Market Review: Stocks Close Mostly Flat As Trump-Xi Meeting Approaches

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Equity Market Recap

  • Stocks once again “tread water”, as major averages fail to move decisively in any direction, but remain not far from recent record highs. Uncertainty surrounding a meeting later this week between President Donald Trump and his Chinese counterpart President Xi partially weighed on market sentiment today, but lack of volatility has been nothing new for stocks during the first quarter. Financials, discretionary, tech and REITs were among the biggest S&P losers today, while energy, utilities, materials and industrials led to the upside after President Trump’s morning comments about dramatically shortening the time it takes to permit infrastructure projects.
  • The NASDAQ Composite Index snapped its 2-day losing streak (a 3-day decline would have been longest in more than three months), helped by AMZN which posted its 5th straight record gain and topped $900 for the first time ever. Airlines declined after DAL monthly metrics update and lowers CASM guidance, retailers dropped after softer URBN guidance/update (M, KSS, and JCP fall), no rebound in auto/parts makers after March auto sales disappointed yesterday, crushing the sector. The continuation into defensive/perceived safe haven investments such as gold, bonds and the yen also notable again today.
  • With markets trading not far from recent record highs, investors remain complacent into earnings season next week, while they await more clarity from the Fed on rate hike pace and policy news out of Washington. Note, since President Donald Trump’s election win in November, the NASDAQ has risen 13.5%, compared with 10.3% for the broad-market S&P 500 and a 12.6% rise in the Dow over the same period
  • Regarding Fed news, Richmond Federal Reserve President Jeffrey Lacker left the U.S. central bank on Tuesday after saying a conversation he had with a Wall Street analyst in 2012 may have disclosed confidential information about Fed policy options. “It was never my intention to reveal confidential information,” Lacker said in a statement describing a 2012 conversation with an analyst from Medley Global Advisors
  • Bloomberg noted that Argentina’s Merval stock index climbed for a ninth straight day to a new record. It’s been setting new highs for the last four days, jumping yesterday on a government agreement with unions and construction companies to boost the sector.

Economic Data

  • Factory Goods Orders for Feb rises 1%, (in-line with estimates) while Factory orders for January were revised up to 1.5%; new orders ex-trans for Feb. rise 0.4% and new orders ex-defense for Feb. rise 1.2% after rising 1.4% in January. Capital goods non-defense ex aircraft new orders for Feb. fall 0.1% after rising 0.2% in January
  • The Trade Deficit for Feb narrowed to (-$43.6) from (-$48.2B) last month and vs. est. (-$44.6B); Imports fell 1.8% in Feb. to $236.43B from $240.69B in January and Exports rose 0.2% in Feb. to $192.87b from $192.51b in January


  • Oil prices advanced on Tuesday ahead of inventory later tonight (API) and tomorrow (DOE), as energy led the commodity complex higher (natural gas outperforming, up 5%). No major news in energy space today, no OPEC speakers, but recent momentum has taken prices of WTI back around the $51 per barrel level. WTI crude rose 79c or 1.6% to settle at $51.03 per barrel.
  • Gold prices neared 5-week highs, topping the $1,260 an ounce level (touched $1263.70 high) to the upside before paring gains on a mixed dollar/demand for defensive assets. Gold settled higher by $4.40, or 0.4%, at $1,258.40 an ounce, rising a third straight session ahead of the China meeting with President Trump. Silver for May delivery settled up 11.1c, or 0.6%, at $18.32 an ounce, its highest settlement since Mar. 1st

Currencies & Bonds

  • The U.S. dollar ended mixed, falling against the “safe-haven” yen, but ended better against the euro (high 1.0675 and low 1.0626). Bloomberg noted that April is the cruelest month for the dollar, as the DXY Index dropped in every April since 2011 by an average 1.7% (bouncing back in May each time). The dollar slipped to lows of 110.27 against the yen before paring losses to 110.72 (yen has been safe haven trade)
  • Treasury markets extend gains as the 10-year yield hits a low of 2.314%, lowest level since 2/24, before rebounding– ending around the 2.34% (slightly below yesterday closing levels. Bonds have caught a bid over the last few weeks as stocks have languished amid uncertainties in Washington and policy, as well as a rotation into defensive assets.
Sector News Breakdown


  • Retailers; KATE shares declined after reports the company will spend a few more weeks negotiating a potential sale of the company after receiving an offer last week from COH, Reuters reported; URBN disclosed in 10K that thus far during 1Q, retail comps are down mid-single-digits (downgraded at Citigroup); LB was also downgraded to neutral at Citi; NKE was cut to hold at Argus as expect Nike’s revenue and EPS growth to slow over the next 12 months, driven by competition from Adidas and Under Armour; RL said is closing stores, cutting jobs and exploring retail concepts as part of restructuring; CONN surges after reporting unexpected Q4 profit; SPLS explores sale after failed ODP deal, WSJ reports
  • Consumer Staples; Goldman Sachs with a few changes in sector as upgraded MDLZ to Conviction Buy and up tgt to $52 from $49 as expects an inflection in gross margins and sees Q1 marking a trough on weak industry growth; EL upgraded to buy and raised price target to $103 from $85 as expects Lauder’s diversified channels of growth to drive sales acceleration in2H and removed KHC from conviction buy list saying fundamental thesis has largely played out
  • Restaurants; after surging nearly 8% yesterday on Bloomberg article saying exploring a possible sale, several analyst weigh in today on PNRA (downgraded at Baird)
  • Auto’s; no rebound in the sector after Monthly auto sales for March were released yesterday and were weaker, hurting autos (F, GM) and suppliers (BWA, LEA); today TSLA traded to new all-time highs, topping $300 per share for the first time


  • Oil drillers/services; SDRL shares plunge after warning restructuring may involve chapter 11 proceedings/has reached agreement with its banking group to extend a series of key dates as part of the company’s ongoing restructuring efforts
  • Other research news; BP upgraded to buy from hold at Deutsche Bank and downgraded E to hold from buy; RRC upgraded to overweight at Capital One
  • Frac sand movers; HCLP upgraded to buy at UBS saying data points for sand demand continue to trend positive while HCLP has taken steps to position itself to benefit from the improving environment; SLCA positive mention at Cowen following meetings w/mgmt
  • Solar, Utility, MLPs; solar stocks got a leg up midday (FSLR, CSIQ, SPWR) after reports President Trump’s administration is exploring the creation of a value-added tax and a carbon tax as part of an overhaul of the tax code, according to The Washington Post. Utilities were one of the better performing S&P sectors


  • Large Cap banks rebounded off earlier lows, once again moving in conjunction with bonds yields (which opened lower and bounced); BAC downgraded to Neutral with a price target of $25 at Citigroup; CME Group March average daily volume (ADV) was 16.9m contracts, up 18% YoY; European banks underperformed U.S. banks; Commerzbank will cut 7,800 jobs in Germany as part of restructuring efforts according to reports
  • Other movers; in insurance, ATH was upgraded to overweight at Morgan Stanley as underlying profitability is much better than reported; AFSI filed its 10-K for 2016 and restating 2014 and 2015 (restatements results in a decline in net income in 2014 of 7.2%, and in 2015 of 11.2%); FLT shares dropped midday after a negative comment by Citron Research


  • Large Cap Pharma; PRTK shares rise after its Omadacycline met all goals in Phase III Pneumonia study; RDHL said the FDA has designated YELIVA (ABC294640) an Orphan Drug for the treatment of cholangiocarcinoma; FLXN was issued two new patents by the USPTO; EVOK says FDA confirms trial for Gimoti NDA acceptable; TEVA rises as the FDA approves Austedo (deutetrabenazine) for the treatment of chorea associated with Huntington’s Disease
  • Managed care; sector outperformed yesterday on no specific news (UNH, CI, HUM); after the close last night, CMS released the final notice for 2018 Medicare Advantage rates of 0.45% without coding and 2.95% with coding came in 20 bps points higher than the Feb 2 Advance Rate, which Leerink said bodes positively for Managed Care, particular for HUM, WCG, and UNH
  • Healthcare suppliers, devices, facilities; BAX was upgraded to outperform at Leerink and raise tgt to $64 from $54; ACHC to replace JOY in the S&P MidCap 400; EXAS said Cologuard is to be included in the 2018 Medicare Advantage quality ratings program;
  • Biotech movers; ONTX rises on positive pre-clinical data for cancer drugs; ABUS was upgraded to a buy and $6 tgt at Chardan; NLNK shares drop after interim results for a phase 2 trial for advanced melanoma (said that data on 60 patients found an objective response rate of 52% and a disease control rate of 73%); CRVS plunged midday after interim results earlier in day

Industrials & Materials

  • Industrials & Machinery; ETN was upgraded to buy at Longbow based in part on a stronger than expected 2017 outlook from electrical products distributors; CAT was added to Conviction List, remains buy rated at Goldman Sachs saying it has an “attractive combination” of higher mid-cycle EPS, exposure to underinvested machinery markets in early stages of recovery; AYI shares fall after 2Q adjusted EPS and sales fell below analysts’ estimates, on continued weakness in smaller, short-cycle projects in the lighting market; CX upgraded to overweight at Morgan Stanley
  • Aerospace & Defense; UTX was added to focus one list at Bank America with $130 tgt; Reuters reported COL and ERJ consider joint sales of remote sensing and border control products, citing Embraer defense CEO Jackson Schneider; OSIS awarded a contract valued at approximately $15 million to provide multiple cargo and vehicle inspection solutions
  • Transports; airlines decline after DAL said PRASM for the month of March increased 0.5% YoY marking the first positive monthly PRASM since November 2015, but cuts 1Q CASM and unit revenue views to up 5%-6%, saw up 5.5-6.5%; sees March quarter passenger unit revenue down about 0.5%, had seen 1Q unit revenue unchanged. In rails, JP Morgan said as frac sand producers shift from higher cost Northern White sand to regional brown sand, it might hinder rails from reaching profitability levels similar to 2014 peak
  • Metals & Mining; WOR was upgraded to hold at Jefferies as equity valuation has normalized and risk-reward rebalanced since their Dec 2016 downgrade; gold miners benefit from higher gold prices/flight to safety trade (GOLD, AEM); FCX said it talks still ongoing to resume Indonesian exports
  • Paper & Container sector; BCC was upgraded to buy at Bank America saying higher wood product prices and sequential improvement in earnings and valuation should act as a catalyst for shares; SEE was removed from Goldman Sachs’ Conviction List due to recent underperformance, although the firm maintains the company’s Buy rating

Technology, Media & Telecom

  • Internet; BMO Capital raised tgt on AMZN to $1,200 from $900 saying he believes the company’s advertising business is gaining significant momentum, while the firm downgraded GOOGL and cut tgt to $880 from $1,005 saying AMZN ad business represents its biggest competitive headwind since FB; AMZN shares touched $900 for first time ever and record high for 5th-straight day
  • Semiconductors; Pacific Crest upgraded both CRUS ($75 tgt) and SWKS ($120 tgt) to overweight on recent channel checks indicating accelerating growth in next-generation iPhones in 2H17; checks indicate lean carrier iPhone 7 inventories and little or no pricing pressures; NVDA was downgraded to underweight at Pac Crest due to signs of desktop GPU market saturation, lower margins from incremental Nintendo Switch revenue and a possible pause in its Datacenter business this summer; TER was initiated outperform and $73 tgt at Baird; CREE also an underperformer in semi space (partially attributed to AYI earnings)
  • Software movers; TLND was upgraded to buy at Citigroup saying 2017 consensus estimates are too low with the company’s Big Data and Cloud revenue hitting an inflection point; GWRE was upgraded to Conviction Buy at Goldman Sachs and up tgt to $70
  • Telecom & Media; GNCMA to be acquired by LVNTA for $27.50 per share and $5 in preferred shares (total value $32.50) rises after The New York Post reported James Dolan’s MSG Networks is sounding out suitors, NY Post
  • Hardware and component movers; TTMI was upgraded to Overweight at JP Moran citing the recent pullback in the shares and potential earnings upside from the iPhone 8 cycle; PSTG was upgraded to neutral at Susquehanna on valuation

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.

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