Equity Market Recap
· Stocks drifted all day, climbing throughout the afternoon session in modest fashion, only to slide in the final hour of trading heading into the weekend. Major averages still closed out the week in positive territory as the S&P 500 posted an advance of around 0.4%, while the Dow was up slightly and the Nasdaq Comp outperformed. Volume picked up late day as markets adjusted for quarterly expiration of futures and options on indexes and individual stocks (quadruple witching) alongside an S&P 500 rebalance. Outside of that, it was a very quiet day for stocks on Wall Street, still left a little “hungover” after the FOMC boosted interest rates for the 2nd time in 3 months Wednesday, but maintained a “gradual” pace of hikes.
· The dollar fell this week on the lack of aggressiveness by the Fed, as well as low inflation expectations which was evident by the University of Michigan sentiment data today. The lower dollar helped gold finish with a 2.5% gain for the week and helped oil score its first weekly gain in three. Up until the final hour of trading, there was a “risk on” mentality most of the session as commodities ended mostly higher. It was also another record setting performance in Europe as the UK FTSE 1oo index closed at all-time highs. A stat worth watching into next week – according to CNBC, we have now gone 107 days without a 1% decline in the Dow Industrials (as well as S&P 500)…three more and it breaks the 110-day record set in 1945!
· Industrial Production for February was unchanged, below estimates for a 0.2% increase and after falling 0.1% in January. Industrial production was revised up to (-0.1%) from (-0.3%) last month. Capacity utilization fell to 75.4% from 75.5% in January, revised up from 75.3%
· Preliminary March Michigan Sentiment rose to 97.6, above est. of 97 and above the 96.3 reading in the prior month; current economic conditions index rose to 114.5 vs. 111.5 last month (highest level since 2000) and the expectations index rose to 86.7 vs. 86.5 last month.
· Leading Index for February rose 0.6% vs. est. up 0.5%
· Commodity prices were mostly higher on a day the dollar slipped again; Gold futures advanced $3.10, or 0.3% to settle at $1,230.20 an ounce, closing the week out higher by 2.4%. Most of the gains came yesterday in reaction to dollar weakness and comments from the Fed Wednesday to raise rates at a gradual pace (taking time/not rushing). Oil prices ended little changed, up 3c at $48.78 per barrel, managing to squeeze out a weekly gain for the first time in three weeks, despite data showing a significant increase the number of active U.S. oil rigs. WTI oil was up roughly 0.6% and Brent crude traded 0.7% higher from last Friday’s settlement.
· The U.S. dollar slipped again on Friday, capping a week to forget for the greenback, posting its worst decline of 2017 and touching the lowest levels since mid-February. The dollar slipped to lows against the yen, holding around the 112.60 level most of the afternoon (overnight high 113.49), while the euro slipped a few basis points. The big event this week was the Fed’s rate hike on Wednesday that was perceived as “dovish” as the FOMC disappointed dollar bulls hoping for indications of a plan for a sped up pace of rate hikes.
· Bonds bounced as yields slipped; bond yields have fallen from 2-year highs earlier this week, with the benchmark 10-year trading at highs of 2.61% prior to the FOMC meeting this week…but are ending the week down around the 2.50% level. Yields have slipped since Wednesday after the Fed failed to signal a more aggressive approach to future rate moves. The FOMC boosted rates by 25 bps as expected, but continued to forecast a total of three rate increases in 2017. Yields ended last week at 2.582%, on fears the Fed might signal the potential for a total of four rate moves.
Other Interesting tidbits
· With St. Patrick’s Day falling on a Friday this year, spending is expected to reach a $5.3 billion, up from $4.4 billion last year, according to the industry trade group National Retail Federation; that’s the highest in the federation’s 13-year history of the survey. Some 27% of that money will go on a party or a bar.
· According to data from LPL Financial, which looked at data going back 20 years, the S&P 500 has ended higher on March 17 four-fifths of the time, with an average gain of 0.72%. That ranks as the eighth best day of the year. Only five days of the year boast a better performance, while another four tie by also rising 80% of the time.https://goo.gl/vohg3V
Sector News Breakdown
· Retailers; TIF trades to 52-week highs after Q4 results top views/though notes flagship stores sales down 11%in FY and 14% in Nov/Dec period;GOOS stock flies in second day of trading since going public Thursday; BURL slipped after cautious comments by Spruce Point Capital; KMX underperformed, though there was lots of weakness in auto/auto retail (PAG, AN, LAD, GPI)
· Casino, Lodging & Leisure; in leisure, SEAS was downgraded to sell at Citigroup as street estimates may be overlooking risks to Ebitda (cut tgt to $15); casino stocks outperform, led by gains in WYNN, MPEL and MGM
· Top news; Baker Hughes (BHI) with weekly rig count data bearish, showing more rigs added online – Baker Hughes (BHI) showed total U.S. rig count rose 21 to 789 (up 12 rigs prior week), with oil rigs up 14 to 631 (up 8 last week) and gas rigs up 6 to 157; so makes oil rig count up a 9thstraight week; PUMP 25M share IPO priced at $14.00; in other sectors, not much movement, but MLPs slide to lows – Alerian MLP Index (AMZ) down -0.6% at lows below 319 level
· Large Cap banks drop on the day as bonds rally and interest rate sensitive stocks move in reaction (JPM, GS, and C); shares of ALLY fall amid concern over conference call timing, implications from weak Feb. used car data. Auto-lending peer Santander Consumer down as much 3.5%
· Insurance; AFSI announced another 10-K filing delay, intended to allow KPMG to complete its YE16 financial & internal control audit; NGHC announced another 10-K filing delay, since its auditor needs more time to finish its review and deliver a final audit opinion
· REITs; Goldman downgrades retail REITs to cautious, saying the group faces slowing rent growth that’s unaccounted for in consensus estimates, while some subsectors are near historically high valuations; cuts MAC to sell from neutral, SPG to neutral from buy
· Asset Managers/Brokers/Exchanges; LPLA released February monthly metrics and AUA increased to $528B, up 2.1% from $517B at the end of January. Cash balances declined -1.3% to $29.6B
· Top story today was AMGN falling after key study disappoints; its new cholesterol-lowering drug Repatha reduced the risk of deaths, heart attacks and strokes by 20% compared with standard treatment with statin drugs, but…expectations were higher and may not be enough for health plans to ease the tight restrictions on use of the expensive drug ($14,500 yearly list price)
· Other stocks fall on AMGN study (new injectable cholesterol-fighting agents known as PCSK9s) – peers follow Amgen lower after the drug-maker’s highly anticipated cardiovascular outcomes data for its cardiovascular drug, Repatha; shares of SNY/REGN sell a similar therapy, Praluent; data was expected to bolster competitors like MDCO and ESPR which are developing therapies using a similar approach – AMGN defended at Oppenheimer & RBC Capital, MDCO defended at Leerink
· Other biotech movers; a couple of big movers today as AVXS shares rise after posting top-line data from a phase 1 trial of its gene therapy against spinal muscular atrophy (SMA). All 15 patients were event-free at 13.6 months of age, a significant improvement over the natural history of the disease; CLBS rises as sells stake in unit for $75M to Hitachi Chemical
· Pharma movers; VRX rises early after ValueAct disclosed its purchase of 3M shares in the company, but Wells Fargo later noted the FDA posted new guidance today on what is needed for generic Xifaxan, and they believe this is a game changing development that makes it much easier for generics to show bioequivalence (a negative for shares); EBS awarded two-year contract valued at $100M from Biomedical Advanced Research and Development Authority (BARDA) for a national stockpile of BioThrax; CRMD shares fell after saying it currently didn’t have enough cash to fund operations through 2017, given expected clinical trial expenses; ZSAN 17M share Secondary priced at $1.50; PTHN was downgraded at Baird and KeyBanc after Q1 results miss; ABUS licensed its proprietary lipid nanoparticle technology to ALXN for exclusive use in one of Alexion’s rare disease programs
Industrials & Materials
· Metals & Mining; STLD guided Q1 EPS to 77c-81c, above est. 62c and raised dividend to 15.5c from 14c (follows raised guidance from NUE yesterday); A Brazilian judge suspended a nearly $50 billion lawsuit against mining firms responsible for the 2015 Samarco disaster. The decision came as part of a ruling in which a federal judge approved a road map toward a final agreement between prosecutors and mining companies VALE, BHP and its joint venture; gold miners also higher despite a few downgrades at Deutsche Bank (cut HMY and GOLD)
Technology, Media & Telecom
· Internet; NFLX initiated outperform and $178 target at Bernstein on positive video on demand, but M Science with cautious comments saying initial Q1 data leaves us cautious on the quarter, despite momentum carried from Q4; SNAP another analyst initiation, and another “non-buy” rating as Mizuho starts with neutral and $20 tgt (11 analyst with coverage – not one buy – 6 sell related ratings), stocks trades to new lows
· Software movers; group got a lift after better ORCL earnings the day prior, last night ADBE with solid quarterly results as EPS increasing by 43% YoY on robust subscription growth of 29% YoY/subscription accounts for 82% of sales, up from 28% in 2013/higher guidance; MULE 13M share IPO priced at $17
Market commentary provided by Hammerstone Markets, a division The Hammerstone Group, a firm separate from and not affiliated with Regal Securities L.P. Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.