 05/04/2018

QOption: Comcast Corporation - 17.91% off its 52wkH, reports earnings on 04/26/2018

Gentex Corporation - 4.78% off its 52wkH, reports earnings on 04/25/2018

Lear Corporation - 7.89% off its 52wkH, reports earnings on 04/27/2018

Louisiana-Pacific Corporation - 9.46% off its 52wkH, reports earnings on 05/04/2018

The J. M. Smucker Company - 8.35% off its 52wkH, reports earnings on 06/07/2018

Our Top Picks in the News

Click headline for story

Pfizer Inc (PFE)

Pfizer Might Be Just What The Doctor Ordered (Seeking Alpha)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Large Cap report

 

See more on our Pfizer QuantShot company report from February 14th

Wynn Resorts (WYNN)

Wynn Resorts higher after business update (Seeking Alpha)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Consumer Discretionary report

 

See more on our Wynn QuantShot company report from February 12th

Cigna Corp (CI)

Cigna to acquire Express Scripts in $67 billion deal (Biz Journals)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Large Cap report

Lockheed Martin (LMT)

Lockheed, MBDA form JV for German missile defense project, Reuters reports (TheFly)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Large Cap report

Global Indices

Index

Levels

1 Day Return

5 Day Return

MTD

YTD

S&P 500

2,726.80

0.00%

1.83%

0.48%

1.99%

Russell 2000

1,574.53

0.00%

4.45%

4.11%

2.54%

DJ Industrial Average

24,801.36

0.00%

0.78%

-0.91%

0.33%

NASDAQ Composite Index

7,396.65

0.00%

3.01%

1.70%

7.15%

CBOE Market Volatility Index

17.37

-

-

-

-

Germany DAX (TR)

12,196.30

-0.40%

0.45%

-1.90%

-5.20%

France CAC 40

5,205.30

0.34%

-1.42%

-2.17%

-2.35%

Japan Nikkei 225

21,368.07

0.54%

-2.17%

-3.17%

-6.64%

Hang Seng Index

30,654.52

1.52%

-2.73%

-0.62%

0.93%

Hang Seng China Enterprises

12,334.83

1.27%

-2.00%

-0.38%

4.02%

S&P ASX 200

5,942.90

0.69%

-1.19%

-1.22%

-2.69%

Source: FactSet          

Large Cap Conviction Buy Movers

Large Cap A Winners Ticker Sector Industry 1 Day Return  5 Day Return YTD
National Beverage Corp. FIZZ Consumer Staples Soft Drinks

2.71%

2.95%

1.48%

LogMeIn, Inc. LOGM Information Technology Internet Software and Services

2.50%

3.06%

7.51%

The Cooper Companies, Inc. COO Healthcare Healthcare Supplies

2.43%

5.06%

13.01%

The Middleby Corporation MIDD Industrials Industrial Machinery

2.30%

3.70%

-7.89%

Encompass Health Corporation EHC Healthcare Healthcare Facilities

2.09%

5.66%

17.79%

Large Cap A Losers Ticker Sector Industry 1 Day Return  5 Day Return YTD
Comcast Corporation CMCS.A Consumer Discretionary Cable and Satellite

-2.03%

-1.01%

-0.25%

United Rentals, Inc. URI Industrials Trading Companies and Distributors

-1.97%

2.69%

3.58%

Louisiana-Pacific Corporation LPX Materials Forest Products

-1.62%

-0.99%

-1.18%

Mohawk Industries, Inc. MHK Consumer Discretionary Home Furnishings

-1.69%

0.28%

-1.11%

The Home Depot, Inc. HD Consumer Discretionary Home Improvement Retail

-1.68%

0.07%

-2.02%

Source: Capital IQ            

Large Cap Conviction Short Movers

Large Cap F Winners Ticker Sector Industry 1 Day Return  5 Day Return YTD
Southwestern Energy Company SWN Energy Oil and Gas Exploration and Production

-5.45%

-6.94%

16.53%

Centennial Resource Development, Inc. CDEV Energy Oil and Gas Exploration and Production

-5.36%

-7.88%

-3.77%

Rite Aid Corporation RAD Consumer Staples Drug Retail

-5.26%

-5.76%

-8.63%

Oasis Petroleum Inc. OAS Energy Oil and Gas Exploration and Production

-4.53%

-1.56%

4.19%

CF Industries Holdings, Inc. CF Materials Fertilizers and Agricultural Chemicals

-2.99%

0.10%

1.62%

Large Cap F Losers Ticker Sector Industry 1 Day Return  5 Day Return YTD
Autodesk, Inc. ADSK Information Technology Application Software

14.87%

18.42%

31.36%

Editas Medicine, Inc. EDIT Healthcare Biotechnology

9.99%

11.38%

37.59%

Tesaro, Inc. TSRO Healthcare Biotechnology

5.76%

14.01%

-20.65%

Puma Biotechnology, Inc. PBYI Healthcare Biotechnology

4.52%

12.17%

-19.37%

Sarepta Therapeutics, Inc. SRPT Healthcare Biotechnology

4.10%

9.37%

33.59%

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

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