Morning Quant Ride

May 02, 2018

Traders' Corner

Key Highlights

  • Results of Fed meeting will be announced at 2:00 p.m, expectations no change in rates policy at this meeting
  • CVS is +2.1% in premarket after releasing its 1Q2018 earnings results
  • YUM is down this morning after giving disappointing 2Q2018 guidance
  • European equities mostly higher after yesterday’s broad closures, Euro Stoxx 600 +0.50%
  • Asia smartphone manufacturers rallied on Apple’s stronger than expected earnings
  • Major cryptocurrencies are rallying to start today (total market capitalization up 3% from yesterday). Today is day three of our current three-day Machine Learning cryptocurrency signal forecast, with new signals tomorrow.

US Stocks Before the Open

US equity futures are little changed this morning with the S&P 500 e-mini futures +0.0.019%, Nasdaq 100 e-minis +0.01% and Dow Jones e-minis +0.48%.  Pre-market trading is relatively quiet with earnings results driving sentiment.  Apple’s (AAPL) positive earnings result last night after the close should set a positive tone for tech stock this morning.  Pre-market, the QQQs are +0.4% while AAPL is +4.3%.  AAPL is +11.25% in pre-market trading this morning. 

US Treasury yields are relatively unchanged ahead of the FOMC decision expected around 2:00pm EST.  Market expectations are for no change in the Fed policy rate.  USD$ Index is flat this morning with no notable changes with any of the G7 pairs.  The CNY$ is weak against the USD$ this AM following the decision by the People’s Bank of China (PBOC) to weaken its daily currency fixing by more than expected prior to the beginning of trade talks with US Officials. The PBOC CNY$ central parity rate is 6.3670 vs the dollar, above the forecast of 6.3610.  At the moment, the CNY$ is currently trading at 6.3590.  Oil markets are relatively quiet this morning with some investors cautioning that the recent rally in WTI/Brent over concerns about a supply shortage if the US were to leave the Iran deal may be overdone.

The VIX continues its downward trajectory this morning, currently at 15.33 after closing at 15.93 on Monday.  OTM May 4 Calls on BAC, OTM June 15 Puts on EEM, OTM May 2 Puts on SPY,  and July 18 Puts on HYG are the most actively traded options in the US this morning.

Some pre-market highlights from this morning:

  • Automatic Data Processing (ADP) reported adjusted F3Q2018 earnings ahead of expectations.  ADP boosted its FY2018 EPS growth outlook to 16-17%.  ADP is +4.2% in pre-market trading.
  • CVS Health (CVS) 1Q2018 earnings results were ahead of Consensus with 2Q guidance ahead of expectations.  CVS is +2.1% in pre-market.
  • Clorox (CLX) reported mixed F3Q2018 earnings results with a disappointing earnings results that was cut on an outlook for rising cost pressures.  CLX is +0.2% this morning ahead of the NY open.
  • Estee Lauder (EL) F3Q2018 earnings ahead of expectations driven by a solid revenue beat.  EL is +0.4% in pre-market trading.
  • Molson Coors (TAP) reported disappointing 1Q2018 earnings results that missed Street estimate by USD$0.29.  TAP is down 5.1% in pre-market.
  • YUM! Brands (YUM) reported blowout 1Q2018 earnings results.  YUM reaffirmed its outlook for CY2018, which given the 1Q2018 earnings result print, is disappointing.  YUM is down 4.7% in pre-market trading.

Major companies reporting earnings over the next 24 hours:

Cryptocurrency Morning Brief

Major cryptocurrencies are posting gains as of 7:10AM EST this morning with Bitcoin at USD$9,168.20, up 1.10% from yesterday’s UTC close. Notable top performers from the thirty cryptocurrencies which our machine learning signals follow include: Bitcoin Cash +11.15%, Iota +7.02%, and VeChain+6.81%, from yesterday’s UTC close. Notable top performers from the thirty cryptocurrencies which our machine learning signals model from the last five-days include: Cardano +25.56%, EOS +22.47%, Lisk +25.75% and Stratis +19.39%. Total market capitalization for cryptocurrencies is now at USD$430.74bn up to the high reached earlier this Monday. Of the 30 cryptocurrencies on which Quantamize produces buy/don’t own machine learning signals (see Crypto Signals), 18 signals are buys.

Cryptocurrency Market News

Joseph Lubin, the co-founder of the Ethereum Foundation spoke at the Collision tech conference yesterday and said that the foundation is extremely comfortable that Ethereum is not a security, and that it never was. Huobi Labs, a subsidiary of Huobi China is looking to enter the blockchain industry by setting up a USD$1bn blockchain fund that will mainly focus on the Chinese market. The venture has a key partnership with Tianya Community Network Technology, a social networking platform in China. A blockchain-based company is launching a peer-to-peer network connecting clients with manufacturers – preventing bottlenecks in production by mapping out manufacturing capacities around the world. This platform is called Productivist and the platform is aiming to be open, global and a free alternative to the heavy investments that firms in the manufacturing sector are required to make to flourish. Barclays CEO, Jes Staley mentioned yesterday that the bank has no plans to set up a cryptocurrency trading desk despite rumors about its move in to the market. Staley mentioned this initiative would be quite challenging for Barclays at this time.

Europe at Midday

European equities are higher with the Euro Stoxx 600 +0.50%, the CAC40 +0.10%, the DAX +1.11%, and the FTSE 100 +0.76%. Materials (+1.30%), information technology (+1.17%), and healthcare (+0.77%) are the best performing sectors in the Euro Stoxx 600, with energy (+0.09%), telecommunications (+0.28%), and financials (+0.33%) being the most significant underperforming sectors. Notable movers in the Euro Stoxx 600 included: Vivendi SA (+3.15%), Volkswagen AG (+2.47%), Daimler AG (+1.28%), and Unilever NV (-1.64%). Market breadth in the Euro Stoxx 600 was strongly positive with 407 of 600 stocks advancing.

Eurozone manufacturing PMI for April came in slightly above expectations (56.2 vs 56.0). The 1Q2018 GDP growth in the Eurozone was in-line with estimates (+2.5% Y/Y vs +2.5% Y/Y). Unemployment in the Eurozone in March was in-line with the consensus (8.5% vs 8.5% estimates), and was unchanged M/M.

A Financial Times report suggested that the Eurozone’s 1Q2018 GDP growth of 0.4% Q/Q was the slowest growth rate in nearly a year and a half.

Asia & Australia While You Were Sleeping

Japanese equities declined with the Nikkei 225 -0.16%. Healthcare (-1.02%), telecommunications (-0.78%), and industrials (-0.38%) were the biggest underperformers in the Nikkei 225, with materials (+1.51%), and financials (+0.15%) being the only sectors in the black. Notable movers in the Nikkei 225 included: FUJIFILM (-5.46%), West Japan Railway (-2.60%), Nitto Denko Corp (+5.05%), and Yamaha Corp (+2.87%). Market breadth in the Nikkei 225 was negative with only 96 stocks advancing while 122 companies declined. The Nikkei Asian review reported that the Japanese government may alter its timeline for fiscal consolidation, potentially changing its target from 2020 to 2025. Japanese non-financial businesses posted an aggregate net profit growth of 30% in FY2017, with net profits tripling over the last 5 years. Japan’s consumer confidence index in April slipped to 43.6, below the consensus of 44.6, and lower compared to March’s results (44.3 prior).

Chinese and Hong Kong equities finished mixed with the Hang Seng -0.27%, the CSI 300 +0.18%, and the Shanghai Composite -0.03%. Consumer discretionary (+2.63%), information technology (+0.89%), and utilities (+0.27%) were the largest outperformers in the Hang Seng, with industrials (-0.87%), financials    (-0.72%), and telecommunications services (-0.70%) being the worst performing sectors. Notable movers in the Hang Seng index included: Hengan International (-2.14%), Link REIT (-1.65%), Sunny Optical (+4.92%), and Hang Seng Bank Ltd (+1.30%). Market breadth for the Hang Seng was decidedly negative with 17 stocks while 32 equities declined. More than 60% of public Chinese companies reported profit growth in 1Q2018, which is being attributed to increasing commodity prices and financial restructuring.

Indian equities advanced with the Sensex +0.13% and the Nifty 50. Consumer staples (+2.06%), energy (+0.58%), and financials (+0.48%) were the strongest performers in the Sensex, with utilities (-1.15%), consumer discretionary (-0.98%), and materials (-0.66%) being the biggest underperformers. Notable movers in the Sensex included: Kotak Mahindra (+3.87%), Bajaj Auto (+0.59%), Tata Steel (-3.30%), and Hindustan Unilever (-2.49%). Market breadth in the Sensex was notably negative with only 10 stocks advancing (20 declines).

Australia equities moved higher with the ASX 200 +0.58%. Industrials (+1.51%), consumer discretionary (+1.09%), and real estate (+0.835) were the best performing sectors in the ASX 200, while telecommunications (-0.12%), energy (+0.05%), and materials (+0.13%) were the largest laggards. Notable movers in the ASX 200 included: Mineral Resources Ltd (+7.38%), ARB Corp (+6.16%), JB Hi-Fi Ltd (-8.96%), and Caltex Australia (-1.53%). Market breadth in the ASX 200 was notably positive with the 142 of 200 stocks closing higher. RBA Governor Philip Lowe remarked that currently, there are no significant drivers for adjusting short-term interest rates.

Stocks Trending in the News

Amazon (AMZN) has submitted a bid, countering Walmart’s (WMT) $12 billion offer, for a 60% stake in Flipkart. The deal includes a $2 billion breakup fee and a non-compete pact with Flipkart management.

AmerisourceBergen (ABC) reported 1Q2018 EPS that was firmly above expectations ($1.94 vs $1.82).

Cedar Fair (FUN) reported 1Q2018EPS of $1.39, softly higher than the $1.36 consensus.

CVS Health Corp (CVS) announced 1Q2018 EPS that was higher than expectations ($1.48 vs $1.41 consensus).

Fujifilm (4901 JP) has filed an objection over a court ruling that temporarily blocked the company’s previously accepted $6.1 billion acquisition deal for Xerox (XRX).

Generac (GNRC) reported 1Q2018 EPS that topped estimates ($0.74 vs $0.63 consensus).

Mastercard (MA) announced that its 1Q2018 EPS was significantly higher than expectations ($1.50 vs $1.24 consensus).

Molson Coors (TAP) reported 1Q2018 EPS that significantly missed estimates ($0.48 vs $0.77 consensus).

US Large Cap Conviction Buy Upcoming Earnings

Company Name Ticker Earnings Date Event Type
Automatic Data Processing, Inc. ADP 5/2/2018 Earnings Release Date
AMETEK, Inc. AME 5/2/2018 Earnings Release Date
Belden Inc. BDC 5/2/2018 Earnings Release Date
The Kraft Heinz Company KHC 5/2/2018 Earnings Release Date
Republic Services, Inc. RSG 5/2/2018 Earnings Release Date
Tyler Technologies, Inc. TYL 5/2/2018 Earnings Release Date
Church & Dwight Co., Inc. CHD 5/2/2018 Estimated Earnings Release Date
Becton, Dickinson and Company BDX 5/3/2018 Earnings Release Date
Intercontinental Exchange, Inc. ICE 5/3/2018 Earnings Release Date
Berry Global Group, Inc. BERY 5/3/2018 Earnings Release Date
Ingredion Incorporated INGR 5/3/2018 Earnings Release Date
Marriott Vacations Worldwide Corporation VAC 5/3/2018 Earnings Release Date
Teledyne Technologies Incorporated TDY 5/3/2018 Earnings Release Date
Assurant, Inc. AIZ 5/3/2018 Earnings Release Date
FleetCor Technologies, Inc. FLT 5/3/2018 Earnings Release Date
Motorola Solutions, Inc. MSI 5/3/2018 Earnings Release Date
Berkshire Hathaway Inc. BRK.B 5/3/2018 Estimated Earnings Release Date
The Chemours Company CC 5/3/2018 Estimated Earnings Release Date