Tuesday, February 6, 18
Another wild-ride for Wall Street as equities open sharply lower after two dreadful days of selling pressure…went into rebound mode the first 30-minutes of trading (huge spikes off lows)…but have since reversed back to the downside. With today’s early market decline, the Dow Industrial Average fell -10% below its January 26th closing record highs, trading down more than 567 points at the open before the rebound ensued, with the Dow rising more than 350 points at one point (all in the first 30-minutes of trading), trading as high as 24,712 (off lows (23,778). The Nasdaq Composite turned positive in just 10 minutes after the open, a 144 point off lows of 6,824, and recovering from its 100-day support of 6,844. The Nasdaq Comp rallied over 1% trading 250 points off the lows (highs 7,059)…but has since turned down on the day. The S&P 500 index rallied off lows of down (2.1%), but also falls from highs.
Nearly every strategist this morning that made comments suggested the sell-off was overdue, with many recommending buying the weakness this morning (Citigroup, FundStrat, RBC, JP Morgan and Wells Fargo with comments today). After a nasty 2-day decline that wiped out over 1,800 in Dow points, President Trump said this morning the administration is said to prepare a February 12th release of its infrastructure plan…the headlines have failed to rally markets further.
Volatility: The CBOE Volatility index (VIX) traded as high as 50.30 this morning, topping the 50 level for the first time since August 2015 (rising over 33%), a day after surging 18 points or 104% yesterday on the market melt-down. Note the VIX 52-week low was 8.56 back on November. As the market rallied on the open, the VIX dropped over 40% from its 9-year highs. Credit Suisse announces “acceleration event” of its VelocityShares Daily Inverse VIX short-term ETN, according to an e-mailed statement by the bank.
Treasuries, Currencies and Commodities
· In currency markets, the dollar showing strength for a 3rd straight session, as the dollar index (DXY) trades back to the 90 level (off recent 3-year lows around the 88 level)
· Bitcoin about rebounds back above the $7,400 level after falling to lows of $5,922 overnight (now up 4% after falling 16% earlier); note Idaho Republican Crapo and ranking member Brown, a Democrat from Ohio, will hold a full Senate Banking Committee hearing Tuesday at 10 a.m. Eastern to explore the SEC and CFTC oversight role for virtual currencies
· Precious metals reversed earlier gains as major U.S. stock averages bounced off the lows, while energy futures remain mixed as natural gas futures drop for a sixth consecutive day, longest streak since Oct. 2016 and lowest settlement since late December, while oil little changed
· Treasury markets are pulling back after surging yesterday following the mass sell-off in global stock markets; the 10-yr yield fell to lows around 2.70% after recently touching fresh 4-year highs of 2.88%; today, the 10-yr yield bouncing about 6 bps to 2.76%
· The December trade deficit widened 5.3% to (-$53.1B), a nine-year high from (-$50.4B) in the prior month and was greater than the estimated deficit of (-$52.1B); imports rose 2.5% in Dec. to $256.47B from $250.24B in Nov. and exports rose 1.8% in Dec. to $203.35B from $199.81B; the 2017 U.S. goods deficit with China hits record $375 billion
· December JOLTS Job Openings at 5.811M vs. consensus of 5.900M
Sector Movers Today
· Semiconductors; MU raised its q2 EPS view to $2.70-$275, up from prior view $2.51-$2.65 (est. $2.51) and raises Q2 revs view to $7.20B-$7.35B from $6.8B-$7.2B (est. $6.97B); SWKS Q1 EPS beat on in-line revs and announced $1B stock buyback plan, though guidance little light; CRUS shares drop as posted Q3 results and an outlook that fell short of estimates amid weaker iPhone sales, leading analysts to chop their price targets
· Optical stocks active on earnings; FN, OCRL, LITE EPS and revs all beat, but guidance also misses for all as well; OCLR reported a Q2 beat on both revenue and earnings but guidance missing consensus/showed strong margin outlook despite the end of its major product cycle; FN 2Q revenues and EPS came in above street expectations, driven by growth in lasers, but guidance also disappoints; LITE strong Q2 beat but sees Q3 EPS 65c-80c vs. est. 94c
· Managed care; CNC and WCG both active on earnings, with bot raising guidance for the year; Bank America noted ANTM and CNC could see a negative impact from Indiana’s federal approval to implement Medicaid work requirements/estimates 33k could lose Medicaid coverage in the state, and estimates the net impact could be -0.1% to 2019 EPS for each; MOH shares fell as announced that it was invited to negotiate for Region 11, but not the remainder of the other seven counties that the company services
· FN +24%; 2Q revenues and EPS came in above street expectations, driven by growth in lasers, but guidance disappoints
· GM +3%; as Q4 results topped expectations
· MU +4%; raised its q2 EPS view to $2.70-$275, up from prior view $2.51-$2.65 (est. $2.51) and raises Q2 revs view to $7.20B-$7.35B from $6.8B-$7.2B (est. $6.97B)
· RE +5%; Q4 profits handily topped consensus estimates
· SPGI +5%; stronger Q4 results, raises dividend and guides year EPS above views
· SWKS +11%; Q1 EPS beat on in-line revs and announced $1B stock buyback plan
· TPR +5%; robust holiday sales helped its comp sales top estimates
· AMC -2%; as Dalian Wanda Group said that it was selling a $1.2B stake in its Chinese cinema business to BABA and a government-backed firm in order to pay down debt
· CAFD -9%; announced that it will be acquired by Capital Dynamics for $12.35/share in cash, ~11% lower than the closing price of $13.83
· CLW -9%; fell to 52-week lows after earnings and guidance miss views
· CMI -3%; as better-than-expected revenues were more than offset by weak operating results in engine, distribution and components
· CRUS -1%; posted Q3 results and an outlook that fell short of estimates amid weaker iPhone sales, leading analysts to chop their price targets
· LULU -2%; CEO Laurent Potdevin has resigned from his role and from the board of directors. The company suggested that Potdevin had not met lululemon’s standards of conduct
· MOH -8%; announced that it was invited to negotiate for Region 11, but not the remainder of the other seven counties that the company services
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.