Equity Market Recap
- Markets rallied in solid fashion, with a broad based “risk-on” type of attitude today, as the Dow Industrials snapped its 8-day losing streak, led behind gains in nearly all sectors. After opening flat to down slightly, the Dow, S&P 500 and NASDAQ all found solid footing around 10:30 AM EST, rallying throughout the session to close solidly, as the “Trump trades” that have slipped the last few days’ regained steam higher. Stocks have slipped on fears the failed GOP Healthcare Bill on Friday will just be the start of a series of roadblocks the Trump Administration will run into regarding its future tax reform, de-regulation, and spending measure bills…but fears eased today following a much stronger than expected consumer confidence report (touched its highest level in 16-years) which helped push major averages higher throughout the afternoon. Recently “beaten” up sectors over the last few days (Trump trades such as financials industrials and materials) rebounded while defensive assets slipped. In Europe, a vote in Scotland’s parliament Tuesday in favor of pursuing a second referendum on Scottish independence was quickly rebuffed by the U.K. government in London. Gold slipped, oil touched best levels in about a week and the dollar rebounded following the economic report/Fed speakers.
- Consumer Confidence for March rose to 125.6, well above consensus est. 114.0 and above the 116.1 prior month. The Present situation confidence rose to 143.1 vs. 134.4 last month and the expectations index rose to 113.8 vs. 103.9 last month.
- Advanced trade deficit of goods for February narrowed to (-$64.8B) from (-$68.8B) in prior month; imports fell 2.1% in Feb. to $191.597B from $195.78Bb in January, while exports fell 0.1% in Feb. to $126.809B from $126.941B in January
- S&P CoreLogic Case-Shiller 20-City Index rises 5.73% YoY in January after rising 5.66% in prior month ; the S&P/Case-Shiller 20-city NSA index at 192.81 after 192.41 in December; and 20-city SA index rose 0.86% m/m in Jan. after rising 0.93% the prior month
- Richmond Fed’s March Manufacturing Survey at 22, above est. for reading of 15; breakdown showed: shipments rose to 17 after 16 the prior month, new order volume increased to 26 after 24 the prior month and order backlogs rose to 14 after 8 the prior month
- Gold prices slipped from earlier highs (of $1,261.40 an ounce) to settle lower by a dime at $1,255.60 an ounce as a rally in U.S. equities and the dollar dulled some its investment appeal. The slide late day comes after gold touched its best level in a month. Gold prices extended losses in futures trading after the dollar gains accelerated.
- Energy prices rise, part of the “risk-on” trade today, as WTI crude advanced 64c, or 1.3% to settle at $48.37 per barrel, its best levels in a week. Prices got a boost after news of disruptions to crude production in Libya overnight. All eyes on inventory data with the API tonight and DOE tomorrow morning.
- The U.S. dollar rallied in the afternoon, erasing earlier small declines as the dollar index (DXY) traded off 4-month lows following a stronger than expected consumer confidence reading. The dollar rebounded against the yen to highs around 111.20 (off 4-month lows of 110.11 yesterday), while the euro slid about -0.5%. Investors also heard from Chairwoman Janet Yellen, Kansas City Fed President George, Def Chair Stanley Fischer, and Dallas Fed President Kaplan today which may have impacted trading late day.
- Treasury yields slipped initially as investors looked to the safety of bonds early, but as stocks rebounded following the better consumer confidence report, bonds pared gains and yields bounced back to Friday closing highs. The yield on the 10-year dropped below 2.36% early (and from 2.34% yesterday), but rallied throughout the session to end back above 2.40%
Sector News Breakdown
- Retailers; even retailers got a boost today with broader market; Cleveland Research said DG comps are trending below consensus Q1-to-date, with softer sales in February and a slight improvement in March; DECK rises after Red Mountain Capital (3.3% holder) sent a letter to company asking it to explore a sale; LB tgt cut to $35 at Jefferies saying data- driven analyses show the PINK brand is peaking, further cracking the Victoria Secret monopoly
- Consumer Staples; MKC mixed Q1 results as EPS beat by 2c, but revs missed and EPS year guidance of $4.05-$4.13 missed midpoint of $4.09 est.; STZ was downgraded to Mixed from Positive at OTR Global
- Auto’s; GM rejected proposal to create 2 classes of stock, saying proposal is too risky and David Einhorn’s plan is “unproven,” GM spokesman told Bloomberg; TSLA active after Tencent reports 5% passive stake/earlier, two analysts (Goldman Sachs and Pacific Crest said quarterly deliveries may miss consensus estimates; Ford (F) to invest $1.2B in 3 Michigan facilities/investing $850M in Michigan assembly plant to retool the facility to build “all-new” Ford Ranger and Ford Bronco
- Restaurants; DRI announced solid Q3 results, while comps beat and raised its ’17 outlook/also announced it will acquire Cheddar’s for $780M; Olive Garden comps above consensus, reflecting continued momentum
- Casino, Lodging & Leisure; in gaming sector, Bernstein said their channel checks indicate that Macau’s GGR (gross gaming revenue) MTD (March1-26) was ~MOP 17.5bn, indicating an ADR (average daily rate) of MOP 673 mm. Last week’s (March 20 – 26) implied ADR was ~MOP 714mm, better than our previous estimate which was ~ MOP 640 mm, 25% over similar period. In cruise lines, CCL Q3 EPS beat by 3c on slightly better revenue and raised year view
- Top story today; a militia shut over a third of Libya’s oil production in a dispute over wage arrears, Libyan oil officials said. Sharara, a giant oil field in Western Libya, reopened in December after a local militia agreed to reopen pipelines that had been closed for over two years. But the Libyan armed group shut the pipelines again late Monday, along with a connected line to the smaller Wafa field, disrupting production of 250,000 barrels a day; HP said it sees 2Q U.S. Land revs days up 34%-35% vs. 1Q
- Frac sand stocks jump; Tudor Pickering said upside looks quite robust – despite recent supply addition announcements and energy macro driven sand stock pain, they continue to believe frac sand demand outstrips supply going forward. The firm said assuming crude oil prices reach $55-60/bbl+, they see exceptionally attractive upside for each of the public sand stocks they cover (FMSA, SLCA, SND); Guggenheim initiated FMSA ($12 tgt) and HCLP ($31 tgt) with buys as well
- Utilities, Coal & Solar movers; FSLR tgt was cut to $29 from $37 at Roth Capital given the near-term earnings challenges ahead and continue to wait for the Series 6 product to come online on time, on budget, and as advertised. The WSJ discussed how Trump’s plan to roll-back climate change policy is not likely going to reverse the US utility industry shift to natural gas, solar, and wind. Utilities were little changed on the day
- Banks rebounding after underperforming major averages yesterday; financials got a lift after bond yields jumped and investors rotated back into banks. In lending and Finance; Freddie Mac said sees ’17 total mortgage originations declining -25%, which will mostly be from plummeting refi’s; SQ announced a launch in the United Kingdom; NSM was initiated at Wedbush with outperform and $19 tgt saying 2017 should be a transitional year for NSM with benefits of growth strategy becoming more apparent in 2018
- Large Cap Pharma; A Senate committee is investigating whether practices at the top five makers of opioids in the United States fueled an epidemic of painkiller abuse that has led to the fatal overdoses of tens of thousands of Americans. Sen. Claire McCaskill (D) sent letters to Purdue Pharma, JNJ’s Janssen, INSY, MYL and DEPO seeking information about sales and marketing materials, internal studies on addictions, details on their compliance with legal settlements and donations to advocacy groups
- Biotech movers; TSRO shares advance after saying late Monday its ovarian cancer drug Zejula, also called niraparib, had been approved by the FDA. Wall Street analysts very positive noting the broad label granted by the FDA to its PARP inhibitor, Zejula, provides a distinct competitive advantage and wider addressable patient population (AGN, CLVS have competing products); FLXN shares slipped on news was presenting at Needham conference next week (dampening recent market takeover speculation); REGN shares were halted ahead of Dermatitis drug PDUFA with SNY scheduled for tomorrow 3/29 – but Dupilumab wins FDA approval (Dupixent gross sticker price $37,000 annually, before discounts, in-line to a touch higher. ($30-35K, per Leerink)
- CRISPR companies; Chardan Capital Markets initiated coverage on sector: CRSP (Buy), EDIT (Buy), NTLA (Buy), and ToolGen (Buy). While broadly positive on the CRISPR sector, due to the technology’s vast potential utility to inactivate toxic genes or replace or repair non-functional genes, they see greater upside potential for Editas and ToolGen, and more modest upside potential for CRISPR Tx and Intellia
- Other movers on news; CARA active after results from Part A of a Phase 2/3 clinical trial assessing its lead product candidate I.V. CR845 in patients with uremic pruritus (UP) met both primary and secondary endpoints; AGN and PRTK announced positive top-line data from both Phase 3 trials of sarecycline in moderate to severe acne; CBIO surges after announce IND approval in South Korea for next-gen subcutaneous factor IX program; OMER gains following announcement of OMS721 presentation at EBMT
- Services & Suppliers; Baird said regarding CROs that its survey indicates confidence in mid- to long-term, still cautious near-term, incrementally positive CRL, continue to favor PRAH, but mixed takeaways for PRXL, Q; after several days of gains, seeing early weakness in hospitals (CYH, UHS, THC, HCA) likely on profit taking after rallying on the Friday Healthcare bill failure
Industrials & Materials
- Dry Bulk Shipping; strong day for sector after Morgan Stanley upgraded SB, SBLK, GOLG to overweight, GNK upgraded to equal-weight and SALT initiated at equal-weight as the firm says it see more upside as freight rates have lagged steel prices by ~30% & as companies approach dividend payout. The dry bulk market has passed through its cyclical lows and is headed toward profitability. Separately today, the Baltic Dry Index jumped 4% to 1,333 in London
- Industrial & Machinery; CBI awarded an engineering, procurement and construction contract by Total Petrochemicals & Refining USA worth ~$1.3B; PSIX jumps after Chinese firm Weichai commits to $60M strategic investment
- Transports; outperform, rising 1.5% on the day, outperforming broader markets after recent underperformance…all 20 names in the index are higher led by R, KEX, CSX, JBHT, KSU, NSC; airlines climbed late day
- Metals & Mining; UBS said they do not believe in buying Brazilian steel names into a 3-5% domestic sales recovery this year and downgraded GGB to sell; CMC was upgraded to outperform from neutral and raise tgt to $24 from $19 at Credit Suisse saying CMC should see significant EBITDA growth over the FY17-19 timeframe
- Gold miners; GG and ABX said they are forming a 50-50 joint venture to study building gold mines in Chile’s Maricunga belt, including the Cerro Casale project. In a series of deals costing GG ~$445M upfront in cash and shares, the miner agrees to acquire KGC 25% stake in Cerro Casale and all of its Quebrada Seca exploration project for an initial $260M in cash. AEM announced that it will raise $220M in equity by issuing and selling 5.0 million shares directly at $43.97; gold miners plunged late day as the dollar surged (NEM, ABX, AUY slid)
Technology, Media & Telecom
- Internet; FB said that the company is starting to roll out a new camera with effects and two additional ways to share the photos and videos that users take. Additionally, in the main Facebook app the company is introducing “Facebook Stories,” which let users share multiple photos and videos as part of a visual collection atop News Feed (features weighed on SNAP); AMZN tgt was raised to $1,025 at Stifel
- Software & Hardware movers; RHT shares rise as Q4 results were very strong across the board, highlighted by reported billings of $986M, well above $879M est. (along with reacceleration of emerging product growth, strong backlog growth); SNX shares came under pressure despite better Q1 results as guidance cited for pause
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.