Morning Quant Ride Mar 9, 2018

Mar 09, 2018

Traders’ Corner

Asian & Australia Equities Recap

 

Japanese and Chinese/Hong Kong equity markets closed up following news that US President Trump is willing to meet with North Korea Supreme Leader Kim Jong-un.  The Nikkei 225 and Topix finished up 0.47% and 0.32% respectively.  Japanese equities were led by materials, telecom and industrials stocks.  Only utilities stocks, as a group, finished down in Tokyo.  The Bank of Japan (BOJ), as expected, kept its target policy the same: short-term rates remain at -0.1% while long-term rates are targeted ~0.0%.  Spending by Japanese households Y/Y in January surprised to the upside, coming in at +2.0% vs. consensus of -1.2%.  Average Y/Y wage growth in January was in-line with consensus at +0.7%.

The Hang Seng finished +1.11% while the Hang Seng China Enterprise and CSI 300 were +0.78% and +.077%.  In Hong Kong, industrials, consumer discretionary and tech stocks were outperformers while utilities stocks, like the Tokyo Stock Exchanges, were the largest laggards.  February China CPI was +2.9% vs. expectations for +2.5% and 1.5% in January.  The acceleration in China CPI rate brought the Y/Y growth rate it its highest level since November 2013.

Indian stocks finished down with the Sensex closing down 0.13%.  Indian stocks continue to trade on country-specific macro risk rather global macro risks.  The widening probe into an alleged USD$2bn fraud at state-run National Bank continues to dominate investor sentiment in India.  Materials stocks continue to decline over concerns that Indian metal producers will be caught up with the US decision to raise tariffs on aluminum and steel imports. 

In the Land Down Under, Aussie stocks rallied with Japanese and Chinese/Hong Kong equity markets with the ASX 200 finishing its trading session +0.23%.  Telecom, industrials and tech stocks were outperformers in the Aussie equity market while energy and materials were the largest underperformers.  Share-price weakness among materials stocks is a little surprising since the US government implied that Australia may receive an exemption from the aluminum and steel tariffs.

European Equities Recap

European equities, in aggregate, are down this morning with the Euro Stoxx 600 -0.10%.  Regional indices are mixed with the FTSE 100 -0.052%, DAX 0.0%, and the CAC 40 -0.38%.  Materials, food & beverage, and retail stocks are outperformers across European equities; real estate and bank stocks are the biggest laggards.  Total volume traded, for the European Composite, is +44.69% above its 10-day average this AM.  The German Trade Balance for January was €21.3B, in-line with consensus of  €21.1B.  German January Industrial production was -0.1% m/m, disappointing vs. consensus +0.9% and -0.5% in December.  French January industrial production was -2.0% m/m, disappointing vs.  consensus -0.4% and  +0.2% in December.  UK January industrial production was +1.3% m/m vs consensus +1.5% and -1.3% in December.  The UK January Trade Balance was -£3.40B vs. a consensus estimate of -£3.0B.  Market breadth in European equities is mixed with declines slightly outpacing advances ahead of the US February Non-farm payrolls jobs report at 8:30am.

Rates & Commodities Recap

US bond yields are in-line with yesterday, at 2.875% and still below 2.90%; however, fixed swap rates are implying a 10-year yield of 2.90%.  Fed Fund futures, ahead of this AM’s February Non-farm payrolls jobs report are implying 3 rate hikes in CY2018 but are discounting the probability of 4 rate hikes.  The US Dollar index is flat this morning with strength in AUD$, EUR€ and GBP£ offsetting weakness in JPY¥.  The USD$/JPY¥ pair is now well above 106 and closing in on 107.  Commodities are markets are mixed this AM with oil prices rallying while precious metals are down.  WTI remains above USD$60/barrel, which we continue to believe it a support level for crude oil.  Precious metals are down in sympathy with the JPY¥ as investors appear to be in a risk-on mode.

Cryptocurrencies Recap

Major cryptocurrencies are down across the board the morning.  There are rumors that the trustee of Mount Gox has begun liquidating large bitcoin positions.  The EU is planning to form a new FinTech lab in 2Q 2018, with the objective of raising the "regulatory and supervisory capacity and knowledge" around new technologies including Blockchain.  PayPal has filed a patent to speed up cryptocurrency transaction times by eliminating the verification time of payments. A bitcoin expert says it is already possible through existing technologies.

US Markets Pre-Market Preview & Recap

US equity markets are flat with a positive bias this AM ahead of February Non-farm payrolls jobs report at 8:30am.  The VIX is below 16.50 after going above 20 earlier this week.  Implied volatility on US index options continues to mean-revert downward; Skew continues to be expensive, implying investors continue to buy out of the money puts.

US Equity Markets were mixed yesterday. Large-Cap stocks outperformed Small-Caps, with the S&P 500 up 0.45%, and the Russell 2000 down 0.16%. The S&P 500 was led higher by Consumer Staples, Utilities, and Healthcare, while energy was the only negative sector. The S&P 500 Tech sector outperformed the Nasdaq, returning +0.46% and +0.42%, respectively.  Market breadth was positive with advances outpacing declines.  The Put/Call ratio for S&P500 options supports our thesis above about Skew: the ratio was 1.21 in yesterday’s trading session.

Express Scripts (ESRX), Akami Technologies (AKAM), and Wynn Resorts (WYNN) were the biggest gainers in the S&P 500 yesterday, while Kroger (KR), Cigna (CI), and L Brands (LB) were the biggest laggards. PCM Inc. (PCMI) and Comtech Telecommunications (CMTL) were two of the most notable gainers on the Russell 2000, while tronc Inc. (TRNC) and ZAGG Inc. (ZAGG) were two notable laggards. Express Scripts (ESRX) and Wynn Resorts (WYNN) were the biggest positive movers in the Nasdaq, while Mercadolibre (MELI) and Cerner Corp (CERN) were the biggest negative movers.

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

Ennis, Inc. - 6.51% off its 52wkH, reports earnings on 04/24/2018

Entercom Communications Corp. - 33.11% off its 52wkH, reports earnings on 05/07/2018

Louisiana-Pacific Corporation - 10.46% off its 52wkH, reports earnings on 05/04/2018

QuantShot: Target Corporation - 11.37% off its 52wkH, reports earnings on 05/16/2018

Time Warner Inc. - 8.77% off its 52wkH, reports earnings on 05/02/2018

Universal Forest Products, Inc. - 17.23% off its 52wkH, reports earnings on 04/18/2018

Our Top Picks in the News

Click headline for story

Darden Restaurants (DRI)

Analysts recommend to Buy services stock: Darden Restaurants, Inc. (DRI) (StreetObserver)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Consumer Discretionary report

 

See more on our Darden QuantShot company report from February 9th

Home Depot (HD)

Here's Why the Best Is Yet to Come for Home Depot, Inc. (Motley Fool)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Consumer Discretionary report

 

See more on our Home Depot QuantShot company report from February 15th

Amazon.com (AMZN)

Amazon: How It’s Rolling Out Changes to Whole Foods (Barron's)
Amazon.com price target raised to $1,760 from $1,620 at UBS (TheFly)
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

Pfizer Inc (PFE)

FDA Ad Com back Pfizer's Xeljanz for certain UC patients; shares up 2% (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)
Wynn Resorts settlement positive for shares, says Jefferies (TheFly)
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

World Wrestling Entertainment (WWE)

WWE in weekly highlight broadcast deal with Spain's GOL (Seeking Alpha)
Top Conviction Buy in March, please see Quantamize Global Top Picks US Consumer Discretionary report

 

See more on our World Wrestling QuantShot company report from February 12th

Global Indices

Index

Levels

1 Day Return

5 Day Return

MTD

YTD

S&P 500

2,738.97

0.00%

1.77%

0.93%

2.44%

Russell 2000

1,571.97

0.00%

2.53%

3.94%

2.37%

DJ Industrial Average

24,895.21

0.00%

1.46%

-0.54%

0.71%

NASDAQ Composite Index

7,427.95

0.00%

2.34%

2.13%

7.60%

CBOE Market Volatility Index

16.47

-

-

-

-

Germany DAX (TR)

12,306.13

-0.40%

3.71%

-1.06%

-4.35%

France CAC 40

5,253.86

0.00%

2.29%

-1.26%

-1.10%

Japan Nikkei 225

21,469.20

0.47%

0.88%

-2.71%

-6.14%

Hang Seng Index

30,996.21

1.11%

0.23%

0.49%

2.46%

Hang Seng China Enterprises

12,431.20

0.78%

1.07%

0.40%

5.34%

S&P ASX 200

5,963.20

0.34%

0.24%

-0.88%

-2.01%

Source: FactSet          

Large Cap Conviction Buy Movers

Large Cap A Winners Ticker Sector Industry 1 Day Return  5 Day Return YTD
The Middleby Corporation MIDD Industrials Industrial Machinery

2.39%

6.18%

-5.69%

Monster Beverage Corporation MNST Consumer Staples Soft Drinks

2.30%

4.93%

-10.21%

Kansas City Southern KSU Industrials Railroads

2.24%

3.87%

3.28%

Comcast Corporation CMCS.A Consumer Discretionary Cable and Satellite

2.10%

1.07%

-7.92%

AbbVie Inc. ABBV Healthcare Biotechnology

2.00%

1.71%

20.99%

Large Cap A Losers Ticker Sector Industry 1 Day Return  5 Day Return YTD
Cigna Corporation CI Healthcare Managed Healthcare

-11.45%

-10.91%

-12.20%

Entercom Communications Corp. ETM Consumer Discretionary Broadcasting

-4.39%

-2.49%

-1.01%

F5 Networks, Inc. FFIV Information Technology Communications Equipment

-3.71%

-0.78%

-0.89%

Encompass Health Corporation EHC Healthcare Healthcare Facilities

-1.77%

3.79%

7.34%

Zions Bancorporation ZION Financials Regional Banks

-1.46%

2.35%

2.06%

Source: Capital IQ            

Large Cap Conviction Short Movers

Large Cap F Winners Ticker Sector Industry 1 Day Return  5 Day Return YTD
Riot Blockchain, Inc. RIOT Healthcare Biotechnology

-5.06%

-9.55%

-9.55%

Esperion Therapeutics, Inc. ESPR Healthcare Biotechnology

-4.13%

-7.34%

-9.04%

Fitbit, Inc. FIT Information Technology Electronic Equipment and Instruments

-2.66%

3.02%

7.11%

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

-2.43%

-2.34%

-0.85%

Loxo Oncology, Inc. LOXO Healthcare Biotechnology

-2.29%

8.11%

16.64%

Large Cap F Losers Ticker Sector Industry 1 Day Return 5  Day Return YTD
Nektar Therapeutics NKTR Healthcare Pharmaceuticals

7.05%

5.41%

81.58%

Tesaro, Inc. TSRO Healthcare Biotechnology

5.60%

20.39%

-16.21%

RPC, Inc. RES Energy Oil and Gas Equipment and Services

3.73%

0.91%

-21.62%

Pandora Media, Inc. P Information Technology Internet Software and Services

3.54%

10.94%

3.11%

Exact Sciences Corporation EXAS Healthcare Biotechnology

3.39%

12.02%

-3.16%

Source: Capital IQ            

Upcoming Earnings

Company Name Ticker Earnings Date
Darden Restaurants, Inc. DRI 03/22/2018
MSC Industrial Direct Co., Inc. Class A MSM 04/10/2018
J.B. Hunt Transport Services, Inc. JBHT 04/16/2018
M&T Bank Corporation MTB 04/16/2018
Celanese Corporation Class A CE 04/17/2018
Comerica Incorporated CMA 04/17/2018
Quest Diagnostics Incorporated DGX 04/18/2018
United Rentals, Inc. URI 04/18/2018
Alliance Data Systems Corporation ADS 04/19/2018
BB&T Corporation BBT 04/19/2018
SEI Investments Company SEIC 04/19/2018
Union Pacific Corporation UNP 04/19/2018
UnitedHealth Group Incorporated UNH 04/19/2018
Kansas City Southern KSU 04/20/2018
Visa Inc. Class A V 04/20/2018

Line for QuantShots

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