Monday, March 5, 18
Stock futures are down slightly but the Dow futures have pared losses after falling as much as 180-points earlier following inconclusive elections in Italy as well as ongoing trade war and rising interest fears. However, in Germany, Social Democrats voted to support a coalition government, which means Chancellor Angela Merkel will serve a fourth term and the country will likely have a government after more than five months of uncertainty. Last week, stocks logged posted weekly losses, with the Dow Jones Industrial Average dropping -3% and notching its fourth-straight-session loss, while the S&P 500 declined -2% for the week and the Nasdaq Composite Index posted a weekly loss of -1.1%. Markets will try to recover from last weeks concerns that U.S. President Donald Trump said last week he will impose a 25% tariff on steel imports and a 10% tariff on aluminum – sparking fears of a global trade war. There are a few economic data points today, including services data, while in corporate news, one large deal in the insurer space, with Axa buying XL Group for over $15B.In Asian markets, The Nikkei Index fell -139 points to settle at 21,042, the Shanghai Index gained 2 points to end at 3,256 and the Hang Seng Index dropped over 2%, or -697 points to settle at 29,886. In Europe, the German DAX is up shy of 100 points, trading back above the 12,000 level, while the FTSE 100 is up about 20 points at 7,090. The FTSE 100 is bouncing off 14-month lows.
Market Closing Prices Yesterday
· The S&P 500 Index climbed 13.58 points, or 0.51%, to 2,691.25
· The Dow Jones Industrial Average fell -70.92 points, or 0.29%, to 24,538.06
· The Nasdaq Composite spiked 77.31 points, or 1.08%, to 7,257.87
· The Russell 2000 Index advanced 25.78 points, or 1.71% to 1,533.17
Events Calendar for Today
· 9:45 AM EST Markit US Services PMI, Feb-F…est. 55.9
· 9:45 AM EST Markit US Composite PMI, Feb-F…
· 10:00 AM EST ISM Non-Manufacturing Index, for February…est. 59.0
· Italy’s national elections yielded no outright winner, initial exit polls showed, likely ushering in a protracted period of political instability. A conservative coalition headlined by former Prime Minister Silvio Berlusconi was set to secure between 33% and 36% of the popular vote for the lower house and 33.5% and 36.5% for the Senate, according to the polls commissioned by state broadcaster RAI, giving it between 225 and 265 seats in the lower house out of 630
· China has set its economic growth target at about 6.5% for this year, according to Premier Li Keqiang at the opening session of the National People’s Congress, the annual legislative meeting, on Monday. China’s economic growth accelerated for the first time in seven years last year, reaching 6.9% on rising global demand
· Beijing also plans to cap consumer-price inflation at 3% for 2018, the same as last year, according to the work report.
· China’s Caixin/Markit services purchasing managers’ index (PMI) fell to 54.2 in February from January’s 68-month high of 54.7, but was still above recent trends
· European retail sales were -0.1% lower in January than in December, following a 1% drop in the earlier month. It was the fourth month out of the last six in which sales fell
Sector News Breakdown
· Homebuilders mentioned on Barron’s saying shares of Lennar (LEN), NVR (NVR), and Meritage Homes (MTH), though, look particularly attractive, along with home-improvement retailer Lowe’s (LOW). Worries about rising interest rates have led to housing stocks selling off. Shares of the four top publicly traded home builders, Lennar (LEN), D.R. Horton (DHI), PulteGroup (PHM) and Toll Brothers (TOL), have tumbled 12% on average YTD, after rising almost 70% in 2017
· Department store stocks mentioned in Barron’s saying have rebounded in recent months, but they are not all likely to emerge as winners.Nordstrom (JWN) and TJX (TJX) appear to have the most staying power, with the former the more attractive choice in terms of valuation. Kohl’s (KSS) and Macy’s (M) are showing new life but need to prove they can repeat their Q4 results
· Oil prices rise ahead of a meeting between OPEC and U.S. shale firms in Houston, raising expectations that oil producers would discuss further how to clear a global oil glut
· S&P SmallCap 600 constituent ALLETE (ALE) will replace IPG Photonics (IPGP) in the S&P MidCap 400
· Northeast and Mid-Atlantic utility crews raced to restore power Sunday for at least 750,000 customers as a strong storm subsided and moved off the coast.
· Eversource Energy (ES) said Sunday it brought in out-of-state workers and private contractors to help fix power outages in Massachusetts, and expected the majority of the work to be done by Tuesday night.
· National Grid (NGG) said it expects to get power back to the hardest-hit areas by midnight Tuesday.
· French insurer Axa to acquire XL Group Ltd. (XL), a property and casualty insurer for $15.3B; the price is at the upper end of expectations. Axa is paying $57.60 a share https://goo.gl/aA2Fmx
· Invesco (IVZ) shares mentioned positively in Barron’s saying the stock weakness a buying opportunity; notes stocks are down 5% from their January 26 peak, while shares of Invesco (IVZ) have fallen much more, which gives investors a buying opportunity
· New York Mortgage Trust (NYMT) will replace ALLETE in the S&P SmallCap 600 effective prior to the open of trading on Wednesday, March 7.
· S&P SmallCap 600 constituent LendingTree (TREE) will replace Bioverativ (BIVV) in the S&P MidCap 400
· Global Net Lease (GNL) will replace GCI Liberty Inc. (GNCMA) in the S&P SmallCap 600 effective prior to the open of trading on Friday, March 9
Industrials & Materials
· China plans to reduce excess capacity in steel and coal by 30 million metric tons and 150 million metric tons respectively this year, the National Development and Reform Commission said. China cut more than 50 million metric tons of steel capacity and 250 million metric tons of coal capacity last year. The government had planned to reduce steel and coal capacity by about 50 million metric tons and over 150 million metric tons respectively in 2017
· President Donald Trump has threatened European automakers with a tax on imports if the EU retaliates against his announced tariffs on aluminum and steel, according to Reuters. German carmakers Volkswagen (VLKAY), Daimler (DDAIF) and BMW build vehicles in the U.S
Technology, Media & Telecom
· Dialog Semiconductor expects Apple (AAPL), its top customer, to use its chips for a significant proportion of its devices in 2019 and 2020, its CEO told a German newspaper https://goo.gl/T3TW9N
· S&P MidCap 400 constituent IPG Photonics (IPGP) will replace Scripps Networks Interactive (SNI) in the S&P 500 index
· Finisar (FNSR) will replace LendingTree (TREE) in the S&P SmallCap 600 effective prior to the open of trading on Thursday, March 8
· Snap Inc. (SNAP) is planning to launch two new models of its Spectacles glasses, after the original version of the glasses was responsible for $40M in losses, according to the New York Post
· Barron’s notes that plenty of people still use fitness trackers and Fitbit (FIT) still sells millions of them, but the company has acknowledged that the market is “rapidly changing.” Fitbit CEO James Park has pledged to expand the company’s line of watches
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.