Morning Quant Ride

Apr 27, 2018

Traders' Corner

Key Highlights

  • Q1 US GDP +2.3% vs consensus +2.0%
  • Asian equities advanced broadly on strength in telecommunications, Hang Seng +0.91%, Nikkei 225 +0.66%, ASX 200 +0.73%
  • European equities higher midday despite softer than expected GDP reports across the region
  • Major cryptocurrencies have picked up momentum and are higher today however Quantamize now has 9 Buy signals, down from 11 yesterday for a rolling three-day period

US Stocks Before the Open

US equity futures are mixed this morning with S&P 500 e-mini futures -0.22%, Nasdaq 100 e-minis +0.17% and Dow Jones e-minis -0.44%.  Positive geopolitical news that North Korea and South Korea are considering denuclearizing the Korean Peninsula is being overshadowed by worries about decelerating economic growth. US 1Q2018 GDP surprised to the upside coming in at +2.3% Q/Q vs. Consensus of +2.0%.  This is contrast to disappointing 1Q2018 GDP results for France, United Kingdom and Spain.

The divergence in performance of Nasdaq futures vs. S&P 500 and Dow Jones futures is explained by strong earnings results from Amazon (+7.4%), Intel Corp (+6.1%) and Microsoft (+3.8%) yesterday after the close.  US Tech 1Q2018 earnings results have surprised to upside which is beginning to serve a fundamental support for tech stock valuations.  For the year, the QQQ, a proxy for large-cap tech stocks, is +4.17% as of yesterday’s close.

GBP£/USD$ pair is weakening this morning, currently -1.14%, following the disappointing 1Q2018 UK GDP results.  In comparison, the EUR€/USD$ is only down 0.25%.  US government bond yields are relatively unchanged this AM with the yield on the US 10-year currently at 2.97%.  Fed Funds futures continue to price in 90%+ probability of 25 bps rate increases to the Fed Funds Rate in June 2018 and August 2018.

The VIX is flat this morning, holding at 16.26 after closing at 16.24 yesterday.  After a shift up mid-week, the VIX is back down to levels seen at the beginning of the week.  OTM April 27 Calls and Puts on SPY, OTM May 11 Calls on EEM, and June 18 Calls on HYG are the move actively traded options in the US this morning.

Some pre-market highlights from this morning (Click name for Q-Factor rating and financial data):

  • Colgate-Palmolive 1Q2018 EPS was ahead of Street expectations.  However, organic revenue growth was below Consensus.  Pre-market, Colgate is -3.0%
  • Exxon Mobil reported disappointing 1Q2018 EPS  after failing to reach oil and natural gas production targets.  Exxon is down 1.47% in pre-market trading
  • Phillips 66 reported 1Q2018 results ahead of market expectations.  Pre-market, Phillips 66 is flat

Major companies reporting earnings through next Monday include (Click name for Q-Factor rating and financial data):

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

Apple Inc. - 10.51% off its 52wkH on 03/13/2018, reports earnings on 05/01/2018

Knowles Corporation - 41.71% off its 52wkH on 06/09/2017, reports earnings on 04/26/2018

SYNNEX Corporation - 28.84% off its 52wkH on 01/04/2018, reports earnings on 06/19/2018

Tech Data Corporation - 30.51% off its 52wkH on 08/30/2017, reports earnings on 05/25/2018

The J. M. Smucker Company - 13.99% off its 52wkH on 06/08/2017, reports earnings on 06/07/2018

United Rentals, Inc. - 18.55% off its 52wkH on 03/13/2018, reports earnings on 07/20/2018

Cryptocurrency Morning Brief

Cryptocurrency Markets
Major cryptocurrencies are rallying across the board this morning. The total market capitalization of cryptocurrencies is back above USD$400bn now at USD$422.7bn. Bitcoin is up 1.37% as of 7:20AM EST at USD$9,318.90, from yesterday’s UTC close. Bitcoin is also up 4.48% over the last five days, showing positive momentum. Notable top performers from the thirty cryptocurrencies which our machine learning signals follow include: EOS +6.31%, Siacoin +6.24% and Stellar +8.25%, from yesterday’s UTC close using volume-weighted exchange pricing. Notably, out of the thirty buy/don’t own signals Quantamize generates (see Crypto Signals), six currently have positive returns year to date. Additionally, 9 cryptocurrencies have “Buy” signals today.

Cryptocurrency Markets
Tech giant IBM has filed a patent for an internet of things (IOT) focused blockchain configuration which would tailor the proof-of-work protocol to address potential security issues in IOT networks. IBM is looking to restrict a nonce, a number than can only be used once, to a predetermined range to solve two challenges currently facing blockchain solutions. Cryptocurrency exchanges Binance and Changelly will be partnering together. They are looking to bring more tokens, faster transactions and better rates to traders. Revolut, an alternative banking app startup has raised USD$250mm and will add new features to support for BCH and XRP to its crypto service. Revolut is valued at USD$1.7bn now and the company offers pre-paid debit cards, fiat currency exchange, cryptocurrency buying and exchange, and peer-to-peer payments.

 

Europe at Midday

European equities are mostly higher with the Euro Stoxx 600 +0.34%, the CAC40 +0.19%, the DAX +0.81%, while only the FTSE 100 is lower (-0.71%). Information technology, materials, and consumer staples were the best performing sectors in the Euro Stoxx 600, with financials, energy, and industrials being the weakest performers. Notable movers in the Euro Stoxx 600 included: Deutsche Bank AG (-4.58%), Anheuser-Busch (-0.92%), adidas AG (+1.58%), and Bayer AG (+1.41%). Market breadth in the Euro Stoxx 600 is strongly positive with 363 of 600 stocks advancing.

Eurozone economic sentiment for April came in at 112.7, higher than the 112.0 estimate, and in-line with March’s economic sentiment. Eurozone consumer confidence for April was in-line with estimates (0.4 vs 0.4 expected). The Eurozone’s business climate indicator for April rose to 1.35, above the 1.2 expectation.

GDP growth reports from the region for 1Q 2018 mostly disappointed. UK 1Q 2018 GDP came in slightly softer than expected on a y/y basis (+1.2% vs +1.4% estimated). France’s 1Q 2018 GDP grew 0.3% q/q, 0.1% lower than the consensus. Spain’s 1Q 2018 also grew at a lower rate than was projected ((+2.9% vs 3.0% consensus).

Germany’s unemployment rate for April was reported to be 5.3%, in-line with the previous month.

Asia & Australia While You Were Sleeping

Japanese equities advanced overnight with the Nikkei 225 +0.66%. Telecommunications (+3.04%), healthcare (+1.35%), and consumer staples (+1.13%) were the biggest outperformers in the Nikkei 225, while industrials (-1.52%), materials (-0.09%), and financials (-0.08%) were the largest laggards. Notable movers included: Advantest Corp (+13.57%), Kyocera Crop (+12.60%), Central Japan Railway (+5.22%), and FANUC Corp (-9.33%). Market breadth in the Nikkei 225 was positive with 140 of 225 stocks in the black. Japanese unemployment for March was in-line with February unemployment at 2.5% and was lower than the consensus of 2.6%. Industrial production growth for March was firmly higher than projected (+1.2% vs +0.5%). Core CPI growth for April was modestly softer than expected (+0.6% vs 0.8% consensus). The BoJ has announced that it will leave its monetary policy unchanged, with shorts term rates at -0.1% and long-term rates at 0.0%.   

Chinese and Hong Kong equities finished broadly higher with the Hang Seng +0.91%, the CSI 300 +0.04%, and the Shanghai Composite +0.23%. Telecommunications (+3.40%), energy (+3.09%), and information technology (+1.65%) were the best performing sectors in the Hang Seng, with utilities (+.20%), financials (+0.43%), and real estate (+0.58%) being the biggest underperformers. Notable movers in the Hang Seng included: China Mobile (+3.54%), Sunny Optical (+3.38%), Sands China (+2.31%), and Ping An Insurance (-2.23%). Market breadth in the Hang Seng was overwhelmingly positive with 41 of 50 stocks advancing. Chinese state-owned enterprises (SOE’s) are doing well in 1Q 2018. Aggregately, profit growth was 16.7% on a y/y basis.

Indian equities moved higher with the Sensex and Nifty 50 closed +0.84% and +0.70%, respectively. Materials (+2.13%), industrials (+2.12%), and energy (+1.54%) were the largest outperformers in the Sensex, with utilities (-0.19%) and consumer discretionary (-0.02%) the only negative sectors. Notable movers in the Sensex included: Axis Bank (+8.97%), Larsen & Tuobro (+2.21%), Tata Consultancy (-2.42%), and Hero MotoCorp (-1.12%) Market breadth for the Sensex was notably positive with twice as many stocks advancing than declining (20 advances vs 10 declines).

Australian equities rose as well, with the ASX 200 +0.73% on the day. Healthcare (+2.36%), telecommunications (+1.50%), and consumer staples (+0.86%) were the strongest performers in the ASX 200, with financials (+0.22%), real estate (+0.47%) and energy (+0.64%) the biggest laggards. Notable movers in the ASX 200 included: Domino’s Pizza Enterprises: (+7.92%), AGL Energy (+3.17%), Newcrest Mining (+3.09%), and LendLease Group (-1.13%). Market breadth in the ASX was decidedly positive with 129 of 200 stocks rising today. At the RBA’s meeting on May 1st, the RBA is expected to leave its interest rate unchanged at 1.5%.

Stocks Trending in the News

Click name for Q-Factor rating and financial data.

Colgate-Palmolive (CL) posted 1Q 2018 adjusted EPS of $0.74, relatively in-line with expectations for EPS of $0.73.

Dover Corp (DOV) reported 1Q 2018 EPS of $0.84, down from a 1Q 2017 EPS of $1.09, a 23% decline y/y.

Dominion Energy (D) has forecasted a range of 2Q 2018 EPS estimates that are below expectations ($0.70-$0.80 vs $0.83).

Fujifilm (4901.JP) and Xerox (XRX) are reportedly reengaging in negotiations after previously agreeing to a $6.1bn merger deal.

Rockwell Collins (COL) reported 2Q 2018 adjusted EPS of $1.81, modestly beating the consensus EPS of $1.78.

Sprint Corp (S) and T-Mobile US (TMUS) have reportedly progressed in merger negotiations, with the potential to complete discussions as early as next week.

Weyerhaeuser (WY) posted 1Q 2018 adjusted EPS that came in higher than expected ($0.36 vs $0.33 estimates).

Stock Movers

Conviction Buy Winners and Losers

Winners Ticker Sector Industry 1 Day Return 5 Day Return YTD
O'Reilly Automotive ORLY Consumer Discretionary Automotive Retail 13.06% 16.22% 7.01%
Micron Technology MU Information Technology Semiconductors 5.34% -0.95% 21.94%
Visa Inc. V Information Technology Data Processing and Outsourced Services 4.84% 2.32% 11.45%
The Home Depot HD Consumer Discretionary Home Improvement Retail 4.70% 4.92% -2.01%
United Parcel Service, Inc. UPS Industrials Air Freight and Logistics 4.25% 4.36% -4.93%
Losers Ticker Sector Industry 1 Day Return 5 Day Return YTD
SEI Investments Co. SEIC Financials Asset Management and Custody Banks -7.46% -9.87% -15.43%
AT&T Inc. T Telecommunication Services Integrated Telecommunication Services -5.97% -4.53% -7.15%
First American Financial Corporation FAF Financials Property and Casualty Insurance -4.39% -4.29% -10.99%
Service Corporation International  SCI Consumer Discretionary Specialized Consumer Services -3.60% 3.06% -1.04%
Union Pacific Corporation UNP Industrials Railroads -2.85% -2.57% -1.67%

Source: S&P Capital IQ

 

Conviction Short Winners and Losers

Winners Ticker Sector Industry 1 Day Return 5 Day Return YTD
Sangamo Therapeutics, Inc. SGMO Healthcare Biotechnology -6.07% -14.70% -14.47%
3D Systems Corporation  DDD Information Technology Technology Hardware, Storage and Peripherals -4.57% -8.28% -8.20%
United Continental Holdings

UAL

Industrials Airlines -2.76% -7.15% -4.10%
QEP Resources, Inc. QEP Energy Oil and Gas Exploation and Production -2.58% -3.05% 23.39%
TripAdvisor, Inc. TRIP Consumer Discretionary Internet and Direct Marketing Retail -2.45% -10.16% -8.56%
Losers Ticker Sector Industry 1 Day Return 5 Day Return YTD
Advanced Micro Devices, Inc. AMD Information Technology Semiconductors 13.70% 10.51% 7.39%
EQT Corporation EQT Energy Oil and Gas Exploration & Production 8.50% 7.56% -10.51%
Gulfport Energy Corporation GPOR Energy Oil and Gas Exploration & Production 7.42% 10.35% -23.98%
Patterson-UTI Energy, Inc PTEN Energy Oil and Gas Drilling 6.29% 5.60% -8.26%
Intercept Pharmaceuticals, Inc. ICPT Healthcare Biotechnology 5.93% 1.95% 19.94%

Source: S&P Capital IQ