Monday, March 26, 18
U.S. stocks rebounding after Friday’s sharp declines, as trade issues continue to dominate market action. After falling last week on rising global trade-war tension fears, specifically with China, markets are getting a lift early on reports that U.S. and China officials are conducting behind-the-scenes talks to avert a global trade war. The early strength is being attributed to comments from Treasury Secretary Mnuchin that America was holding productive talks with China, which has eased trade war concerns. There were also reports the U.S. and South Korea agreed to amend their free-trade deal to address American concerns about a growing deficit and resolve friction over tariffs on South Korean steel. The two stories are helping underpin early strength for global stock averages. There are also a handful of Federal Reserve speakers that may capture attention as well, as a holiday-shortened week of trading kicks off. Major averages pared gains early after news that the U.S. and EU will expel Russian diplomats in response to the nerve-agent poisoning of a former Russian spy in the U.K.
Stocks reclaim most of Friday’s market pullback: Recall, the S&P 500 Index dropped over 2% Friday and was down 5.9% for the week, its biggest drop in more than 2-years, the Dow Industrials fell -1.7% Friday, falling over 425 points to the lowest since November 22nd. The Nasdaq Composite plunged -2.43% Friday, down over 6.5% for the week while the Nasdaq 100 Index dropped 7.2%, the most since August 2015, led by declines in FB following its data leak news. Coming into today, the Dow was 10% below its record close while the S&P is 8.5% below its all-time high and the NASDAQ 6.6% below its record.
Treasuries, Currencies and Commodities
· In currency markets, the U.S. dollar slumps early, with the index moving to lows around 89.10 (overnight highs 89.51), led by a decline against the euro (around 1.245) and British pound (back above 1.42), though edges higher vs. the Japanese yen
· Precious metals holding last week gains, with gold futures up a few dollars around the $1360 an ounce level, getting a lift from a weaker US dollar. Last week, gold prices advanced 2.9%, with most of the gains coming the last two-days of the week on a soft dollar, stock market decline and fears of a global trade war after the U.S. announced tariffs on China
· Energy futures slipping slightly after posting its highest settlement in eight weeks, and posting a gain of roughly 5.6% for the week
· Treasury markets pulling back only slightly after last week’s gains, as investors rotate back into riskier assets (such as stocks), with markets in full rebound mode early after last week’s decline; the yield on the 10-year up around 2.84%
Sector Movers Today
· Metals & Mining; in steel, on Sunday, Bloomberg reported the U.S. and South Korea reached an agreement in principle to alter Korus, the bilateral trade deal between the allies. The U.S. signaled South Korea will reduce the volume of steel exported into the U.S. as part of its concessions, though no further details were provided (AKS, X, CMC, STLD, NUE)
· Industrial & Machinery; DOV downgraded to neutral at JPMorgan as believe key catalysts that underpinned their prior thesis have played out and with Wellsite out of the way soon and a new CEO at the helm, the story now shifts to business fundamentals and forward strategic direction; ETN was upgraded to buy at Jefferies as they raise near-term estimates with potential further upside as the year progresses.
· Restaurants; Restaurants Morgan Stanley upgraded QSR to overweight and downgraded JACK as they look toward the sustainable growth models of the underlying asset-light cash flows to determine which have the greatest potential to deliver peer-leading shareholder returns based on valuation, capacity for return of capital and purity of income stream; DRI was upgraded to overweight at Stephens as believes the stock’s below-market valuation more than compensates for the slowdown in same-store sales growth; UBS said survey of CMG brand perceptions remain below pre-food safety incident levels and suggests continued weakness among light frequency and non-Chipotle customers
· AMAT +4%; as semiconductors rebound sharply, led by equipment names
· DLTR +2%; upgraded to overweight at Piper and $112 tgt citing sensible investments with FDO to drive comp growth improvement and discounted valuation
· FINL +29%; as JD Sports Fashion to acquire the shoe retailer for $558M in cash, with holders getting $13.50 per share https://goo.gl/Wk15QX
· IMGN +4%; early-stage study of mirvetuximab soravtansine in combination with MRK’s immunotherapy Keytruda showed positive effect in Phase 1/2 ovarian cancer study
· LOW +6%; announced Chairman, President and CEO Niblock to retire
· MSFT +6%; as Morgan Stanley raised tgt to Street high $130 saying company is poised to keep a dominant position in the public cloud market
· TVPT +10%; as Elliott Associates reports 11.8% stake and urges review of strategic options
· USG +17%; unanimously rejects unsolicited $5.9B buyout bid by Knauf (value at $42 per share) saying it substantially undervalues the company https://goo.gl/cr1tSf
· AMD -1%; downgraded to negative at Susquehanna citing crypto mining competition
· BHVN –23%; as released data from two phase 3 clinical trials for its migraine drug rimegepant
· FB -2%; extends last week’s decline of more than 10% on data leak concerns
· GE -1%; continues downtrend for the Dow component and industrials
· LFIN -9%; mentioned cautiously by Citron Research
· PAYX -2%; quarterly revs beat, but shares slid after commentary on conference call
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.