Morning Quant Ride

Apr 26, 2018

Traders' Corner

Key Highlights

  • US equity index futures are rallying following positive earnings results from US tech and consumer companies Facebook, Paypal and Qualcomm
  • The yield on the US 10-year is back below 3.0% this morning on the biggest downward move in the 10-year yield in almost 3 weeks
  • European equities are broadly advancing, strength in telecommunications is leading markets higher
  • ECB announces unchanged policies on QE and rates
  • Asian equities finished mixed, Chinese/Hong Kong equities sold-off with the Hang Seng -1.06%
  • 11 of the 30 cryptocurrencies our machine learning signals follow are buys. Notable top performers are Siacoin, Iota and Nano

US Equities Before the Open

US equity futures are pointing to a positive open this morning with earnings season outweighing any major geopolitical concerns.  S&P 500 e-mini futures +0.21%, Nasdaq 100 e-minis +0.56% and Dow Jones e-minis +0.14% following positive results from major US tech and consumer tech companies Advanced Micro Devices (+9.2% pre-market), Citrix Systems (+3.4% pre-market), Facebook (+7.2% pre-market), PayPal (+3.8% pre-market), Qualcomm (+0.5% pre-market) yesterday. 

 

EUR€/USD$ pair is flat this AM following the decision by the European Central Bank (ECB) to keep its policy rates unchanged.  WTI remains above USD$68/barrel with concerns about a potential US exit from the Iran Nuclear Deal outweighing concerns about expanding US output.  The Brent-WTI spread remains near a 3-year high with the two global oil benchmarks pricing in the divergence in expectations for domestic US and international oil production.

 

The yield on the US 10-year is trading below 3.0% (after closing above 3.0% yesterday) with a weaker USD$ and worries about a deceleration in global growth driving demand for US government bonds.  The move down in the US 10-year yield this morning is the biggest downward move in almost 3 weeks.

 

After jumping north of 18.00 on this past Tuesday, the VIX is currently sitting at 17.44, implying a reduction in risk premiums across US options.  The VVIX, a measure of the volatility of VIX is currently south of 100.  OTM May 18 Puts and OTM April 27 Puts on SPY, OTM April 27 QQQ, OTM January 19 Puts on RIG are the most actively traded options in the US this morning.

 

Some pre-market highlights from this morning:

  • ABBVIE reported very strong 1Q2018 results which were ahead of expectations and raised it FY2018 guidance.  Pre-market, the stock is up +2.7%.
  • BorgWarner reports disappointing F2Q2018 EPS that were below Market expectations.  Mid-point of FY2018 guidance is in-line with Wall Street expectation.  Pre-market, the stock is flat.
  • Conoco Phillips reported good 1Q2018 results with disappointing production guidance for 2Q.  Pre-market, the stock is up +1.5%.
  • Helmerich & Payne F2Q2018 results were in-line with Wall Street expectations.  Pre-market, the stock is flat.
  • Pepsi reported 1Q2018 EPS ahead of Consensus and reaffirmed FY guidance.  Pre-market, the stock is down 0.2%.
  • Valero reports a good 1Q208 EPS that was ahead of expectations.  Pre-market, the stock is up 1.6%.

Major companies reporting earnings over the next 24 hours include:

  • American Airlines
  • Digital Realty Trust
  • Hartford Financial Services
  • Intel Corp
  • National Oilwell Varco

In today's market action we are watching the following Conviction Buy market laggards (Click name for Q-Factor rating and financial data):

Coherent, Inc. - 51.14% off its 52wkH on 01/17/2018, reports earnings on 05/01/2018

DXC Technology Company - 5.59% off its 52wkH on 03/20/2018, reports earnings on 05/22/2018

Encompass Health Corporation - 3.87% off its 52wkH on 04/05/2018, reports earnings on 04/26/2018

Ennis, Inc. - 16.05% off its 52wkH on 11/29/2017, reports earnings on 06/20/2018

MCBC Holdings, Inc. - 16.67% off its 52wkH on 02/12/2018, reports earnings on 05/10/2018

Pfizer Inc. - 6.97% off its 52wkH on 01/29/2018, reports earnings on 05/01/2018

Cryptocurrency Morning Brief

Cryptocurrency Markets

Major cryptocurrencies are mixed to start the day. Bitcoin is down 0.52% as of 8:30AM EST at USD$8,856.10, from yesterday’s UTC close. Notable top performers from the thirty cryptocurrencies which our machine learning signals follow include: Siacoin +23.97%, OmiseGO +12.70% and Nano +12.18%, from yesterday’s UTC close using volume-weighted exchange pricing. Out of the thirty buy/don’t own signals Quantamize generates (see Crypto Signals), 11 are a buy currently for a three-day rolling period.

General Cryptocurrency Info

IBM has built a blockchain technology called TrustChain. This technology proves the provenance of jewelry by following the supply chain from mine to store.  Monex Group, the Japanese firm that recently acquired cryptocurrency exchange Coincheck, has said it is looking to develop its own blockchain platform, followed by an initial coin offering (ICO). Gemini exchange announced yesterday that it will be partnering with Nasdaq and use the SMARTS Market Surveillance offering to detect any price manipulation or other illicit activities. The bank Banco Bilbao Vizcaya Argentaria (BBVA) has become the first global bank to issue a loan using blockchain technology. The blockchain technology reportedly cut the negotiation time from days to hours and BBVA has called the transaction a “significant advance in the exploitation of [distributed ledger] technology”.

EU at Midday

European equities are higher today with the Euro Stoxx 600 +0.46%, the FTSE 100 +0.12%, the CAC40 +0.49%, and the DAX +0.18%. Telecommunications (+1.10%), consumer staples (+0.99%), and utilities (+0.97%) sectors being the best performing sectors in the Euro Stoxx 600, while materials (-0.33%), information technology (-0.02%), and financials (+0.29%) are the largest laggards. Notable movers in the Euro Stoxx included: Safran SA (+3.23%), Volkswagen AG (+2.81%), Anheuser-Busch (+1.26%), and Bayerische Motoren Werke (+1.15%). Market breadth in the Euro Stoxx 600 is decidedly positive with 445 of 600 stocks in positive territory.

The ECB has announced that it will leave its policy rates unchanged for the time being and will continue its €30bn per month QE program until September 2018. 

GfK SE, a leading German research institute, released results for German consumer confidence in May that was in-line with expectations (10.9 vs 10.9 consensus).

Asia & Australia While You Were Sleeping

Japanese equities closed higher with the Nikkei 225 +0.47%. Consumer staples (+0.82%), consumer discretionary (+0.36%), and materials (+0.17%) were the best performing sectors in the Nikkei 225, while telecommunications (-0.39%), industrials (+0.00%), and healthcare (+0.04%) were the largest laggards. Notable movers in the Nikkei 225 included: Tokyo Electron (+8.42%), Screen Holdings (+2.81%), Kao Corp (+2.45%), and Mitsui Mining (-2.49%). Market breadth in the Nikkei 225 was positive with 117 of 225 stocks finishing in positive territory. Embattled Japanese Prime Minister Shinzo Abe is denying claims that he is considering holding an election earlier than expected. Yomiuri, a Japanese newspaper, is reporting that Japanese employers have increased wages by 2.54% so far this year. This is a 0.36% increase Y/Y, but still below the Japanese government’s 3% wage growth goal.

Chinese and Hong Kong Equities were broadly negative with the Hang Seng -1.06%, the CSI 300 -1.91%, and the Shenzhen Composite -2.15%. All sectors in the Hang were negative with consumer discretionary (-2.00%), information technology (-1.94%), energy (-1.44%), and financials (-1.08%) being the biggest underperformers. Notable movers in the Hang Seng included: Sunny Optical (-6.97%), AAC Technologies (-3.49%), Geely Auto Mobile (-2.36%), and WH Group (+1.28%). Market breadth in the Hang Seng was notably negative with 34 of 50 stocks in the red. China will restart its Qualified Domestic Institution Investor (QDII) program, enabling Chinese financial firms to acquire foreign equities and bonds for the first time since 2015. China is considering reducing the tariffs it places on auto imports from 25% to a range of 10%-15%. A lower tariff on autos was one of the potential trade policy changes announced by Chinese President Xi Jinping earlier this month.

Indian equities advanced with the Sensex +0.62%, and the Nifty 50 +0.45%. Consumer staples (+1.51%), financials (+0.63%), and energy (+0.48%) were the largest outperformers in the Sensex, while materials (-0.97%) and industrials (-0.76%) were the biggest decliners. Notable movers in the Sensex included: Hindustan Unilever (+2.17%), Tata Consultancy (+2.09%), Infosys Ltd (+1.27%), and Bharti Airtel (-2.61%). Market breadth in the Sensex was relatively neutral with 17 of 30 stocks finishing positive. 

Australian equities finished modestly lower, with the ASX 200 declining 0.18%. Healthcare (+2.05%), energy (+1.27%), and consumer staples (+1.07%) were the best performing sectors in the ASX 200, while financials (-1.77%), materials (-0.22%), and consumer discretionary (+0.30%) being the biggest laggards. Notable movers in the ASX 200 included: Blackmores (-4.17%), Westpac Banking (-3.60%), Altium (-2.74%), and Treasury Wine (+3.11%). Market breadth for the ASX 200 were positive with 117 of 200 stocks in the black. Australian export prices for 1Q 2018 rose more than expected (+4.9% vs +4.1% consensus) and increased more than they did in 4Q 2017 (+2.8%). Import prices growth came in higher than expected as well in 1Q 2018 q/q (+2.1% vs 1.2% estimated).

Stocks Trending in the News

Click name for Q-Factor rating and financial data.

Boeing Co (BA) plans to deliver its first jets to the Iranian government this year. Boeing CEO Dennis Muilenburg stated that he is not concerned that the failure of the deal will lead to production cuts of the company’s 777 jetliner product. 

Domino’s Pizza (DPZ) announced 1Q 2018 EPS of $2.00, firmly higher than estimates of $1.77.

Duetsche Bank AG (DBK.GR) is planning “significant “job cuts and will scale back its sales and trading business in the US. Deutsche Bank will also limit its corporate finance business in the US and Asia as the company focuses on further developing domestic European operations.

Facebook (FB) shares are up 7.00% pre-market after posting 1Q 2018 EPS of $1.69 pre-share, firmly beating estimates of $1.35 per share, despite backlash from the Cambridge Analytica data breach scandal.

Ford (F) announced this morning that it will be eliminating all of its North American sedan product lines, excluding its Mustang and Focus models, as market preferences have shifted to pickup trucks and crossover vehicles. 

General Motors (GM) posted 1Q 2018 EPS of $1.43, strongly beating the $1.24 estimate.

Nasdaq (NDAQ) CEO Adena Friedman noted that Nasdaq would “consider becoming a crypto exchange over time”, but that the company would wait for regulatory concerns to settle first.

Nintendo Co (7974.JP) CEO Tatsumi Kimishima has announced that he will be stepping down from his role in June and will be replaced by Shuntaro Furukawa.

PepsiCo (PEP) reported 1Q 2018 EPS that narrowly beat the consensus ($0.96 vs $0.93 expected). Revenue came in above expectations as well ($36.1bn vs $34.66bn consensus).

 

Stock Movers

Conviction Buy Winners and Losers

Winners Ticker Sector Industry 1 Day Return 5 Day Return YTD
Norfolk Southern Corp. NSC Industrials Railroads 8.14% 6.73% 0.73%
Anthem, Inc. ANTM Healthcare Managed Healthcare 6.15% 5.65% 6.15%
Laboratory Corporation of America Holdings LH Healthcare Healthcare Services 3.99% 4.56% 8.28%
Prestige Brand Holdings, Inc.  PBH Healthcare Pharmaceuticals 3.90% 5.65% -28.03%
Gentex Corporation GNTX Consumer Discretionary Auto Parts and Equipment 2.91% 4.55% 9.74%
Losers Ticker Sector Industry 1 Day Return 5 Day Return YTD
Rollins, Inc. ROL Industrials Environomental and Facilities Services -2.62% -5.39% -3.29%
FleetCor Technologies, Inc. FLT Information Technology Data Processing and Outsourced Services -2.17% -3.67% -0.60%
CenterPoint Energy, Inc. CNP Utilities Multi-Utilities -1.74% -6.60% -9.05%
Markel Corporation MKL Financials Property and Casualty Insurance -1.51% -1.23% -2.54%
SEI Investments Co. SEIC Financials Asset Management and Custody Banks -1.48% -2.60% -8.61%

Source: S&P Capital IQ

 

Conviction Short Winners and Losers

Winners Ticker Sector Industry 1 Day Return 5 Day Return YTD
TripAdvisor TRIP Consumer Discretionary Internet and Direct Marketing Retail -8.54% -7.90% -6.26%
Energous Corporation WATT Industrials Electrical Components and Equipment -6.11% -7.15% 14.97%
Finisar Corporation

FNSR

Information Technology Communications Equipment -6.07% -2.66% -5.06%
Ligand Pharmaceuticals Incorporated LGND Healthcare Pharmaceuticals -4.36% -7..34% -6.32%
Advanced Micro Devices AMD Information Technology Semiconductors -3.77% -2.80% -3.38%
Losers Ticker Sector Industry 1 Day Return 5 Day Return YTD
California Resources Corporation CRC Energy Oil and Gas Exploration & Production 6.42% 7.72% 31.38%
Superior Energy Services, Inc. SPN Energy Oil and Gas Equipment & Services 4.25% 4.25% 6.96%
Southwestern Energy Company SWN Energy Oil and Gas Exploration & Production 4.21% 4.94% -20.07%
Oasis Petroleum Inc. OAS Energy Oil and Gas Exploration & Production 3.91% 4.72% 26.52%
ImmunoGen, Inc, IMGN Healthcare Biotechnology 3.70% 0.88% 61.62%

Source: S&P Capital IQ